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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: March 31, 1998 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 12, 1998 the Registrant had 15,697,923 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 March
31, 1998 and June 30, 1997, and the related unaudited condensed consolidated
statements of operations for the three and nine months ended March 31, 1998 and
1997, and statements of cash flows for the three and nine months ended March
31, 1998 and 1997, 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>
MARCH 31, JUNE 30,
1998 1997
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<S> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 8,905 $ 58,237
AMOUNT RECEIVABLE FROM RELATED PARTY 50,000 160,478
GRANT CONTRIBUTION RECEIVABLE 0 20,000
OTHER CURRENT ASSETS 6,370 24,344
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TOTAL CURRENT ASSETS 65,275 263,059
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PROPERTY AND EQUIPMENT, NET 20,670 30,636
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INTANGIBLE ASSETS 28,995 31,787
INVESTMENT IN NEW CONCEPT THERAPEUTICS 250,000 0
TOTAL ASSETS $ 364,940 $ 325,482
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 596,616 $ 609,322
CONVERTIBLE NOTE PAYABLE TO RELATED PARTY 671,347 564,500
NOTE PAYABLE TO NEW CONCEPT THERAPEUTICS 156,500 0
DEFERRED GRANT REVENUE 0 20,000
DIVIDEND PAYABLE TO GLYCOSYN PREFERRED STOCKHOLDERS 4,450 4,450
TOTAL CURRENT LIABILITIES 1,428,913 1,198,272
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MINORITY INTERESTS 89,000 89,000
STOCKHOLDERS' DEFICIT:
COMMON STOCK 15,698 13,968
ADDITIONAL PAID-IN CAPITAL 15,501,510 15,323,740
ACCUMULATED DEFICIT (16,632,470) (16,261,789)
CUMULATIVE TRANSLATION ADJUSTMENT (37,711) (37,709)
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TOTAL STOCKHOLDERS' DEFICIT (1,152,973) (961,790)
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TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 364,940 $ 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 NINE MONTHS ENDED
MARCH 31, DECEMBER 31,
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
SALES $ 0 $ 33,913 $ 0 $ 46,581
COST OF SALES 0 37,373 0 49,047
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GROSS PROFIT 0 (3,460) 0 (2,466)
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EXPENSES:
GENERAL AND ADMINISTRATIVE 33,338 41,881 162,779 126,003
AMORTIZATION AND DEPRECIATION 3,458 3,823 12,757 10,054
SALARIES AND RELATED EXPENSES 46,137 84,019 167,556 294,318
RESEARCH AND DEVELOPMENT 0 0 0 5,000
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TOTAL EXPENSES 82,933 129,723 343,092 435,375
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LOSS FROM OPERATIONS (82,933) (133,183) (343,092) (437,841)
-------- --------- --------- ---------
GRANT INCOME 0 40,000 20,000 40,000
LOSS ON INVESTMENT 0 0 0 (15,716)
INTEREST INCOME/(EXPENSE) (16,180) (14,680) (46,791) (42,615)
-------- --------- --------- ---------
TOTAL OTHER INCOME (EXPENSE) (16,180) 25,320 (26,791) (18,331)
-------- --------- --------- ---------
INCOME (loss) FROM CONTINUING OPERATIONS BEFORE
PROVISION FOR INCOME TAXES (99,113) (107,863) (369,883) (456,172)
PROVISION FOR INCOME TAXES 0 0 (800) (1,100)
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NET INCOME (loss) (99,113) (107,863) (370,683) (457,272)
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BASIC AND DILUTED LOSS PER SHARE $ (0.01) $ (0.01) $ (0.02) $ (0.04)
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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 NINE MONTHS ENDED
MARCH 31,
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1998 1997
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<S> <C> <C>
CASH FLOWS FROM (USED FOR) OPERATING ACTIVITIES:
NET LOSS $ (370,683) $ (457,272)
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ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
USED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 12,757 10,054
ACCRUED INTEREST 46,851 45,666
CHANGES IN ASSETS AND LIABILITIES:
RELATED PARTY RECEIVABLE 110,478 18,500
INVENTORY 0 48,601
OTHER CURRENT ASSETS 17,974 3,549
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (12,707) (57,144)
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TOTAL ADJUSTMENTS 175,353 69,226
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CASH USED BY OPERATING ACTIVITIES $ (195,330) $ (388,046)
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CASH FLOWS FROM INVESTING ACTIVITIES:
PAYMENT FOR PROPERTY AND EQUIPMENT 0 (62,885)
INCREASE IN INVESTMENT (250,000) 0
DECREASE IN INVESTMENT 0 61,875
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CASH USED BY INVESTING ACTIVITIES $ (250,000) $ (1,010)
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CASH FLOWS FROM FINANCING ACTIVITIES:
NOTE PAYABLE TO NEW CONCEPT THERAPEUTICS 156,500 0
NOTE PAYABLE TO NEW CAPITAL AG 60,000
ISSUANCE OF STOCK 179,500 89,000
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NET CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES $ 396,000 $ 89,000
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EFFECT OF EXCHANGE RATE CHANGES ON CASH $ (2) $ (28)
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NET INCREASE IN CASH AND CASH EQUIVALENTS (49,332) (300,084)
Cash and Cash Equivalents at Beginning of Period 58,237 347,022
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Cash and Cash Equivalents at End of Period $ 8,905 $ 46,938
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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 March 31, 1998, 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 nine months ended March
31, 1998 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.
On January 23, 1998, the Company's subsidiary, Glycosyn, entered into a $60,000
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 January 22, 1999. At the
Company's option, the loan's principal and interest can be repaid using Gycosyn
stock, valued at 75% of the average price 90 days preceding the repayment date.
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 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. (See ITEM 2)
6
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NOTE 4 - ISSUANCE OF COMMON STOCK
During the nine months ended March 31, 1998 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 1,600,000 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 nine 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.
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 $610,000 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 $610,000 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
During the nine months ended March 31, 1998, the Company had no revenue from
operations as a result of its discontinuation of sales and marketing of the
Bioptron lamps. Operating expenses incurred during the three and nine months
ended March 31, 1998 totaled $82,933 and $343,092 respectively, and relate
primarily to the proposed Reorganization.
LIQUIDITY AND CAPITAL RESOURCES
For the purpose of preserving the Company as a going concern, the Company has
entered into the Reorganization Agreement. In connection with the proposed
Reorganization, the Company will transfer all of its assets and liabilities to
Glycosyn. In connection therewith, the principal creditors of the Company
except New Capital Investment Fund ("NCIF") which is presently owed
approximately $610,000 by the Company, will agree to release the Company of any
further liability for their claims. At the same time, the Company will sell to
NCIF 2,850,000 shares of its Glycosyn Common Stock in consideration of NCIF's
agreement to cancel the $610,000 of indebtedness owed by Harrier.
In event the Company fails to consummate the 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: May 12, 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> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 8,905
<SECURITIES> 0
<RECEIVABLES> 50,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 65,275
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 364,940
<CURRENT-LIABILITIES> 1,428,913
<BONDS> 0
0
0
<COMMON> 15,698
<OTHER-SE> (1,137,275)
<TOTAL-LIABILITY-AND-EQUITY> 364,940
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 82,933
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,180
<INCOME-PRETAX> (99,113)
<INCOME-TAX> 0
<INCOME-CONTINUING> (99,113)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (99,113)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
