SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
FOR THE YEAR ENDED DECEMBER 31, 1998
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
Commission File Number 0-9201
BIO-RESPONSE, INC.
(Name of small business issuer in its charter)
Delaware 59-3453151
(state or other jurisdiction of incorporation or organization)
(IRS Employer identification No.)
1612 N. Osceola Avenue, Clearwater, Florida 33755
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (727) 443 3434
Securities Registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.004 per share.
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 [_]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Issuer'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. [_]
The issuer's revenues for its most recent fiscal year were $0.
The aggregate market value of the 2,040,919 shares of Common Stock, $.004
par value per share, held by non-affiliates of the Issuer, based on the closing
sale price on December 27, 1998 of $0.03 per share, was $61,228. However, since
trading is sporadic and rare, the non-affiliates holding cannot be reasonably
assessed and the audit financials reflect zero value. The number of shares of
the Common Stock, outstanding on December 31, 1998 was 9,176,554. This
outstanding number is subject to a reverse split of 30.5885 to 1, approved by a
Special Meeting of the Stockholders held on March 10, 1997, which results in
outstanding shares of 300,000. Further Ms. Fonner and Capston, in the same
Special Meeting, were approved for a compensation of additional 200,000 shares
for their duties. To avoid administrative complexity associated with effecting a
reverse split and requiring the stockholder to change certificates twice,
Management has elected to defer the issuance of stock to Capston, Ms. Fonner or
her designees along with effecting the reverse split until an acquisition is
completed or management perceives that it is necessary.
Check whether the issuer has filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [X]
DOCUMENTS INCORPORATED BY REFERENCE Not Applicable.
PART I
Item 1. Description of Business
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
Bloomberg, 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
October 15, 1996. At this time, the published quote was $0.03 bid and $0.10
asked. The Company continues to be quoted on the OTCBB, but there is no active
trading.
In 1996, 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 report the Company is
lawfully incorporated, validly existing and in good standing under the laws of
the State of Delaware.
Operations
The Company has no assets, liabilities, management or ongoing operations and
has not engaged in any business activities. In July of 1997, the Stockholders
overwhelmingly voted for the adoption and implementation of a Plan presented by
Capston and Ms. Fonner, (sole director) whereby the Company was restructured as
a "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 and Ms. Fonner believes the Company offers 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, neither is aware
of any empirical statistical data that would independently confirm or quantify
their 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 and Ms. Fonner on behalf of the
Company. Consequently, the Company's potential success will be heavily dependent
on the efforts and abilities of Ms. Fonner, Capston and its consultants and
legal advisors, who have virtually unlimited discretion in searching for,
negotiating and entering into a business combination transaction. Ms. Fonner and
Capston have had limited experience in the proposed business of the Company.
Although Ms. Fonner and Capston believes that the Company will be able to enter
into a business combination transaction during 1998, there can be no assurance
as to how much time will elapse before a business combination is effected, if
ever. The Company is 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, Ms. Fonner, legal advisers 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, Ms. Fonner, legal advisers and consultants anticipate 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. Ms. Fonner, legal
advisers and consultants believe 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
Registrant 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 Registrant 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 Registrant'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 until after the completion of the acquisition occurs, and then, only
in an orderly manner.
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 Registrant 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 Registrant 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 Registrant 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 Registrant intends
to structure any business combination in such manner as to minimize Federal and
state tax consequences to the Registrant and any target company.
As part of the Registrant'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
Registrant's limited resources and Capston's limited expertise. The manner in
which the Registrant participates in an opportunity will depend on the nature of
the opportunity, the respective needs and desires of the Registrant and other
parties and the relative negotiating strength of the Registrant and such other
management.
With respect to any business combination negotiations, Capston will
ordinarily focus on the percentage of the Registrant 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 Registrant'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
Registrant can be expected to have a significant dilutive effect on the
percentage of shares held by the Registrant'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 Registrant of the related costs incurred.
Item 2. Description of Property
As a result of its 1989 Bankruptcy, the Company has no assets, liabilities,
or ongoing operations. The Company had no operations during the year ended
December 31, 1998 and no material assets or liabilities as of December 31, 1998.
Item 3. Legal Proceedings
Not Applicable
Item 4. Submission of matters to a vote of Security Holders
Not Applicable
PART II
Item 5. Market for Registrant's Common Equity
As of December 31, 1998, there has been no active trading in the Issuer's
common stock for over five years. The Issuer does have market makers, but does
not have any active trading. The ask and bid are constantly below $.25. The
Company's trading symbol is BRSP and trades on the OTCBB.
Item 6. Management Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
Since July of 1997, the Company has been actively seeking an acquisition of
assets, property or business that may benefit the Company and its stockholders.
While these efforts have not resulted in a suitable business combination
transaction, the Company's experience during this period confirms that demand
for well-structured public shells is strong. Over this time period, the Company
has evaluated a number of potential acquisition candidates. In each case,
however, the Company has rejected as unsuitable because of several reasons. The
most predominant ones were capital structure, lack of audited statements and
inadequate working capital. In some cases, the Company was rejected for unknown
reasons. However, Capston continues to seek for a qualified candidate.
Financial Condition
As a result of its 1989 Bankruptcy, the Company has no assets, liabilities,
or ongoing operations and has not engaged in any business activities since
September 1989. The Company had no operations during the year ended December 31,
1998 and no material assets or liabilities as of December 31, 1998. Stockholder
approved the Plan whereby the Company will be restructured as a "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,
although there can be no assurance that management will be successful in its
efforts to negotiate such a transaction.
Plan of Operation.
The Company has not engaged in any material operations or had any revenues
from operations since its bankruptcy. The Company's plan of operation for the
next twelve months is to continue to seek the acquisition of assets, property or
business that may benefit the Company and its stockholders. Because the Company
has no resources, management anticipates that to achieve any such acquisition,
the Company will be required to issue shares of its common stock as the sole
consideration for such acquisition.
During the next twelve months, the Company's only foreseeable cash
requirements will relate to maintaining the Company in good standing or the
payment of expenses associated with reviewing or investigating any potential
business venture, which are anticipated to be advanced by Capston as loans to
the Company. Because the Company has not identified any such venture as of the
date of this Registration Statement, it is impossible to predict the amount of
any such loans. However, any loans from Capston will be on terms no less
favorable to the Company than would be available from a commercial lender in an
arm's length transaction. As of the date of this Annual Report on Form 10-K, the
Company has not found any acquisition to date.
Management anticipates that Capston, will advance minor administrative
expenses up to approximately $50,000. In the event that additional funding is
required in order to keep the Company in good standing and/or to review or
investigate any potential merger or acquisition candidate, the Company may
attempt to raise such funding through a private placement of its common stock to
accredited investors.
At the present time, management has no plans to offer or sell any securities
of the Company. However, at such time as the Company may decide to engage in
such activities, management may use any legal means of conducting such offer or
sale, including registration with the appropriate federal and state regulatory
agencies and any registration exemptions that may be available to the Company
under applicable federal and state laws.
Because the Company is not currently making any offering of its securities,
and does not anticipate making any such offering in the foreseeable future,
management does not believe that Rule 419 promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended, concerning
offerings by blank check companies, will have any effect on the Company or any
activities in which it may engage in the foreseeable future.
Item 7. Financial Statements.
For the information called for by this Item, see the Financial Statements
attached.
Item 8. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure.
The Registrant's financial statements for the years ended December 31, 1989
were audited by the firm of TOUCHE ROSS & Co., Certified Public Accountants. As
a result of the bankruptcy proceedings discussed elsewhere herein, the
Registrant did not prepare financial statements for the years ended December
31,1990 through December 31, 1996. In connection with the revival and
restoration of the Company's certificate of incorporation, the firm of Want &
Ender, Certified Public Accountants was retained to audit the Registrant's
balance sheet for the year ended December 31, 1996 and to serve as the
Registrant's auditor in the future. During the fiscal year ended 1990, and the
subsequent periods preceding the appointment of Want & Ender, CPAs, there were
no known reportable disagreements between the Registrant and the firm of TOUCHE
ROSS & Co., Certified Public Accountants, on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure.
PART III
Item 9. Directors and Executive Officers of the Registrant
Ms. Sally Fonner, age 50, the president and sole stockholder
of Capston, performs the duties of President, Secretary,
Treasurer and Sole Director of the Registrant. Ms. Fonner term of
office is anticipated be no more than two years or until
permanent management can be located, whichever should occur first
in time. Ms. Fonner's sole purpose is to seek out qualified new
operations and management. Ms. Fonner shall seek re-election at
the annual meeting in 1999 if a business combination has not been
completed.
Item 10. Executive Compensation.
Ms. Fonner is the sole officer and director of the Registrant and has
received no monetary compensation for services performed during her tenure.
Further, no future monetary compensation agreement between Ms. Fonner and the
Registrant is contemplated. Notwithstanding the foregoing, the Ms. Fonner was
approved by the stockholders in a Special Meeting, to have compensation of
200,000 shares of stock, not subject to the reverse split approved by
stockholders in the same meeting. To avoid administrative complexity associated
with effecting a reverse split and requiring the stockholder to change
certificates twice, Management has elected to defer the issuance of stock to
Capston, Ms. Fonner or her designees until an acquisition is completed or it is
deemed necessary to do so.
Item 11. Security Ownership of Certain Beneficial Owners and
Management
The following table presents certain information regarding the beneficial
ownership of the Company's equity securities at February 28, 1998 by (i) each
person known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each of the Company's directors and officers, and
(iii) all directors and officers as a group.
Number of Shares Percent of
Name Beneficially Owned (1) Class
Eli S. Jacobs ................. 2,975,218 32.4%
375 Park Avenue
New York, New York 10022
Executive Life Insurance Co ... 3,157,891 12.5%
11444 West Olympic Boulevard
Los Angeles, California 90064
Elliott Associates, L.P. ...... 1,000,526 9.8%
110 E. 59th Street
New York, New York 10022
Capston Network Company ....... 2,000 .0002%
1612 N. Osceola Avenue
Clearwater, Florida 34615
All directors and officers as a
a group ....................... 2,000 .0002%
The above information, with the exception of Capston Network Company, is taken
from the last filed 10-K dated June 30, 1989. Capston has no information, which
would lead them to change the above data.
(1) Unless otherwise indicated, each person or group has sole voting and
investment power with respect to all listed shares.
The Company knows of no arrangements that will result in a change in control
at a date after this Annual Report on Form 10-KSB, however, the Issuer's
proposed Proxy Statement will provide for significant stock compensation to
certain individuals selected by Capston in the event that the plan of
reorganization described therein is approved by the Stockholders.
Item 12. Certain Relationships and Related Transactions
No officer, director or family member of an officer or director has engaged
in any material transaction with the issuer since the beginning of the Issuer's
most recent fiscal year.
Item 13. Exhibits and Reports on Form 8-K.
Financial statements filed with this report:
Independent Auditor's report for December 31, 1997 and December 31, 1998.
Balance Sheet of December 31, 1997 and December 31, 1998.
Statements of Income for December 31, 1997 and December 31,1998.
Shareholders Equity for December 31, 1997 and December 31, 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the 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.
Date: May 1st, 1999 By________/s/____________
Sally Fonner,
Director
President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934 this report
has been signed below by the following person on behalf of the Registrant and in
the capacities and on the date indicated.
Date: May 1st, 1999 By_________/s/____________
Sally Fonner,
Director
President
and Chief Financial Officer
<PAGE>
386 PARK AVENUE SOUTH SUITE 1618 NEW YORK, NY
TEL 212.684.2414 FAX 212.684.5433 EMAIL
[email protected]
WANT & ENDER
CPA, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
MARTIN ENDER, CPA
STANLEY Z. WANT, CPA, CFP
Independent Auditor's Report
To the Shareholders and Board of Directors BIO-RESPONSE, INC.
We have audited the accompanying consolidated balance sheet of BIO-RESPONSE,
INC. (A Dormant State Company) at December 31, 1998 and December 31, 1997 and
the related consolidated statements of operations, shareholders'
equity/(deficit), and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We have conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of BIO-RESPONSE, INC.
(A Dormant State Company) at December 31, 1998 and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/
Martin Ender
Want & Ender CPA, P.C.
Certified Public Accountants
New York, NY
April 30, 1999
<PAGE>
BIO-RESPONSE, INC.
( A Dormant State Company)
Consolidated Balance Sheets
December 31, 1998 and 1997
1998 1997
ASSETS
Organization Cost ......................... 0 0
Total Assets .............................. 0 0
LIABILITIES AND STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY
Common Stock, par value $.004 per share;
20,000,000 shares authorized;
9,176,554 shares issued and outstanding .. 00
Additional Paid in Capital ................ 45,030 41,945
Net Profit/(Loss) ......................... (45,030) (41,945)
Total Stockholders' Equity ................ 0 0
Total Liabilities and Stockholders' Equity 0 0
See accompanying notes to financial statements
<PAGE>
BIO-RESPONSE, INC.
(A Dormant State Company)
Consolidated Statements of Operations
For the Year Ended December 31, 1998 and 1997
1998 1997
Revenues ................... $ 0 $ 0
Expenses
Administrative Expenses .... 45,030 41,945
Net Income/Loss for the year $(45,030) $(41,945)
See accompanying notes to financial statements.
<PAGE>
BIO-RESPONSE, INC.
(A Dormant State Company)
Consolidated Statement of Changes in Shareholders'
Equity/(Deficit)
For the years ended December 31, 1998 and 1997
1998 1997
Common Stock
(9,176,554 SHARES ISSUED & OUTSTANDING) $ 0 $ 0
Additional Paid in Capital ............ 87,285 42,255
Balance January ....................... (42,255) (350)
Net Income/(Loss) for the year ........ (45,030) (41,945)
Balance December 31 ................... 0 0
See accompanying notes to financial statements
<PAGE>
BIO-RESPONSE, INC.
Statement of Cash Flows
For the Period Ended December 31, 1998
Current Year Prior Year
12-31-98 12-31-97
Cash Flows from Operating Activities
Net Income ..................................... $(45,030) $(41,945)
Net Cash Provided (Used) By Operating Activities $(45,030) (41,945)
Cash Flows from Financing Activities ........... 0 0
Proceeds from Capston-Paid in Capital .......... 45,030 41,945
Net Cash Provided (Used) By Financing Activities 45,030 41,945
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.
<PAGE>
BIO-RESPONSE, INC.
(A Dormant State Company)
December 31, 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 its
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 .
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<NAME> BIO RESPONSE, INC.
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