<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: March 31, 1997 Commission File Number: 1-9925
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HARRIER, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 87-0427731
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2200 Pacific Coast Highway, Suite 301, Hermosa Beach, California 90254
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(Address of Principal Executive Offices) (Zip Code)
Not Applicable
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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
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As of May 14, 1997 the Registrant had 13,967,923 shares of its common stock,
par value $0.001, issued and outstanding.
Transitional Small Business Disclosure Format: Yes X No .
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Page 1 of 11 consecutively numbered pages.
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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
March 31, 1997 and June 30, 1996 (the Registrant's most recent fiscal year
end), and the related unaudited condensed consolidated statements of
operations for the three and nine months ended March 31, 1997 and 1996, and
statements of cash flows for the three and nine months ended March 31, 1997
and 1996, 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
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HARRIER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
MARCH 31, JUNE 30,
1997 1996
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CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 46,938 $ 347,022
INVESTMENTS, NET 0 61,875
AMOUNT RECEIVABLE FROM RELATED PARTY 37,848 56,346
INVENTORY 50,852 99,453
OTHER CURRENT ASSETS 9,275 12,822
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TOTAL CURRENT ASSETS 144,913 577,518
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PROPERTY AND EQUIPMENT, NET 68,176 12,554
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INVESTMENTS, NET 123,406 123,406
INTANGIBLE ASSETS 32,717 35,509
TOTAL ASSETS $ 369,212 $ 748,987
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 559,257 $ 616,424
CONVERTIBLE NOTE PAYABLE TO RELATED PARTY 549,333 503,667
TOTAL CURRENT LIABILITIES 1,108,590 1,120,091
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STOCKHOLDERS' EQUITY:
COMMON STOCK 11,968 11,968
PREFERRED STOCK 45 0
ADDITIONAL PAID-IN CAPITAL 15,314,695 15,225,740
ACCUMULATED DEFICIT (16,028,375) (15,571,103)
CUMULATIVE TRANSLATION ADJUSTMENT (37,711) (37,709)
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TOTAL STOCKHOLDERS' EQUITY (739,378) (371,104)
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 369,212 $ 748,987
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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 UNAUDITED FINANCIAL
STATEMENTS.
3
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HARRIER, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
MARCH 31, MARCH 31,
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1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES $ 33,913 $ 9,085 $ 46,581 $ 56,392
COST OF SALES 37,373 6,625 49,047 51,950
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GROSS PROFIT (3,460) 2,460 (2,466) 4,442
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EXPENSES:
GENERAL AND ADMINISTRATIVE 41,881 121,601 126,003 331,765
AMORTIZATION AND DEPRECIATION 3,823 8,315 10,054 23,084
SALARIES AND RELATED EXPENSES 84,019 110,183 294,318 317,884
RESEARCH AND DEVELOPMENT 0 31,632 5,000 212,038
--------- -------- --------- ---------
TOTAL EXPENSES 129,723 271,731 435,375 884,771
--------- -------- --------- ---------
LOSS FROM OPERATIONS (133,183) (269,271) (437,841) (880,329)
--------- -------- --------- ---------
OTHER INCOME (EXPENSE):
COLLABORATIVE INCOME 0 0 0 46,651
ROYALTY INCOME 0 0 0 14,210
GRANT INCOME 40,000 0 40,000 0
LOSS ON INVESTMENT 0 0 (15,716) 0
INTEREST INCOME/(EXPENSE) (14,680) 1,037 (42,615) 8,384
--------- -------- --------- ---------
TOTAL OTHER INCOME (EXPENSE) 25,320 1,037 (18,331) 69,245
--------- -------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
PROVISION FOR INCOME TAXES (107,863) (268,234) (456,172) (811,084)
PROVISION FOR INCOME TAXES 0 5,624 (1,100) 47,405
--------- -------- --------- ---------
NET INCOME (LOSS) (107,863) (262,610) (457,272) (763,679)
--------- -------- --------- ---------
NET INCOME (LOSS) PER COMMON SHARE $ (0.01) $ (0.02) $ (0.04) $ (0.06)
--------- -------- --------- ---------
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
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HARRIER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED
MARCH 31,
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1997 1996
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CASH FLOWS FROM (USED FOR) OPERATING ACTIVITIES:
NET LOSS $(457,272) $(763,679)
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ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
USED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 10,054 23,084
ACCRUED INTEREST 45,666 0
CHANGES IN ASSETS AND LIABILITIES:
RELATED PARTY RECEIVABLE 18,500 (4,844)
ACCOUNTS RECEIVABLE 0 23,879
RECEIVABLE FROM JOINT VENTURE 0 34,679
ASSETS HELD FOR SALE 0 17,500
INVENTORY 48,601 37,734
OTHER CURRENT ASSETS 3,549 7,810
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (57,144) 104,314
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TOTAL ADJUSTMENTS 69,226 244,156
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CASH USED BY OPERATING ACTIVITIES $(388,046) $(519,523)
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CASH FLOWS FROM INVESTING ACTIVITIES:
DECREASE IN INVESTMENT 61,875 0
PAYMENT FOR PROPERTY AND EQUIPMENT (62,885) (6,016)
INCREASE IN PATENT COSTS 0 (1,289)
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CASH USED BY INVESTING ACTIVITIES $ (1,010) $ (7,305)
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CASH FLOWS FROM FINANCING ACTIVITIES:
ISSUANCE OF STOCK 89,000 150,595
NET CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES $ 89,000 $ 150,595
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EFFECT OF EXCHANGE RATE CHANGES ON CASH $ (28) $ (28)
NET INCREASE IN CASH AND CASH EQUIVALENTS (300,084) (376,261)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 347,022 494,068
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 46,938 $ 117,807
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
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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 March 31, 1997, 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 and nine months ended March 31, 1997 are not necessarily indicative of
the operating results for the full year.
NOTE 2 - INVENTORIES
Inventories at March 31, 1997 and June 30, 1996 consist of:
March 31, 1997 June 30, 1996
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Finished Goods $50,852 $99,453
NOTE 3 - CONVERTIBLE NOTE PAYABLE TO RELATED PARTY
On June 9, 1996, the Company entered into a $500,000 loan agreement with an
entity affiliated with the President and the Chairman of the Board. The loan
bears interest of 12% and is due on June 4, 1997. At the Company's option,
the loan's principal and interest can be repaid using the Company's stock (or
its subsidiary's stock, if publicly traded), valued at 75% of the average
price 90 days preceding the repayment date. In consideration for entering
into the agreement, Glycosyn Pharmaceuticals, Inc. issued 52,100 shares
valued to represent 1% in loan fees.
NOTE 4 - LETTER OF INTENT
On March 2, 1997, the Company entered into a non-binding letter of intent to
acquire a Swiss-based corporation engaged in the business of computer data
storage ("Acquisition Candidate"). Under the terms of the letter of intent,
the Company would acquire all of the capital stock the the Acquisition
Candidate and the present shareholders of the Acquisition Candidate will
acquire approximately 88.5% of the issued and outstanding common stock of the
Company. The Company's acquisition of the Acquisition Candidate is subject to
further due diligence on the part of both parties, a definitive agreement
between the parties and the approval of the transaction by the Company's
directors and shareholders. There can be no assurance that the Company will
consummate the proposed transaction or that the terms of any transaction will
not materially vary from the foregoing terms.
6
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NOTE 5 - SUBSEQUENT EVENTS
On April 30, 1997, the Company issued 2,000,000 units at a price of $0.05 per
unit. Each unit consists of one (1) share of Harrier, Inc. common stock and one
(1) common stock Warrant exercisable at $0.13 per share. The Warrants expire at
5:00 p.m. on April 1, 2000. The units were sold pursuant to Regulation S under
the Securities Act of 1933 to five European investors. There was no underwriter
involved in the transaction. The proceeds from the sale of the units will be
used for working capital and administrative and professional fees associated
with a prospective merger.
7
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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's
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.
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 PART III, ITEM 1, LEGAL
PROCEEDINGS). Due to the termination of the 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 previously funded by
the Company 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.
8
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RESULTS OF OPERATIONS
The Company is no longer actively marketing the Bioptron Lamp. Lamps sold by
the Company are on a direct order basis only. The majority of sales are made
to the Company's 50% partnership, Derma Ray, LLC. All other corporate
overhead is focused on restructuring the Company and facilitating a merger
transaction.
The Company's operations are carried out through its Glycosyn subsidiary and
corporate office in Hermosa Beach, California. The Glycosyn subsidiary is
developing pharmaceuticals at its laboratory and the Company's Hermosa Beach
office coordinates administraive and financial management for both entities.
LIQUIDITY AND CAPITAL RESOURCES
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 share. 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 3 months, the Company can elect to
extend the term of the note for another 12 months.
9
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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. To this date, no action or
arbitration has been carried out by either party.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) NONE
(B) REPORTS ON FORM 8-K:
Form 8-K dated April 30, 1997 filed with the Securities and Exchange
Commission on May 6, 1997.
10
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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: May 16, 1997 By /s/ Kevin DeVito
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Kevin DeVito - President
/s/ Candace M. Beaver
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Candace M. Beaver
Chief Financial Officer/Secretary
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 46,938
<SECURITIES> 0
<RECEIVABLES> 37,848
<ALLOWANCES> 0
<INVENTORY> 50,852
<CURRENT-ASSETS> 144,913
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 369,212
<CURRENT-LIABILITIES> 1,108,590
<BONDS> 0
0
45
<COMMON> 11,968
<OTHER-SE> (751,391)
<TOTAL-LIABILITY-AND-EQUITY> 369,212
<SALES> 33,913
<TOTAL-REVENUES> 33,913
<CGS> 37,373
<TOTAL-COSTS> 37,373
<OTHER-EXPENSES> 129,723
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,680
<INCOME-PRETAX> (107,863)
<INCOME-TAX> 0
<INCOME-CONTINUING> (107,863)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (107,863)
<EPS-PRIMARY> (0.017)
<EPS-DILUTED> 0
</TABLE>
