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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: December 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 February 13, 1998 the Registrant had 15,497,923 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
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ITEM 1. FINANCIAL STATEMENTS REQUIRED BY FORM 10-QSB
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Harrier, Inc. (the "Registrant") files herewith the unaudited condensed
consolidated balance sheets of the Registrant and its subsidiaries as of
December 31, 1997 and 1996, and the related unaudited condensed consolidated
statements of operations for the three and six months ended December 31, 1997
and 1996, and statements of cash flows for the three and six months ended
December 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, 1997 on file with the Securities and
Exchange Commission on December 10, 1997 is hereby incorporated by reference.
2
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HARRIER, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 13,962 $ 58,237
Amount receivable from related party 55,000 160,478
Grant contribution receivable 0 20,000
Other current assets 12,479 24,344
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Total Current Assets 81,441 263,059
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PROPERTY AND EQUIPMENT, net 23,197 30,636
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Intangible assets 29,926 31,787
Investment in New Concept Therapeutics 250,000 0
Total Assets $ 384,564 $ 325,482
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 589,807 $ 609,322
Convertible note payable to related party 595,167 564,500
Note payable to New Concept Therapeutics 200,000 0
Deferred grant revenue 0 20,000
Dividend payable to Glycosyn preferred stockholders 4,450 4,450
Total Current Liabilities 1,389,424 1,198,272
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Minority Interests 89,000 89,000
STOCKHOLDERS' EQUITY:
Common Stock 15,298 13,968
Additional paid-in capital 15,461,910 15,323,740
Accumulated deficit (16,533,357) (16,261,789)
Cumulative translation adjustment (37,711) (37,709)
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Total Stockholders' Equity (1,093,860) (961,790)
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Total liabilities and
stockholders' equity $ 384,564 $ 325,482
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</TABLE>
3
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HARRIER, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
December 31, December 31,
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1997 1996 1997 1996
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<S> <C> <C> <C> <C>
SALES $ 0 $ 5,330 $ 0 $ 12,668
COST OF SALES 0 4,837 0 11,674
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GROSS PROFIT 0 493 0 994
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EXPENSES:
General and administrative 85,773 45,626 129,441 84,122
Amortization and depreciation 6,239 3,757 9,299 6,231
Salaries and related expenses 61,291 102,135 121,419 210,299
Research and development 0 0 0 5,000
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Total expenses 153,303 151,518 260,159 305,652
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LOSS FROM OPERATIONS (153,303) (151,025) (260,159) (304,658)
----------- ---------- ----------- ----------
OTHER INCOME (EXPENSE):
Grant income 0 0 20,000 0
Loss on investment 0 (15,716) 0 (15,716)
Interest income/(expense) (15,367) (15,241) (30,611) (27,935)
----------- ---------- ----------- ----------
Total Other Income (Expense) (15,367) (30,957) (10,611) (43,651)
----------- ---------- ----------- ----------
Income (loss) from continuing operations before
provision for income taxes (168,670) (181,982) (270,770) (348,309)
Provision for income taxes 0 (800) (800) (1,100)
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Net income (loss) (168,670) (182,782) (271,570) (349,409)
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Net income (loss) per common share $ (0.01) $ (0.02) $ (0.02) $ (0.03)
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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)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
DECEMBER 31,
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1997 1996
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<S> <C> <C>
Cash Flows from (used for) Operating Activities:
Net Loss $(271,570) $(349,409)
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Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and Amortization 9,299 6,231
Accrued interest 30,666 30,666
Changes in assets and liabilities:
Related party receivable 105,478 19,547
Inventory 0 11,751
Other current assets 11,865 3,683
Accounts payable and accrued expenses (19,511) (13,807)
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Total Adjustments 137,797 58,071
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Cash Used by Operating Activities $(133,773) $(291,338)
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Cash Flows from Investing Activities:
Payment for property and equipment 0 (57,404)
Increase in investment (250,000) 0
Decrease in investment 0 61,875
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Cash used by Investing Activities $(250,000) $ 4,471
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Cash Flows from Financing Activities:
Note payable to New Concept Therapeutics 200,000 0
Issuance of stock 139,500 0
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Net Cash Flows Provided by
Financing Activities $ 339,500 $ 0
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Effect of Exchange Rate Changes on Cash $ (2) $ 0
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Net Increase in Cash and Cash Equivalents (44,275) (286,867)
Cash and Cash Equivalents at Beginning of Period 58,237 347,022
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Cash and Cash Equivalents at End of Period $ 13,962 $ 60,155
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</TABLE>
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 December 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, 1997 audited financial statements. The results of operations for the
three months ended September 30, 1997 are not necessarily indicative of the
operating results for the full year.
NOTE 2 - 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, 1998. 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 3 - SECURITIES PURCHASE AGREEMENT AND PLAN OF REORGANIZATION
On October 30, 1997, the Company entered into a Securities Purchase Agreement
and Plan of Reorganization ("Reorganization Agreement") with COPE AG
("COPE"), a Swiss sock corporation engaged in the business of providing high
volume information management consulting services and solutions to Swiss,
German and Austrian industries. Pursuant to the Reorganization Agreement, the
shareholders of COPE will become the controlling stockholders of the Company
and COPE will become a wholly-owned subsidiary of the Company. (See ITEM 2)
NOTE 4 - ISSUANCE OF COMMON STOCK
During the six months ended December 31, 1997 the Company issued
approximately 130,000 shares of Harrier, Inc. common stock as payment in
lieu of cash in the settlement of a lawsuit.
In addition, the Company issued 1,200,000 shares of Harrier, Inc. common
stock at $0.10 per shares and 900,000 common stock warrants. The shares were
sold pursuant to Regulation S under the Securities Act of 1933 to seven
European investors. There was no underwriter involved in the transaction. The
proceeds from the sale of the shares will be used for working capital and
administrative and professional fees associated with a prospective merger.
6
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NOTE 5 - SUBSEQUENT EVENTS
Subsequent to December 31, 1997 the Company issued 400,000 shares of Harrier,
Inc common stock at $0.10 per share. The shares were sold pursuant to
Regulation S under the Securities Act of 1933. There was no underwriter
involved in the transaction. The proceeds from the sale of the shares 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
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GENERAL:
Harrier, Inc., a Delaware corporation ("Harrier" or "the Company"), has
historically been engaged in the discovery, development and sale of selected
products and technologies in the health, fitness and medical markets. Since
1996, the Company's strategic force has been to find a merger candidate. The
Company has considered a merger to be a priority due to the absence of
significant sales of the Company's Bioptron lamps and the Company's
continuing inability to obtain the additional capital necessary to fund its
pharmaceutical research and development operations.
Unless the context otherwise requires, the term "Company" refers to Harrier,
Inc., a Delaware corporation, and its majority subsidiary, Glycosyn
Pharmaceuticals, Inc., a Delaware corporation, and it equity interest in
DermaRay International, LLC, a California limited liability company.
On October 30, 1997, the Company entered into a Securities Purchase Agreement
and Plan of Reorganization ("Reorganization Agreement") with COPE AG
("COPE"), a Swiss stock corporation engaged in the business of providing high
volume information management consulting, services and solutions to Swiss,
German and Austrian industries. Pursuant to the Reorganization Agreement,
the shareholders of COPE will become the controlling stockholders of the
Company and COPE will become a wholly-owned subsidiary of the Company
(referred to herein as the "COPE Reorganization"). In connection with the
COPE Reorganization, the Company has terminated its Bioptron Lamp operations
and intends to conduct the following series of transactions (refereed to
herein as the "Glycosyn Recapitalization"):
- Concurrent with the close of the COPE Reorganization, Harrier will
transfer all of its assets and liabilities to Glycosyn. In connection
therewith, the principal creditors of Harrier, except NCIF which is
presently owed $595,000 by Harrier, will agree to release Harrier of any
further liability for their claims.
- Concurrent with the close of the COPE Reorganization, Harrier will
sell to NCIF 2,850,000 shares of its 5,000,000 Glycosyn Common Stock in
consideration of NCIF's agreement to cancel the $595,000 of indebtedness
owed by Harrier.
This report contains forward-looking statements that are based on the
Company's beliefs as well as assumptions made by and information currently
available to the Company. When used in this registration statement, the
words "believe," "expect," "anticipate," "estimate" and similar expressions
are intended to identify forward-looking statements. Such statements are
subject to certain risks, uncertainties and assumptions, including, without
limitation, the Company's continuing losses and working capital deficit. The
Company's lack of adequate working capital, the miscellaneous risks
associated with the proposed COPE reorganization, including the risk that the
transaction will not be consummated; and general economic conditions. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially form those
anticipated, estimated, or projected. The Company cautions potential
investors not to place undue reliance on any such forward-looking statements
all of which speak only as to the date made.
8
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RESULTS OF OPERATIONS
All corporate overhead is focused on restructuring the Company and
facilitating a merger transaction. The operating expenses incurred during the
quarter and six months ended December 31, 1997 totaled $153,303 and 260,159
respectively, and relate primarily to the proposed COPE Reorganization. (See
ITEM 2).
LIQUIDITY AND CAPITAL RESOURCES
For the purpose of preserving the Company as a going concern, the Company has
entered into the COPE Reorganization Agreement. In connection with the
proposed COPE Reorganization, Harrier will transfer all of its assets and
liabilities to Glycosyn. In connection therewith, the principal creditors of
Harrier, except New Capital Investment Fund ("NCIF") which is presently owed
$595,000 by Harrier, will agree to release Harrier of any further liability
for their claims. At the same time, Harrier will sell to NCIF 2,850,000
shares of its Glycosyn Common Stock in consideration of NCIF's agreement to
cancel the $595,000 of indebtedness owed by Harrier.
In the event the Company fails to consummate the COPE Reorganization and the
Glycosyn recapitalization, the Company will require substantial additional
capital in order to continue its present level of operations, of which there
can be no assurance. The report of the Company's independent accountants for
the Company's 1997 fiscal year includes an explanatory paragraph with respect
to substantial doubt existing about the Company's ability to continue as a
going concern in the absence of additional capital.
9
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PART II
OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
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NONE
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(A) NONE
(B) REPORTS ON FORM 8-K:
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: February 27, 1998 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-30-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 13,962
<SECURITIES> 0
<RECEIVABLES> 55,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 81,441
<PP&E> 118,481
<DEPRECIATION> 95,283
<TOTAL-ASSETS> 384,564
<CURRENT-LIABILITIES> 1,389,424
<BONDS> 0
0
0
<COMMON> 15,298
<OTHER-SE> (1,109,158)
<TOTAL-LIABILITY-AND-EQUITY> 384,564
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 153,303
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,367
<INCOME-PRETAX> (168,670)
<INCOME-TAX> 0
<INCOME-CONTINUING> (168,670)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (168,670)
<EPS-PRIMARY> (.017)
<EPS-DILUTED> 0
</TABLE>
