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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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from July 1, 1997 to September 30, 1997
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.)
340 Granite St. Suite 200, Manchester, NH 03102
(Address of principal Executive offices Zip Code)
(603) 641-8443
Issuer's telephone number, including area code
Former name, former address and formal fiscal year,if changed since last report.
10 Chestnut Street, Unit D, Bedford, NH 03110
603-471-1255
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, 9,446,659 shares of common
stock, par value $.01 per share as of November 08, 1997.
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Transitional Small Business Disclosure Format (Check One) Yes _____No __X__
1
<PAGE>
BIORELEASE CORP.
INDEX
PART I. FINANCIAL INFORMATION Page
Number
------
Item 1. Financial Statements ..........................................3
Balance sheets as of September 30, 1997 (unaudited)
and June 30, 1997..............................................3
Statements of Operations for the Three Months Ended
September 30, 1997 (unaudited) and 1996 (unaudited),
and from October 20, 1989 (inception) to
September 30, 1997 (unaudited).................................4
Statements of Cash Flows for the three Months Ended
September 30, 1997 (unaudited) and 1996 (unaudited),
and from October 20, 1989 (inception) to September 30,
1997 (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..............................................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
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1......Financial Statement
BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
September 30, 1997 and June 30, 1997
<TABLE>
<CAPTION>
September
30, 1997 June 30,
Unaudited 1997
--------- --------
ASSETS
------
<S> <C> <C>
Current Assets:
Cash $ 32,186 $ 15,277
Accounts receivable 0 8,099
Inventories 19,681 19,681
Other receivables 195 195
Prepaid expenses and other current assets 180 180
------------ ------------
Total current assets 52,242 43,432
------------ ------------
Equipment and leasehold improvements, net 16,587 18,987
------------ ------------
Other assets:
Intangible assets, net 27,246 32,347
Other noncurrent assets 699 699
------------ ------------
Total assets $ 96,774 $ 95,465
============ ============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCIES)
---------------------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 118,503 $ 116,397
Accrued expenses 137,727 141,243
Notes payable stockholders,current 55,575 58,575
Deferred Income 20,000 20,000
Other current liabilities 2,378 2,367
------------ ------------
Total current liabilities 334,183 338,582
Notes payable stockholders, long term 14,955 14,955
Notes payable others, long term 16,000 16,000
Other liabilities 87,734 87,734
Total liabilities 452,872 457,271
------------ ------------
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, 1997 and
June 30, 1997 99,216 99,216
Additional paid-in capital 9,110,298 9,110,298
Development stage accumulated deficit (9,510,111) (9,515,820)
Stock subscriptions receivable (50,000) (50,000)
------------ ------------
(350,597) (356,306)
Less: Treasury stock, at par (5,500) (5,500)
Total Stockholder's Equity (Deficiencies) (356,097) (361,806)
------------ ------------
Total liabilities and stockholders'
equity (deficiencies) $ 96,774 $ 95,465
============ ============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE>
BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 1997 and 1996,
and the Cumulative Period from Inception to September 30, 1997
(Unaudited)
-----------
<TABLE>
<CAPTION>
Three Months Ended Inception
September 30, (October 20,1989)
1997 1996 to September 30, 1996
---- ---- ---------------------
<S> <C> <C> <C>
Revenues $ 20,000 $ 12,691 $ 516,396
Cost of goods sold ( 0) ( 0) (23,296)
----------- ----------- ----------
Gross profit 20,000 12,691 493,100
Costs and expenses:
Biotech selling expenses - - (601,116)
Research and development - - (2,558,041)
Purchased technology - - (690,000)
General and administrative (12,673) (44,317) (4,217,070)
(Loss)/Gain from operations 7,327 (31,626) (7,573,127)
Interest, net (1,617) (981) 82,059
Lease commitment costs - - (315,000)
Litigation costs - (99,242)
Offering costs - - (334,946)
Option compensation - - (219,375)
Other income (cost) - - (23,034)
Realized loss for decline
in value of investment - - (1,500,000)
Gain on equipment sale - 62,616
Income recognized on - - 293,606
settlements
Total other income (cost) (1,617) (981) (2,056,550)
Loss)/Gain before provision for
(benefit from) income taxes
and cumulative effect of
change in accounting principle 5,710 (32,607) (9,629,677)
Provision for income taxes - - 343,873
(Loss)/Gain before cumulative
effect of change in accounting
principle 5,710 (32,607) (9,973,550)
Cumulative effect of change in
accounting principle - - 463,440
Net (loss)/gain 5,710 ($ 32,607) (9,510,110)
=========== =========== ==========
Weighted average shares 9,388,325 9,471,659 5,575,916
Total loss per share ($0.00) ($0.00) ($1.71)
The accompanying notes are an integral part of the
consolidated financial statements.
</TABLE>
4
<PAGE>
BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the three Months Ended September, 1997 and 1996
and the Cumulative Period from Inception to September 30, 1997
(Unaudited)
----------
<TABLE>
<CAPTION>
Inception
Three Months Ended (October
September 30, 20, 1989)
to September 30,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss)/Gain $ 5,710 ($ 32,610) ($ 9,510,110)
Adjustments to reconcile net loss to
net cash used in development
activities:
Depreciation and amortization 7,500 5,833 243,516
Cumulative effect of change in - - ( 463,440)
accounting principle
(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 technologies - - 605,000
Common Stock issued in exchange for
services rendered - - 95,012
Common stock options issued in
exchange of
services rendered - - 52,300
Amortization of unearned - - 140,625
compensation
Repricing of A Warrants - - 78,750
Changes in current assets:
Cash held as collateral - - -
Accounts Receivable (8,099) 371 -
Inventories - - (19,681)
Other receivables - (1,015) (195)
Prepaid expenses and other current - (632) (180)
assets
Deferred tax asset - - 463,440
Other non-current assets - (14,810) (699)
Changes in current liabilities:
Accounts payable (828) 8,809 186,520
Accrued expenses 2,500 25,978 151,211
Other liabilities - 4,248 (692)
-------- --------- ------------
Net cash used in operating activities $ 6,783 ($ 3,828) ($ 6,389,828)
-------- --------- -----------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
<PAGE>
BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended September 30, 1997 and 1996
and the Cumulative Period from Inception to September 30, 1997
(Unaudited)
--------
<TABLE>
<CAPTION>
Inception
Three Months Ended (October 20, 1989)
September 30, to September 30,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from investing activities:
Purchase of collateralized mortgage
obligations - - (1,000,000)
Proceeds from collateralized - - 1,000,000
mortgage obligations
Purchase of fixed assets - - (333,187)
Purchase of intangible assets - - (105,205)
Proceeds from sale of assets ( -) ( -) ( -)
----------- -------- -----------
Net cash used in investing activities ( -) ( -) (248,650)
----------- -------- -----------
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) 86,530
Issuance of common stock, net - 5,784 2,095,966
Purchase of investments in
issuance of common stock - - (1,500,000)
Recapitalization - - 4,031,176
----------- -------- -----------
Net cash provided by investing
activities (3,000) 2,784 6,651,082
----------- -------- -----------
Net increase (decrease) in cash 16,909 (1,044) 32,186
Cash at beginning of period 15,277 1,200 -
----------- -------- -----------
Cash at end of period $ 32,186 $ 156 $ 32,186
========= ======== ============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
6
<PAGE>
BIORELEASE CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
AND CUMULATIVE FROM INCEPTION (OCTOBER 20, 1989) TO SEPTEMBER 30, 1997
ITEM 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, 1997. 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,
1997 are not necessarily indicative of the results that may be expected for the
year ended June 30, 1998.
7
<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.
Three Months Ended September 30, 1997 and 1996
For the three months ended September 30, 1997, the Company had revenues
of $20,000, costs of goods sold of $0, no cell culture operation costs, no
research and development expenses, general and administrative expenses of
$12,673, interest expense of $1,617, no litigation costs, no gain on sale of
equipment of and no income taxes resulting in a net gain of $5,710 compared to
the three months ended September 30, 1996, in which the Company had revenues of
$12,691, cost of goods sold of $0, no cell culture operations 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 assets, 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 $32,607.
From October 20, 1989, the initial date of the Subsidiary's activity,
through September 30, 1997, the Subsidiary had revenues of $516,396, cost of
goods sold of $23,296, 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 $4,217,070, other costs in the aggregate
of $2,056,550, income taxes of $343,873 and a cumulative effect of change in
accounting principle of $463,440 thereby yielding an accumulated net loss of
$9,510,110.
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
current capital is the Company's funds and revenues.
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.
8
<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.
9
<PAGE>
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 12, 1997 By: /s/ Richard F. Schubert
------------------------------------------
Richard F. Schubert, Chairman and
Principal Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000797662
<NAME> Biorelease, Corp.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1.000
<CASH> 32,186
<SECURITIES> 0
<RECEIVABLES> 185
<ALLOWANCES> 0
<INVENTORY> 19,681
<CURRENT-ASSETS> 52,242
<PP&E> 41,270
<DEPRECIATION> 22,283
<TOTAL-ASSETS> 96,774
<CURRENT-LIABILITIES> 334,183
<BONDS> 0
0
0
<COMMON> 99,216
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 96,774
<SALES> 20,000
<TOTAL-REVENUES> 20,000
<CGS> 0
<TOTAL-COSTS> 14,290
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,617
<INCOME-PRETAX> 5,710
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,710
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
