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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549





FORM 10-KSB





ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

Commission file number:
000-27866





Vyrex Corporation

(Name of small
business issuer as specified in its charter)







|                                                             |  |                                  
|------------------------------------------------------------ |  | ---------------------------------
|Delaware                                                     |  | 88-0271109                       
|(State or other jurisdiction of corporation or organization) |  | (IRS Employer Identification No.)

21615 N. 2ndAvenue, Phoenix, Arizona

(Address of principal executive
offices)

(623) 780-3321

(Issuers telephone number including area code)







|                                                            |  |                               
|----------------------------------------------------------- |  | ------------------------------
|Securities registered pursuant to Section 12(b) of the Act: |  | None                          
|                                                            | 
|Securities registered pursuant to Section 12(g) of the Act: |  | Common Stock, Par Value $.0001
|                                                            |  | Warrants                      
|                                                            |  | (Title of Class)              





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   ̈

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.   ̈

Check if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer   ̈    Accelerated filer   ̈    Non-accelerated filer   ̈    Smaller reporting company  x

Indicate by check mark
whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ̈    No  x

State issuers revenues for its most recent year: $25,500

State the
aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and ask prices of such stock equity, as of June 29, 2007, the last business
day of the issuers most recently completed second fiscal quarter: $96,315.

As of March 31, 2008, the issuer had 25,882,878 shares of
common stock outstanding.









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Vyrex Corporation

Annual Report on Form 10-KSB

Year Ended December 31, 2007

INDEX



|           |  |                                                                                                                                          |  |     
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                                                                          |  | PAGE
|PART I    
|           |  |                                                                                                                                         
|ITEM 1.    |  | BUSINESS                                                                                                                                 |  | 1   
|           |  |                                                                                                                                         
|ITEM 2.    |  | PROPERTY                                                                                                                                 |  | 6   
|           |  |                                                                                                                                         
|ITEM 3.    |  | LEGAL PROCEEDINGS                                                                                                                        |  | 6   
|           |  |                                                                                                                                         
|ITEM 4.    |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                                      |  | 7   
|          
|PART II   
|           |  |                                                                                                                                         
|ITEM 5.    |  | MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES                        |  | 7   
|           |  |                                                                                                                                         
|ITEM 6.    |  | MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                                                                                |  | 8   
|           |  |                                                                                                                                         
|ITEM 7.    |  | FINANCIAL STATEMENTS                                                                                                                     |  | 11  
|           |  |                                                                                                                                         
|ITEM 8.    |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                                                     |  | 11  
|           |  |                                                                                                                                         
|ITEM 8A.   |  | CONTROLS AND PROCEDURES                                                                                                                  |  | 11  
|           |  |                                                                                                                                         
|ITEM 8B.   |  | OTHER INFORMATION                                                                                                                        |  | 11  
|          
|PART III  
|           |  |                                                                                                                                         
|ITEM 9.    |  | DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT |  | 11  
|           |  |                                                                                                                                         
|ITEM 10.   |  | EXECUTIVE COMPENSATION.                                                                                                                  |  | 13  
|           |  |                                                                                                                                         
|ITEM 11.   |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.                                          |  | 13  
|           |  |                                                                                                                                         
|ITEM 12.   |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.                                                               |  | 14  
|           |  |                                                                                                                                         
|ITEM 13.   |  | EXHIBITS                                                                                                                                 |  | 14  
|           |  |                                                                                                                                         
|ITEM 14.   |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                                                   |  | 14  
|           |  |                                                                                                                                         
|SIGNATURES |  |                                                                                                                                          |  | 17  



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PART I



|ITEM 1. | BUSINESS
|------- | --------

General

Vyrex Corporation (Vyrex or the Company) was incorporated in Nevada in 1991, and operated as a research and development stage
company seeking to discover and develop pharmaceuticals, nutraceuticals and cosmeceuticals for the treatment and prevention of respiratory, cardiovascular and neurodegenerative diseases and conditions associated with aging (the Biotech
Business). The Biotech Business was unsuccessful and, as a result, the Company ceased material operations relating to that business in October 2005; however, the Company has retained its intellectual property rights and contract rights
relating to that business. On October 17, 2005, the Company reincorporated in Delaware.

On February 11, 2008, Vyrex, PowerVerde,
Inc. (PowerVerde) and Vyrex Acquisition Corporation (VAC), a wholly-owned subsidiary of Vyrex, all Delaware corporations, entered into an Agreement and Plan of Merger (the Merger Agreement). Pursuant to the terms
of the Merger Agreement, on February 12, 2008, VAC merged with and into PowerVerde, with PowerVerde remaining as the surviving corporation and a wholly-owned subsidiary of Vyrex (the Merger). As consideration for the Merger, as of
the closing of the Merger, each issued and outstanding share of common stock of PowerVerde was converted into the right to receive 1.2053301 shares of the common stock of Vyrex and each share of VAC was converted into one share of PowerVerde common
stock. As a result of the Merger, the former shareholders of PowerVerde hold 95% of the common stock of Vyrex. Pursuant to the Merger Agreement, PowerVerde paid $233,000 in accounts payable and other liabilities owed by Vyrex.

Please note that the information provided below relates to the combined company after the Merger. Since our operations after the Merger will consist
solely of PowerVerde operations, except where the context otherwise requires, references throughout this Report hereafter to PowerVerde, we, us, our and the Company will mean or refer to
PowerVerdes business and operations.

The Company is a Delaware corporation formed in March 2007 by its two principal owners and
officers, George Konrad and Fred Barker. The Company was formed in order to further develop, commercialize and market a series of unique electric generating power systems designed to produce electrical power with zero emissions based on a patented
pressure-driven motor. The design of the motor was conceived by Mr. Barker in January 2001. Mr. Barker previously had a working relationship with Mr. Konrad and enlisted Mr. Konrad and his manufacturing expertise, together with
Mr. Barkers own engineering expertise, to co-develop the motor.

An initial prototype of the motor was created and tested in
early 2002, based on which Messrs. Barker and Konrad concluded that the concept would work. A new design was developed in early 2007 which resulted in a motor that produced more torque and horsepower as well as being easier to mass produce. The
prototype has been tested extensively, and substantial tooling, engineering and CAM/CNC programming has been completed for the production model motor; however, the final design for the production model has not yet been completed. We expect to
complete the final design by the end of the third quarter of 2008, at which time we would be able to begin manufacturing.

Messrs. Barker
and Konrad together obtained U.S. Patent No. 6,840,151, which was issued on January 11, 2005. On June 6, 2007, Messrs. Barker and Konrad and the Companys predecessor PowerVerde, LLC, permanently and exclusively assigned to
PowerVerde all rights to the patent and the other intellectual property relating to the PowerVerde systems.

We plan to manufacture and
market the PowerVerde power systems to end users in the U.S. market; however, we have not yet hired any employees. An international division is planned to coordinate global OEM licensing partnerships. We have not yet entered into any agreements for
distribution or marketing of its products, and there can be no assurance that we will ever do so.



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Product Description

The primary PowerVerde motor, with its related Organic Rankine Cycle, produces 10 kW of net power for individual end users and the system can be installed in multiple units for business, schools, hospitals and other
users of electrical power. These non-combustion motors are powered by any gas pressure source. With relatively low pressure (100-250psi), they produce substantial torque and horsepower. The PowerVerde system has very few moving parts, which results
in a motor of durability and reliability. The system requires:



| |  |  | A heat source (solar, waste heat, geothermal) or well-head pressure from methane, CO2or natural gas wells
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | An Organic Rankine Cycle (ORC) to convert heat into pressure
| | - |  | ------------------------------------------------------------



| |  |  | PowerVerde patented engine to convert the pressure into horsepower
| | - |  | ------------------------------------------------------------------



| |  |  | A generator to convert the horsepower into electricity
| | - |  | ------------------------------------------------------

We have built and tested the pre-production motor and Organic Rankine Cycle, and we believe that the overall design meets or exceeds performance parameters. We believe that we will soon be able to enhance the
systems power capacity to 20 kW of net power; however, there can be no assurance that we will be successful in this effort.

Government
Regulations and Incentives

We believe that the time is right for the PowerVerde system. Regulatory proposals to limit greenhouse gasses
are gaining momentum. One such measure would be a carbon tax placed on fuels in proportion to their carbon content. Another would be a tax on oil. Yet another would be a cap and trade system. All of these would drive up the price of
electricity from fossil fuel sources yet have no impact on carbon-free renewable sources such as those offered by us.

Governments,
utilities, businesses, and consumers alike are acutely aware of the negative effects of pollution and use of fossil fuels. Fossil fuel-based emissions contribute to serious health and environmental conditions such as acid rain, particulate
pollution, nitrogen deposition, and global climate change. Consequently, government agencies at the federal, state and local levels have implemented and proposed various economic incentives in the form of tax credits, rebates, deductions,
accelerated depreciation and other subsidies designed to enhance the use of energy-efficient and clean power sources. We believe that these incentives will have a substantial positive impact on demand for the PowerVerde systems; however, there can
be no assurance that, even with these incentives, our systems will be economically competitive or that the incentives will continue to be available.

Competition

We face substantial competition from numerous other companies, most of whom have financial and other resources
substantially greater than those of the Company. The Companys competition is worldwide, ranging from solo inventors and small businesses all the way to major utility companies and multinational corporations, all of whom are attempting to
design, develop and market clean and efficient methods for the generation and delivery of electricity. This competition is expected to increase due to pressures arising from the high prices of oil and natural gas and from environmental concerns.
These competitors may prove more successful in offering similar products and/or may offer alternative products which prove superior in performance and/or more popular with potential customers than our products. Our ability to commercialize our
products and grow and achieve profitability in accordance with our business plan will depend on our ability to satisfy our customers and withstand increasing competition by providing high-quality products at reasonable prices. There can be no
assurance that we will be able to achieve or maintain a successful competitive position.

Risk Factors

Investing in our common stock is speculative and involves a high degree of risk. Prospective investors should carefully consider the following risks and
uncertainties and all other information contained or referred to in this Report before making an investment decision in us. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that we are
unaware of, or that we currently deem immaterial, also may become important factors that affect us. Our business, financial condition or results of operations could be materially and adversely affected by some or all of the matters described below
or other currently unknown factors. In that case, the trading price of our common stock could decline, and you could lose all of your investment.



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Risks Related to Our Business

We may need to raise substantial additional capital to fund our business.

We will need to raise substantial additional
funds. Without such additional funds, we may have to cease operations. We will require substantial additional funding for our contemplated research and development activities, commercialization of our products and ordinary operating expenses.
Adequate funds for these purposes may not be available when needed or on terms acceptable to us. Insufficient funds may require us to delay or scale back our activities or to cease operations.

We face substantial competition in our industry, and we may be unable to attract customers and maintain a viable business.

We face substantial competition from numerous other companies, most of whom have financial and other resources substantially greater than ours. Our
competition is worldwide, ranging from solo inventors and small businesses all the way to major utility companies and multinational corporations, all of whom are attempting to design, develop and market clean and efficient methods for the generation
and delivery of electricity. This competition is expected to increase due to pressures arising from the high prices of oil and natural gas and from environmental concerns. These competitors may prove more successful in offering similar products
and/or may offer alternative products which prove superior in performance and/or more popular with potential customers than our products. Our ability to commercialize our products and grow and achieve profitability in accordance with our business
plan will depend on our ability to satisfy our customers and withstand increasing competition by providing high-quality products at reasonable prices. There can be no assurance that we will be able to achieve or maintain a successful competitive
position.

Our success is dependent on the services of our key management and personnel.

Our success will depend in large part upon the skill and efforts of our founders and executive officers, George Konrad and Fred Barker, and other key
personnel who may be hired. Loss of any such personnel, whether due to resignation, death, and disability or otherwise, could have a material adverse effect on you. In addition, Messrs. Konrad and Barker do not intend to work for PoweVerde on a
full-time basis, as they have substantial other business activities. They intend to dedicate the time they deem appropriate to meet PowerVerdes needs; however, there can be no assurance that they will be willing or able to dedicate such time
and attention as would maximize PowerVerdes chances for success.

We have a limited operating history.

We have only a limited operating history. We have yet to generate any revenues, and the commercial value of our products is uncertain. There can be no
assurance that we will ever be profitable. Further, we are subject to all the risks inherent in a new business including, but not limited to: intense competition; lack of sufficient capital; loss of protection of proprietary technology and trade
secrets; difficulties in commercializing its products, managing growth and hiring and retaining key employees; adverse changes in costs and general business and economic conditions; and the need to achieve product acceptance, to enter and develop
new markets and to develop and maintain successful relationships with customers, third party suppliers and contractors.

We may have difficulty in
protecting our intellectual property and may incur substantial costs to defend ourselves in patent infringement litigation.

We rely
primarily on a combination of trade secrets, patents, copyright and trademark laws, and confidentiality procedures to protect our proprietary technology, which is our principal asset.

Our ability to compete effectively will depend to a large extent on our success in protecting our proprietary technology, both in the United States and
abroad. There can be no assurance that (i) any patent that we apply for will be issued, (ii) any patents issued, including our existing U.S. Patent No. 6,840,151 B1, on which our current products are based, will not be challenged,
invalidated, or circumvented, (iii) that we will have the financial resources to enforce our patents or (iv) the patent rights granted will provide any competitive advantage. We could incur substantial costs in defending any patent
infringement suits or in asserting our patent rights, including those granted by third parties, and we might not be able to afford such expenditures.



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We have limited protection over our trade secrets and know-how.

Although we have entered into confidentiality and invention agreements with our key personnel, there can be no assurance that these agreements will be
honored or that we will be able to protect our rights to our non-patented trade secrets and know-how effectively. There can be no assurance that competitors will not independently develop substantially equivalent or superior proprietary information
and techniques or otherwise gain access to our trade secrets and know-how.

We may be unable to obtain required licenses from third-parties for product
development.

We may be required to obtain licenses to patents or other proprietary rights from third parties. If we do not obtain
required licenses, we could encounter delays in product development or find that the development, manufacture or sale of products requiring these licenses could be foreclosed.

The reduction or elimination of contemplated government incentives may force our business plan to be changed.

Our business plan relies to a significant extent on the availability of substantial federal, state and local governmental incentives for the purchase of energy-saving, environmentally-friendly products such as our
systems. These incentives include, among others, tax deductions, tax credits, rebates and accelerated depreciation. There can be no assurance that some or all of these incentives will not be substantially reduced or eliminated, nor can there be any
assurance that any currently proposed incentives will actually take effect.

Lower energy prices may hinder our ability to attract customers and be
profitable.

Our products are energy-efficient electric generators which compete primarily with conventional oil and natural
gas-generated electricity produced and delivered by conventional utility companies. A significant decrease in the price of oil and/or natural gas could therefore materially adversely affect our competitive position.

We may be unable to purchase materials and parts on commercially reasonable terms from suppliers.

Our success will depend to a large extent on our ability to obtain a reliable supply of materials and parts from our suppliers on commercially reasonable
terms. This may not prove possible due to competition, inflation, shortages, international crises, adverse economic and political conditions, business failures of suppliers or other reasons.

Our insurance may not provide adequate coverage.

Although we maintain insurance which we consider prudent, there can be no assurance that such insurance will prove adequate in the event of actual casualty losses or broader calamities such as terrorist attacks, earthquakes, financial
crises, economic depressions or other catastrophic events, which are either uninsurable or not economically insurable. Any such losses could have a material adverse effect on the Company.

We may be unable to obtain or maintain insurance for our commercial products.

The design, development and manufacture of our proposed products involve an inherent risk of product liability claims and associated adverse publicity. There can be no assurance we will be able to obtain or maintain
insurance for any of our proposed commercial products. Such insurance is expensive, difficult to obtain and may not be available in the future on acceptable terms or at all. We are also exposed to product liability claims in the event the use of our
proposed products result in injury.

Risks Related to Our Common Stock; Liquidity Risks

Our stock price may become highly volatile.

The
market prices for securities of emerging and development stage companies such as ours have historically been highly volatile. Difficulty in raising capital as well as future announcements concerning us or our competitors, including the results of
testing, technological innovations or new commercial products, government regulations, developments concerning proprietary rights, litigation or public concern as to safety of potential products developed by us or others, may have a significant
adverse impact on the market price of our stock.



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We do not pay dividends on our common stock, and we have no intention to do so in the future.

For the near-term, we intend to retain any remaining future earnings, if any, to finance our operations and do not anticipate paying any cash dividends
with respect to our common stock.

There has been minimal trading in our stock for years.

Our common stock is currently quoted on the OTCBB under the symbol VYXC. There has been minimal trading of our common stock for several
years, and no assurance can be given as to when, if ever, an active trading market will develop or, if developed, that it will be sustained. As a result, investors may be unable to sell their shares of our common stock.

We may issue additional shares of our stock which may dilute the value of our stock.

As a result of the Merger, we have issued to the former PowerVerde shareholders 24,588,734 shares of our common stock. These shares are restricted
securities subject to Rule 144. The sale or availability for sale of substantial amounts of common stock in the public market under Rule 144 or otherwise could materially adversely affect the prevailing market prices of our common stock and could
impair our ability to raise additional capital through the sale of our equity securities.

We may issue shares of preferred stock that could defer a
change of control or dilute the interests of holders of our common stock shareholders.

Our Board of Directors is authorized to issue
up to 50,000,000 shares of preferred stock. The Board of Directors has the power to establish the dividend rates, liquidation preferences, voting rights, redemption and conversion terms and privileges with respect to any series of preferred stock.
The issuance of any series of preferred stock having rights superior to those of the common stock may result in a decrease in the value or market price of the common stock and could further be used by the Board as a device to prevent a change in
control favorable to the Company. Holders of preferred stock to be issued in the future may have the right to receive dividends and certain preferences in liquidation and conversion rights. The issuance of such preferred stock could make the
possible takeover of the Company or the removal of management of the Company more difficult, and adversely affect the voting and other rights of the holder of the common stock, or depress the market price of the common stock.

Our common stock is covered by SEC penny stock rules which may make it more difficult for you to sell or dispose of our common stock.

Since we have net tangible assets of less than $1,000,000, transactions in our securities are subject to Rule 15g-9 under the Exchange Act which imposes
additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally, individuals with a net worth in excess of $1,000,000 or annual incomes
exceeding $200,000 or $300,000 together with their spouses). For transactions covered by this Rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchasers written consent to the
transaction prior to the sale. Consequently, this Rule may affect the ability of broker-dealers to sell our securities, and may affect the ability of shareholders to sell any of our securities in the secondary market.

The Commission has adopted regulations which generally define a penny stock to be any non-NASDAQ equity security of a small company that has
a market price (as therein defined) less than $5.00 per share, or with an exercise price of less than $5.00 per share subject to certain exceptions, and which is not traded on any exchange or quoted on NASDAQ. For any transaction by broker-dealers
involving a penny stock (unless exempt), the rules require delivery, prior to a transaction in a penny stock, of a risk disclosure document relating to the penny stock market. Disclosure is also required to be made about compensation payable to both
the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in an account and information on the
limited market in penny stocks.



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Our charter documents could deter a takeover effort or delay changes in control or management of the Company.

Our Certificate of Incorporation and Bylaws contain provisions that may make it more difficult to acquire control of the Company by means
of tender offer, over-the-counter purchases, a proxy fight, or otherwise. The Certificate of Incorporation also includes provisions restricting stockholder voting rights. Our Certificate of Incorporation includes a provision that requires that any
action required by the stockholders may not be effected by a written consent, and that special meetings of the stockholders may only be called by the Board of Directors. This provision makes it difficult for stockholders to pass any resolution not
supported by the Board of Directors except at a regularly called meeting. Our Certificate of Incorporation provides for a staggered term of the Board of Directors, thus eliminating the ability to elect all of the directors in any one year. This
provision may make the implementation of a change in management a process requiring more than one year even if supported by a majority of the stockholders. Our Certificate of Incorporation provides that directors may only be removed for cause and a
vote of 70% of the stockholders. Certain provisions of the Certificate of Incorporation may only be amended by a vote of 70% of the stockholders. As a result of the number of shares currently owned by management, this provision may for some time
have the effect of indirectly eliminating any possibility stockholders could pass a resolution unless approved by management, in connection with any question submitted or required to be submitted to a vote of the stockholders. Our Certificate of
Incorporation also requires that stockholders give advance notice to the Company of any directorship nominations or other business to be brought by the stockholders at any stockholders meeting. This provision makes it more difficult for
stockholders to nominate candidates for the Board of Directors who are not supported by management. In addition, the Certificate of Incorporation requires advance notice for stockholder proposals to be brought before the annual meeting. The
requirements include that the notice must specify certain information regarding the stockholder and the meeting. This provision to implement stockholder proposals makes it more difficult even if a majority of stockholders are in support thereof.
Each of these provisions may also have the effect of deterring hostile take-overs or delaying changes in control or management of the Company. In addition, the indemnification provisions of our Bylaws and Certificate of Incorporation may represent a
conflict of interest with the stockholders since officers and directors may be indemnified prior to any judicial determinations as to their conduct.

FORWARD-LOOKING STATEMENTS

Prospective investors are cautioned that the statements in this Report that are not
descriptions of historical facts may be forward-looking statements that are subject to risks and uncertainties. This Report contains certain 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. Such forward-looking statements are based on the beliefs of our management as well as on assumptions made by and information currently available to us as of the date of this Report. When used
in this Report, the words plan, will, may, anticipate, believe, estimate, expect, intend, project and similar expressions, as they relate to
PowerVerde, are intended to identify such forward-looking statements. Although PowerVerde believes these statements are reasonable, actual actions, operations and results could differ materially from those indicated by such forward-looking
statements as a result of the risk factors included in this Report or other factors. We must caution, however, that this list of factors may not be exhaustive and that these or other factors, many of which are outside of our control, could have a
material adverse effect on PowerVerde and our ability to achieve our objectives. All forward-looking statements attributable to PowerVerde or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set
forth above.



|ITEM 2. | PROPERTY
|------- | --------

We do not own any real property. We share use of a full-service machining and manufacturing facility located at 21615 N. 2ndAvenue, Phoenix, Arizona, owned by Arizona Research and Development, Inc. (ARD), a company wholly-owned by George Konrad, the Companys President and largest shareholder (the ARD Facility). We pay monthly rent
of $.75 per square foot of space that we use and also pay our proportional share of the facilitys utilities. As of March 2008, we are using approximately 700 square feet at a monthly rental of approximately $525. We expect to substantially
increase our use of the ARD Facility by the end of 2008, and we believe that the ARD Facility will be adequate to satisfy our needs through that time; however, in the event that we begin material sales, we may need to move to a larger facility.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

We are not party to any disputes
or legal proceedings at the time of this Report.



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|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

None.

PART II



|ITEM 5. | MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
|------- | -----------------------------------------------------------------------------------------------------------------

Our common stock began trading on the Over-The-Counter Bulletin Board (OTCBB) on October 22, 1998 under the symbol VYRX.
Prior to that date, the common stock was tracked on the Nasdaq Small Cap Market. The over-the-counter market quotations provided reflect inter-dealer prices, without retail mark-ups, mark-down or commission and may not represent actual transactions.
The following table sets forth the range of high and low sales prices on the OTCBB for the periods indicated, as adjusted for a 12-for-100 reverse stock split which accompanied our reincorporation in Delaware in October 2005. Trading of the common
stock on the OTCBB through the date of this report has been based on adjusted pre-split shares and actual post-split shares that began on or about June 30, 2006 under the symbol VYXC.



|                 |  |                    |  |      |      |     |   |    
|---------------- |  | ------------------ |  | ---- | ---- | --- | - | ---
|Period Beginning |  | Period Ending      |  | High |      | Low
|January 1, 2006  |  | March 31, 2006     |  | $    | 2.08 |     | $ | .42
|April 1, 2006    |  | June 30, 2006      |  | $    | 1.42 |     | $ | .67
|July 1, 2006     |  | September 30, 2006 |  | $    | 2.75 |     | $ | .85
|October 1, 2006  |  | December 31, 2006  |  | $    | 1.55 |     | $ | .87
|January 1, 2007  |  | March 31, 2007     |  | $    | 1.80 |     | $ | .55
|April 1, 2007    |  | June 30, 2007      |  | $    | 1.10 |     | $ | .40
|July 1, 2007     |  | September 30, 2007 |  | $    | .51  |     | $ | .35
|October 1, 2007  |  | December 31, 2007  |  | $    | .37  |     | $ | .35
|January 1, 2008  |  | March 26, 2008     |  | $    | 2.75 |     | $ | .30

Dividends

We have never declared or paid any cash dividends on our common stock, nor do we intend to declare or pay any cash dividends on our common stock in the foreseeable future. Subject to the limitations described below,
the holders of the Companys common stock are entitled to receive only such dividends (cash or otherwise) as may (or may not) be declared by the Companys Board of Directors.

Sale of Unregistered Securities

Except for (i) the 24,588,734 shares of common stock issued to
former PowerVerde shareholders in connection with the Merger, (ii) 250,000 shares issued on February 11, 2008 to Don Leach in payment of Vyrexs March 10, 2003, $200,000 promissory note held by him, (iii) 20,000 shares
issued on February 11, 2008, to Richard G. McKee, Jr. for consulting services, and (vi) 5,000 shares issued on February 11, 2008, to Mary Jane Dean for financial and administrative services, Vyrex did not sell any securities without
registering the securities under the Securities Act during its most recently completed fiscal year, i.e., its fiscal year ended December 31, 2007, or during the previous three fiscal years ended December 31,
2006, December 31, 2005, and December 31, 2004, respectively, or during the period from December 31, 2007, through the filing of this Report. These shares were issued pursuant to an exemption from registration requirements under
Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended.



7



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##### Table of Contents

|ITEM 6. | MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
|------- | ---------------------------------------------------------

The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein.

Critical Accounting Policies

The financial statements of Vyrex Corporation are prepared in
conformity with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements requires our management to make estimates and assumptions about future events that effect the
amounts reported in the financial statements and related notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. We believe the following
critical accounting policies affect its more significant judgments and estimates used in the preparation of financial statements.

Accounting for
Uncertainty in Income Taxes

We adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation
No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109 (FIN 48), on January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprises financial statements in accordance with FASB Statement 109, Accounting for Income Taxes, and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our financial statements. Our
evaluation was performed for the tax years ended December 31, 2004, 2005 and 2006, the tax years which remain subject to examination by major tax jurisdictions as of December 31, 2007.

We may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and
immaterial to our financial results. In the event we have received an assessment for interest and/or penalties, it has been classified in the financial statements as selling, general and administrative expense.

Revenue Recognition

Licensing and royalty
revenue from royalty agreements is recognized in accordance with the terms of the specific agreement, which generally includes a quarterly minimum payment by the licensee.

Stock Options and Warrants

Effective January 1, 2006, we adopted the fair value method of
accounting for awards of employee stock and options in accordance with SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation, Transition and
Disclosure, and SFAS No. 123R, Share-Based Payment. These standards require the cost associated with employee services in exchange for equity instruments based on the grant-date fair value of the award, be recognized over the
period during which the employee is required to provide services in exchange for the award. No compensation cost is recognized for awards for which employees do not render the requisite service. Because the Company changed its method of accounting
from the intrinsic method as per APB Opinion No. 25, upon adoption, the grant date fair value of employee share options was estimated using the Black-Scholes model. Compensation cost for the unvested portion of equity awards granted prior to
January 1, 2006, will be recognized over the remaining vesting periods. See Note 6, Stock Option Plans.



8



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Overview

From January 1991 until October, 2005, the Company devoted substantially all of its efforts and resources to research and development related to its unsuccessful Biotech Business, in particular the study of biological oxidation and
antioxidation directed to the development of potential therapeutic products for the treatment of various diseases and conditions. In the most recent years, the Companys research focused mainly on targeted antioxidant therapeutics and
nutraceuticals. The Company is a development stage company, has never generated any substantial revenue from product sales and has relied primarily on equity financing, licensing revenues, and various debt instruments for its working capital. The
Company has been unprofitable since its inception.

Following the cessation of material Biotech Business operations in October 2005, the
Company turned its primary focus to seeking an appropriate merger partner for its public shell. During 2007, operating expenses for the Company decreased $48,000 as a result of reduced rental expenses, auditing and financial expenses and patent
fees. Royalty revenue amounted to $25,000 for 2007 compared to $43,000 in 2006. The reduction in royalty was due to the decrease in sales of the Boron compound licensed by FutureCeuticals, a division of Van Drunen Farms. The net loss was $93,000 in
both 2007 and 2006. As of December 31, 2007, the Companys accumulated deficit was approximately $13,626,000. The Company does not expect to receive any further material revenues from its Biotech Business. The Company is entitled to a
minimum royalty of $7,500 per year under its Boron compound sublicense agreement; however, it must pay $7,500 per year to the licensor.

The Companys business is subject to significant risks, including the risks inherent in our research and development efforts, uncertainties associated with obtaining and enforcing patents and intense competition. See Risk
Factors.

Results of Operations

Years ended
December 31, 2007 and 2006

Since January 2007, the Companys major activities consisted of seeking a merger partner.

Research and development expenses remained at $7,500 in 2007 and 2006. These expenses were limited to the licensing fee for the Boron
compound.

General and administrative expenses decreased $47,000 to $75,000 in 2007 compared to $122,000 in 2006. This decrease was the
result of a reduction in expenses for auditing, patent fees and rent. Other expenses were limited to general office expenses such as telephone, utility, and postage.

Net loss was $93,000 in both 2007 and 2006, while basic and diluted loss per share was $(0.09) in both 2007 and 2006.

Liquidity and Capital Resources

The Company has financed its operations since inception through the sale of debt and equity
securities. As of December 31, 2007, the Company had a working capital deficit of $497,000 compared to a working capital deficit of $419,000 at December 31, 2006. Pursuant to the February 2008 Merger and related transactions, PowerVerde
satisfied $433,000 of the Companys liabilities ($233,000 in accounts payable owed by Vyrex and $200,000 owed pursuant to a certain promissory note issued by Vyrex).

For the year ended December 31, 2007, the Company provided $17,000 of cash in operating activities, compared to $34,000 used during 2006.

As of the date of this Report, we have enough cash to sustain operations for approximately the next three months.



9



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Consequently, we will need to raise substantial additional capital in order to finance our plan of operations. We intend to seek the necessary funds though
private debt and/or equity transactions. There can be no assurance that we will be able to raise the necessary funds. If we do not, we will be forced to cease operations.

Plan of Operation

General

The following plan of operation for our ongoing PowerVerde business provides information which our management believes is relevant to an assessment and understanding of our business, operations and financial
condition. This plan of operation contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ substantially from those anticipated in any forward-looking statements included in this discussion
as a result of various factors, including those set forth in Risk Factors contained elsewhere in this Report.

We plan to mass
produce patented renewable power systems using proven techniques established by high technology manufacturing companies such as Boeing. This outsourcing process utilizes other companies to produce many of the necessary parts which save the selling
company the cost of buying machinery or establishing a large manufacturing facility with the attendant costs of salaries, benefits and overhead.

We are in a unique position to utilize such a system. One of the principals, George Konrad, owns and operates a manufacturing facility, Arizona Research and Development (ARD), which is capable of producing all of the
manufactured parts needed for the PowerVerde renewable power systems. We intend to enter into an agreement with ARD to manufacture machined parts for the PowerVerde patented motor as well as assemble the motors and Organic Rankine Cycles, all on
fair market terms. ARD will also test and qualify all systems under a rigid quality control program. See Certain Relationships and Related Transactions.

ARD has been involved in the development of the PowerVerde systems and is uniquely positioned to continue on to the manufacturing process.

All machining will be done by CNC lathes and machining centers owned by ARD. As production increases it may be necessary for ARD to subcontract certain components or enlarge the present facility.

The design and tooling process of rapid prototyping has been employed by PowerVerde and ARD throughout the developmental program using solid
modeling CAD, Stereo lithography, Finite Element Analysis, Computerized Fluid Dynamics (CFD), CAM, CNC machining and other techniques developed by the aerospace industry. This process produces products that are ready to go into mass-produced
manufacturing immediately upon completion of the testing program.

PowerVerde also intends to contract to local refrigeration specialty
companies the job of installing and maintaining the power systems. The companies will be contracted in each area of market penetration.

We
have no employees as of the date of this Report; however, we intend to add sales and marketing staff to promote the systems as soon as beta testing is complete, which is expected to occur by the end of the third quarter of 2008. We have not yet
entered into any agreements for distribution or marketing of our products, and there can be no assurance that we will ever do so.

We
intend to continue with research and development activities in order to further improve and refine our products.

Production

ARD will purchase all materials and components utilized in the PowerVerde renewable electrical generating systems and deliver the finished product to
PowerVerde under the terms of the agreement to be entered into between them. ARD has been manufacturing high tech camera booms for many years and has established a working relationship with suppliers of aluminum, steel and all other parts needed for
the manufacture of PowerVerde energy systems. ARD will be responsible for maintaining inventory of all parts and materials.

PowerVerde
will provide to ARD all manufacturing drawings, specifications, parts lists, material requirements, assembly manuals and quality control requirements relating to the systems to be produced.



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Production schedules will be determined by sales and established by PowerVerde.



|ITEM 7. | FINANCIAL STATEMENTS
|------- | --------------------

The financial statements of
the Company and other information required by this Item are set forth herein in a separate section beginning with the Index to the Financial Statements on page F-1.



|ITEM 8. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------

There has been no change in or disagreements with Accountants.



|ITEM 8A. | CONTROLS AND PROCEDURES.
|-------- | ------------------------

Managements Annual Report on
Internal Control Over Financial Reporting.

Management of the Company is responsible for establishing and maintaining adequate control
over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of financial statements.

All internal controls over financial reporting, no matter how well designed, have inherent limitations, including the possibility of human error and the
circumvention of overriding of controls. Therefore, even effective internal control over financial reporting can provide only reasonable, and not absolute, assurance with respect to financial statement preparation and presentation. Further, because
of changes in conditions, the effectiveness of internal controls over financial reporting may vary over time. Because of its inherent limitations, internal controls over financial reporting may also fail to prevent or detect misstatements.
Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

Our
management, including our chief executive officer and chief financial officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2007. In making its assessment of internal control over financial
reporting, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this evaluation, our management concluded that, as of December
31, 2007, our internal control over financial reporting was effective based on those criteria.

This annual report does not include an
attestation report of the Companys independent registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Companys registered public accounting
firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only managements report in this annual report.

Changes in Internal Control Over Financial Reporting.

There have been no changes in internal control over financial
reporting.



|ITEM 8B. | OTHER INFORMATION
|-------- | -----------------

None.

PART III



|ITEM 9. | DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
|------- | ----------------------------------------------------------------------------------------------------------------------------------------

In connection with the Merger, all of the prior officers and directors of the Company (G. Dale Garlow, Sheldon S. Hendler, M.D., Ph.D., Thomas K. Larson,
Jr., and Richard G. McKee, Jr.) resigned and George Konrad, Fred Barker and Richard H. Davis were appointed to the Board. As a result of the foregoing, our Board of Directors now consists of three members.

The names of our current officers and directors, as well as certain information about them are set forth below:



|                 |  |     |  |                                    
|---------------- |  | --- |  | -----------------------------------
|Name             |  | Age |  | Position(s)                        
|George Konrad    |  | 49  |  | President, Treasurer, Director     
|                 |  |    
|Fred Barker      |  | 72  |  | Vice President, Secretary, Director
|                 |  |    
|Richard H. Davis |  | 47  |  | Director                           

George Konrad. Mr. Konrad is in charge of our operations. His company, ARD, is
involved in various advanced technology projects. ARD is a full-service R & D machine shop with CNC and CAD-CAM capabilities. Mr. Konrad has substantially improved the design of the JimmyJib, a camera boom that is used by cinematographers
all over the world. This boom has electronic remote capabilities and is utilized at most movie locations and major sporting events around the world. ARD manufactures all of the major components for the JimmyJib and turns out thousands of parts each
month.

Fred Barker.Mr. Barker directs our engineering activities. He is a graduate of the University of Washington, with a
degree in mechanical engineering, and has done advanced studies at the University of Puget Sound and the University of Arizona. He was awarded two National Defense Education Act (NDEA) scholarships for science and math and was a



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Fulbright Scholar. From 1958 to 1972, Mr. Barker worked as an engineer for The Boeing Company, focusing on the structures, wing groups and
instrumentation of the 737, 747, 757 and 767 aircraft. From 1987 to 2002, Mr. Barker owned and operated VertiFan, Inc., which designed and developed vertical take-off and landing aircraft under a U.S. Department of Defense contract.
Mr. Barker has been honored for outstanding contributions by the Seattle chapters of the American Societies of Manufacturing Engineers and Automotive Engineers.

Richard H. Davis. Richard Davis received a B.S degree in economics from Florida State University in 1982. He joined First Equity Corporation (First Equity) in Miami that same year. First Equity
operated as a regional full-service brokerage and investment bank. Mr. Davis duties included equity deal structure and brokerage-related activities. After First Equity was acquired in 2001, Mr. Davis joined the corporate finance
department of William R. Hough & Company (Hough), where he continued structuring equity finance and private acquisitions. Hough was acquired in 2004 by RBC Dain Rauscher (Dain), a global investment banking firm. Dain
consolidated Houghs corporate finance activities into its New York offices. Mr. Davis elected to remain in Miami and joined Martinez-Ayme Securities, assuming the newly-created position of managing director of corporate finance.

Election of Directors

Holders of our
common stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders, including the election of directors. Cumulative voting with respect to the election of directors is not permitted by our Certificate of
Incorporation.

Our Board of Directors shall be elected at the annual meeting of the shareholders or at a special meeting called for that
purpose. Each director shall hold office until the next annual meeting of shareholders and until the directors successor is elected and qualified.

Committees

Our Board does not yet have any committees; however, we intend to establish an audit committee and a
compensation/stock option committee in the near future.

Compliance with Section 16(a) of the Securities and Exchange Act of 1934

Under the securities laws of the United States, our directors, executive officers and any persons holding more than 10% of the
Companys common stock are required to report their initial ownership of the Companys common stock and any subsequent changes in that ownership to the Securities and Exchange Commission. Specific due dates for these reports have been
established and the Company is required to identify in this Report those persons who failed to timely file these reports. Our review has revealed the following:



| |  |  | Richard G. McKee, Jr, a director of the Company from January 2000 until his February 2008 resignation, filed in March 2008 the following late reports:
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | (i) | a Form 3 report due in January 2000 with respect to his ownership of common stock as of the date he became a director; and
| | --- | --------------------------------------------------------------------------------------------------------------------------



| | (ii) | a Form 4 report reflecting a November 2001 private purchase of 18,101 shares of common stock and issuance to him of 20,000 shares of common stock in February 2008 in consideration
of his consulting services relating to the Merger.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | No Form 3 or Form 4 reports were filed by the Companys officers and directors who resigned or whose service was otherwise terminated in connection with or
prior to the Merger, except for Mr. McKees reports described above.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In making this disclosure, we have relied
solely on written representations of our directors and executive officers and copies of the reports that have been filed with the Commission.



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Code of Ethics

We have not adopted a code of ethics for our management because of the costs involved and our lack of resources and limited operations.



|ITEM 10. | EXECUTIVE COMPENSATION.
|-------- | -----------------------

We have not paid any
compensation to officers or directors in such capacity; however, we periodically engage the services of Messrs. Konrad and Barker to perform certain services at a rate of $60 per hour. We believe that the compensation to Mr. Barker does not
exceed the compensation that would be charged by an unaffiliated third-party rendering comparable services. See Certain Relationships and Related Transactions.

Employment Agreements

We have not entered into employment agreements with our executive officers as
of the date of this Report. We may in the future enter into employment agreements with Messrs. Konrad and Barker. No assurance can be given as to when, if ever, such agreements will be entered into or the terms thereof; however, we intend to use
fair market terms in any such agreement. We expect that such agreements could include bonuses, severance payments, non-competition provisions and other material items.

We may also issue to our officers and directors stock options on terms and conditions to be determined by our Board of Directors or designated committee.

Compensation of Directors

We have not yet determined a compensation plan for our directors. We
intend to provide our directors with reasonable compensation for their services in cash, stock and/or options.

Indemnification of Directors and
Officers

Our Certificate of Incorporation allows us to indemnify our present and former officers and directors and other personnel
against liabilities and expenses arising from their service to the full extent permitted by Delaware law. The persons indemnified include our (i) present or former directors or officers, (ii) any person who while serving in any of the
capacities referred to in clause (i) who served at our request as a director, officer, partner, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, and (iii) any person nominated or designated by (or pursuant to authority granted by) our board of directors or any committee thereof to serve in any of the capacities referred to in clauses (i) or (ii).



|ITEM 11. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
|-------- | -----------------------------------------------------------------------------------------------

The following table sets forth certain information as of February 12, 2008, following the closing of the Merger regarding the beneficial ownership of
our common stock by (i) each of our directors and named executive officers; and (ii) all of our executive officers and directors as a group. To our knowledge, no other person beneficially owns more than 5% of our common stock.



|                                                            |  |              |  |                 
|----------------------------------------------------------- |  | ------------ |  | ----------------
|Name and Address of Beneficial Owner                        |  | Shares Owned |  | Percent of Class
|George Konrad 21615 N Second Avenue Phoenix, AZ 85027       |  | 12,077,407   |  | 46.7            
|                                                            |  |             
|Fred Barker 21615 N Second Avenue Phoenix, AZ 85027         |  | 3,615,990    |  | 14.0            
|                                                            |  |             
|Richard H. Davis1 8365 SW 168 Terrace                       |  | 474,900      |  | 1.8             
|Palmetto Bay, FL l33157                                     |  |              |  |                 
|                                                            |  |             
|All Directors and Executive Officers as a group (3 persons) |  | 16,168,297   |  | 62.5            



|1 | Mr. Davis shares include 120,533 shares owned by
Mr. Davis wife, as to which he disclaims beneficial ownership.
|- | -----------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|ITEM 12. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
|-------- | --------------------------------------------------------------------------

Pursuant to its agreement with ARD, the Company uses the ARD Facility and pays ARD (i) monthly rent of $.75 per square foot plus a proportionate share of utilities, (ii) $60 per hour for engineering,
development and machining services by Mr. Konrad, and (iii) rates ranging from $60-$75 per hour for machine shop services and manufacturing services. Pursuant to its agreement with Mr. Barker, the Company pays him $60 per hour for his
engineering and development services. See Property.

Since inception in March 2007, we have paid from approximately $3,000 to
$8,000 per month, for a total of approximately $48,000, under our agreement with ARD, and from approximately $7,000 to $8,000, for a total of approximately $55,000, under our agreement with Mr. Barker.

We do not have any independent directors, as Messrs. Konrad and Barker are officers and principal shareholders, and Mr. Davis works for our
investment banking firm. We intend to seek qualified independent directors to serve on our Board of Directors.



|ITEM 13. | EXHIBITS
|-------- | --------

See Exhibit Index, below.



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES.
|-------- | ---------------------------------------

The firm
of Berenfeld Spritzer Shechter & Sheer, Certified Public Accountants and Advisors LLP (Berenfeld) was designated by our Board of Directors to audit the financial statements of our company for the fiscal year ended
December 31, 2007 and 2006.

Our Audit Committee, comprised of directors who resigned in connection with the Merger, pre-approved the
engagement of Berenfeld for all professional services. The pre-approval process generally involved the full Audit Committee evaluating and approving the particular engagement prior to the commencement of services. We intend to reconstitute the Audit
Committee shortly and follow the same approval procedures for future audits.

The following table summarizes the aggregate fees billed and
expected to be billed to us by Berenfeld for fiscal years ended December 31, 2007 and 2006:



|                                      |  |      |        |      |   |       
|------------------------------------- |  | ---- | ------ | ---- | - | ------
|Principal Accountant Fees and Service |  | 2007 |        | 2006
|Audit Fees                            |  | $    | 24,000 |      | $ | 26,000
|Tax Fees                              |  |      | 750    |      |   | 750   
|                                      |  |      |        |      |   |       
|Total                                 |  | $    | 24,750 |      | $ | 26,750
|                                      |  |      |        |      |   |       

Audit Fees

The aggregate fees billed by Berenfeld for professional services rendered for the fiscal year ended 2007 and 2006, including fees associated with the annual audit, the reviews of the consolidated financial statements
included in our Forms 10-KSB, the reviews of the quarterly reports on Form 10-QSB, fees related to filing with the Securities and Exchange Commission and consultations on accounting issues and the application on new accounting pronouncements were
approximately $24,000 and $26,000, respectively.



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##### Table of Contents

Tax Fees

The aggregate fees billed by Brahna Deer for tax compliance, tax advice and tax planning rendered to the Company for the fiscal years ended December 31, 2007 and 2006 were approximately $750 and $750, respectively.



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Vyrex Corporation

Annual Report on Form 10-KSB

Year Ended December 31, 2007

EXHIBIT INDEX



|            |  |                                                                                                                                                  
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                      
|3.1         |  | Certificate of Incorporation of Vyrex (Delaware) Corporation as filed with the Delaware Secretary of State on September 8, 2005.1                
|            | 
|3.2         |  | Bylaws of Vyrex (Delaware) Corporation, dated as of September 9, 2005.1                                                                          
|            | 
|10.1        |  | Agreement and Plan of Merger, dated as of February 11, 2008 by and among Vyrex Corporation, Vyrex Acquisition Corporation and PowerVerde, Inc.1,2
|            | 
|10.2        |  | Services Agreement dated as of February 11, 2008, between PowerVerde, Inc., and Fred Barker d/b/a Barker Engineering.1                           
|            | 
|10.3        |  | Services Agreement dated as of February 11, 2008, between PowerVerde, Inc., and Arizona Research and Development, Inc.1                          
|            | 
|21.1        |  | Subsidiaries of the Company.1                                                                                                                    
|            | 
|31.1        |  | Certification of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.                                                
|            | 
|31.2        |  | Certification of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.                                                
|            | 
|32.1        |  | Certification of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.                                                
|            | 
|32.2        |  | Certification of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.                                                



|1 | Previously filed on Form 8-K filed with the SEC on
February 11, 2008.
|- | ---------------------------------------------------------------------

|2 | Nonmaterial schedules and exhibits identified in the Agreement and Plan of Merger have been omitted pursuant to
Item 601(b)(2) of Regulation S-B. The Company agrees to furnish supplementally to the SEC upon request by the SEC of a copy of any omitted schedule(s) or exhibit(s).
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

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 INCORPORATED
|                      |  |  | 
|Dated: March 31, 2008 |  |  |  | By:                |  | /s/ George Konrad                        
|                      |  |  |  |                    |  | George Konrad                            
|                      |  |  |  |                    |  | President and Principal Executive Officer

In accordance with the Exchange Act, this Report has been signed by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated.



|                     |  |                                                                                                                                             |  |               
|-------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|Signature            |  | Title                                                                                                                                       |  | Date          
|                     |  |                                                                                                                                            
|/S/George Konrad     |  | President, Chief Executive Officer, Chief Financial
Officer, Treasurer and Director (principal executive, financial
and accounting officer) |  | March 31, 2008
|                     |  |                                                                                                                                            
|/S/Fred Barker       |  | Vice President, Secretary and Director                                                                                                      |  | March 31, 2008
|                     |  |                                                                                                                                            
|/S/Richard H. Davis. |  | Director                                                                                                                                    |  | March 31, 2008



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##### Table of Contents

Vyrex Corporation

Annual Report on Form 10-KSB

Year Ended December 31, 2007

INDEX TO FINANCIAL STATEMENTS



|                                                        |  |     
|------------------------------------------------------- |  | ----
|                                                        |  | Page
|Report of Independent Registered Public Accounting Firm |  | F-2 
|                                                        | 
|Balance Sheet                                           |  | F-3 
|                                                        | 
|Statement of Operations                                 |  | F-4 
|                                                        | 
|Statement of Stockholders Equity (Deficiency)          |  | F-5 
|                                                        | 
|Statements of Cash Flows                                |  | F-8 
|                                                        | 
|Notes to Financial Statements                           |  | F-9 



F-1



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Audit Committee, Board of Directors and Stockholders of Vyrex
Corporation

We have audited the accompanying balance sheets of Vyrex Corporation (a development stage enterprise) as of December 31, 2007 and 2006
and the related statements of operations, changes in stockholders equity (deficiency) and cash flows for the years then ended, and for the period from January 1, 2005 through December 31, 2007. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted
our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the companys internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial position of Vyrex Corporation (a development stage enterprise) as of December 31, 2007 and 2006, and the results of its operations and its cash flows for the years then ended and
for the period from January 1, 2005 through December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has incurred recurring operating losses, has a
working capital deficiency and a net capital deficiency. These conditions raise substantial doubt about the Companys ability to continue as a going concern. Managements plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that may result from the outcome of this uncertainty.



|                                                                                      
|--------------------------------------------------------------------------------------
|/s/ Berenfeld Spritzer Shechter & Sheer, LLP Certified Public Accountants and Advisors
|Coral Gables, Florida                                                                 
|March 28, 2008                                                                        



F-2



---

##### Table of Contents

Vyrex Corporation

(a development stage enterprise)

Balance Sheet



|                                                                                                |  |             |             |   |      |   |             |  
|----------------------------------------------------------------------------------------------- |  | ----------- | ----------- | - | ---- | - | ----------- | -
|                                                                                                |  | December 31 |            
|                                                                                                |  | 2007        |             |   | 2006 |  
|Assets                                                                                          |  |             |             |   |      |   |             |  
|Current assets:                                                                                 |  |             |             |   |      |   |             |  
|Cash                                                                                            |  | $           | 4,125       |   |      | $ | 3,721       |  
|Accounts receivable                                                                             |  |             | 5,736       |   |      |   | 5,265       |  
|                                                                                                |  |             |             |   |      |   |             |  
|Total assets                                                                                    |  | $           | 9,861       |   |      | $ | 8,986       |  
|                                                                                                |  |             |             |   |      |   |             |  
|                                                                                                |  |            
|Liabilities and stockholders deficiency                                                        |  |             |             |   |      |   |             |  
|Current liabilities:                                                                            |  |             |             |   |      |   |             |  
|Accounts payable                                                                                |  | $           | 200,609     |   |      | $ | 126,158     |  
|Accrued liabilities and accrued vacation                                                        |  |             | 85,372      |   |      |   | 63,995      |  
|Accrued payroll                                                                                 |  |             | 20,637      |   |      |   | 20,637      |  
|Notes payable                                                                                   |  |             | 200,000     |   |      |   | 217,000     |  
|                                                                                                |  |             |             |   |      |   |             |  
|Total liabilities                                                                               |  |             | 506,618     |   |      |   | 427,790     |  
|                                                                                                |  |             |             |   |      |   |             |  
|Commitments and contingencies                                                                   |  |             |             |   |      |   |             |  
|                                                                                                |  |            
|Stockholders deficiency:                                                                       |  |             |             |   |      |   |             |  
|Preferred stock, $.0001 par value; 50,000,000 shares authorized; none issued                    |  |             |            |   |      |   |            |  
|Common stock, $.0001 par value; 200,000,000 shares authorized; 1,019,144 issued and outstanding |  |             | 102         |   |      |   | 102         |  
|Additional paid-in capital                                                                      |  |             | 13,129,473  |   |      |   | 13,114,487  |  
|Deficit accumulated during the development stage                                                |  |             | (13,626,332 | ) |      |   | (13,533,393 | )
|                                                                                                |  |             |             |   |      |   |             |  
|Total stockholders deficiency                                                                  |  |             | (496,757    | ) |      |   | (418,804    | )
|                                                                                                |  |             |             |   |      |   |             |  
|Total liabilities and stockholders deficiency                                                  |  | $           | 9,861       |   |      | $ | 8,986       |  
|                                                                                                |  |             |             |   |      |   |             |  

The accompanying notes are an integral part of these financial statements.



F-3



---

##### Table of Contents

Vyrex Corporation

(a development stage enterprise)

Statement of Operations



|                                                               |  |                          |           |   |            |   |           |                |  |   |             |  
|-------------------------------------------------------------- |  | ------------------------ | --------- | - | ---------- | - | --------- | -------------- |  | - | ----------- | -
|                                                               |  | Years ended December 31, |           |   | Cumulative |  
|                                                               |  | 2007                     |           |   | 2006       |   |           | from Inception | 
|Licensing and royalty revenue                                  |  | $                        | 25,465    |   |            | $ | 43,465    |                |  | $ | 922,129     |  
|                                                               |  |                          |           |   |            |   |           |                |  |   |             |  
|Operating expenses:                                            |  |                          |           |   |            |   |           |                |  |   |             |  
|Research and development                                       |  |                          | 7,500     |   |            |   | 7,525     |                |  |   | 6,493,778   |  
|Marketing and selling                                          |  |                          |           |   |            |   |           |                |  |   | 438,664     |  
|General and administrative                                     |  |                          | 74,497    |   |            |   | 121,995   |                |  |   | 6,525,162   |  
|Loss on disposal of fixed assets                               |  |                          |           |   |            |   |           |                |  |   | 13,664      |  
|                                                               |  |                          |           |   |            |   |           |                |  |   |             |  
|Total operating expenses                                       |  |                          | 81,997    |   |            |   | 129,520   |                |  |   | 13,471,268  |  
|                                                               |  |                          |           |   |            |   |           |                |  |   |             |  
|Loss from operations                                           |  |                          | (56,532   | ) |            |   | (86,055   | )              |  |   | (12,549,139 | )
|                                                               |  |                          |           |   |            |   |           |                |  |   |             |  
|Other income (expense):                                        |  |                          |           |   |            |   |           |                |  |   |             |  
|Interest income                                                |  |                          |           |   |            |   | 332       |                |  |   | 476,376     |  
|Other income                                                   |  |                          |           |   |            |   |           |                |  |   | 4,434       |  
|Gain on sale of investment in available-for-sale securities    |  |                          |           |   |            |   | 13,878    |                |  |   | 13,878      |  
|Interest expense                                               |  |                          | (36,407   | ) |            |   | (21,040   | )              |  |   | (221,981    | )
|Charge from issuance of stock options for bridge financing     |  |                          |           |   |            |   |           |                |  |   | (1,349,900  | )
|                                                               |  |                          |           |   |            |   |           |                |  |   |             |  
|Total other expense                                            |  |                          | (36,407   | ) |            |   | (6,830    | )              |  |   | (1,077,193  | )
|                                                               |  |                          |           |   |            |   |           |                |  |   |             |  
|Net loss                                                       |  | $                        | (92,939   | ) |            | $ | (92,885   | )              |  | $ | (13,626,332 | )
|                                                               |  |                          |           |   |            |   |           |                |  |   |             |  
|Net loss per share  basic and diluted                         |  | $                        | (0.09     | ) |            | $ | (0.09     | )              |  |   |             |  
|                                                               |  |                          |           |   |            |   |           |                |  |   |             |  
|Weighted-average common shares outstanding  basic and diluted |  |                          | 1,019,144 |   |            |   | 1,019,144 |                |  |   |             |  
|                                                               |  |                          |           |   |            |   |           |                |  |   |             |  

The accompanying notes are an integral part of these financial statements.



F-4



---

##### Table of Contents

Vyrex Corporation

(a development stage enterprise)

Statement of Stockholders Equity (Deficiency)

For the Period from January 2, 1991
(Inception)

through December 31, 2007



|                                                                                                                                           |  |              |  |            |    |                 |                                         |            |       |                          |   |              |   |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------ |  | ---------- | -- | --------------- | --------------------------------------- | ---------- | ----- | ------------------------ | - | ------------ | - |  | - | ---------- | -
|                                                                                                                                           |  | Common Stock |  | Additional |    |                 | Deficitaccumulatedduring thedevelopment |            |       | Totalstockholdersequity |  
|                                                                                                                                           |  | Shares       |  | Amount     |    | paid-in capital |                                         |            | stage |                          |   | (deficiency) |  
|Issuance (at $.02 per share) for acquisition of technology retroactively reduced for 18,000 shares returned and retired on October 1,
1995 |  | 402,000      |  | $          | 40 |                 | $                                       | 6,660      |       |                          | $ |             |   |  | $ | 6,700      |  
|Issuance (at $.02 per share) for cash                                                                                                      |  | 60,000       |  |            | 6  |                 |                                         | 994        |       |                          |   |              |   |  |   | 1,000      |  
|Issuance (at $8.33 per share) for cash                                                                                                     |  | 96,000       |  |            | 10 |                 |                                         | 799,990    |       |                          |   |             |   |  |   | 800,000    |  
|Issuance as compensation (at $8.33 per share)                                                                                              |  | 3,900        |  |            |   |                 |                                         | 32,500     |       |                          |   |             |   |  |   | 32,500     |  
|Issuance (at $16.67 per share) upon conversion of note payable                                                                             |  | 12,000       |  |            | 2  |                 |                                         | 199,998    |       |                          |   |             |   |  |   | 200,000    |  
|Issuance (at $25.00 per share) for cash, net of issuance costs of $4,086                                                                   |  | 3,960        |  |            |   |                 |                                         | 94,914     |       |                          |   |             |   |  |   | 94,914     |  
|Net loss                                                                                                                                   |  |             |  |            |   |                 |                                         |           |       |                          |   | (1,085,932   | ) |  |   | (1,085,932 | )
|                                                                                                                                           |  |              |  |            |    |                 |                                         |            |       |                          |   |              |   |  |   |            |  
|Balance at December 31, 1993                                                                                                               |  | 577,860      |  |            | 58 |                 |                                         | 1,135,056  |       |                          |   | (1,085,932   | ) |  |   | 49,182     |  
|Issuance (at $25.00 per share) for cash, net of issuance costs of $21,000                                                                  |  | 11,880       |  |            | 1  |                 |                                         | 275,999    |       |                          |   |             |   |  |   | 276,000    |  
|Issuance (at $25.00 per share) in lieu of finders fee                                                                                     |  | 840          |  |            |   |                 |                                         | 21,000     |       |                          |   |             |   |  |   | 21,000     |  
|Issuance (at $25.00 per share) in lieu of finders fee                                                                                     |  | 600          |  |            |   |                 |                                         | 15,000     |       |                          |   |             |   |  |   | 15,000     |  
|Issuance (at $25.00 per share) for cash, net of issuance costs of $41,844                                                                  |  | 2998         |  |            |   |                 |                                         | 33,126     |       |                          |   |             |   |  |   | 33,126     |  
|Net loss                                                                                                                                   |  |             |  |            |   |                 |                                         |           |       |                          |   | (467,683     | ) |  |   | (467,683   | )
|                                                                                                                                           |  |              |  |            |    |                 |                                         |            |       |                          |   |              |   |  |   |            |  
|Balance at December 31, 1994                                                                                                               |  | 594,178      |  |            | 59 |                 |                                         | 1,480,181  |       |                          |   | (1,553,615   | ) |  |   | (73,375    | )
|Issuance (at $25.00 per share) for cash, net of issuance costs of $46,976                                                                  |  | 17,993       |  |            | 2  |                 |                                         | 402,842    |       |                          |   |             |   |  |   | 402,844    |  
|Issuance (at $25.00 per share) in settlement of account payable                                                                            |  | 725          |  |            |   |                 |                                         | 18,123     |       |                          |   |             |   |  |   | 18,123     |  
|Issuance (at par value) as compensation for services related to prior issuances of common stock                                            |  | 9,960        |  |            | 1  |                 |                                         | (1         | )     |                          |   |             |   |  |   |           |  
|Issuance (at $25.00 per share) as compensation for services related to offering                                                            |  | 1,600        |  |            |   |                 |                                         | 40,002     |       |                          |   |             |   |  |   | 40,002     |  
|Issuance (at $25.00 per share) of options for 54,000 shares as compensation for arranging bridge financing                                 |  |             |  |            |   |                 |                                         | 1,349,900  |       |                          |   |             |   |  |   | 1,349,900  |  
|Net loss                                                                                                                                   |  |             |  |            |   |                 |                                         |           |       |                          |   | (1,854,584   | ) |  |   | (1,854,584 | )
|                                                                                                                                           |  |              |  |            |    |                 |                                         |            |       |                          |   |              |   |  |   |            |  
|Balance at December 31, 1995                                                                                                               |  | 624,456      |  |            | 62 |                 |                                         | 3,291,047  |       |                          |   | (3,408,199   | ) |  |   | (117,090   | )
|Proceeds from initial public offering (at $54.17 per unit), net of issuance costs of $1,135,453                                            |  | 126,852      |  |            | 13 |                 |                                         | 5,735,664  |       |                          |   |             |   |  |   | 5,735,677  |  
|Sale of option to purchase 36,000 shares (at $25.00 per share)                                                                             |  |             |  |            |   |                 |                                         | 50,000     |       |                          |   |             |   |  |   | 50,000     |  
|Exercise of stock options (at $25.00 per share) for cash                                                                                   |  | 36,000       |  |            | 4  |                 |                                         | 899,996    |       |                          |   |             |   |  |   | 900,000    |  
|Conversion of notes payable and related accrued interest (at $25.00 per share)                                                             |  | 10,322       |  |            | 1  |                 |                                         | 258,044    |       |                          |   |             |   |  |   | 258,045    |  
|Exercise of stock options (at $.0019 per share) for cash                                                                                   |  | 54,000       |  |            | 5  |                 |                                         | 95         |       |                          |   |             |   |  |   | 100        |  
|Issuance of units as compensation for legal services (at $37.92 per share)                                                                 |  | 2,915        |  |            |   |                 |                                         | 110,529    |       |                          |   |             |   |  |   | 110,529    |  
|Net loss                                                                                                                                   |  |             |  |            |   |                 |                                         |           |       |                          |   | (1,820,614   | ) |  |   | (1,820,614 | )
|                                                                                                                                           |  |              |  |            |    |                 |                                         |            |       |                          |   |              |   |  |   |            |  
|Balance at December 31, 1996                                                                                                               |  | 854,545      |  |            | 85 |                 |                                         | 10,345,375 |       |                          |   | (5,228,813   | ) |  |   | 5,116,647  |  
|Balance at December 31, 1996                                                                                                               |  | 854,545      |  | $          | 85 |                 | $                                       | 10,345,375 |       |                          | $ | (5,228,813   | ) |  | $ | 5,116,647  |  
|Exercise of warrants, 24 shares at $66.67 per share                                                                                        |  | 24           |  |            |   |                 |                                         | 1,600      |       |                          |   |             |   |  |   | 1,600      |  
|Warrants issued in conjunction with debenture offering                                                                                     |  |             |  |            |   |                 |                                         | 62,220     |       |                          |   |             |   |  |   | 62,220     |  



F-5



---

##### Table of Contents

Vyrex Corporation

(a development stage enterprise)

Statement of Stockholders Equity (Deficiency)

For the Period from January 2, 1991 (Inception)

through December 31, 2007



|                                                                       |  |              |  |            |  |                                         |  |             |                          |  |              |  
|---------------------------------------------------------------------- |  | ------------ |  | ---------- |  | --------------------------------------- |  | ----------- | ------------------------ |  | ------------ | -
|                                                                       |  | Common Stock |  | Additional |  | Deficitaccumulatedduring thedevelopment |  |             | Totalstockholdersequity | 
|                                                                       |  | Shares       |  | Amount     |  | paid-in capital                         |  | stage       |                          |  | (deficiency) |  
|Net loss                                                               |  |             |  |           |  |                                        |  | (3,295,840  | )                        |  | (3,295,840   | )
|                                                                       |  |              |  |            |  |                                         |  |             |                          |  |              |  
|Balance at December 31, 1997                                           |  | 854,569      |  | 85         |  | 10,409,195                              |  | (8,524,653  | )                        |  | 1,884,627    |  
|Issuance of stock as partial consideration for placement of debentures |  | 960          |  |           |  | 50,000                                  |  |            |                          |  | 50,000       |  
|Issuance of stock on conversion of debentures                          |  | 27,267       |  | 3          |  | 807,638                                 |  |            |                          |  | 807,641      |  
|Issuance of shares upon cashless exercise of stock options             |  | 8,019        |  | 1          |  | 396,579                                 |  |            |                          |  | 396,580      |  
|Issuance of 45,000 stock options for services                          |  |             |  |           |  | 87,000                                  |  |            |                          |  | 87,000       |  
|Net loss                                                               |  |             |  |           |  |                                        |  | (3,388,412  | )                        |  | (3,388,412   | )
|                                                                       |  |              |  |            |  |                                         |  |             |                          |  |              |  
|Balance at December 31, 1998                                           |  | 890,815      |  | 89         |  | 11,750,412                              |  | (11,913,065 | )                        |  | (162,564     | )
|Issuance (at $2.83 per share) for cash                                 |  | 14,329       |  | 1          |  | 40,599                                  |  |            |                          |  | 40,600       |  
|Issuance of 5,640 stock options for services                           |  |             |  |           |  | 6,580                                   |  |            |                          |  | 6,580        |  
|Issuance of 30,000 warrants for services                               |  |             |  |           |  | 30,500                                  |  |            |                          |  | 30,500       |  
|Net loss                                                               |  |             |  |           |  |                                         |  | (788,548    | )                        |  | (788,548     | )
|                                                                       |  |              |  |            |  |                                         |  |             |                          |  |              |  
|Balance at December 31, 1999                                           |  | 905,144      |  | 90         |  | 11,828,091                              |  | (12,701,613 | )                        |  | (873,432     | )
|Forgiveness of accrued compensation                                    |  |             |  |           |  | 422,559                                 |  |            |                          |  | 422,559      |  
|Issuance (at $7.50 per share) for cash                                 |  | 36,000       |  | 4          |  | 269,996                                 |  |            |                          |  | 270,000      |  
|Exercise of stock options (at $.83 per share) for cash                 |  | 30,000       |  | 3          |  | 24,997                                  |  |            |                          |  | 25,000       |  
|Exercise of warrants (at $.83 per share) for cash                      |  | 12,000       |  | 1          |  | 9,999                                   |  |            |                          |  | 10,000       |  
|Issuance (at $8.33 per share) for cash                                 |  | 18,000       |  | 2          |  | 149,998                                 |  |            |                          |  | 150,000      |  
|Reduction of exercise price for options and warrants                   |  |              |  |            |  | 148,000                                 |  |            |                          |  | 148,000      |  
|Net loss                                                               |  |              |  |            |  |                                         |  | (335,487    | )                        |  | (335,487     | )
|                                                                       |  |              |  |            |  |                                         |  |             |                          |  |              |  
|Balance at December 31, 2000                                           |  | 1,001,144    |  | 100        |  | 12,853,640                              |  | (13,037,100 | )                        |  | (183,360     | )
|Issuance of 6,000 stock options for services                           |  |             |  |           |  | 18,500                                  |  |            |                          |  | 18,500       |  
|Issuance of 24,000 warrants for services                               |  |             |  |           |  | 50,000                                  |  |            |                          |  | 50,000       |  
|Net loss                                                               |  |             |  |           |  |                                        |  | (202,185    | )                        |  | (202,185     | )
|                                                                       |  |              |  |            |  |                                         |  |             |                          |  |              |  
|Balance at December 31, 2001                                           |  | 1,001,144    |  | 100        |  | 12,922,140                              |  | (13,239,285 | )                        |  | (317,045     | )

(Continued)



F-6



---

##### Table of Contents

Vyrex Corporation

(a development stage enterprise)

Statement of Stockholders Equity (Deficiency)

For the Period from January 2, 1991 (Inception)

through December 31, 2007



|                                                                |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              |             |   |  |   |          |  
|--------------------------------------------------------------- |  | ------------ |  | ---------- | --- | ----------------------------- | - | ---------- | --------------------------------------- | - | ------- | ------------------------ |  | ------------ | ----------- | - |  | - | -------- | -
|                                                                |  | Common Stock |  | Additional |     | Accumulatedothercomprehensive |   |            | Deficitaccumulatedduring thedevelopment |   |         | Totalstockholdersequity | 
|                                                                |  | Shares       |  | Amount     |     | paid-in capital               |   | income     |                                         |   | stage   |                          |  | (deficiency) |            
|Balance at December 31, 2001                                    |  | 1,001,144    |  | $          | 100 |                               | $ | 12,922,140 |                                         |   |         |                          |  | $            | (13,239,285 | ) |  | $ | (317,045 | )
|Modification of stock options                                   |  |              |  |            |     |                               |   | 2,000      |                                         |   |         |                          |  |              |             |   |  |   | 2,000    |  
|Issuance of stock upon exercise of warrants at $.83 per share   |  | 18,000       |  |            | 2   |                               |   | 14,998     |                                         |   |         |                          |  |              |             |   |  |   | 15,000   |  
|Forgiveness of accrued compensation                             |  |              |  |            |     |                               |   | 140,978    |                                         |   |         |                          |  |              |             |   |  |   | 140,978  |  
|Issuance of 2,400 warrants for services                         |  |              |  |            |     |                               |   | 2,000      |                                         |   |         |                          |  |              |             |   |  |   | 2,000    |  
|Issuance of 600 warrants for services                           |  |              |  |            |     |                               |   | 300        |                                         |   |         |                          |  |              |             |   |  |   | 300      |  
|Net loss                                                        |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              | (3,763      | ) |  |   | (3,763   | )
|                                                                |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              |             |   |  |   |          |  
|Balance at December 31, 2002                                    |  | 1,019,144    |  |            | 102 |                               |   | 13,082,416 |                                         |   |         |                          |  |              | (13,243,048 | ) |  |   | (160,530 | )
|Issuance of 12,000 warrants in connection with debt issuance    |  |              |  |            |     |                               |   | 6,000      |                                         |   |         |                          |  |              |             |   |  |   | 6,000    |  
|Net loss                                                        |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              | (90,540     | ) |  |   | (90,540  | )
|                                                                |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              |             |   |  |   |          |  
|Balance at December 31, 2003                                    |  | 1,019,144    |  |            | 102 |                               |   | 13,088,416 |                                         |   |         |                          |  |              | (13,333,588 | ) |  |   | (245,070 | )
|Forgiveness of accrued compensation                             |  |              |  |            |     |                               |   | 26,071     |                                         |   |         |                          |  |              |             |   |  |   | 26,071   |  
|Net loss                                                        |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              | (37,800     | ) |  |   | (37,800  | )
|Effect of change in fair value of available-for-sale securities |  |              |  |            |     |                               |   |            |                                         | $ | 12,231  |                          |  |              |             |   |  |   | 12,231   |  
|                                                                |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              |             |   |  |   |          |  
|Comprehensive loss                                              |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              |             |   |  |   | (25,569  | )
|                                                                |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              |             |   |  |   |          |  
|Balance at December 31, 2004                                    |  | 1,019,144    |  |            | 102 |                               |   | 13,114,487 |                                         |   | 12,231  |                          |  |              | (13,371,388 | ) |  |   | (244,568 | )
|Net loss                                                        |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              | (69,120     | ) |  |   | (69,120  | )
|Effect of change in fair value of available-for-sale securities |  |              |  |            |     |                               |   |            |                                         |   | 3,515   |                          |  |              |             |   |  |   | 3,515    |  
|                                                                |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              |             |   |  |   |          |  
|Comprehensive loss                                              |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              |             |   |  |   | (65,605  | )
|                                                                |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              |             |   |  |   |          |  
|Balance at December 31, 2005                                    |  | 1,019,144    |  | $          | 102 |                               | $ | 13,114,487 |                                         | $ | 15,746  |                          |  | $            | (13,440,508 | ) |  | $ | (310,173 | )
|Net loss                                                        |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              | (92,885     | ) |  |   | (92,885  | )
|Effect of securities sold Dec 2006                              |  |              |  |            |     |                               |   |            |                                         |   | (15,746 | )                        |  |              |             |   |  |   | (15,746  | )
|                                                                |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              |             |   |  |   |          |  
|Comprehensive loss                                              |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              |             |   |  |   | (108,631 | )
|                                                                |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              |             |   |  |   |          |  
|Balance at December 31, 2006                                    |  | 1,019,144    |  | $          | 102 |                               | $ | 13,114,487 |                                         | $ |        |                          |  | $            | (13,533,393 | ) |  | $ | (418,804 | )
|                                                                |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              |             |   |  |   |          |  
|Net loss                                                        |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              | (92,939     | ) |  |   | (92,939  | )
|Issuance of 25,000 warrants in connection with debt issuance    |  |              |  |            |     |                               |   | 14,986     |                                         |   |         |                          |  |              |             |   |  | $ | 14,986   |  
|                                                                |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              |             |   |  |   |          |  
|Balance at December 31, 2007                                    |  | 1,019,144    |  | $          | 102 |                               | $ | 13,129,473 |                                         | $ |        |                          |  | $            | (13,626,332 | ) |  | $ | (496,757 | )
|                                                                |  |              |  |            |     |                               |   |            |                                         |   |         |                          |  |              |             |   |  |   |          |  

The accompanying notes are an integral part of these financial statements.



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##### Table of Contents

Vyrex Corporation

(a development stage enterprise)

Statements of Cash Flows



|                                                                                          |  |                          |         |   |            |   |         |                |  |   |             |  
|----------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---------- | - | ------- | -------------- |  | - | ----------- | -
|                                                                                          |  | Years ended December 31, |         |   | Cumulative |  
|                                                                                          |  | 2007                     |         |   | 2006       |   |         | From Inception | 
|Operating activities                                                                      |  |                          |         |   |            |   |         |                |  |   |             |  
|Net loss                                                                                  |  | $                        | (92,939 | ) |            | $ | (92,885 | )              |  | $ | (13,626,332 | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                          |         |   |            |   |         |                |  |   |             |  
|Depreciation, amortization and impairment charges                                         |  |                          |         |   |            |   |         |                |  |   | 336,329     |  
|Accretion of debt discount                                                                |  |                          | 14,986  |   |            |   |         |                |  |   | 20,986      |  
|Interest receivable                                                                       |  |                          |         |   |            |   |         |                |  |   | 3,506       |  
|Loss on disposal of fixed assets                                                          |  |                          |         |   |            |   |         |                |  |   | 13,664      |  
|Issuance of compensatory notes, stock, stock options and warrants                         |  |                          |         |   |            |   |         |                |  |   | 2,302,512   |  
|Gain on sale of available-for-sale securities                                             |  |                          |         |   |            |   | (13,878 | )              |  |   | (13,878     | )
|Other income                                                                              |  |                          |         |   |            |   |         |                |  |   | (4,434      | )
|Changes in operating assets and liabilities:                                              |  |                          |         |   |            |   |         |                |  |   |             |  
|Accounts receivable and other assets                                                      |  |                          | (471    | ) |            |   | 17,235  |                |  |   | 94,264      |  
|Accounts payable and accrued liabilities                                                  |  |                          | 95,828  |   |            |   | 55,688  |                |  |   | 805,272     |  
|                                                                                          |  |                          |         |   |            |   |         |                |  |   |             |  
|Net cash provided by (used in) operating activities                                       |  |                          | 17,404  |   |            |   | (33,840 | )              |  |   | (10,068,111 | )
|                                                                                          |  |                          |         |   |            |   |         |                |  |   |             |  
|Investing activities                                                                      |  |                          |         |   |            |   |         |                |  |   |             |  
|Sale of available-for-sale securities                                                     |  |                          |         |   |            |   | 18,311  |                |  |   | 18,311      |  
|Purchase of short-term investments                                                        |  |                          |         |   |            |   |         |                |  |   | (8,440,442  | )
|Sale of short-term investments                                                            |  |                          |         |   |            |   |         |                |  |   | 8,467,931   |  
|Purchases of fixed assets                                                                 |  |                          |         |   |            |   |         |                |  |   | (209,595    | )
|Proceeds on sale of fixed assets                                                          |  |                          |         |   |            |   |         |                |  |   | 10,000      |  
|Patent, trademark and copyright costs                                                     |  |                          |         |   |            |   |         |                |  |   | (133,519    | )
|Other assets, including notes receivable from related parties                             |  |                          |         |   |            |   |         |                |  |   | (4,202      | )
|                                                                                          |  |                          |         |   |            |   |         |                |  |   |             |  
|Net cash provided by (used in) investing activities                                       |  |                          |         |   |            |   | 18,311  |                |  |   | (291,516    | )
|                                                                                          |  |                          |         |   |            |   |         |                |  |   |             |  
|Financing activities                                                                      |  |                          |         |   |            |   |         |                |  |   |             |  
|Net proceeds from issuance of common stock                                                |  |                          |         |   |            |   |         |                |  |   | 7,889,808   |  
|Exercise of stock options and sale of options                                             |  |                          |         |   |            |   |         |                |  |   | 975,100     |  
|Exercise of warrants                                                                      |  |                          |         |   |            |   |         |                |  |   | 25,000      |  
|Proceeds from short-term loan                                                             |  |                          |         |   |            |   |         |                |  |   | 875,230     |  
|Proceeds from notes payable                                                               |  |                          |         |   |            |   | 17,000  |                |  |   | 808,114     |  
|Repayment of notes payable                                                                |  |                          | (17,000 | ) |            |   |         |                |  |   | (209,500    | )
|Advances from potential investors                                                         |  |                          |         |   |            |   |         |                |  |   | 100,000     |  
|Repayment of advances                                                                     |  |                          |         |   |            |   |         |                |  |   | (100,000    | )
|                                                                                          |  |                          |         |   |            |   |         |                |  |   |             |  
|Net cash provided by (used in) financing activities                                       |  |                          | (17,000 | ) |            |   | 17,000  |                |  |   | 10,363,752  |  
|                                                                                          |  |                          |         |   |            |   |         |                |  |   |             |  
|Net increase in cash and cash equivalents                                                 |  |                          | 404     |   |            |   | 1,471   |                |  |   | 4,125       |  
|                                                                                          |  |                          |        
|Cash and cash equivalents, beginning of period                                            |  |                          | 3,721   |   |            |   | 2,250   |                |  |   |            |  
|                                                                                          |  |                          |         |   |            |   |         |                |  |   |             |  
|Cash and cash equivalents, end of period                                                  |  | $                        | 4,125   |   |            | $ | 3,721   |                |  | $ | 4,125       |  
|                                                                                          |  |                          |         |   |            |   |         |                |  |   |             |  
|Supplemental cash flow information                                                        |  |                          |         |   |            |   |         |                |  |   |             |  
|Forgiveness of debt                                                                       |  |                          |         |   |            |   |         |                |  | $ | 589,608     |  
|Conversion of notes payable and related accrued interest                                  |  |                          |         |   |            |   |         |                |  | $ | 258,045     |  
|Issuance of stock as consideration for conversion of debentures                           |  |                          |         |   |            |   |         |                |  | $ | 857,641     |  
|Issuance of stock upon cashless exercise of stock options                                 |  |                          |         |   |            |   |         |                |  | $ | 396,580     |  
|Warrants issued in connection with convertible debentures and notes payable               |  |                          |         |   |            |   |         |                |  | $ | 68,220      |  

The accompanying notes are an integral part of these financial statements.



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Vyrex Corporation

(a development stage enterprise)

NOTES TO FINANCIAL STATEMENTS

Note 1 - BASIS OF PRESENTATION AND THE COMPANY

Basis of Presentation

The accompanying financial
statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of Vyrex Corporation (the Company) as a going concern and the realization of the
Companys assets and the satisfaction of its liabilities in the normal course of business. As of December 31, 2007, the Company has an accumulated deficit of $13,626,332 and stockholders deficiency of $496,757. Due to the
Companys recurring losses and stockholders 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 potential inability
of the Company to continue as a going concern.

The Companys principal activities during 2007 involved seeking a merger partner for its public shell.
The sought-after Merger occurred in February 2008. See Note 8  Subsequent Event. The Companys activities, both during its biotech phase and since the Merger, 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.

The Company

The Company was incorporated in Nevada on January 2, 1991. Its initial biotech operations ceased in all material respects in October 2005. Since the February 2008 Merger, the Companys primary focus has been
to develop, commercialize and market the proprietary PowerVerde renewable energy power systems.

In
October 2005, the Company reincorporated its domicile from Nevada to Delaware. The new Delaware Company had an authorized capitalization of 250,000,000 shares of capital stock, consisting of 200,000,000 shares of common stock, $0.0001 par value per
share, and 50,000,000 shares of preferred stock, $0.0001 par value per share. Pursuant to the reincorporation merger agreement, the Delaware Company issued 12/100thof a share of common stock of the Delaware Company for each share of common stock of the Company outstanding as of the date of the merger, and the Delaware Company was the surviving corporation of the merger with the
same board members as the Company.

As a result of the reincorporation transaction, the Company increased its authorized capital stock from 60,000,000
(50,000,000 of common stock and 10,000,000 of preferred stock) to 250,000,000 (200,000,000 of common stock and 50,000,000 of preferred stock), and the par value of the Companys capital stock changed from $0.001 per share to $0.0001 per share.

The Company cannot assure that its current cash reserves and other resources will fund the business through at least December 31, 2008. The Company
cannot assure that it will be able to continue the business through December 31, 2008 unless additional funds are received.



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Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Stock Options and Warrants

Effective January 1, 2006, the Company adopted Statement of Financial Accounting
Standards 123 (revised 2004), Share-Based Payments: (SFAS 123(R)). The Company adopted SFAS 123(R) using the modified prospective basis. Under this method, compensation costs recognized beginning January 1, 2006 included in costs
related to 1) all share-based payments granted prior to but not yet vested as of January 1, 2006, based on previously estimated grant-date fair values, and 2) all share-based payments granted subsequent to December 31, 2005 based on the
grant-date fair value estimated in accordance with the provisions of SFAS 123 (R). The Company has used the Black-Scholes option pricing model to estimate the fair value of stock options granted subsequent to the date of adoption of SFAS
123(R).Options and warrants granted to consultants and other non-employees are valued based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable, and expensed over
the term of the consulting or other agreements.

Revenue Recognition

Licensing and royalty revenue from royalty agreements is recognized in accordance with the terms of the specific agreement, which generally includes a quarterly minimum payment by the licensee.

Income Taxes

The Company accounts for income taxes pursuant to the
asset and liability method which requires deferred income tax assets and liabilities to be computed for temporary differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts
in future periods based on enacted laws and rates applicable to the periods in which the temporary differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount
expected to be realized. The income tax provision is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

Accounting for Uncertainty in Income Taxes

We adopted the provisions of Financial Accounting Standards Board
(FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes- an interpretation of FASB Statement No. 109 (FIN 48), on January 1, 2007. FIN 48 clarifies the accounting for uncertainty in
income taxes recognized in an enterprises financial statements in accordance with FASB Statement 109, Accounting for Income Taxes, and prescribes a recognition threshold and measurement process for financial statement recognition
and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our financial statements. Our evaluation was
performed for the tax years ended December 31, 2004, 2005 and 2006, the tax years which remain subject to examination by major tax jurisdictions as of December 31, 2007.

We may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. In the event we have
received an assessment for interest and/or penalties, it has been classified in the financial statements as selling, general and administrative expense.

Net Loss Per Share

Basic net loss per share is computed using the weighted-average number of common shares outstanding during the periods
presented. Diluted earnings per share have not been presented because the assumed conversion of convertible notes payable and the exercise of the Companys outstanding options and warrants would have been antidilutive. Options and warrants will
have a dilutive effect only



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when the average market price of the common stock during the period exceeds the exercise price of the options or warrants. The number of shares potentially
issuable at December 31, 2007 and 2006 upon the conversion or exercise that were not included in the computation of net loss per share totaled 264,275 and 276,875, respectively.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Recent Accounting Developments

In December 2007, the FASB issued
Statement of Financial Accounting Standards No. 141R (revised 2007), Business Combinations (SFAS 141R). SFAS 141R replaces SFAS 141 and establishes principles and requirements for how an acquirer recognizes and measures
its financial statements in the identifiable assets acquired, including goodwill, the liabilities assumed and any non-controlling interest in the acquiree. SFAS 141R also establishes disclosure requirements to enable users of the financial
statements to evaluate the nature and financial effects of the business combination. This statement is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the impact the adoption of SFAS 141R will have on
our financial position and results of operations.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160,
Noncontrolling Interests in Consolidated Financial Statements (SFAS 160). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of
consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parents ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also
establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. This standard is effective for fiscal years beginning
after December 15, 2008. We are currently evaluating the impact the adoption of SFAS 160 will have on our financial position and results of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits entities to choose to measure eligible financial instruments at fair value. The
unrealized gains and losses on items for which the fair value option has been elected should be reported in earnings. The decision to elect the fair value options is determined on an instrument by instrument basis, it should be applied to an entire
instrument, and it is irrevocable. Assets and liabilities measured at fair value pursuant to the fair value option should be reported separately in the balance sheet from those instruments measured using another measurement attribute. SFAS
No. 159 is effective as of the beginning of the first fiscal year that begins after November 15, 2007. The Company is currently analyzing the potential impact of adoption of SFAS No. 159 to its financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, (SFAS 157). SFAS 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. The Company does not anticipate that adoption of this standard will have a material impact on its financial statements.

Note
3 - WARRANTS

Activity with respect to warrants for the purchase of the Companys common stock is summarized as follows:



|                             |  |                     |  |                |              |                               |   |     
|---------------------------- |  | ------------------- |  | -------------- | ------------ | ----------------------------- | - | ----
|                             |  | WarrantsOutstanding |  | Exercise Price |              | WeightedAverageExercise Price
|Balance at January 1,2006    |  | 12,000              |  | $              | 0.92         |                               | $ | 0.92
|Issued in 2006               |  | 25,000              |  | $              | 0.87         |                               | $ | 0.87
|Balance at December 31, 2006 |  | 37,000              |  | $              | 0.87 - $0.92 |                               | $ | 0.89
|Balance at December 31, 2007 |  | 25,000              |  | $              | 0.87         |                               | $ | 0.87

The 12,000 warrants issued prior to January 1, 2006 expired in 2007. The 25,000 warrants outstanding at December
31, 2007 will expire in October 2009.



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Note 4 - CONCENTRATION OF CREDIT RISK

Concentrations of credit risk with respect to accounts receivable are significant due to the Company only having one customer, although the payment terms are generally short. No write-offs have been initiated during
the course of the contract.

Note 5 - INCOME TAXES

At
December 31, 2007, the Company had net operating loss carryforwards available to reduce future taxable income, if any, of approximately $16,285,911 and $3,969,755 for Federal and California income tax purposes, respectively; however, $3,313,914
of the net operating loss carryforwards for California expired in 2007. The Federal net operating loss begins to expire in 2011. The difference between the Federal and California tax loss carryforwards is primarily related to the expiration of
California loss carryforwards. At December 31, 2007, the Company also had research and development credit carryforwards of approximately $486,000 and $250,000 for Federal and state income tax reporting purposes, respectively. Pursuant to
Internal Revenue Code Sections 382 and 383, use of the Companys net operating loss and credit carryforwards may be limited if a cumulative change in ownership of more than 50% occurs within a three year period.

Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes (the loss and
tax credit carryforwards described above) give rise to the Companys deferred income taxes. The components of the Companys deferred tax assets as of December 31, 2007 and 2006 are as follows:



|                                              |  |      |            |   |      |   |            |  
|--------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                              |  | 2007 |            |   | 2006 |  
|Net operating loss carryforwards              |  | $    | 5,888,000  |   |      | $ | 6,134,000  |  
|Research and development credit carryforwards |  |      | 736,000    |   |      |   | 736,000    |  
|Other                                         |  |      | 27,000     |   |      |   | 30,000     |  
|                                              |  |      |            |   |      |   |            |  
|                                              |  |      | 6,651,000  |   |      |   | 6,900,000  |  
|Valuation allowance                           |  |      | (6,651,000 | ) |      |   | (6,900,000 | )
|                                              |  |      |            |   |      |   |            |  
|                                              |  | $    |           |   |      | $ |           |  
|                                              |  |      |            |   |      |   |            |  

As the ultimate realization of the potential benefits of the Companys net operating loss carryforwards is
considered unlikely by management, the Company has offset the deferred tax assets attributable to those potential benefits through valuation allowances in 2007 and 2006 and, accordingly, the Company did not recognize any benefit from income taxes in
the accompanying statements of operations to offset its pre-tax losses. The valuation allowance decreased by $249,000 as a result of the expiration of a portion of the net operating loss carryforwards.

Note 6 - STOCK OPTION PLAN

The Companys 1993 Stock Option Plan
(the Plan) was adopted by the Board of Directors in February 1994. Pursuant to the Plan, the Company may grant both incentive stock options and nonqualified stock options. Incentive stock options may be granted only to employees, while
consultants, employees, officers and directors are eligible for the grant of nonqualified options. The total number of shares of common stock of the Company reserved and available for grant under the Plan is 465,000 shares.



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The maximum term of stock options granted under the Plan is ten years, but if the optionee at the time of the grant has
voting power over more than 10% of the Companys outstanding capital stock, the maximum term is five years. The exercise price of incentive stock options granted under the Plan must be at least equal to the fair market value of such shares on
the date of grant. The exercise price of nonqualified stock options granted under the Plan must be at least 85%, or 110% with respect to holders of 10% of the voting power of the Companys outstanding capital stock, of the fair market value of
the stock subject to the option on the date of the grant. At December 31, 2007, a total of 264,275 stock options are exercisable.

Activity with
respect to the stock option plan is summarized as follows:



|                                                |  |                         |   |  |                      |               |                                |   |              
|----------------------------------------------- |  | ----------------------- | - |  | -------------------- | ------------- | ------------------------------ | - | -------------
|                                                |  | StockOptionsOutstanding |   |  | OptionExercise Price |               | Weighted-AverageExercise Price
|Balance at January 1, 2006                      |  | 311,471                 |   |  |                      |               |                                | $ | 11.04        
|Expired                                         |  | (34,596                 | ) |  | $                    | 3.39 - $62.50 |                                | $ | 3.39 - $62.50
|Balance at December 31, 2006                    |  | 276,875                 |   |  |                      |               |                                | $ | 10.73        
|Expired                                         |  | (12,600                 | ) |  | $                    | 2.85 - $49.38 |                                | $ | 3.39 - $62.50
|                                                |  |                         |   |  |                      |               |                                |   |              
|Balance at December 31, 2007                    |  | 264,275                 |   |  |                      |               |                                | $ | 9.40         
|                                                |  |                         |   |  |                      |               |                                |   |              
|Shares available for grant at December 31, 2007 |  | 200,725                 |   |  |                      |               |                                |   |              
|                                                |  |                         |   |  |                      |               |                                |   |              

The following is a further breakdown of the options outstanding as of December 31, 2007:



|                         |                       |                    |         |                                        |      |                                |   |                    |  |                                                     |  |   |      
|------------------------ | --------------------- | ------------------ | ------- | -------------------------------------- | ---- | ------------------------------ | - | ------------------ |  | --------------------------------------------------- |  | - | -----
|Range of Exercise Prices |                       | OutstandingOptions |         | Weighted-AverageRemainingLife in Years |      | Weighted-AverageExercise Price |   | OptionsExercisable |  | Weighted-AverageExercise Priceof OptionsExercisable
|                         | $     0.83 - $4.67    |                    | 216,000 |                                        | 3.83 |                                | $ | 2.86               |  | 216,000                                             |  | $ | 2.86 
|                         | $               25.00 |                    | 21,000  |                                        | 2.32 |                                |   | 25.00              |  | 21,000                                              |  |   | 25.00
|                         | $ 47.92 - $50.00      |                    | 27,275  |                                        | 1.17 |                                |   | 49.16              |  | 27,275                                              |  |   | 49.16
|                         |                       |                    |         |                                        |      |                                |   |                    |  |                                                     |  |   |      
|                         |                       |                    | 264,275 |                                        | 3.44 |                                |   | 9.40               |  | 264,275                                             |  |   | 9.40 
|                         |                       |                    |         |                                        |      |                                |   |                    |  |                                                     |  |   |      

Note 7 - NOTES PAYABLE AND RELATED CONVERSION AND STOCK OPTIONS

At December 31, 2007, the Company had an outstanding note payable with a principal balance of $200,000 which bore interest at an annual rate of 10%. The note was
collateralized by substantially all of the assets of the Company and was due on March 10, 2006. The investor had the option to convert the principal amount into Vyrex common shares at a price of $2.08 during the first year, $4.17 the second
year and $6.25 the third year. Further in connection with the Promissory Note, the investor was issued warrants, exercisable within three years from the date of issuance, entitling the investor to purchase 12,000 Vyrex common shares at an exercise
price of $0.917 per share. The Company determined the fair market value of these warrants were $0.50 per warrant utilizing the Black-Scholes option pricing model. The $6,000 was treated as a discount to the note and was accreted over the term of the
loan. As further consideration for the loan, the Company agreed to amend the strike price terms of the right to convert the principal amount of the Promissory Note into Vyrex common shares from $4.17 to $2.08 the second year and from $6.25 to $4.17
the third year. In March of 2006 the private investor agreed to extend the note an additional six months to September 2006. The right to convert the principal amount into Vyrex Common Shares at a strike price of $4.17 in the third year was extended
to September of 2006. In September of 2006, the private investor agreed to extend the note to March 2007. The right to convert the principal amount into Vyrex Corporation common shares at a strike price of $2.917 per share in the third year was
extended to March 2007. The private investor was issued a warrant exercisable within three (3) years from the date of issuance entitling the Lender to purchase Vyrex Corporation common shares in the amount of twelve thousand
(12,000) shares at an exercise price of $0.92 per share. Interest on the unpaid balance continued to accrue at the rate of 10% per year. In March of 2007, the private investor agreed to extend the maturity date of the note until June of
2007. The right to convert the principal amount into Vyrex Corporation common shares at a strike price of $2.917 per



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share in the third year was extended to June 2007. In July 2007 the private investor agreed to extend the maturity date of the principal sum of $200,000 to
September 2007. The private investor had again agreed to extend the maturity date of the note together with all accrued interest from September 30, 2007 to March 31, 2008. The $200,000 note was paid in full pursuant to the issuance of
250,000 shares of the Companys common stock immediately prior to the Merger.

During October 2006, the Company obtained a note from a private
investor group to loan the Company $17,000. The note along with the accrued interest was due and payable at the time of Vyrex Corporation receipt of funds from a merger or acquisition or no later than one year from the date of the note. The note
bears a rate of 10% interest per year. Further in connection with the Promissory Note warrants were issued in the total amount of 25,000, split equally between the partners, exercisable within three years from the date of issuance at an exercise
price per share of $0.87. The Company determined the fair value of these warrants to be $14,986 ($0.60 per warrant) utilizing the Black-Scholes option pricing model. The warrants were recorded as an increase to additional paid-in-capital with a
corresponding discount to the note payable to be accreted over the term of the loan. The note was paid in full during the fourth quarter 2007.

Note 8 -
SUBSEQUENT EVENT

On February 11, 2008, Vyrex Corporation (Vyrex or the Company), PowerVerde, Inc. (PowerVerde)
and Vyrex Acquisition Corporation (VAC), a wholly-owned subsidiary of Vyrex, all Delaware corporations, entered into an Agreement and Plan of Merger (the Merger Agreement). Pursuant to the terms of the Merger Agreement, on
February 12, 2008, VAC merged with and into PowerVerde, with PowerVerde remaining as the surviving corporation and a wholly-owned subsidiary of Vyrex (the Merger). As consideration for the Merger, as of the closing of the Merger,
each issued and outstanding share of common stock of PowerVerde was converted into the right to receive 1.2053301 shares of the common stock of Vyrex and each share of VAC was converted into one share of PowerVerde common stock. As a result of the
Merger, the former shareholders of PowerVerde hold 95% of the common stock of Vyrex. Pursuant to the Merger Agreement, PowerVerde paid $233,000 in accounts payable and other liabilities owed by Vyrex.

In addition, immediately prior to execution of the Merger Agreement, Vyrex paid a $200,000 promissory note through issuance of 250,000 shares of common stock and issued
an additional 25,000 shares of common stock as payment for certain consulting and administrative services.

In connection with the Merger, all of the
Companys officers and directors resigned, and the following individuals were appointed to their respective positions set forth beside their names below:



|                 |  |                                       
|---------------- |  | --------------------------------------
|Name             |  | Title                                 
|George Konrad    |  | President, Treasurer and Director     
|Fred Barker      |  | Vice President, Secretary and Director
|Richard H. Davis |  | Director                              

The merger transaction will be accounted for as a recapitalization of Vyrex and the financial statements just
subsequent to the merger transaction will consist of the historical balance sheet of both companies, the historical results of operations of Vyrex, and the operations of the legal parent, PowerVerde.



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Exhibit Index



|     |  |                                                                                                  
|---- |  | -------------------------------------------------------------------------------------------------
|     | 
|31.1 |  | Certification of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|     | 
|31.2 |  | Certification of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.1 |  | Certification of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.2 |  | Certification of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.