FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-9201
BIO-RESPONSE, INC.
(Exact name of Issuer as specified in its charter)
Delaware 59-3453151
other jurisdiction of (I.R.S.
Employer
incorporation or organization)
Identification No.)
1612 N. Osceola Avenue
Clearwater, Florida 33755
(Address of principal offices)
(813) 443-3434
(Issuer's telephone number, including area code)
Indicate by check mark whether the Issuer (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Issuer was required to file
such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
dates.
Title of Each Class Outstanding at September 30, 1998
Common Stock, $0.0004 Par
Value9,176,554 Shares
subject to a reverse
split of 30.5885 and
other shares approved for
issuance. See ITEM 4.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE
ITEM 1 Financial Statements
Consolidated Balance Sheets as of September 30, 1998
and September 30, 1997 3
Consolidated Statements of Income for the Nine Month
Periods Ended September 30, 1998 and September 30, 1997. 4
Consolidated Statements of Cash Flow for the Nine Month
Periods Ended September 30, 1998 and September 30, 1997. 5
Notes to Financial Statements 6
ITEM 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II OTHER INFORMATION 9
SIGNATURES 9
BIO-RESPONSE, INC.
(a Dormant State Company)
Consolidated Balance Sheet
September 30, 1998 and September 30, 1997
(unaudited)
09/30//98 09/30/97
Assets
Organization Cost $ 0 $ 0
Total Assets 0 0
Liabilities and
Shareholder's Equity 0 0
Stockholders' Equity 0 0
Common Stock par value
at $.0004 per share
20,000,000 shares authorized,
9,176,554 shares issued
and outstanding 0 0
Net Income/Loss for Period (43,921) 27,777
Additional Paid in Capital 43,921 (27,777)
Retained Earnings (Deficit) 0 0
______ _______
Total Shareholders' Equity 0 0
______ _______
Total Liabilities and
Shareholders Equity $ 0 $ 0
========= ========
See accompanying notes to financial statements
BIO-RESPONSE, INC.
(a Dormant State Company)
Consolidated Statements of Operations
for the periods ending September 30, 1998 and September 30, 1997
(unaudited)
1998 1997
09-30-98 09-30-97
_______ ________
Revenues $ 0 $ 0
Expenses
Administrative Expenses $ 43,921 $ 27,777
Filing Fees $ 0 $ 0
Net Income/Loss for the
period $ (43,921) $ (27,777)
========= ========
See accompanying notes to financial statements
BIO-RESPONSE, INC.
(a Dormant State Company)
Consolidated Statements of Cash Flows
for nine months ended September 30, 1998 and 1997
(unaudited)
For Nine Months Ended
09-30-98 09-30-97
Cash Flows from Operating Activities
Net Income $(43,921) $(27,777)
Net Cash Provided (used) /
By Operating Activities 0 0
Expenses Paid by Capston 43,921 27,777
Net Increase (Decrease) in Cash 0 0
Cash at Beginning of Period 0 0
Cash at End of Period $ 0 $ 0
======== ====
See accompanying notes to financial statements
BIO-RESPONSE, INC.
(A Dormant State Company)
September 30, 1998
Note 1. HISTORY OF THE COMPANY
BIO-RESPONSE, Inc., (A Dormant State Company), was incorporated
on 1972, under the laws of the State of Delaware. The Company
conducted an initial public offering of its Common Stock in
January, 1979 and in connection with an application to list its
Common Stock on the NASDAQ system, the Company also registered
its Common Stock pursuant to Section 12(g) of the Securities
Exchange Act of 1934.
On September 14, 1989, the Company filed a voluntary petition
under Chapter 11 of the Bankruptcy Act (Case No. 4-89-04159 N-3)
in the U.S. Bankruptcy Court for the Northern District of
California. On September 15, 1995, the Company's case under
Chapter 11 was closed under court order. As a result of the
bankruptcy case, all assets of the Company were overseen by the
Trustee in Bankruptcy. The assets were sold and the Company
ceased all operations. The Trustee in Bankruptcy effected an
orderly liquidation of corporate assets and used the proceeds to
repay the Company's creditors. On September 15, 1995 the
Company's case under Chapter 11 was closed by an order of the
Court and the Trustee in Bankruptcy was discharged. As a result
of the Bankruptcy, the Company has no assets, liabilities,
management or ongoing operations and has not engaged in any
business activities for well over a half of a decade.
Note 2. RESTORATION OF CORPORATE STATUS
On June 10, 1996, acting in its capacity as the holder of 2000
shares (0.0002%) of the Company's common stock, and without
first receiving the consent, approval or authorization of any
other person associated with the Company, Capston Network Company
effected a renewal, revival and restoration of the Company's
certificate of incorporation pursuant to Section 312 of the
General Corporation Law of Delaware. Thereafter, Capston filed a
10-K for the years ending December 31, 1990-1996, and a Proxy
Statement seeking approval and ratification of its actions, along
with authorization to seek a suitable business combination
transaction. This proxy statement was ultimately distributed to
the Company's stockholders and the proposals therein were
approved by the holders of a majority of the Company's issued and
outstanding shares.
Under the terms of the original Proxy Statement, Capston was
authorized to seek a suitable business combination transaction on
behalf of the Company and to submit the terms of any proposed
business combination transaction to the Company's stockholders
for their approval. Capston did not receive and was not entitled
to receive any equity interest in the Company as a result of it's
actions prior to the date of the Proxy Statement. Moreover,
Capston was not entitled to reimbursement for any expenses
incurred by it on behalf of the Company except to the extent
that the terms of a business combination transaction provided for
the reimbursement of such expenses. However, because Sally Fonner
is both the President of BIO-RESPONSE and Capston, prior Staff
Accounting Bulletins require under generally accepted accounting
principles the treatment of debiting the expenses with
corresponding credit to paid-in capital. Future expenses of
Capston or others will be treated this way. These expenses are
actual cash expenditures and do not reflect any costs associated
with the operation of Capston nor any personnel time or cost.
Note 3. FUTURE EXPENSES
Capston will continue to extend administrative expenses to keep
BIO-RESPONSE current with its reporting requirements, keeping the
Corporation in good standing, any required proxy solicitation or
acquisition efforts. These amounts should not exceed $50,000 in
out-of-pockets costs. In addition, as approved, and as a result
of a suitable acquisition, additional fees paid for by issuance
of equity position would be for: (i) Capston of 200,000 shares,
(ii)up to 4,500,000 shares for an acquisition(s) and (iii) up to
5% of the acquisition for a finder's fee .
Item 2. Management Discussion and Analysis of Financial Condition
and Results of Operations.
Financial Condition
BIO-RESPONSE has no operations, assets or liabilities.
Expenses incurred to keep it in good standing with governmental
and regulatory bodies, maintain the transferability of its stock
and interact with stockholders, are paid by Capston.
Corporate Background Information
BIO-RESPONSE conducted an initial public offering of its
Common Stock in September, 1979 pursuant to a Form S-2
Registration Statement under the Securities Act of 1933 (the
"Securities Act"). In connection with an application to list its
Common Stock on the NASDAQ system, the Company also registered
its Common Stock pursuant to Section 12(g) of the Securities
Exchange Act of 1934 (the "Exchange Act"). The Company remained
current with respect to its reporting obligations under the
Exchange Act until 1990.
After pursuing its business for several years, BIO-RESPONSE
filed a voluntary petition under Chapter 11 of the Bankruptcy Act
on September 14, 1989. This proceeding was filed in with the U.S.
Bankruptcy Court for the Northern District of California and
designated as Case # 4-89-04159 N-3. On September 15, 1995 the
Company's case under Chapter 11 was closed by an order of the
Court. As a result of the Bankruptcy, the Company has no assets,
liabilities, management or ongoing operations and has not engaged
in any business activities for well over a half of a decade.
During the pendancy of the Bankruptcy, the Company did not
file franchise tax returns with and pay the required franchise
taxes to the State of Delaware. As a result, the Company's
corporate charter was revoked by order of the Secretary of State
of the State of Delaware on August 30, 1991. Similarly, the
Company did not file with the SEC either (a) the regular reports
that are required of all companies that have securities
registered under the Exchange Act, or (b) a certification on Form
15 terminating its registration under the Exchange Act. As a
result, the Company remained a Registrant under the Exchange Act
but was seriously delinquent in its SEC reporting obligations.
According to Lumiere Securities, the last published quotation for
the Company's Common Stock was posted by M. H. Meyerson & Co.,
Inc., one of the Company's market makers, on September 30, 1998.
At this time, the published quote was $0.03 bid and $0.10 asked.
Acting in its capacity as a Stockholder of the Company, and
without first receiving any consent, approval or authorization of
any officer, director or other Stockholder of the Company,
Capston effected a renewal, revival and restoration of the
Company's certificate of incorporation pursuant to Section 312 of
the General Corporation Law of the State of Delaware. In general,
Section 312 provides that any corporation may "procure an
extension, restoration, renewal or revival of its certificate of
incorporation, together with all the rights, franchises,
privileges and immunities and subject to all of its duties, debts
and liabilities which had been secured or imposed by its original
certificate of incorporation" upon compliance with certain
procedural requirements.
After reviewing the applicable files, Capston determined
that the only debt of the Company that was "secured or imposed by
its original certificate" was the obligation of BIO-RESPONSE to
pay its Delaware taxes. Therefore, Capston paid all past due
franchise taxes on behalf of the Company and then filed a
Certificate of Renewal, Revival, Extension and Restoration of the
Company's Certificate of Incorporation on behalf of the Company
under the authority granted by Section 312(h). The total out-of-
pocket costs paid by Capston incurred in connection with the
restoration of the Company's charter was $450. This Certificate
was filed in the office of the Secretary of State of the State
of Delaware on December 26, 1996 and at the date of this Proxy
Statement the Company is lawfully incorporated, validly existing
and in good standing under the laws of the State of Delaware.
Proposed Operations
While the Company has no assets, liabilities, management or
ongoing operations and has not engaged in any business
activities, Capston believes that it may be possible to recover
some value for the Stockholders through the adoption and
implementation of a Plan whereby the Company will be restructured
as a "clean public shell" for the purpose of effecting a business
combination transaction with a suitable privately-held company
that has both business history and operating assets.
Capston believes the Company will offer owners of a suitable
privately-held company the opportunity to acquire a controlling
ownership interest in a public company at substantially less cost
than would otherwise be required to conduct an initial public
offering. Nevertheless, Capston is not aware of any empirical
statistical data that would independently confirm or quantify
Capston's beliefs concerning the perceived value of a merger or
acquisition transaction for the owners of a suitable privately-
held company. The owners of any existing business selected for a
business combination with the Company will incur significant
costs and expenses, including the costs of preparing the required
business combination agreements and related documents, the costs
of preparing a Current Report on Form 8-K describing the business
combination transaction and the costs of preparing the
documentation associated with any future reporting under the
Exchange Act and registrations under the Securities Act.
The Plan is approved by the Stockholders. The Company is
fully reactivated and ready to be used as a corporate vehicle to
seek, investigate and, if the results of such investigation
warrant, effect a business combination with a suitable privately-
held company or other business opportunity presented to it by
persons or firms that seek the perceived advantages of a publicly
held corporation. The business operations proposed in the Plan
are sometimes referred to as a "blind pool" because Stockholders
will not ordinarily have an opportunity to analyze the various
business opportunities presented to the Company, or to approve or
disapprove the terms of any business combination transaction that
may be negotiated by Capston on behalf of the Company.
Consequently, the Company's potential success will be heavily
dependent on the efforts and abilities of Capston and its
officers, directors and consultants, who will have virtually
unlimited discretion in searching for, negotiating and entering
into a business combination transaction. Capston and its
officers, directors and consultants have had limited experience
in the proposed business of the Company. Although Capston
believes that the Company will be able to enter into a business
combination transaction within 12 months after the approval of
the Plan by the Stockholders, there can be no assurance as to how
much time will elapse before a business combination is effected,
if ever. The Company will not restrict its search to any specific
business, industry or geographical location, and the Company may
participate in a business venture of virtually any kind or
nature.
Capston and its officers, directors and consultants
anticipate that the selection of a business opportunity for the
Company will be complex and extremely risky. Because of general
economic conditions, rapid technological advances being made in
some industries, and shortages of available capital, Capston
believes that there are numerous privately-held companies seeking
the perceived benefits of a publicly traded corporation. Such
perceived benefits may include facilitating debt financing or
improving the terms on which additional equity or may be sought,
providing liquidity for the principals of the business, creating
a means for providing incentive stock options or similar benefits
to key employees, providing liquidity for all stockholders and
other factors.
Potential business opportunities may occur in many different
industries and at various stages of development, all of which
will make the task of comparative investigation and analysis of
such business opportunities extremely difficult and complex.
Capston anticipates that the Company will be able to participate
in only one business venture. This lack of diversification should
be considered a substantial risk inherent in the Plan because it
will not permit the Company to offset potential losses from one
venture against gains from another. Moreover, due to the
Company's lack of any meaningful financial, managerial or other
resources, Capston believes the Company will not be viewed as a
suitable business combination partner for either developing
companies or established business that are in need of substantial
additional capital.
Acquisition of Opportunities
In implementing a particular business combination
transaction, the Company may become a party to a merger,
consolidation, reorganization, joint venture, franchise or
licensing agreement with another corporation or entity. It may
also purchase stock or assets of an existing business. After the
consummation of a business combination transaction, it is likely
that the present Stockholders of the Company will only own a
small minority interest in the combined companies. In addition,
as part of the terms of the acquisition transaction, all of the
Company's officers and directors will ordinarily resign and be
replaced by new officers and directors without a vote of the
Stockholders. Capston does not intend to obtain the approval of
the Stockholders prior to consummating any acquisition other than
a statutory merger that requires a Stockholder vote. Capston and
its officers, directors and consultants do not intend to sell any
shares held by them in connection with a business acquisition.
It is anticipated that any securities issued in a business
combination transaction will be issued in reliance on exemptions
from registration under applicable Federal and state securities
laws. In some circumstances, however, as a negotiated element of
a business combination, the Company may agree to register such
securities either at the time the transaction is consummated or
at some specified time thereafter. The issuance of substantial
additional securities and their potential sale into any trading
market that may develop may have a depressive effect on such
market. While the actual terms of a transaction to which the
Company may be a party cannot be predicted, it may be expected
that the parties to the business transaction will find it
desirable to avoid the creation of a taxable event and thereby
structure the acquisition in a so called "tax free"
reorganization under Sections 368(a)(1) or 351 of the Internal
Revenue Code of 1986, as amended (the "Code"). In order to
obtain tax free treatment under the Code, it may be necessary for
the owners of the acquired business to own 80% or more of the
voting stock of the surviving entity. In such event, the
stockholders of the Company would retain less than 20% of the
issued and outstanding shares of the combined companies, which
could result in significant dilution in the equity of such
stockholders. The Company intends to structure any business
combination in such manner as to minimize Federal and state tax
consequences to the Company and any target company.
As part of the Company's investigation of potential business
opportunities, Capston and its officers, directors and
consultants will ordinarily meet personally with management and
key personnel, may visit and inspect material facilities, obtain
independent analysis or verification of certain information
provided, check reference of management and key personnel, and
take other reasonable investigative measures, to the extent of
the Company's limited resources and Capston's limited expertise.
The manner in which the Company participates in an opportunity
will depend on the nature of the opportunity, the respective
needs and desires of the Company and other parties and the
relative negotiating strength of the Company and such other
management.
With respect to any business combination negotiations,
Capston will ordinarily focus on the percentage of the Company
which target company stockholders would acquire in exchange for
their ownership interest in the target company. Depending upon,
among other things, the target company's assets and liabilities,
the Company's stockholders will in all likelihood only own a
small minority interest in the combined companies upon completion
of the business combination transaction. Any business combination
effected by the Company can be expected to have a significant
dilutive effect on the percentage of shares held by the Company's
current Stockholders.
Upon completion of a business combination transaction, there
can be no assurance that the combined companies will have
sufficient funds to undertake any significant development,
marketing and manufacturing activities. Accordingly, the combined
companies may be required to either seek additional debt or
equity financing or obtain funding from third parties, in
exchange for which the combined companies might be required to
issue a substantial equity position. There is no assurance that
the combined companies will be able to obtain additional
financing on terms acceptable to the combined companies.
It is anticipated that the investigation of specific
business opportunities and the negotiation, drafting and
execution of relevant agreements, disclosure documents and other
instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and
others. If a decision is made not to participate in a specific
business opportunity the costs incurred in the related
investigation would not be recoverable. Furthermore, even if an
agreement is reached for the participation in a specific business
opportunity, the failure to consummate that transaction may
result in the loss of the Company of the related costs incurred.
Exemption from Rule 419
As an existing Registrant under the Exchange Act, the
Company's proposed activities are not subject to SEC Rule 419
which was adopted to strengthen the regulation of "blind pool"
companies which Congress has found to have been common vehicles
for fraud and manipulation in the penny stock market. The Company
is not subject to Rule 419 because it is not offering stock to
the public in an offering registered under the Securities Act.
Accordingly, Stockholders are not entitled to the substantive
protection provided by Rule 419.
PART II - OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
NONE
ITEM 2.CHANGES IN SECURITIES
NONE
ITEM 3.DEFAULTS ON SENIOR SECURITIES
NONE
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5.OTHER INFORMATION
NONE
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits None
B.Reports on Form 8-K None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
BIO-RESPONSE, INC.
Sally A. Fonner
Chief Executive Officer
Dated: September 30, 1998
Sally A. Fonner
Chief Financial Officer
Dated: September 30, 1998
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