SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 March 31, 1997
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 (IRS Employer Identification No.)
incorporation or organization)
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 requiring 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 April 30, 1997.
Transitional Small Business Disclosure Format (Check One) Yes No X
<PAGE>
BIORELEASE CORP.
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statement
Consolidated Balance Sheets as of March 31, 1997
(unaudited) and June 30, 1996...................................... 3
Consolidated Statements of Operations for the
Three Months and the Nine Months ended
March 31, 1997 (unaudited) and 1996 (unaudited),
and from October 20, 1989 (inception) to
March 31, 1997 (unaudited)......................................... 4
Consolidated Statements of Cash Flows for the
Nine Months Ended March 31, 1997 (unaudited)
and 1996 (unaudited), and from October 20,
1989 (inception) to March 31, 1997 (unaudited)..................... 5
Notes to Unaudited Financial Statements............................ 7
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................... 9
Item 2. Changes in Securities............................................... 9
Item 3 Defaults Upon Senior Securities...................................... 9
Item 4 Submission of Matters to a Vote of Security Holders.................. 9
Item 5. Other Information................................................... 9
Item 6 Exhibits and Reports on Form 8-K..................................... 9
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
<PAGE>
<TABLE>
<CAPTION>
BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
March 31, 1997 and June 30, 1996
March 31, June 30,
1997 1996
(Unaudited) (Unaudited)
----------- -----------
ASSETS
<S> <C> <C>
Cash .................................................. $ 11,418 $ 1,200
Accounts receivable ................................... 22,292 563
Inventories ........................................... 23,366 27,679
Other receivables ..................................... -- --
Prepaid expenses and other current assets.............. 1,379 1,679
-------- ------------
Total current assets .................................. $ 58,455 $ 31,121
Equipment and Leasehold improvements, net.............. 21,587 30,040
Intangible assets, net ................................ 29,029 38,947
Other noncurrent assets ............................... 698 699
------------ -----------
Total assets .......................................... $ 109,769 $ 100,807
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ...................................... $ 123,169 $ 90,637
Accrued expenses ...................................... 108,892 70,642
Notes payable - stockholders, current ................. 58,100 85,530
Loans payable - other ................................. 27,500 --
Income taxes payable .................................. 1,549 1,549
Other current liabilities ............................. 1,500 1,500
----------- -----------
Total current liabilities ............................. $ 320,710 $ 249,858
Notes payable - stockholders, long term ............... 18,430 --
Notes payable - other, long term ...................... 16,000 16,000
Other liabilities ..................................... 87,734 87,734
----------- -----------
Total liabilities ..................................... $ 442,874 $ 353,592
Stockholders' equity:
Common stock of $.01 par value ........................ 99,217 98,803
Additional paid-in capital ............................ 9,119,296 9,113,927
Stock warrants outstanding ............................ -- --
Development stage accumulated deficit ................. (9,497,118) (9,411,015)
Stock subscription receivable ......................... (50,000) (50,000)
------------ -----------
$ ( 328,605) $ (248,285)
Less: Treasury stock .................................. (4,500) (4,500)
----------- -----------
Total stockholders' equity (deficit) .................. $ (333,105) $ (252,785)
----------- -----------
Total liabilities and stockholders' equity (deficiency) $ 109,769 $ 100,807
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended March 31, 1997 and 1996
and the Cumulative Period from Inception to March 31, 1997
Three Months Ended Nine Months Ended Inception
March 31, March 31, (October 20, 1989)
1997 1996 1997 1996 to March 31, 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues ...................................... $ 41,534 $ 1,500 $ 87,185 $ 63,983 $ 474,297
Cost of Goods Sold ............................ 3,772 -- 4,313 3,073 19,610
----------- ----------- ----------- ----------- -----------
Gross Profit .................................. $ 37,762 $ 1,500 $ 82,872 $ 60,910 $ 454,687
Operating Expenses:
Cell culture operations ....................... -- -- -- -- (601,116)
Research and development ...................... -- -- -- (25,000 (2,558,041)
Purchased technology .......................... -- -- -- -- (690,000)
General and administrative .................... (57,927) (68,985) (135,634) (189,698) (4,171,266)
Other ......................................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Loss from operation ........................... $ (20,165) $ (67,485) $ (52,762) $ (153,788) $(7,565,736)
----------- ----------- ----------- ----------- -----------
Other costs:
Interest, net ................................. $ (981) $ (1,249) $ (2,943) $ (3,654) 84,408
Lease commitment cost ......................... -- -- -- -- (315,000)
Litigation costs .............................. -- -- -- (5,474) (99,242)
Other income (costs) .......................... -- -- -- -- (23,024)
Gain (Loss) on sale of assets ................. -- (2,700) -- (1,600) 62,616
Offering costs ................................ -- -- (30,396) -- (321,830)
Option compensation ........................... -- -- -- -- (219,375)
Income recognized on settlements .............. -- -- -- 29,361 280,500
Realized loss for decline in investments ...... -- -- -- (1,500,000)
----------- ----------- ----------- ----------- -----------
Total Other Costs ............................. $ (981) $ (3,949) $ (33,339) $ 18,633 $(2,050,947)
----------- ----------- ----------- ----------- -----------
Income (Loss) before provision for
(benefit from)income taxes and cumulative
effect of change in accounting principle ... $ (21,146) $ (71,434) $ (86,101) $ (135,155) $(9,616,683)
Provision (credit) for income taxes 343,871
Income (Loss) before cumulative effect of
accounting principle ......................... (21,146) (71,434) (86,101) (135,155) (9,960,554)
Cumulative effect of change in accounting
principle.................................. 463,440
----------- ----------- ----------- ----------- ------------
Net Income (Loss) ........................... $ (21,146) $ (71,434) $ (86,101) $ (135,155) $(9,497,114)
=========== =========== =========== =========== ===========
Weighted average shares ..................... 9,471,659 8,962,263 9,476,159 8,962,263 5,414,876
Income (Loss) per share ..................... (0.01) (0.01) (0.01) (0.02) (1.75)
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
<CAPTION>
BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months and Nine Months
Ended March 31, 1997 and 1996
and the Cumulative Period from Inception to March 31, 1997
(Unaudited)
Nine Months Ended Inception
March 31, (October 20, 1989)
1997 1996 to March 31, 1997
---- ---- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net Loss .................................................... $ (86,101) $ (135,155) $(9,497,116)
Adjustments to reconcile net loss to net cash ............... -- -- --
used in development activities: ............................. -- -- --
Depreciation and amortization ............................... 22,637 19,153 232,067
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 purchased technology .... -- -- 605,000
Common stock issued in exchange for services rendered ....... -- -- 52,300
Common stock options issued in exchange for services rendered -- -- 89,228
Amortization of unearned compensation ....................... -- -- 140,625
Repricing of A warrants ..................................... -- -- 78,750
Changes in Current Assets: .................................. -- -- --
Cash - escrow ............................................... -- -- --
Accounts receivable ......................................... (21,729) 35,168 (22,292)
Other receivables ........................................... -- -- --
Inventories ................................................. 4,313 3,073 (23,366)
Prepaid expenses and other current assets ................... 300 787 (1,379)
Deferred tax asset .......................................... -- -- 463,440
Other non-current assets .................................... (1) 403 (700)
Changes in current liabilities:
Accounts payable ............................................ 32,532 5,111 194,120
Accrued expenses ............................................ 38,250 9,811 116,720
Other current liabilities ................................... -- -- 90,783
----------- ----------- -----------
Net cash used in operating activities ....................... $ (9,799) $ (61,649) $(6,441,964)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of government backed securities .................... $ -- $ -- $(1,000,000)
----------- ----------- -----------
Proceeds from collateralized mortgage obligations ........... -- -- 1,000,000
Purchase of fixed assets .................................... -- (1,370) (333,187)
Proceeds from sale of assets ................................ -- -- 189,742
Purchase of intangible assets ............................... (4,266) (13,691) (100,538)
----------- ----------- -----------
Net cash used in investing activities ....................... $ (4,266) $ (15,061) $ (243,983)
----------- ----------- -----------
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
<CAPTION>
BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH
FLOW For the Three Months and Nine Months
Ended March 31, 1997 and 1996
and the Cumulative Period from Inception to March 31, 1997
(Unaudited)
Nine Months Ended Inception
March 31, (October 20, 1989)
1997 1996 to March 31, 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from financing activities:
Advances from stockholders .................................... $ -- $ -- $ 594,385
Payments of advances from stockholders ........................ -- -- (159,975)
Loans payable notes payable ................................... 27,500 -- 27,500
Issuance of common stock, net ................................. (9,000) (9,000) 92,530
Purchase of investments in issuance of common stock ........... 5,783 -- 3,611,749
Notes receivable .............................................. -- 72,710 (1,500,000)
Recapitalization .............................................. -- -- 4,031,176
----------- ----------- -----------
Net cash provided by investing activities ..................... $ 24,283 $ 63,710 $ 6,697,365
----------- ----------- -----------
Net increase (decrease) in cash ............................... $ 10,218 $ (13,000) $ 11,418
Cash at beginning of period ................................... 1,200 13,521 --
----------- ----------- -----------
Cash at end of period ......................................... $ 11,418 $ 521 $ 11,418
=========== =========== ===========
Supplemental disclosure of non-cash transactions:
Interest ...................................................... $ 1,962 $ -- $ 85,389
Marketable securities acquired through issuance of common stock -- -- --
Issuance of common stock for subscription receivable .......... -- -- 50,000
Liabilities repaid through issuance of common stock ........... $ 5,784 $ -- $ 582,773
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the Nine Months Ended March 31, 1997 and 1996
and the Cumulative Period from Inception to March 31, 1997
(Unaudited)
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
Item 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 nine months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the year
ended June 30, 1997.
2. Loans payable - During the previous quarter, a Private Placement was
undertaken by the Company to raise up to $500,000 in the form of unsecured
notes from accredited individuals relating to a then pending business
combination between the Company and TheraMed Partners, Inc.. On March 13,
1997 the Company announced that TheraMed Partners, Inc. and the Company had
terminated their previously announced agreement to undertake this business
combination along with a related spin-off of the Subsidiary, Biorelease
Technologies, Inc. to the Company's stockholders. As a result of the
termination of this agreement, the Company immediately terminated the
Private Placement and offered recision rights to the holders of these
Private Placement subscription notes. As of March 31, 1997, $87,500,
representing all subscriptions which the Company had accepted prior to the
termination, was rescinded. The termination agreement with TheraMed
resulted in the Company borrowing $27,500 from TheraMed to be forgiven
ratably by TheraMed if and when TheraMed raises up to $550,000 from
investors over the five (5) calendar quarters following the date of the
termination agreement.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Three Months Ended March 31, 1997 and 1996
For the three months ended March 31, 1997 the Company, including its
subsidiary Biorelease Technologies, Inc. ("the Subsidiary") had revenues of
$41,534 ($21,534 from Erythrogen(TM) sales and $20,000 from the Baxter
cooperative agreement), cost of sales of $3,772, no expenses for cell culture
operation, no research and development expenses, no cost for purchase
technology, general and administration expenses of $57,927 and interest expense
of $981 resulting in a net loss of $21,146 compared with the three months ended
March 31, 1996 in which the Company had revenues of $1,500, costs of goods sold
of $0, no costs of cell culture operations, no research and development
expenses, administrative and general costs of $68,985, interest expense of
$1,249, and a loss on sale of assets of $2,700 resulting in a net loss of
$71,434.
Nine Months Ended March 31, 1997, and 1996
For the nine months ended March 31, 1997, the Company had revenues of
$87,185, cost of goods sold of $4,313, no cell culture costs, no research and
development costs, no purchased technology costs, general and administrative
costs of $135,634, interest of $2,943, offering costs of $30,396 and no income
taxes resulting in a net loss of $86,101 as compared to the nine months ended
March 31, 1996 in which the Company had revenues of $63,983, cost of goods sold
of $3,073, cell culture operation costs of $0, research and development costs of
$25,000, purchased technology costs of $0, general and administrative costs of
$189,698, interest expense of $3,654, settlement expense of $5,474, loss on sale
of assets of $1,600, option compensation expense of $0, income recognized on
settlements of $29,361 and income taxes of $0 resulting in a net loss of
$135,155. The decrease in net loss over the previous fiscal year's nine months
resulted primarily from the reduction of administrative costs.
Liquidity and Capital Resources
At March 31, 1997, the Company had negative working capital of $262,255 as
compared with the Company's negative working capital of $218,737 at June 30,
1996. The change in the Company's working capital between June 30, 1996 and
March 31, 1997 is attributable to operating expenses in excess of revenues, net
of settlements.
With the termination of the TheraMed business combination, the Company
expects to operate within the limited cash flow generated by its product sales
and its licensing revenue for the remainder of this fiscal year. In this scaled
back configuration, the Company will focus on prepaid research at the University
of New Hampshire and limited outside research to available cash. Depending on
results of this limited research, the Company may be in a position to raise
additional funds within the next several quarters.
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 condition 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.
<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.
On October 8, 1996 the Company announced it had agreed in principle to
enter into a reorganization with TheraMed Partners, Inc. Between
November, 1996 and January, 1997 the Company placed $87,500 in
Subscription Notes under a Private Placement related to this
reorganization. On March 13, 1997 the Company announced it had
terminated this agreement and rescinded $87,500 representing the
entirety of subscriptions accepted by the Company under the Private
Placement. Further, on February 12, 1997, the Company announced that
Dr. Leon Gauci had assumed the role of President of the Subsidiary
(Biorelease Technologies, Inc.).
Item 6. Exhibits and Reports of Form 8-K
None
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.
March 14, 1997 By: /s/ Richard F. Schubert
--------------------------------------
Richard F. Schubert, Chairman and
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000797662
<NAME> BioRelease Corp
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-16-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1.0000
<CASH> 11,418
<SECURITIES> 0
<RECEIVABLES> 22,292
<ALLOWANCES> 0
<INVENTORY> 23,366
<CURRENT-ASSETS> 58,455
<PP&E> 21,587
<DEPRECIATION> 0
<TOTAL-ASSETS> 109,769
<CURRENT-LIABILITIES> 320,710
<BONDS> 0
0
0
<COMMON> 99,217
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 109,769
<SALES> 0
<TOTAL-REVENUES> 41,534
<CGS> 3,772
<TOTAL-COSTS> 57,927
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (21,146)
<INTEREST-EXPENSE> 981
<INCOME-PRETAX> (21,146)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,146)
<EPS-PRIMARY> (017)
<EPS-DILUTED> 0
</TABLE>
