SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File No. 0-15260
Biorelease Corp.
(Exact name of small business issuer as specified in its charter)
Delaware 88-0218411
(State or other jurisdiction of (Internal Revenue Service
incorporation or organization) Employer Identification No.)
10 Chestnut Drive #D, Bedford, NH 03110
(Address of principal Executive offices) (Zip Code)
(603) 471-1255
Issuer's telephone number, including area code
Former name, former address and formal fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such 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 _____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the last practicable date, 9,471,659 shares of common
stock, par value $.01 per share as of November 08, 1996.
Transitional Small Business Disclosure Format (Check One)
Yes _____ No __X__
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<PAGE>
BIORELEASE CORP.
INDEX
PART I. FINANCIAL INFORMATION Page
Number
Item 1. Financial Statements . . . . . . . . . . 3
Balance sheets as of September 30, 1996
(unaudited) and June 30, 1996. . . . . . 3
Statements of Operations for the Three
Months Ended September 30, 1996
(unaudited) and 1995 (unaudited), and
from October 20, 1989 (inception) to
September 30, 1996 (unaudited) . . . . . 4
Statements of Cash Flows for the three
Months Ended September 30, 1996
(unaudited) and 1995 (unaudited), and
from October 20, 1989 (inception) to
September 30, 1996 (unaudited) . . . . . 5
Notes to Unaudited Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operation. . . . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . 10
Item 2. Changes in Securities . . . . . . 10
Item 3. Defaults Upon Senior Securities . 10
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . 10
Item 5. Other Information . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K. 10
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statement
BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
September 30, 1996 and June 30, 1996
<TABLE>
September June 30,
ASSETS 30,1996 1996
------- ----
Unaudited
---------
<S> <C> <C>
Current Assets
Cash $ 156 $ 1,200
Accounts receivable 192 563
Inventories 27,679 27,679
Other receivables 1,015 -
Prepaid expenses and other current assets 2,311 1,679
--------- ---------
Total current assets 31,353 31,121
--------- ---------
Equipment and leasehold improvements,net 27,044 30,040
--------- ---------
Other assets
Intangible assets, net 36,110 14,811
Deferred legal fees for
future acquisition 38,947 -
Other noncurrent assets 698 699
--------- ---------
Total assets $ 110,016 $ 100,807
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCIES)
Current liabilities
Accounts payable $ 99,446 $ 90,637
Accrued expenses 96,620 70,642
Notes payable stockholders,current 55,600 85,530
Income taxes payable 1,549 1,549
Other current liabilities 5,748 1,500
--------- ---------
Total current liabilities 258,963 249,858
Notes payable stockholders, long term 26,930 -
Notes payable others, long term 16,000 16,000
Other liabilities 87,734 87,734
Total liabilities 389,627 353,592
--------- ---------
Stockholders' equity (Deficiency):
Common stock of $.01 par value,
50,000,000 shares authorized,
9,921,659 and 9,880,354 issued and
9.471.659 and 9,430,354
outstanding at September 30, 99,217 98,803
1996 and June 30, 1996
Additional paid-in capital 9,119,297 9,113,927
Development stage accumulated
deficit (9,443,625) (9,411,015)
Stock subscriptions receivable ( 50,000) ( 50,000)
--------- ---------
( 275,111) ( 248,285)
Less: Treasury stock, at par ( 4,500) ( 4,500)
Total Stockholder's Equity
(deficiencies) ( 279,611) (252,785)
----------- ------------
Total liabilities and
stockholders'equity
(deficiencies) $ 110,016 $ 100,807
=========== ===========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
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BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS For
the Three Months Ended September 30, 1996 and
1995,
and the Cumulative Period from Inception to September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Inception
(October 20,1989)
September 30, to September
------------- ------------
30, 1996
--------
1996 1995
---- ----
<S> <C> <C> <C>
Revenues $ 12,691 $ 14,109 $ 399,803
Cost of goods sold ( 0) ( 6) ( 15,297)
----------- ----------- -----------
Gross profit 12,691 14,103 384,506
Costs and expenses:
Biotech selling expenses - - ( 601,116)
Research and development - (12,500) (2,558,041)
Purchased technology - - ( 690,000)
General and administra-
tive ( 44,317) ( 60,783) (4,079,949)
----------- ---------- -----------
Loss from operations ( 31,626) ( 59,180) (7,544,600)
----------- ---------- -----------
Interest, net ( 981) (1,193) 86,370
Lease commitment costs - - ( 315,000)
Litigation costs - (4,825) ( 99,242)
Offering costs - - ( 291,434)
Option compensation - - ( 219,375)
Other income (cost) - - ( 23,024)
Realized loss for decline in
value of investment - - (1,500,000)
Gain on equipment sale - 1,100 62,616
Income recognized on
settlements - - 280,500
----------- --------- ----------
Total other income
(cost) ( 981) ( 4,918) (2,018,589)
Loss before provision for (benefit
from) income taxes and cumulative
effect of change in accounting
principle ( 32,607) ( 64,098) (9,563,189)
Provision for income taxes - - 343,873
---------- --------- ----------
Loss before cumulative effect of
change in accounting
principle ( 32,607) ( 64,098) (9,907,062)
Cumulative effect of change in
accounting principle - - 463,440
--------- ---------- ----------
Net loss ($32,607) ($ 64,098) (9,443,622)
========= ========= ===========
Weighted average shares 9,471,659 8,892,263 5,168,977
Total loss per share ($0.00) ($0.01) ($1.77)
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
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<PAGE>
BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the three Months Ended September, 1996 and
1995 and the Cumulative Period from Inception to
September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Inception
Three Months Ended (October 20, 1989)
September 30, to September 30,
1996 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from
operating
activities:
Net loss ($ 32,610) ( $ 64,098) ($ 9,443,625)
Adjustments to
reconcile net loss to
net cash used in
development activities:
Depreciation and
amortization 5,833 6,498 215,263
Cumulative effect of
change in accounting
principle - - ( 463,440)
(Gain) Loss on sale of
assets - - ( 38,704)
Recognized loss on
investment - - 1,500,000
Loss on extinguishment
of debt - - 42,000
Common Stock issued
in exchange for pur-
chased technologies - - 605,000
Common Stock issued
in exchange for
services rendered - - 89,228
Common stock options issued
in exchange of services
rendered - - 52,300
Amortization of unearned
compensation - - 140,625
Repricing of A Warrants - - 78,750
Changes in current assets:
Cash held as collateral - - -
Accounts Receivable 371 35,239 ( 192)
Inventories - 5 (27,679)
Other receivables ( 1,015) - ( 1,015)
Prepaid expenses and other
current assets ( 632) 254 ( 2,311)
Deferred tax asset - - 463,440
Other non-current
assets ( 14,810) 403 ( 15,509)
Changes in current liabilities:
Accounts payable 8,809 2,030 170,397
Accrued expenses 25,978 13,297 104,448
Other liabilities 4,248 - 95,031
------- ------------ -----------
Net cash used in
operating
activities ( 3,828) ( 6,372) ( 6,435,993)
--------- ------------ ---------------
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
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<PAGE>
BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS For
the Three Months Ended September 30, 1996 and 1995
and the Cumulative Period from Inception to September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Inception
September 30, (October 20, 1989)
to September 30,
1996 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from investing activities:
Purchase of collateralized mort-
gage obligations - - ( 1,000,000)
Proceeds from collateralized
mortgage obligations - - 1,000,000
Purchase of fixed
assets - ( 1,220) ( 333,187)
Purchase of intangible
assets - ( 2,726) ( 96,272)
Proceeds from sale of
assets ( -) ( -) 189,742
----------- -------- -------------
Net cash used in
investing
activities ( -) ( 3,946) ( 239,717)
----------- -------- -------------
Cash flows from financing activities:
Advances from and amounts due
to stockholders - - 594,385
Payments of advances
from stockholders - - ( 159,975)
Notes receivable - - -
Notes payable ( 3,000) ( 3,000) 98,530
Issuance of common
stock, net 5,784 - 3,611,750
Purchase of investments
in issuance of common
stock - - ( 1,500,000)
Recapitalization - - 4,031,176
----------- ------- -------------
Net cash provided
by investing
activities 2,784 ( 3,000) 6,675,866
------------- -------- ------------
Net increase (decrease)
in cash ( 1,044) ( 13,318) 156
Cash at beginning
of period 1,200 13,521 0
------------ ---------- ------------
Cash at end of period $ 156 $ 203 $ 156
============= ========== =============
</TABLE>
The accompanying notes are an
integral part of the consolidated
financial statements.
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<PAGE>
BIORELEASE CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
AND CUMULATIVE FROM INCEPTION (OCTOBER 20, 1989) TO SEPTEMBER 30, 1996
1. Basis of presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB
and Rule 310 of Regulation S-B. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete consolidated financial statements and should be
read in conjunction with the Company's audited consolidated financial
statements at and for the fiscal year ended June 30, 1996. In the
opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended September
30, 1996 are not necessarily indicative of the results that may be
expected for the year ended June 30, 1997.
2. $14,811 in deferred legal fees relate to the pending acquisition of
Theramed Partners, Inc. which is subject to approval of stockholders.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
The following discussion includes the business of Biorelease Technologies,
Inc. (the "Subsidiary"), since the Company, prior to its acquisition of the
Subsidiary, had no operations other than raising capital and searching for an
acquisition candidate (i.e., the Subsidiary). Where relevant, all numbers
retroactively take into account the acquisition of the Subsidiary by the
Company. During this quarter $14,811 was incurred relating to the proposed
acquisition of Theramed Partners, Inc, such amount being deferred pending
completion of the acquisition which is subject to the approval of the
stockholders of the Company.
Three Months Ended September 30, 19965 and 1995
For the three months ended September 30, 1996, the Company had revenues of
$12,691, costs of goods sold of $0, no cell culture operation costs, no research
and development expenses, general and administrative expenses of $44,317,
interest expense of $981, no litigation costs, no gain on sale of equipment of
and no income taxes resulting in a net loss of $32,607 compared to the three
months ended September 30, 1995, in which the Company had revenues of $14,109,
cost of goods sold of $6, no cell culture operations costs, research and
development expenses of $12,500, general and administrative expenses of $60,783,
interest expense of $1,193, litigation costs of $4,825, a gain on sale of assets
of $1,100, no income recognized on settlements, no other non-operating costs, no
realized loss for decline in value of investment and no income taxes resulting
in a net loss of $64,098.
From October 20, 1989, the initial date of the Subsidiary's activity,
through September 30, 1996, the Subsidiary had revenues $399,803, cost of goods
sold of $15,297, Cell culture operation expenses of $601,116, research and
developmental expenses of $2,558,041, purchased technology costs of $690,000,
general and administrative expenses of $4,079,949, other costs in the aggregate
of $2,018,589, income taxes of $343,873 and a cumulative effect of change in
accounting principle of $463,440 thereby yielding an accumulated net loss of
$9,443,622.
Liquidity and Capital Resources
From inception until the closing of the Reorganization, the Subsidiary's
primary source of funds has been the proceeds from private offerings of its
Common and Preferred Stock. Since the Reorganization, the primary source of
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current capital is the Company's funds and revenues.
Contained in the most recent Annual Report on Form 10KSB is discussion
relating to the acquisition of Theramed Partners, Inc. (Theramed) following
which the Company expects to spin out the Subsidiary operations to the Company's
stockholders in proportion to their interest in the Company and begin focussing
on merger and acquisition activities through Theramed. Theramed has agreed to
advance funds to the Company pending stockholder approval of the acquisition. At
September 30, 1996 such advances were $5,000 plus the assumption of the
Company's obligations to R T Robertson Consultants. In the event the Company is
unable to complete the Theramed transaction and raise the funds anticipated to
cover the planned operating expenses, the Company would be unable to implement
its revised strategy and would be forced to further curtail operations until
capital or financing can be obtained. Any such additional financing could result
in significant dilution to existing stockholders.
At September 30, 1996, the Company had negative working capital of
$227,610, as compared with the Company's negative working capital of $218,737 at
June 30, 1996. The decrease in the Company's working capital between June 30 and
September 30, 1996 is attributable to continuing operations without significant
revenues or new capital formation.
Dividend Policy
The Company has not declared or paid any dividends on its common stock
since its inception and does not anticipate the declaration or payment of cash
dividends in the foreseeable future. The Company intends to retain earnings, if
any, to finance the development and expansion of its business. Future dividend
policy will be subject to the discretion of the Board of Directors and will be
contingent upon future earnings, if any, the Company's financial condition,
capital requirements, general business conditions and other factors. Therefore,
there can be no assurance that dividends of any kind will ever be paid.
Effect of Inflation
Management believes that inflation has not had a material effect on its
operations for the periods presented.
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<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of matters to a Vote of Securities Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports of Form 8-K.
None.
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BIORELEASE CORP.
November 08, 1996 By:/s/ Richard F. Schubert
-----------------------
Richard F. Schubert, Chairman
and Principal Financial Officer
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<TABLE> <S> <C>
<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> 156
<SECURITIES> 0
<RECEIVABLES> 192
<ALLOWANCES> 0
<INVENTORY> 27,679
<CURRENT-ASSETS> 31,353
<PP&E> 27,044
<DEPRECIATION> 2996
<TOTAL-ASSETS> 110,016
<CURRENT-LIABILITIES> 258,963
<BONDS> 0
0
0
<COMMON> 99,217
<OTHER-SE> (378,828)
<TOTAL-LIABILITY-AND-EQUITY> 110,016
<SALES> 12,691
<TOTAL-REVENUES> 12,691
<CGS> 0
<TOTAL-COSTS> 44,317
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (32,626)
<INTEREST-EXPENSE> 981
<INCOME-PRETAX> (32,607)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,607)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
