<PAGE>
- --------------------------------------------------------------------------------
U.S. SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: SEPTEMBER 30, 1996 Commission File Number:1-9925
HARRIER, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 87-0427731
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2200 Pacific Coast Highway, Suite 301, Hermosa Beach, California 90254
(Address of Principal Executive Offices) (Zip Code)
Not Applicable
--------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year (If Changed Since Last
Report)
Check whether the registrant (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 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
--- ---
As of December 20, 1996 the Registrant had 11,967,923 shares of its common
stock, par value $0.001, issued and outstanding.
Transitional Small Business Disclosure Format: Yes X No
--- ---
- --------------------------------------------------------------------------------
Page 1 of 14 consecutively numbered pages.
<PAGE>
PART 1
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
ITEM 1. FINANCIAL STATEMENTS REQUIRED BY FORM 10-QSB
- --------------------------------------------------------------------------------
Harrier, Inc. (the "Registrant") files herewith the unaudited condensed
consolidated balance sheets of the Registrant and its subsidiaries as of
September 30, 1996 and June 30, 1996 (the Registrant's most recent fiscal
year end), and the related unaudited condensed consolidated statements of
operations for the three months ended September 30, 1996 and 1995, and
statements of cash flows for the three months ended September 30, 1996 and
1995, together with the unaudited condensed notes thereto. In the opinion of
management of the Registrant, the financial statements reflect all
adjustments, all of which are normal recurring adjustments, necessary to
present fairly the financial condition of the Registrant for the interim
periods presented. The financial statements included in this report on
Form 10-QSB should be read in conjunction with the audited financial
statements of the Registrant and the notes thereto included in the annual
report of the Registrant on Form 10-KSB for the year ended June 30, 1996 on
file with the Securities and Exchange Commission on December 3, 1996 is
hereby incorporated by reference.
2
<PAGE>
HARRIER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
September 30, June 30,
1996 1996
-------------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 150,853 $ 347,022
Investments, net 54,716 61,875
Amount receivable from related party 41,711 56,346
Inventory 92,706 99,453
Other current assets 17,289 12,822
-------------- ----------
Total Current Assets 357,275 577,518
-------------- ----------
PROPERTY AND EQUIPMENT, net 60,265 12,554
-------------- ----------
Investments, net 123,406 123,406
Intangible assets 34,578 35,509
Total Assets $ 575,524 $ 748,987
-------------- ----------
-------------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 594,255 $ 616,424
Convertible note payable to related party 519,000 503,667
Total Current Liabilities 1,113,255 1,120,091
-------------- ----------
STOCKHOLDERS' EQUITY:
Common Stock 11,968 11,968
Additional paid-in capital 15,225,740 15,225,740
Accumulated deficit (15,737,730) (15,571,103)
Cumulative translation adjustment (37,709) (37,709)
-------------- ----------
Total Stockholders' Equity (537,731) (371,104)
-------------- ----------
Total liabilities and
stockholders' equity $ 575,524 $ 748,987
-------------- ----------
-------------- ----------
NOTE: The balance sheet at June 30, 1996 has been taken from the audited
financial statements at that date and condensed.
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
HARRIER, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended
September 30,
---------------------------
1996 1995
------------ ------------
SALES $ 7,338 $ 36,610
COST OF SALES 6,837 37,635
------------ ------------
GROSS PROFIT 501 (1,025)
------------ ------------
EXPENSES:
General and administrative 38,496 109,645
Amortization and depreciation 2,474 7,384
Salaries and related expenses 108,164 101,278
Research and development 5,000 105,357
------------ ------------
Total Expenses 154,134 323,664
------------ ------------
LOSS FROM OPERATIONS (153,633) (324,689)
------------ ------------
OTHER INCOME (EXPENSES):
Collaborative income 0 5,000
Royalty income 0 12,950
Interest expense (12,694) 5,039
------------ ------------
Total Other Income (Expense) (12,694) 22,989
------------ ------------
Income (loss) from continuing operations
before provision for income taxes (166,327) (301,700)
Provision for income taxes (300) (12,250)
------------ ------------
Net income (loss) (166,627) (313,950)
------------ ------------
Net income (loss) per common shares $ (0.01) $ (0.03)
------------ ------------
------------ ------------
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
4
<PAGE>
HARRIER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
For the Three Months Ended
September 30,
---------------------------
1996 1995
------------ ------------
Cash Flows from (used for) Operating Activities:
Net Loss $ (166,627) $ (313,950)
------------ ------------
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization 2,474 7,384
Write-down of patents 0
Changes in assets and liabilities:
Related party receivable 14,637 24,169
Accounts receivable 0 (2,768)
Receivable from joint venture 0 34,680
Inventory 6,747 24,599
Other current assets (4,467) 7,172
Accounts payable and accrued expenses (22,171) (23,897)
------------ ------------
Total Adjustments (2,780) 71,339
------------ ------------
Cash Used by Operating Activities $ (169,407) $ (242,611)
------------ ------------
Cash Flows from Investing Activities:
Increase in loan receivable 15,333 0
Decrease in investment 7,159
Payment for property and equipment (49,254) (58)
Increase in patent costs 0 (1,339)
Cash used by Investing Activities $ (26,762) $ (1,397)
------------ ------------
Net Increase in Cash and Cash Equivalents (196,169) (244,008)
Cash and Cash Equivalents at Beginning of Period 347,022 494,069
------------ ------------
Cash and Cash Equivalents at End of Period $ 150,853 $ 250,061
------------ ------------
------------ ------------
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
5
<PAGE>
HARRIER, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
------------------------------
The accompanying financial statements have been prepared by the Registrant
without audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at September 30, 1996, and for
all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
unaudited condensed consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in the Registrant's
June 30, 1996 audited financial statements. The results of operations for the
three months ended September 30, 1996 are not necessarily indicative of the
operating results for the full year.
NOTE 2 - INVENTORIES
-----------
Inventories at September 30, 1996 and June 30, 1996 consist of:
September 30, 1996 June 30, 1996
------------------ -------------
Finished Goods $92,706 $99,453
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL:
Harrier, Inc. and its subsidiaries is a Delaware corporation organized in 1985,
and together with its subsidiaries (collectively "the Company") has been engaged
in the discovery, development and sale of selected products and technologies in
the health, fitness and medical markets. The Company current strategic focus is
to find a merger candidate. A merger is the Company's priority due its Capital
Deficit (See Liquidity and Capital Resources). The Company is also managing
financial and strategic operations of its 95% owned subsidiary, Glycosyn
Pharmaceuticals, Inc. and working with the DermaRay International LLC, ("LLC")
its 50% owned partnership in the distribution of a medical device. There still
exists significant technologies primarily in the biochemical field, that are in
various stages of development. The Company has transferred all of those
technologies to its Glycosyn subsidiary. The Company still owns certain rights
to a medical device, the Bioptron-Registered Trademark- Lamp ("Lamp"), which is
currently being marketed as a pain relief medical device in limited quantities.
No assurance can be given that any of the Company's products or technologies
under development will be commercially successful. For the year ending June 30,
1996, Lamp sales accounted for 100% of the Company's operating revenues, and 44%
of the Company's total revenue. Other revenue sources (Sale of Securities,
interest income and miscellaneous revenue) represented 56% of total Company
income.
The Company's strategy is to seek corporate partners to finalize development
and commercialization of the Biochemical Technologies currently under
development. Pursuant to this strategy, the Company entered into a joint drug
discovery and development program with American Diagnostica Inc. ("ADI"), of
Greenwich, Connecticut, in May 1993 under which ADI financed development and
testing of certain new synthetic drugs using the Company's proprietary
GLYCOSYLATION processes. The joint drug development and discovery agreement with
ADI was terminated in August 1995. (See Item 3 Litigation). Due to the
termination of the American Diagnositca Inc. ("ADI") research and development
agreement, the Company has assumed the financial responsibilities previously
assigned to ADI. Those responsibilities include approximately $350,000 in past
due payables. Because of limited resources, certain development projects have
been suspended and all external development grants have been terminated. The
Company anticipates that the future sales in this business will be predominantly
through glycosylation feasibility and related chemical synthesis work, license
agreements and joint ventures with pharmaceutical concerns. The Company also
owns 50% of a Limited Liability Company with Naturade, Inc. owning the other
50%, to manufacture and market the Lamp in North America and in other selected
international territories.
PRODUCTS AND TECHNOLOGIES
BIOPTRON-Registered Trademark- LAMP
The Lamp utilizes linearly polarized incoherent light of specific wavelength
distribution and power density. Independent biological and clinical studies have
confirmed both a biostimulative effect on cells and beneficial results in
general skin care from use of the Lamp. The spectral distribution includes
infrared wavelengths which allow the light from the Lamp to reach underlying
tissues during treatment. The Lamp emits no ultraviolet light.
The consumer model, "B1" Lamp, is a small, hand-held device that directs
polarized light of a yellow shade on the treatment area. The second model,
designated "Bioptron 2" or "B2", is a larger lamp designed to be used in
hospitals, doctors' offices and professional skin care centers.
7
<PAGE>
The U.S. Federal Drug Administration's ("FDA") Radiological Device Division has
granted the Lamp "substantial equivalence" status under Section 510(k) of the
Food, Drug and Cosmetic Act, providing that medical claims for pain relief made
for similar infrared devices are applicable to the Lamp. There can be no
assurance that such regulatory approval will be maintained in the future or that
additional approvals will be received. The Mexican Secretariat of Health has
approved the Lamp as a prescriptive device for sale in that country to doctors
and hospitals for the treatment of dermatological and rheumatological ailments.
NATURADE JOINT VENTURE
The Company owns certain distribution rights to the Lamp in the western
hemisphere. Its marketing strategy is focused primarily on selling the Lamp
in the pain relief market. The Company has in the past and continues to sell
to wholesalers in various direct selling businesses including health spas and
pain relief centers. The Company continues to seek additional marketing
partners in the United States, Mexico, and Canada.
On November 29, 1994 the Company formed the DermaRay International Limited
Liability Company ("LLC"), a manufacturing and marketing joint venture with
Naturade, Inc. ("Naturade"), a 70-year old manufacturer and supplier of
health and beauty products. The objective of the LLC is to develop and sell
pain relief products centered around the medically-approved use of the Lamp.
Naturade is developing additional products to include in the system such as
pain relief gels, rubs and skin enhancement products to complement the Lamp.
For its 50% equity ownership interest, Naturade contributed 100,000 shares of
its restricted common stock, along with 24 months of unburdened corporate
contribution such as management and administrative services. Both parties
have agreed to continue the partnership beyond the 24 month term where both
parties share in operating income/loss. The Harrier contribution consisted of
$200,000 in cash. In addition, both companies contributed manufacturing and
distribution rights to proprietary devices and formulations to be sold under
various trademarks including Bioptron-Registered Trademark- and DermaRay-TM-.
The LLC plans to market the Company's current inventory of lamps for pain
relief and assemble new Bioptron Compact lamps for delivery to customers
under current order schedules.
Primary operations are conducted through the LLC where there are greater
resources to manufacture, inventory, sell, fulfill and service customers in
both the medical and consumer markets. The Company, in conjunction with the
LLC, is selling the Lamp in several consumer catalogues. Currently eight of
these catalogues have begun promotion. Initial orders have been received from
several of these distributors with slightly over 800 Lamps units sold over
the last 3 months starting in July of this year. Assembly of the first 1,000
Compact Lamps has been completed at the DermaRay facility in Los Angeles,
California. Due to a lack of historical selling data with these catalogues,
no estimate can be made at this time regarding the number of Lamps that will
be sold in the future.
BIOCHEMICAL TECHNOLOGIES
GLYCOSYN PHARMACEUTICALS, INC. ("GLYCOSYN")
Glycosyn is a majority owned subsidiary of the Company and was formed to
further develop and finance technologies currently owned or licensed by the
Company in the field of carbohydrate chemistry which the Company believes to
have broad applications in the fields of medical therapeutics. Patents have
been filed for several of those technologies. Furthermore, newer
technologies are in the "discovery" stage, meaning chemical activity has been
characterized and further development is underway to support additional
patent applications. In the current fiscal year, the Company transferred
100% of its glycosylation rights and technologies to Glycosyn. In addition,
the Company sold 5% of Glycosyn's common stock to outside investors.
8
<PAGE>
Glycosyn seeks to fund and manage internal research and support laboratory
staff through fee for service chemistry contracts and Small Business
Innovative Research ("SBIR") and Economic Union ("EU") research grants.
Another objective, the completion of pre-clinical development of HAR7 and
related glycosylated camptothecins, is a work in progress. Glycosyn also
seeks to advance one analog to clinical trials (IND) within 18 months of
financing and to seek out and successfully execute at least one alliance with
a major pharmaceutical company for the development of products based upon
technologies of the Company within two (2) years after the successful
completion of the initial financing.
STRATEGIC OVERVIEW
Glycosyn also seeks to apply its technology to additional therapeutics. Based
upon the pre-clinical results, Glycosyn will select ten compounds for
IN-VITRO evaluation and, based upon IN-VITRO results, select three or more
compounds for pre-clinical biological evaluation. The strategies Glycosyn
intends to employ in order to achieve its objectives involves the submission
of three SBIR and two EU grants per year for the first three years of
operation. Glycosyn also seeks to meet with licensing representatives of
major pharmaceutical companies to negotiate an agreement for the further
clinical development of a glycosylated antineoplastic as an anticancer
therapeutic.
STRUCTURES TARGETED FOR DEVELOPMENT
Glycosyn is currently synthesizing proprietary glycosylated analogs of two or
more antibiotics. Such antibiotics could relate to, or in fact be, existing
successfully marketed compounds. Several candidates are in preclinical
development in their NON-GLYCOSYLATED form. Glycosyn also seeks to conduct
IN-VIVO evaluations of two or more antineoplastics chemically GLYCOSYLATED
using its proprietary technologies. Such antineoplastics could relate to, or
in fact be, compounds currently approved for use by the FDA.
Other goals involve the evaluation of current anti-tubercular drugs for their
potential to be glycosylated utilizing current technologies and selection of
the most promising candidate(s) for glycosylation and evaluate these analogs
against drug-resistant strains of M. TUBERCULOSIS. and to evaluate compounds
used in the treatment of AIDS (and possibly other auto-immune diseases) to
determine whether or not Company owned GLYCOSYLATION and other technologies
can play a role in either reducing production costs, enhancing absorption, or
improving activity through cell surface binding, cell penetration, or
improved anti-viral activity.
COMPANY'S GLYCOSYLATION PROCESSES
The Company has a number of biochemical technologies under development. One
technology, a synthetic process called GLYCOSYLATION, may improve the
manufacturing and effectiveness of various physiologics and pharmaceuticals.
In the field of new drug development, the success of a compound depends on
several critical biological factors, including solubility, absorption,
distribution, metabolism, bioavailability and toxicity. Frequently, a
newly-discovered substance demonstrates an important biological effect, but
its usefulness as a drug is limited by adverse characteristics such as poor
absorption or unacceptable toxicity. In these cases, which include many
commonly used medications, the starting compound is chemically modified to
overcome undesirable attributes. Structural modification of a potential drug
may consist of either removal of certain molecules or addition of new
molecules such as carbohydrates and proteins. In some cases, addition of a
single carbohydrate molecule in a strategic location in the molecular chain
can make the critical difference. GLYCOSYLATION, a scientific term used to
describe such a chemical attachment of sugar molecules, is considered to be
one of the most important reactions used by the pharmaceutical industry. In
many cases, however, compounds with significant potential are unable to
withstand the high temperatures and acidic conditions of standard
GLYCOSYLATION procedures, and cannot be modified to overcome these
limitations. Development of milder methods of GLYCOSYLATION have been the
subject of intense investigation in both industry and academia during the
past several decades.
9
<PAGE>
Glycosyn owns exclusive proprietary rights to a new method of GLYCOSYLATION
which it believes may enhance the effectiveness of current drugs and allow
for the creation of new drugs not previously achievable through standard
procedures. These potential drug categories include anti-fungal drugs,
cholesterol-lowering agents, antibiotics, anti-neoplastics and drugs targeted
towards the treatment of central nervous system disorders ("CNS"). The
Company's method of GLYCOSYLATION appears to have several distinct
advantages over standard methods of GLYCOSYLATION. In addition to its
extreme mildness, the process is rapid, produces high yields, and is
relatively inexpensive. The Company believes it is suitable for industrial
purposes and can be applied to various sizes and types of starting compounds.
Using the Company's GLYCOSYLATION process, several categories of compounds,
previously considered difficult or impossible to perform with other methods,
have been successfully modified. The Company believes that the commercial
value of its technology is derived from its ability to GLYCOSYLATE complex
chemical structures. In most cases, these compounds are large molecules that
have several functional groups (atoms or groups of atoms that project out
from the base structure of the compound). Biologically, these functional
groups are essential to obtaining the desired effect of the compound as a
potential drug. However, under the harsh conditions of standard
GLYCOSYLATION methods, many important functional groups would not survive the
reaction. In contrast, large molecules with many sensitive functional groups
have undergone the Company's process of GLYCOSYLATION successfully and remain
intact. The Company is actively pursuing the development of those molecules
as new pharmacological agents. Due to insufficient working capital at this
time, there can be no assurance that any of these development plans can be
pursued.
In 1993, the Company was notified that it had received a Notice of Allowance
from the U.S. Patent and Trademark Office covering its claims to a novel
method of using and producing GLYCOSIDES. The patent has since been issued.
Utilizing the Company's method, an alcohol or phenol, especially a
hydroxy-steroid such as a water insoluble cholesterol, is GLYCOSYLATED in a
single step through the use of a mild catalyst. The Company believes that
the applicability of the process can be expanded to include more complex
sugars and their attachment at other bonding sites which are difficult or
impossible to accomplish by standard methods. This patent is the first in a
series of patents which the Company hopes to have issued which utilize the
Company's GLYCOSYLATION process in the development of new pharmaceutical
products.
GLYCOSYN CHEMICAL SYNTHESIS FACILITIES
On July 31, 1996 the Company's 95% owned subsidiary, Glycosyn
Pharmaceuticals, Inc. ("Glycosyn"), concluded the construction of its
chemistry laboratory. Glycosyn plans to continue development of novel
glycosylated compounds and sell services utilizing its proprietary chemical
synthesis methods at these new facilities. Previously, the Company conducted
its research and development through various grants with Universities and
private organizations. The laboratory is a fully functional chemical research
facility capable of small scale batch preparation of up to 100 grams of
material. Larger quantities will be contracted out to a Good Manufacturing
Practice ("GMP") or GMP-like facility as necessary
ONGOING PRE-CLINICAL DEVELOPMENT (ANTI-CANCER DRUGS)
To date the Company has contracted pre-clinical development of the HAR series
to the Institute for Drug Development. A novel series of anti-cancer
compounds were synthesized by the Company and four analogs, HAR 4, 5, 6 and
7, were initially evaluated against three experimental tumor models. These
models included murine P388 Leukemia, B16 melanoma, and the MX-1 human breast
tumor xenografts. The four agents demonstrated high curative activity in all
three models. There was evidence, based in IN VITRO and IN VIVO results,
that these compounds are acting as both pro-drugs and intrinsically active
compounds. One candidate, HAR 7, was then tested against SK-MES and MV522
Human Lung Tumor xenograft and DU-145 and PC-3 Human Prostate Tumor
xenografts implanted in mice. The results again
10
<PAGE>
showed the HAR 7 compound to be highly active in these tumor models and
significantly more active than the positive control on a multiple and
especially single-dose schedule.
The Company is refining its biochemical technologies at its current lab
facilities. Prior to moving its drug development efforts to the Durham
facility, the Company conducted research at several institutions including
the University of Michigan in Ann Arbor and The Institute for Drug
Development in San Antonio, Texas ("IDD"). Directed and sponsored by the
Company, these projects focused on all aspects of drug development. Efforts
included identification and synthesis of new proprietary compounds, detailed
chemical analysis of these compounds, the characterization of their toxicity,
pharmacokinetics and metabolism, IN-VITRO and IN-VIVO biological testing,
and applications for patent protection. The pharmaceutical molecules targeted
for GLYCOSYLATION are anti-cancer and/or antibiotic compounds with a number
of highly sensitive functional groups.
MERGER OBJECTIVES FOR THE COMPANY
In conjunction or sometime following the spin off of the Glycosyn subsidiary,
the Company plans to merge with a company with significantly larger
operations and financial resources. At this time the Company is in discussion
with several merger candidates based in Germany and Switzerland. There can be
no assurance as to the timing or success of these merger discussions.
The Company will either sell off or continue to operate the DermaRay LLC with
Naturade, Inc. following the planned merger.
11
<PAGE>
RESULTS OF OPERATIONS
Sales for the quarter ended September 30, 1996 decreased $29,272 from those
of the prior year. The decrease is due to the Company focusing its efforts on
development of the Glycosyn process and finding additional financing and/or
merger candidates. (See Merger Objectives for the Company)
Operating expenses decreased from $323,664 for the three months ended
September 30, 1995 to $153,134 for the three months ended September 30, 1996.
The net decrease of $170,530 is a result of limited operating capital and
minimal staff.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996 the Company had current assets of $357,275 and
current liabilities of $1,113,255 resulting in negative working capital of
$755,980. Of the total assets at that date, $150,853 was in cash, $54,716 was
in investments, $92,706 was in inventory, $41,711 was in receivables and
$17,289 was in other assets.
The Company continues to concentrate on developing its biochemical
technologies and a distribution network for the Bioptron Lamp. As disclosed
in previous financial statements, the Company invested $200,000 and acquired
a 50% interest in a joint venture that markets, distributes and sells the
Bioptron Lamps and other health-related products. However, there can be no
assurance that the Company will successfully develop its biochemical
technologies or establish profitable networks for the Lamp.
The Company has a significant working capital shortage. Its history of
capital problems were intensified with the termination of the research and
development agreement with ADI that left the Company with significant
financial obligations for past research work. Financing for activities to
date have come from the sale of the Company's stock, limited Lamp sales and
short-term borrowings. To continue the development of its biochemical
technologies, the Company will require substantially more capital than it
currently has. There can be no assurance as to the Company's ability to fully
develop and license its biochemical technologies and other products.
During the year ended June 30, 1996 the Company entered into a $500,000 loan
agreement with an entity affiliated with the President and Chairman of the
Board. The loan bears interest of 12% and is due on June 4, 1997. The
proceeds of the note were utilized to pay approximately $140,000 in past due
research obligations, $160,000 was loaned to Glycosyn for initial working
capital, and the balance was retained by the Company for its own working
capital needs including professional fees related to the ADI lawsuit. Loan
obligations can be paid with public securities of either the Company or it
Glycosyn subsidiary. 52,100 common shares of Glycosyn has been paid to the
lender at a value of $1.00 per Glycosyn shares. The lender has agreed to
extend the term of the note if the Company does not have funds to pay the
loan back or if the value of equity stock payments is overly dilutive to the
Company. Although the note matures in 9 months, the Company can elect to
extend the term of the note for another 12 months.
This Form 10-QSB contains certain forward looking statements that involve
risks and uncertainties. Certain risks and uncertainties which may impact the
accuracy of forward looking statements with respect to revenues, expenses and
operating results and my include without limitation, the Company's current
and future liquidity and cash flow deficits, increasing competitive
pressures, general economic conditions, technological advances and the timing
of operating and other expenditures.
12
<PAGE>
PART II
OTHER INFORMATION
- ------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
- ------------------------------------------------------------------------------
In August 1995, ADI filed an action against the Company seeking an
unspecified amount of actual and punitive damages for an allegedly wrongful
termination of a research and development agreement. Management believes that
it has meritorious defenses to ADI's claims and that the claims are without
merit, but there can be no assurances as to the ultimate outcome of the
litigation. In September, 1996, the court granted the Company's motion in the
alternative dismissing ADI's complaint or staying all proceedings pending the
conclusion of mandatory arbitration in California as the parties provided in
the research and development agreement.
- ------------------------------------------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------------------------------------------
(A) NONE
(B) NONE
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
HARRIER, INC.
Dated: December 20, 1996 By /s/Kevin DeVito
------------------------
Kevin DeVito - President
/s/Candance M. Beaver
------------------------
Candance M. Beaver
Chief Financial Officer/Secretary
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 150,853
<SECURITIES> 54,716
<RECEIVABLES> 41,711
<ALLOWANCES> 0
<INVENTORY> 92,706
<CURRENT-ASSETS> 357,275
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 575,524
<CURRENT-LIABILITIES> 1,113,255
<BONDS> 0
0
0
<COMMON> 11,968
<OTHER-SE> (549,699)
<TOTAL-LIABILITY-AND-EQUITY> 575,529
<SALES> 7,338
<TOTAL-REVENUES> 7,338
<CGS> 6,837
<TOTAL-COSTS> 6,837
<OTHER-EXPENSES> 154,134
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,694
<INCOME-PRETAX> (166,327)
<INCOME-TAX> 300
<INCOME-CONTINUING> (166,327)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (166,327)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> 0
</TABLE>
