As filed with the Securities and Exchange Commission on February 4, 2000
Registration No. 33-
--------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BIORELEASE TECHNOLOGIES, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 2834 02-0449012
- ---------------------------- -------------------- -------------
(State or other jurisdiction (Standard industrial (IRS Employer
of incorporation) classification code) I. D. Number)
R. Bruce Reeves
Biorelease Technologies, Inc.
340 Granite Street Suite 200 340 Granite Street Suite 200
Manchester, NH 03102 Manchester, NH 03102
(603) 641-8443 (603) 641-8443
- ---------------------------- -----------------------------
( address including zip code (name, address including zip
and telephone number including code and telephone number
area code of registrant's principal including area code of agent
service) for executive offices)
Copies to:
John B. Lowy, Esq.
JOHN B. LOWY, P.C.
645 Fifth Avenue, 4th Floor
New York, New York 10022
(212-371-7799)
--------------
(Counsel for Registrant)
xx Approximate date of commencement of proposed stock dividend distribution: As
soon as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. ( )
TOTAL NO. OF PAGES:__________
EXHIBIT INDEX PAGE NO.:______
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
----------------------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Title of Maximum Proposed Amount of
Each Class Amount Offering Maximum Regis-
of Securities Being Price Per Aggregate tration
Being Registered Registered Share(1) Offering Price Fee
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Registered shares of
Common Stock 4,582,122 $0.004 $18,328 $4.84
</TABLE>
(1) Estimated for purposes of computing the registration fee pursuant to Rule
457. Directors have assumed the value equals book value less estimated
offering costs divided by total shares outstanding.
BIORELEASE TECHNOLOGIES, INC.
CROSS REFERENCE SHEET
Cross Reference Sheet Pursuant to Rule 501(b)
of Regulation S-K Between Registration
Statement on Form S-1 and the Registration Statement
<TABLE>
<CAPTION>
Form S-1 Item No. Regulation S-K Location in
and Caption Item No. Registration Statement
<S> <C> <C> <C>
1. Forepart of the Regis-
tration Statement and
Outside Front Cover
Page of Registration Statement 501(a) Cover of registra-
tion statement
(b) This sheet
(c) Outside Front Cover
2. Inside Front and
Outside Back Cover
Pages of Registration Statement 502(a) Available Information
(b) Description of
Common Stock
</TABLE>
2
<PAGE>
Where You Can Find More Information
Biorelease Corp. (Biorelease) files annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). These reports make reference to the business of Biorelease
Technologies, Inc. (The Company). You may read and copy any reports, statements
or other information filed by Biorelease at the Commission's public reference
rooms in Washington, D.C., New York City and Chicago. Please call the Commission
at 1-800-SEC-0330 for further information on the public reference rooms.
Biorelease's filings are also available to the public from commercial document
retrieval services and at the Internet web site maintained by the Commission at
http://www.sec.gov. The Common stock of Biorelease Corp is traded on the
National Association of Securities Dealers "Over the counter electronic bulletin
board (OTCEBB) under the symbol "BRLZ".
Biorelease filed a Registration Statement on Form S-4 (the "Registration
Statement") to register with the Commission the Biorelease common stock to be
issued to PMC stockholders in the Merger. A Proxy Statement/Prospectus was a
part of that Registration Statement and constitutes a prospectus of Biorelease
in addition to being a proxy statement of Biorelease for the Biorelease Special
Meeting and a proxy statement of PMC for the PMC Special Meeting. As allowed by
the Commission's rules, this Proxy Statement/Prospectus does not contain all of
the information you can find in the Registration Statement or the exhibits to
the Registration Statement. That Proxy Statement/Prospectus summarizes some of
the documents that are exhibits to the Registration Statement, and are available
for a more complete description of the matters covered by those documents.
3
<PAGE>
TABLE OF CONTENTS
Page
WHERE CAN YOU FIND MORE INFORMATION 3
SUMMARY OF THE REGISTRATION STATEMENT 8
FORWARD LOOKING STATEMENTS 9
WHO CAN ANSWER QUESTIONS 9
RISK FACTORS 10
DILUTION 15
FRACTIONAL SHARES 15
FEDERAL TAX CONSEQUENCES 16
BIORELEASE'S REASON FOR SPINNING OFF THE COMPANY 17
THE COMPANY 18
APPLICATION OF PROCEEDS 18
MARKET PRICE OF SECURITIES 18
SELECTED FINANCIAL INFORMATION 19
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS 20
THE COMPANY AND IT'S BUSINESS 22
LEGAL PROCEEDINGS 28
MANAGEMENT 28
CERTAIN TRANSACTIONS 32
CAPITALIZATION 36
DIVIDEND POLICY 37
LEGAL MATTERS 37
EXPERTS 37
AUDITED FINANCIAL STATEMENTS F-1 - F-13
PART II - INFORMATION NOT REQUIRED IN REGISTRATION STATEMENT
4
<PAGE>
REGISTRATION STATEMENT SUBJECT TO COMPLETION
BIORELEASE TECHNOLOGIES, INC.
4,582,122 Shares Offering Price - $_____ Per Share
Currently, Biorelease Technologies, Inc. (the "Company") is a controlled
subsidiary of Biorelease Corp. (BIORELEASE). As more fully described in this
Registration Statement, the company was formed in February 1990 in California,
and reincorporated in Delaware in August 1992. BIORELEASE is now spinning-off
the Company by distributing approximately 90.8% of the outstanding Common Stock,
namely 4,582,122 shares, to BIORELEASE shareholders and certain creditors. The
record date for determining BIORELEASE shareholders entitled to receive the
Company's shares is March 15, 2000 and the Company's shares are being
distributed to BIORELEASE Shareholders on the basis of one Company share for
each 15 shares of BIORELEASE held as of the record date. The number of the
Company's shares to be distributed to Biorelease shareholders is 800,000 shares
based upon the assumption that on the record date BIORELEASE will have issued,
and outstanding, 12,124,238 shares of its Common Stock. No fractional shares are
being issued. The Company's shares will be distributed to BIORELEASE
shareholders as soon as this Registration Statement becomes effective.
BIORELEASE has not received a ruling from the Internal Revenue Service to the
effect that the distribution will not result in taxable gain or loss to
BIORELEASE or to its shareholders. The officers and directors of BIORELEASE as a
group, who control approximately 10.3% of the outstanding shares of BIORELEASE,
are receiving control of approximately 22.1% of the shares of the Company, which
are being distributed in the spin-off. The officers and directors of BIORELEASE
are also the officers and directors of the Company, but will resign as
Biorelease's officers and directors if and when BIORELEASE completes its
proposed reverse acquisition with Polar Molecular Corporation (See "Registration
Statement Summary").
The Common Stock of the BIORELEASE is currently traded on the National
Association of Securities Dealers "Over the counter electronic bulletin board
(OTCEBB)" under the symbol "BRLZ." The price of the BIORELEASE stock should not
be taken as any indication of the market value of the Company's stock. Shares of
the Company have never traded on any public market.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK, AND, IF RESOLD, SHOULD NOT BE
PURCHASED BY ANYONE WHO REQUIRES A CURRENT RETURN ON HIS OR HER INVESTMENT OR
WHO CANNOT AFFORD A TOTAL LOSS OF HIS OR HER INVESTMENT (SEE "RISK FACTORS").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY
AUTHORITY NOR HAS THE COMMISSION OR ANY OF THE FOREGOING AUTHORITIES PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS REGISTRATION STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
5
<PAGE>
<TABLE>
<CAPTION>
Price to Underwriter's Proceeds to the
the Public (1) Commissions(2) Company (3)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4,582,122 shares to be registered $ not applicable $0 $0
</TABLE>
(See notes on following page)
The date of this Registration Statement is _______ __, 2000
[RED-INK LEGEND TO BE PLACED ON LEFT MARGIN OF PRELIMINARY REGISTRATION
STATEMENT, IF PRELIMINARY REGISTRATION STATEMENTS ARE DISTRIBUTED]
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Registration Statement shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
such state.
6
<PAGE>
(Footnotes from cover page)
(1) Estimated for purposes of computing the registration fee pursuant to
Rule 457. Directors have assumed the value equals the net tangible
book value divided by the number of shares outstanding. There is no
historic trading history of the Company's stock.
(2) There is no underwriter associated with this stock dividend.
(3) BIORELEASE is issuing one share of the Company's common stock for
each 15 shares held by each of its stockholders of record on the
record date for this stock dividend. No net proceeds will become
available to the Company.
7
<PAGE>
--------------------------
The purpose of this Form S-1 registration is to register certain shares of the
Company being issued to shareholders of BIORELEASE of record as of the record
date and certain Company creditors and consultants as part of a transaction
under which BIORELEASE is spinning off its entire interest in the Company
whereby these parties will become shareholders in the Company. No shares in the
Company currently held by stockholders other than BIORELEASE are being
registered. The Company reserves the right in its sole discretion to withdraw,
cancel or modify the offering in whole or in part.
----------------------------
Reports to Securityholders
The Company intends to file annual reports on Form 10 KSB containing
certified financial statements and quarterly reports on Form 10QSB containing
unaudited financial statements.
REGISTRATION STATEMENT SUMMARY
The following is a summary of certain information contained in this
Registration Statement and is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in the Registration
Statement.
Biorelease Technologies, Inc. or the Company, which is still in development
stage, has two core technologies (the "Technologies"): hemoglobin stabilization
and sustained drug release, based on chondroitin sulfate. The Company's first
product, a cell culture additive, ErythrogenTM, uses hemoglobin stabilization
technology to produce a proprietary cell culture additive, currently being sold
by the Company on a limited basis for research use. The Company previously
conducted research on licensing applications based on its chondroitin based
sustained drug release technology with application to both cell culture markets
and therapeutics. There are presently no licensing research activities ongoing.
The Company has had limited sales of ErythrogenTM over the past several years
in amounts ranging from $0 to $26,265 annually. The Company plans to continue
with its limited sales of this product while seeking a merger candidate which
can benefit from its technology base and, upon the completion of this
registration, from the public status of the Company.
NASDAQ Symbol ... Common Stock - xxx
Use of Neither BIORELEASE or the Company will receive any
Proceeds ....... proceeds from the issuance of this stock dividend.
Securities BIORELEASE expects to issue one share in the Company to
the BIORELEASE stockholders of record for each fifteen
shares of BIORELEASE stock held on the record date plus
it will distribute additional shares currently held by
BIORELEASE to certain creditors, officers and directors
of the Company.
Purpose of the
Distribution BIORELEASE has entered into an Agreement and Plan of
Reorganization ("the Reorganization Agreement") with
Polar Molecular Corporation ("Polar") pursuant to which,
among other things, BIORELEASE is to acquire Polar in a
reverse acquisition and Polar's management will replace
present management of BIORELEASE. As part of that
Reorganization Agreement, BIORELEASE has agreed with
Polar that upon completion of the reverse acquisition,
BIORELEASE will have no assets or liabilities.
Therefore, by effecting this spin-off and distributing
shares of the Company in accordance with this
registration statement, Biorelease will be divesting
itself of all of its assets and liabilities and will
thus be in compliance with the Reorganization Agreement
with Polar.
8
<PAGE>
Risks of
Offering ....... This offering involves a high degree of risk (see "Risk
Factors").
FORWARD LOOKING STATEMENTS MAY PROVE INACCURATE
This document contains "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. These statements relate
to expectations concerning matters that are not historical facts and are
therefore subject to risks and uncertainties. When we use words such as
"believes," "expects," "anticipates" or similar expressions, we are making
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, the Company cannot
give any assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from such
expectations ("Cautionary Statements") are disclosed herein and therein,
including, without limitation in conjunction with the forward-looking statements
included under "Risk Factors." All forward-looking statements attributable to
BIORELEASE or the Company are expressly qualified in their entirety by the
Cautionary Statements described herein.
WHO CAN HELP YOU ANSWER YOUR QUESTIONS
If you have questions about the Stock
distribution, you should contact:
Biorelease Corp.
340 Granite Street, Suite 200
Manchester, NH 03102
(603) 641-8443
ATTN Dr. R. Bruce Reeves, President
9
<PAGE>
RISK FACTORS
THE SECURITIES REGISTERED HEREBY ARE SPECULATIVE IN NATURE AND INVOLVE A HIGH
DEGREE OF RISK. IF RESOLD, THE SECURITIES SHOULD BE PURCHASED ONLY BY PERSONS
WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. THEREFORE, EACH PROSPECTIVE
INVESTOR SHOULD, PRIOR TO PURCHASE, CONSIDER VERY CAREFULLY THE FOLLOWING RISK
FACTORS, AS WELL AS ALL OF THE OTHER INFORMATION SET FORTH ELSEWHERE IN THIS
REGISTRATION STATEMENT.[ADD NH DISCLAIMER]
Development Stage of the Company and its Proposed Products &
Technological Uncertainty. To date, the Company has had only limited sales of
its sole product, ErythrogenTM. While Management anticipates limited sales of
ErythrogenTM for certain applications (e.g., research use) should continue at
current levels, these current levels would most likely not be sufficient to
sustain operations. During the current fiscal year ending June 30, 2000, the
Company hopes to find a merger candidate through which it can optimize the value
of its technologies and, following the effective date of this registration,
benefit from its publicly traded status. There can be no assurance that the
Company's efforts will be successful. See "The Company and its Business."
History of Losses; Uncertainty of Future Profitability. At December 31,
1999, the Company had accumulated net losses during the development stage of
$5,794,328. The Company has operated at a loss since its inception and it is
anticipated that the Company will incur substantial losses in future periods.
There can be no assurance as to when or if the Company will be able to achieve
profitability or complete a merger beneficial to the stockholders. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Future Capital Needs; Uncertainty of Future Funding. Since inception,
the Company has expended substantial funds for technology acquisition and
research and development. The Company expects its negative cash flow from
operations will continue for the foreseeable future. The Company expects that it
will need to arrange additional public and/or private financing, requiring the
issuance of additional equity securities, and/or to enter into relationships
with one or more strategic joint venture partners or merger candidates. There
can be no assurance that any such additional funding will be available to the
Company or, if available, that it will be available on acceptable terms. Any
such additional financing may result in significant dilution to existing
stockholders. In order to obtain financing, the Company may also enter into
collaborative arrangements that may require the Company to grant certain rights
to its products or technologies. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Market Pricing and Acceptance of ErythrogenTM. Management believes
that market pricing and acceptance of ErythrogenTM primarily will depend upon
the concentrations of ErythrogenTM necessary to obtain optimal cell growth, the
price per volume of ErythrogenTM as compared to the price per volume of fetal
bovine serum and an end user's willingness to try a new additive. No assurance
can be given that ErythrogenTM will receive general overall market acceptance.
See "The Company and its Business."
10
<PAGE>
Governmental Regulation. The Company does not expect to develop
therapeutic products independent of licensing and collaborative agreements.
Regulation by governmental authorities in the United States and other countries
is a significant factor in the production and marketing of any future
therapeutic and pharmaceutical applications and products derived from its
technologies. In order to test clinically and to produce and market products for
human therapeutic use, the Company would have to abide by mandatory procedures
and safety standards established by the United States Food and Drug
Administration ("FDA") and comparable agencies in foreign countries. The process
of completing clinical testing and obtaining FDA approval for a new therapeutic
and pharmaceutical product is likely to take a number of years and require the
expenditure of substantial resources. Even after initial FDA approval has been
obtained, further studies may be required to provide additional data on safety
or to gain approval for the use of a product as a treatment for clinical
indications other than those for which the product was initially tested. Also,
the FDA may require post-marketing testing and surveillance programs to monitor
the drugs' efficacy and side effects. Results of these post-marketing programs
may prevent or limit the further marketing of the products. In addition, the
Company would be subject to regulation under state and federal law regarding
occupational safety, laboratory practices, environmental protection and
hazardous substance control and to other present and possible future local,
state, federal and foreign regulation. The Company does not project it will be
able to finance the rigorous procedures required for regulatory approval nor can
assurance be given that the Company will ever be able to obtain regulatory
approval for any of its products.
Competition. Fetal bovine serum ("FBS") and a variety of other cell
culture additives and supplements are currently available to users of cell
culture media, and there are a number of other products that are competitive
with the Company's ErythrogenTM. Because of the uncertainly of price and
supply of FBS, there is a tendency among users and distributors to stockpile
FBS, and this may present an impediment to the Company's marketing of Erythrogen
TM . With any culture media supplement, broad customer acceptance will be a
factor of (i) the number of cell lines supported by the substance, (ii) the
product's shelf life and cost, and (iii) its biological activity or other such
features as might affect or characterize its performance. The Company expects to
compete with a number of manufacturers and suppliers of such cell culture media
supplements, and there continue to be other products in development that may
compete directly with those of the Company. Most of the Company's competitors
have greater financial and personnel resources than the Company. No assurance
can be given that the Company will be able to successfully compete.
Technological Change. The biotechnology and pharmaceutical industries
are intensely competitive and subject to rapid technological change. The
Company's future success will depend in part on its ability to obtain and
maintain a competitive position with respect to evolving technologies. This
requires constant ongoing research and development to first develop and then
continually improve a product. There can be no assurance that technological
developments by competitors may not render the Company's product obsolete or
noncompetitive.
Manufacturing and Raw Materials. The Company's ability to generate a
profit from ErythrogenTM will depend, among other things, on its ability to have
ErythrogenTM and any other products it may develop manufactured in commercial
quantities at a competitive cost. To date, only limited quantities of
ErythrogenTM have been manufactured. While management believes that it will be
able to find one or more facilities capable of manufacturing ErythrogenTM , no
assurance can be given that the Company will be able to continue to have
ErythrogenTM manufactured in commercial quantities on a cost-effective basis.
Moreover, if the Company's plans are modified to include preclinical testing,
clinical testing and development of pharmaceutical grade products, such will
require that ErythrogenTM and any other such products derived from its
hemoglobin stabilization technology to be developed by the Company be
manufactured under GMP (good manufacturing practice) at an FDA approved GMP
facility. While the Company's current manufacturer produces certain GMP products
in portions of its GMP facility, the manufacturing for ErythrogenTM has not
been performed in a GMP facility. While there are a number of GMP facilities
around the Country, management believes that it may be difficult to secure a GMP
facility that accepts blood products and supplies bovine red blood cells, the
primary raw material for manufacturing ErythrogenTM. GMP facilities that do
not work with blood products may be hesitant to allow blood products in their
facility for fear of cross contamination to other products. See "See The Company
and its Business-Manufacturing."
11
<PAGE>
Patents and Proprietary Technology. The Company's success will depend,
in part, on its ability to protect trade secrets and operate without infringing
the proprietary rights of others both in the United States and in other
countries. The patent position of biotechnology companies generally is highly
uncertain and involves complex legal and factual questions. No consistent policy
has emerged regarding the breadth of claims covered in biotechnology patents.
There can be no assurance that the patents of others will not have an adverse
effect on the ability of the Company to do business. Furthermore, there can be
no assurance that others will not independently develop similar products, or
will not duplicate any of the Company's products. The Company currently has
allowed its patents to lapse and holds no issued or applied for patents.
Attraction and Retention of Key Personnel. Currently, the Company has no
employees. The success of the Company is substantially dependent upon contracted
management services through an affiliated party and on the Company's ability to
attract and retain qualified scientific, medical, manufacturing, marketing and
sales consultants and/or advisors on an as needed basis. There is substantial
competition for qualified personnel, including competition from companies with
substantially greater resources than the Company as well as universities and
research institutions. There is no assurance that the Company will be successful
in recruiting or retaining key personnel or consultants to enable it to develop
and conduct its business. Such failure could have a material adverse effect on
the Company. See "Management"
Product Liability and Insurance. The Company has not and does not intend
to seek product liability insurance coverage for sales of ErythrogenTM. Such
coverage is expensive, and no assurance can be given that the Company will ever
obtain such insurance, or if obtainable, that such insurance can be acquired at
a reasonable cost or in sufficient amounts to protect the Company against losses
due to liability. The Company's inability to obtain insurance at an acceptable
cost or to otherwise protect against potential product liability could prevent
or inhibit the commercialization of the Company's proposed future products if
any. In addition, a product liability claim or recall could have a material
adverse effect on the business or financial condition of the Company.
Sales and Marketing. In order to market ErythrogenTM, the Company has
contracted with a related party possessing applicable technical expertise to
support and service small users and a single media formulator. Management
believes that, due to the Company's limited resources, this related party will
market ErythrogenTM only to media suppliers and pharmaceutical manufacturers.
There can be no assurance that the Company will be successful in achieving sales
levels sufficient to reach financial break even. See "The Company and its
Business-Sales and Marketing."
12
<PAGE>
Depressive Effect of Potential Stock Sales By BIORELEASE Stockholders on
the Market Price of the Company's Common Stock. After the completion of the
registration set forth herein, BIORELEASE will spin off shares it presently owns
in the Company to the security holders of BIORELEASE of record as of the record
date. Sales of common stock in the Company held by BIORELEASE security holders
in large numbers could be expected to have a depressive effect on the market
price of the Company's common stock. To mitigate the effects of sales by the
BIORELEASE Securityholders, certain related parties, holding approximately 77 %
of the shares being registered hereunder, have agreed to certain holding periods
and, within these holding periods, sales may only be made when the bid price of
the Company's Common Stock is at or over certain minimum levels. See "Certain
Transactions."
Lack of Sustained Public Market for Common Stock; Possible Volatility of
Market Price. At present, the Company's stock is not publicly traded. No
assurance can be given that a sustained trading market in the Company's
securities will ever develop or be sustained. Therefore, recipients of the
Company's stock herein may not be able to resell their securities at any price,
and, in fact, may be unable to sell their securities in the future. Moreover,
the market price of the Shares of Common Stock, like that of the common stock of
many other undercapitalized biotechnology companies, is likely to be highly
volatile. Factors such as research results by the Company or its competitors,
other evidence of the safety or efficacy of the Company's products,
announcements of technological innovations by the Company or its competitors,
governmental regulation, developments in patent or other proprietary rights of
the Company or its competitors, and fluctuations in the Company's operating
results may have a significant effect on the market price of the Common Stock.
In addition, the OTC stock market has experienced and continues to experience
extreme price and volume fluctuations which have affected the market price of
many biotechnology companies and which have often been unrelated to the
operating performance of these companies. The broad market fluctuations, as well
as general economic and political conditions, may adversely affect the market
price of the Company's stock.
Application of the Penny Stock Rules. The Company does not currently
meet the requirements of the Nasdaq Small Cap Market, trading of the Listed
Securities and therefore trading, if any, will be conducted on an electronic
bulletin board established for securities that do not meet the Nasdaq listing
requirements or in what is commonly referred to as the "pink sheets." As a
result, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the price of, the Company's securities. In addition,
the Company's securities are subject to the so-called penny stock rules that
impose additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally defined as an investor with a net worth in excess of $1,000,000 or
annual income exceeding $200,000, or $300,000 together with a spouse). For
transactions covered by this rule, the broker-dealer must make a special
suitability determination for the purchaser and must have received the
purchaser's written consent to the transaction prior to sale. Consequently, this
may affect the ability of broker-dealers to sell the Company's securities and
the ability of subsequent purchasers of the dividend shares to sell their
securities in the secondary market.
The Securities and Exchange Commission (the "Commission") has adopted
regulations that define a "penny stock" to be any equity security that has a
market price (as defined in the regulations) of less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain exceptions. For
transactions involving a penny stock, unless exempt, the rules require the
delivery, prior to the transaction, of a disclosure schedule relating to the
penny stock market. The broker-dealer also must disclose the commissions payable
to both the broker-dealer and the registered representative, current quotations
for the securities and, if the broker-dealer is the sole market-maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed control
over the market. Finally, monthly statements must be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks. As a result, if the Common Stock is determined
to be "penny stock," an investor may find it more difficult to dispose of the
Company's Common Stock.
13
<PAGE>
No Dividends. Although BIORELEASE distributed a dividend of Common Stock
of Vegas Chips, Inc. in January 1992, and has announced it intends to proceed
with the spin off of the Company's shares to the BIORELEASE stockholders,
neither BIORELEASE nor the Company has declared a cash dividend since inception.
For the foreseeable future it is anticipated that earnings, if any, which may be
generated from operations of the Company will be used to finance the growth of
the Company. Therefore, it is not expected that cash dividends will be paid to
stockholders. See "Dividend Policy."
Shares Available for Future Sale; Possible Depressive Effect on Market
Price. Excluding the Shares registered pursuant to this Registration Statement,
465,058 Shares of Common Stock are also presently issued and outstanding as of
the date hereof and are "restricted securities" as that term is defined under
the Securities Act of 1933 (the "Act"), as amended, and in the future may be
sold in compliance with Rule 144 of the Act or pursuant to a Registration
Statement filed under the Act. Rule 144 provides, in essence, that a person
holding restricted securities for a period of one (1) year may sell those
securities in unsolicited brokerage transactions or in transactions with a
market-maker, in an amount equal to one (1%) percent of the Company's
outstanding Common Stock every three (3) months. Additionally, Rule 144 requires
that there be available adequate current public information with respect to the
issuer. Such information is deemed available if the issuer satisfies the
reporting requirements of sections 13 or 15(d) of the Exchange Act and of Rule
15c2-11 thereunder. Rule 144 also permits, under certain circumstances, the sale
of Shares by a person who is not an affiliate of the Company and who has
satisfied a two year holding period without any quantity limitation and whether
or not there is adequate current public information available. Purchasers should
be aware that sales under Rule 144, or pursuant to a Registration Statement
filed under the Act (see "Risk Factors-Depressive Effect of Potential Sales By
BIORELEASE Stockholders on Market Price of Common Stock"), may have a depressive
effect on the market price of the Company's securities. Certain principal
stockholders including the Company's Officers and Directors have agreed not to
sell any of their Shares below a threshold price for a period of six months from
the date of this Registration Statement, unless the purchaser takes such Shares
subject to the same restrictions.
Non-Registration in Certain Jurisdictions of Securities. Although the
stock registered hereunder will not knowingly be sold to purchasers in
jurisdictions in which the shares are not registered or otherwise qualified for
sale, persons may buy registered shares in any after-market which may develop or
may move to jurisdictions in which the shares are not so registered. No
assurances can be given that the Company will be able to effect any required
registration or qualification.
Dependence on Management and Consultants. The Company's success is
substantially dependent upon the ability of its management, particularly Dr.
Reeves, the Company's President, and the association with RT Robertson
Consultants, Inc., a management consulting firm affiliated with Dr. Reeves. The
loss of this key relationship with this related party could substantially and
adversely affect its business. Dr. Hiroshi Mizukami and Dr. Victor Chan consult
on scientific matters for the Company on an as needed basis. The Company does
not have employment agreements with Dr. Reeves or either of its two principal
scientific consultants. The Directors of the Company recently engaged RT
Robertson Consultants, Inc. to (i) continue as its managing agent to oversee the
ErythrogenTMproduct sales, (ii) to complete the registration of the Company's
shares and (iii) to act as its exclusive agent to complete a merger which will
add value to the Company's shares. (See Certain Transactions)
14
<PAGE>
Control by Management. After issuance of the stock dividend to the
BIORELEASE stockholders and management, related parties will still own
beneficially or otherwise control approximately 81 % of the then outstanding
shares of the Company's issued common stock. Neither the Articles of
Incorporation nor the Bylaws of The Company provide for cumulative voting. Since
the election of directors and certain other matters requiring shareholder
approval will be decided by majority vote (except as otherwise provided by the
laws of Delaware or The Company's Articles of Incorporation or By-laws),
management may be able to effectively control The Company. See "Certain
Transactions" and "Management."
Non-Arm's Length Transactions. The Company and BIORELEASE have engaged
in certain transactions with certain of its officers and directors that may not
be considered as having occurred at arm's length. See "Management" and "Certain
Transactions."
DILUTION
The net tangible book value of the Company at December 31, 1999 was
$20,540. Net tangible book value consists of the net tangible assets of the
Company (total assets less total liabilities and intangible assets) (see
"Financial Statements"). At December 31, 1999, there were 5,047,180 shares of
the Company's Common Stock outstanding. The net tangible book value of the
Company's Common Stock at that date was approximately $0.004 per Share. These
figures give effect to the deduction of the estimated expenses, including filing
fees, printing, legal, accounting, transfer agent and other costs to be paid by
the Company. The net tangible book value per share is not expected otherwise to
change since no new shares in the Company are being issued.
FRACTIONAL SHARES
On the Effective Date, the stock dividend interest in the Company of
each BIORELEASE stockholder of record who owns fewer than fifteen shares of
common stock of BIORELEASE on the record date will be terminated, and he, she or
it will have no right to vote or participate as a stockholder or share in the
assets or any future earnings of the Company. Such holder of less than fifteen
shares in BIORELEASE shall continue as a voting stockholder in BIORELEASE
subject to the terms and conditions under the merger agreement with PMC if such
is approved by a majority of the BIORELEASE stockholders. Accordingly, the
Company will not issue fractional shares in connection with the spin off.
Instead, holders of BIORELEASE stock who would otherwise be entitled to receive
a fractional share of the Company's Common Stock on account of the stock
dividend shall receive in lieu of such fractional shares, an amount in cash (the
"Cash-in-Lieu Amount") equal to the product of the fractional shares which a
holder would otherwise be entitled to, multiplied by the closing bid and closing
asked price per share, of the Common Stock as quoted on price as the Board of
Directors of Biorelease determines, in its discretion, to be the fair market
value per share of the Company's Common Stock) on the business day prior to the
Effective Date. No interest shall be payable on the Cash-in-Lieu Amount. If the
"Cash-in-Lieu Amount" is less than $1.00 there will be no payment made.
15
<PAGE>
FEDERAL TAX CONSEQUENCES
The following is a summary of the material federal income tax
consequences affecting holders of Biorelease Corp. common shares receiving a
dividend of the Company's shares. In the opinion of Berry Moorman P.C., special
tax counsel to BIORELEASE for the stock dividend, the distribution of the shares
in the Company to holders of BIORELEASE common shares ("the Biorelease
Dividend") more likely than not will constitute a taxable transaction under the
Internal Revenue Code of 1986, as amended (the "Code"), and may also be subject
to state or local income taxes. Because of the complexity of the provisions of
the Code referred to below and because tax consequences may vary depending upon
the particular facts relating to each holder of BIORELEASE common shares, each
holder should consult their own tax advisors concerning their individual tax
situations and the tax consequences of the offering under the Code and under any
applicable state, local or foreign tax laws.
Berry Moorman P.C. has advised the Company that, under current
interpretations of case law, the Code, and applicable regulations thereunder,
the federal income tax consequences applicable to the Biorelease Dividend
generally are as follows:
The BIORELEASE Dividend can be considered as constituting "property"
within the meaning of Section 317(a) of the Code. The federal income tax
consequences of a distribution of the Biorelease Dividend, as determined under
the Code and the regulations thereunder, are as follows: (i) each non corporate
holder of BIORELEASE common shares will be deemed to have received a
distribution from BIORELEASE, generally taxable as ordinary dividend income, in
an amount equal to the fair market value (if any) of the dividend shares, as of
the date of distribution, (ii) each corporate holder of BIORELEASE common shares
(other than foreign corporations and S corporations) will be deemed to have
received a distribution from BIORELEASE (generally taxable as a dividend subject
to the dividends received deduction for corporations (generally 70%, but 80%
under certain circumstances) in an amount equal to the fair market value (if
any) of the shares, as of the date of distribution; and (iii) the tax basis of
the shares in the hands of each holder (whether corporate or non corporate) of
BIORELEASE common shares will be equal to the fair market value (if any) of the
dividend shares as of the date of distribution. Because of the predominantly
factual nature of determining the fair market value, if any, of the Company,
Berry Moorman P.C. has expressed no opinion with respect to the fair market
value of the Company shares.
Since the fair market value of the Company shares will determine the amount
of taxable income deemed received by the holders of BIORELEASE common shares,
the determination of the fair market value of the Biorelease Dividend as of the
date of distribution is critical. The BIORELEASE Board of Directors believes
that the per share value of Common Stock, represented by the Biorelease Dividend
at the date of the registration statement, approximates the net book value after
recognizing the costs of the registration, and that the Company shares should
have substantially no value for federal income tax purposes. However, the
Internal Revenue Service is not bound by this determination.
16
<PAGE>
Resale of the Company Shares
Upon registration, the transferable nature of the Biorelease Dividend shares
will permit a holder of these Company shares to resell the shares. Pursuant to
Section 1234 of the Code, a Company shareholder who sells Company shares within
one year of the date of share distribution will be entitled to treat the
difference between the value of the shares when received and the selling price
as a short-term capital gain or capital loss, provided that the Company shares
would have been a capital asset in the hands of the holder had it been acquired
by him. The gain or loss so recognized would be short-term since the Company
shares will have been held for less than twelve months.
BIORELEASE'S REASONS FOR SPINNING OFF THE COMPANY
The BIORELEASE Board has unanimously approved spinning off the stock it holds in
the Company to the BIORELEASE stockholders and certain consultants, officers and
directors of the Company. BIORELEASE entered into a definitive agreement to
merge with PMC subject to the approval by both company's stockholders. As a
condition of the PMC merger, BIORELEASE directors believed it was beneficial to
retain the value, if any, of the interest it held in the Company. For the past
several years BIORELEASE has tried unsuccessfully to find a buyer for the
Company. By spinning its interest in the Company off to its stockholders,
creditors and Company management, BIORELEASE directors believe the Company's
limited product sales and publicly traded status will allow the BIORELEASE
stockholders to potentially achieve additional value not otherwise available if
not completed prior to the merger with PMC. The BIORELEASE Directors believe
that the spin off of a portion of the Company's stock, to the creditors and
consultants, contributed to allowing BIORELEASE to complete the Asset Agreement
with the creditors and consultants who received an option to acquire 2,749,273
shares in the Company held by BIORELEASE (60% of the shares held by BIORELEASE)
at the Company's then book value per share. The BIORELEASE directors further
believe it was in the best interest of the Company's stockholders to assure that
Directors and Officers of the Company would have an incentive to continue
managing the Company and thereby agreed to issue 1,032,849 of the shares then
held to assure services through calendar year 2000 and to oversee this
registration. The BIORELEASE Board believed that, with the creditor group in
control of the Company following the PMC / BIORELEASE merger, the BIORELEASE
stockholders holding this new interest in the Company would have a chance to
build additional value not otherwise possible.
The BIORELEASE Board also identified and considered a variety of potentially
negative factors in its deliberations concerning the spin off, including, but
not limited to the risk that the potential benefits retained under the spin off
might not be fully realized, the additional transaction costs expected to be
incurred in connection with the spin off and the other risks described under
"Risk Factors--Risks Related to spin off " herein. After due consideration, the
BIORELEASE Board concluded that the risks associated with the proposed spin off
were outweighed by the potential benefits of the spin off.
The foregoing discussion of the information and factors considered by the
BIORELEASE Board is not intended to be exhaustive but is believed to include all
material factors considered by the BIORELEASE Board. In view of the wide variety
of information and factors, both positive and negative, considered by the
BIORELEASE Board, the BIORELEASE Board did not find it practical to, and did
not, quantify or otherwise assign relative or specific weights to the foregoing
factors considered. After taking into consideration all of the factors set forth
above, the BIORELEASE Board concluded that the spin off was in the best
interests of BIORELEASE and its stockholders.
17
<PAGE>
THE COMPANY
The Company is a development stage corporation originally incorporated
in California on February 6, 1990 as FLS Acquisition Corp. (d/b/a Biokinetics)
to acquire and develop technologies and rights to technologies (collectively,
"the Company Technologies") held by Fluid Life Systems, Inc. ("FLS"). Between
June 30, 1992 and August, 1992 BIORELEASE acquired approximately 91.2% of the
issued and outstanding shares of common and preferred stock of the Company. In
August 1992, the Company reincorporated in Delaware under the name "Biorelease
Technologies, Inc." The Company's technologies consist of a hemoglobin
stabilization technology and sustained drug release technology based on
chondroitin sulfate. These technologies had been researched and developed by
predecessors and unaffiliated persons over a four to six year period prior to
their acquisition by the Company. See "The Company and its Business."
The Company's executive office is provided at no cost by a related party
and is located at 340 Granite Street, Suite 200, Manchester, New Hampshire 03102
and its telephone number is (603) 641-8443.
APPLICATION OF PROCEEDS
Amounts due certain creditors totaling $11,000 was offset to acquire
2,749,273 of the shares to be registered hereunder. There are no cash proceeds
to the Company expected from the distribution and registration hereunder of
stock dividend to the BIORELEASE Stockholders, creditors and consultants.
MARKET PRICE OF SECURITIES
As of the date of this Registration Statement, shares of the Company's
stock have never traded on public markets. The approximate number of record
holders of the Company's Common Stock, following the spin off, will be 1,697
inclusive of those brokerage firms and/or clearing houses which will be holding
the Company's common Shares for their clientele (with each such brokerage house
and/or clearing house being considered as one holder), but exclusive of new
parties holding less that a single share of stock in the Company.
18
<PAGE>
SELECTED FINANCIAL INFORMATION FOR THE COMPANY
The selected financial information presented below as of June 30, 1999 and 1998
and for the years then ended is derived from the financial statements of the
Company audited by Ferrari & Associates P.C. The selected financial information
presented below as of December 31, 1999 and 1998 and for the three-month periods
then ended is unaudited, but, in the opinion of management, includes all
adjustments (consisting of only normally recurring accruals) necessary to fairly
present such information. The results of the six months ended December 31, 1999
are not necessarily indicative of results that may be expected for the full
year. The financial data should be read in conjunction with those financial
statements and the footnotes thereto appearing elsewhere in this document and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
Six Months Ended December 30,
-----------------------------
Fiscal Year Ended June 30, 1999 1998
-------------------------- ------ -----
1999 1998 (unaudited) (unaudited)
----- ------ ----------- -----------
Statements of Income Data:
- --------------------------
<S> <C> <C> <C> <C>
Sales $ 11,630 $ 62,275 $ 0 $ 2,130
Gross Profits 8,812 60,234 0 1,953
Operating expenses (87,715) (20,674) 0 75,915
Other Income net of expense 162,235 (4,742) 0 (2,627)
Net income (loss) $ 83,332 $ 34,818 $ 0 $ (76,589)
</TABLE>
<TABLE>
<CAPTION>
December 30,
-----------------------------
June 30, 1999 1998
---------------------------- ---- -----
Balance Sheet Data 1999 1998 (unaudited) (unaudited)
- ------------------ ------ ------ ---------- ------------
<S> <C> <C> <C> <C>
Working capital $ 16,366 $ (150,329) $16,366 $ (145,480)
Total assets 20,540 47,638 20,540 33,754
Total liabilities 0 193,218 0 179,731
Stockholders' equity (deficit) $ 20,540 $ (145,580) $20,540 $ (145,976)
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Forward Looking Statements
The discussion in this section contains forward-looking statements that
involve risks and uncertainties regarding the Company's revenues and associated
costs and expenses. The Company's actual results could differ materially from
those discussed herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in the section
entitled "Risk Factors" as well as those risks discussed in this section and
elsewhere in this Registration Statement.
Results of Operations
In April, 1994, following a failed BIORELEASE financing and BIORELEASE
delisting by NASDAQ for falling below required asset levels, the Company
experienced a severe cash flow shortage and had to severely curtail its funding
of research on its technologies. In May 1994, the Company terminated
substantially all then remaining laboratory personnel, professional staff and
administrative personnel except for one remaining research scientist and Dr.
Reeves. Late in June 1995 the Company moved to office facilities in Bedford, NH.
In October 1997 the Company moved to its current location in Manchester, NH. As
a part of this consolidation, the Company sold all non-essential equipment,
destroyed all non-essential inventory of ErythrogenTM and settled its
outstanding lease obligations with both its equipment and facilities lessors.
The Company also reached settlement with a number of its creditors by issuing
stock in the BIORELEASE in exchange for creditor releases. Currently, the
Company continues to maintain inventory of ErythrogenTM, its cell culture
additive product, in order to provide for supply of the product to existing and
new customers. For the past several years, the Company has focused primarily on
ErythrogenTM sales activities. All other operating activities have now ceased.
Other than possible licensing opportunities, therapeutic products which could
have been derived from the Company's technologies are years away from market
introduction and would require significant additional research and development,
including extensive preclinical and clinical testing and regulatory approval and
additional resources the Company presently does not possess.
See "Item 1. The Company and its Business."
Sales from ErythrogenTM for the years ended June 30, 1999, and 1998,
were $11,630 and $8,717, respectively. During year end June 30, 1994 the Company
ceased promoting direct sales to research and laboratory markets because of the
extremely high promotion costs necessary to access these markets. Instead, the
Company has focused on supplying a single industrial client, which incorporates
ErythrogenTM in a proprietary media.
In 1995, the Company obtained its first significant sponsored research
revenues. This revenue amounted to $0 in 1999 and $47,154 in 1998. Chondroitin
sulfate sales were $0 in 1999 and $6,404 in 1998. Total revenues were $11,630 in
1999 compared to $62,825 for the year ended June 30, 1998. Because of the
closing of the Company's laboratory facilities, it is unlikely sponsored
research will resume until the Company re-establishes new laboratory facilities,
if ever. Following its restructuring and consolidation, the Company has and will
continue to focus on industrial ErythrogenTM sales and continue to pursue
licensing and/or sale of its chondroitin sulfate therapeutic sustained release
drug technology.
20
<PAGE>
Year Ended June 30, 1999 compared to the Year Ended June 30, 1998
For the year ended June 30, 1999 the Company had revenues of $11,630,
cost of revenues of $2,818, research and development costs of $0, purchased
technology costs of $0, general and administrative cost of $87,715, interest
expense of $4,173, Other income of $393, a loss on the sale of assets of $0,
income recognized on indemnified liabilities of $165,860, income recognized on
settlements of $155 and no income taxes as compared with the year ended June 30,
1998 in which the Company, had revenues of $62,275, cost of revenues of $2,041,
research and development costs of $0, purchased technology costs of $0, general
and administrative costs of $20,674, interest expense of $4,742 and no income
taxes. This resulted in a net income of $83,332 for the year ended June 30, 1999
as compared with the year ended June 30, 1998, in which the Company had a net
income of $34,818. The income for year ended June 30, 1999 was primarily as a
result of income recognized on indemnified liabilities ($165,860) offset by
general and administrative costs of 87,715. Without this income the Company
would have a net loss of $82,528 as compared to the previous fiscal year's
income of $34,818. Loss from operations in fiscal year ended June 30, 1999 was
$78,903 as compared with fiscal 1998 in which the income from operations was
$39,560. The change in loss from operations resulted from the discontinued
Sponsored research revenues from Baxter in December 1997. Administrative and
general costs for fiscal year ended June 30, 1999 included $67,000 of
management, accounting and tax preparation costs for the past five years that
had previously not been allocated to the Company from the Company's parent
(Biorelease Corp.), other non-operational income in fiscal year ended June 30,
1999 in the aggregate of $166,015 as compared to an expense of $0 in fiscal 1998
was as a result of settlement of liabilities necessary to comply with the
proposed merger agreement between the Company's parent corporation, Biorelease
Corp and POLAR MOLECULAR CORPORATION.
Liquidity and Capital Resources
From inception the Company's primary source of funds has been the
proceeds from private offerings of its Common Stock. Since the Reorganization
with BIORELEASE, the primary source of capital has been from revenues and
investments from the Company's parent, Biorelease Corp.
At June 30, 1999, the Company had a working capital of $16,366 as
compared with the Company's negative working capital of $150,329 at June 30,
1998. The change in the Company's working capital between June 30, 1999 and June
30, 1998 is primarily attributable to settlements.
During fiscal years 1996 and 1997, the Company benefited from the
exclusive licensing agreement relating to research revenues from the Company's
sustained release technology sponsored by Baxter Healthcare. This exclusive
agreement ended December 31, 1997.
The drastic restructuring of its operations over the past four years
has allowed the Company to operate at significantly lower expense levels than
those of the previous years. Revenues from ErythrogenTM sales have exceeded
direct costs for three of the last four fiscal years, but they have not been
sufficient to carry general and administrative expenses not directly relating to
ErythrogenTM .
21
<PAGE>
THE COMPANY AND ITS BUSINESS
General
Biorelease Technologies, Inc., formerly FLS Acquisition Corp. (d/b/a
Biokinetics) (the "Company") is a development stage company engaged in limited
sales of a proprietary, cell-culture additive (ErythrogenTM) and maintains
knowledge relating to applications of a drug delivery technology based on
chondroitin sulfate, a naturally occurring substance found abundantly in all
mammals including humans. For the past six (6) years, the Company has generated
$173,064 in revenues from the sale of its cell culture additive and other
proprietary technologies and received $355,620 in sponsored research and
licensing access revenues related to chondroitin sulfate drug technology
applications. The Company expects to continue offering ErythrogenTM for
limited sale while it seeks and qualifies one or several companies with whom to
merge or form a strategic affiliation.
The Company possesses technology in the field of blood substitutes and
sustained release drug delivery technology based on chondroitin sulfate. Until
April 1994, Dr. R. Bruce Reeves, a founder of the Company, served as President
and CEO of both the Company and BIORELEASE. Dr. Reeves was re-appointed on
February 11, 1998 as President of both the Company and BIORELEASE to effectuate
merger activity for BIORELEASE and identify strategic affiliations for the
Company. R T Robertson Consultants, Inc., a corporation wholly-owned by members
of Dr. Reeves' family, entered into a consulting agreement with BIORELEASE to
oversee the business activities of the Company from April 1, 1996 through the
present. In addition to providing the services of Dr. Reeves, Robertson provides
office space for the Company at no cost and provides corporate oversight and
product management for the Company's product, ErythrogenTM. The Company has no
employees. Since February 1998, Dr Reeves has served as President and CEO
without compensation.
The Company began its biotechnology activities by acquiring the hemoglobin
stabilization and processing technologies of Oxygenetics, an early stage
California based company which allowed the Company to become a participant in
the $3 to $5 billion synthetic blood business. The Company's founders included
Richard Schubert, currently a Director of the Company, past President of the
American Red Cross, Dr. R. Bruce Reeves and Dr. Paul Maybury, formerly a
Director until September 30, 1997. The Company subsequently acquired sustained
release drug delivery technology based on chondroitin sulfate in order to expand
its business franchise into other therapeutic areas. Drug delivery has become
one of the fastest growing areas in the pharmaceutical industry with companies
increasingly turning to novel delivery systems to extend the patent life of
existing drugs, increase product portfolios, enhance safety and efficacy, reduce
unwanted side-effects, improve patient compliance and maintain product sales
against competition. Products utilizing novel drug delivery technologies have
already captured a significant share of several therapeutic markets and some
systems may be able to provide new therapies by modifying the activity of
existing compounds.
Since its founding, the Company has focused on development and
promotion of its proprietary hemoglobin based cell-culture additive,
ErythrogenTM, along with developing applications of its sustained release drug
technology. During fiscal year 1993, the Company began to generate minimal
revenues ($7,942) from the first sales of ErythrogenTM in non-FDA regulated
applications. ErythrogenTM sales plus minimal sales of the Company's chondroitin
sulfate technologies were $11,630 and $15,121 during the years ended June 30,
1999 and 1998, respectively and $173,064 from inception to June 30, 1999. The
Company received $0 in fiscal 1999 and $47,157 during the year ended June 30,
1998 for licensing revenues inclusive of patent cost reimbursement from Baxter
Healthcare (see Next Paragraph) related to their use of chondroitin sulfate drug
delivery for blood substitutes. At this time, the Company has no products
approved by the FDA or in clinical trials and does not intend to conduct
clinical trials or to develop a pharmaceutical marketing unit. BIORELEASE has
invested approximately 3.7 million dollars ($3.7 million) in the Company's
technologies including support and administrative expenses.
22
<PAGE>
By mid 1994, following the delisting of BIORELEASE, it was clear that
available capital was insufficient to allow the Company to become a
self-standing synthetic blood producer in light of the large costs necessary to
bring such a product to market. By that time, the Company had invested
substantially all of its development resources into two core proprietary
technologies: hemoglobin stabilization and sustained drug release technology
based on chondroitin sulfate. The Company's cell culture additive, ErythrogenTM,
uses hemoglobin stabilizing technology to produce a proprietary cell culture
additive. The Company has discontinued direct promotion of ErythrogenTM to the
research and laboratory markets because of the high cost of promotion. Instead,
the Company has retained a related party to oversee industrial applications.
From August, 1994 to December, 1995 the Company received financial support to
demonstrate the benefit of its chondroitin sustained release technology as
applied to a blood substitute product under development by Baxter Healthcare
(Baxter). The Company was given notice that these exclusive licensing rights
held by Baxter Healthcare would not be renewed after December 31, 1997. The
Company has received $355,620 of revenues under the Baxter agreement.
After closing its research facilities in June 1995, the Company's
primary technical support activities were conducted at the University of New
Hampshire ("UNH") pursuant to a research agreement. Research at UNH focused on
cell culture application development of ErythrogenTM. Since 1995, the Company
has operated its research and sales activities without employees, using
consultants and research affiliations to achieve limited sales of the Company's
cell culture product, ErythrogenTM.
Chondroitin Sulfate Sustained Release Technology
While the Company was pursuing its own blood substitute product, it
acquired a sustained release drug delivery technology based on chondroitin
sulfate, a naturally occurring compound found in the cartilage tissue of all
cartilage containing animals (including humans). This technology, patented in
the U.S. and abroad, has been applied by the Company to a number of drugs and
biological compounds with the effect of extending the drug's in vivo dwell time.
This technology has received development support from Baxter Healthcare and
resulted in an initial licensing agreement in April 1996 with Baxter for
Baxter's blood substitute application, such recently revised to become
non-exclusive. Chondroitin sulfate enjoys key advantages that differentiate it
within the drug delivery marketplace. Unlike a number of competitive drug
delivery technologies, chondroitin sulfate is naturally occurring in the body,
is highly biocompatible and is readily available from a number of natural
sources. The Company has complexed chondroitin sulfate, derived from bovine
sources, to various drugs and proteins. Commercial applications could enable the
Company to participate, with corporate partners, in a new generation of
sustained-release drug delivery applications for the pharmaceutical industry
with emphasis on large dose and chronically used drugs, actively competing in a
drug delivery market that is currently estimated at tens of billions of dollars.
Because of the limited working capital position the Company has terminated all
development activities relating to this technology pending finding a partner
willing to provide the resources to develop this technology further. During this
most recent fiscal year ending June 30, 1999 the Company allowed its remaining
sustained release patents to lapse.
23
<PAGE>
ErythrogenTM Cell Culture Product and Business Opportunity
The Company's focus, in the non-regulated biologics industry, has been
to develop a cell culture product based on its blood technology for the cell
culture additive market. Cell culture is the process by which living cells
(bacterial, plant, yeast, insect, and mammal) are propagated in a controlled
environment (medium). Cell culture is maintained at the proper bath temperature
and supplemented with nutrients and salts, and is utilized by the pharmaceutical
and biotechnology industries to generate recombinant products. Agents that
enhance the efficiency and productivity of cell culture can be developed for
markets that are both sizable and independent of FDA clinical trials. Fetal
bovine serum (FBS), the serum component of blood obtained from calf fetuses, is
the cell culture additive used most commonly (represents approximately 50% of
the additive market) to provide nutrition and enhance the growth of cells. Cells
grown in culture can be used to produce biological materials including
antibiotics, antibodies, biopesticides, and genetically engineered proteins and
viruses.
In academic and industrial laboratories, cells are propagated in
vessels ranging from plastic flasks to large stainless steel bioreactors. Cells
can be maintained more easily in flasks in research laboratories. Scale-up of
cell cultures into large volume spinner/shaker flasks and bioreactors has
encountered difficulty in supplying oxygen uniformly to high-density cell
cultures. No method has been wholly satisfactory in addressing this problem.
Biorelease has developed purified, stabilized tetrameric hemoglobin that
utilizes hemoglobin's oxygen carrying capability to increase the oxygen delivery
to cells contained in the media. ErythrogenTM enhances the growth of cultured
cells, especially those of high-density cultures and reduces the amount of
nutrients that must be added. Most importantly, ErythrogenTM significantly
increases protein expression and production.
The Company introduced its first cell culture additive, ErythrogenTM,
in late 1993. ErythrogenTM has been sold to a number of research laboratories,
including the NIH, as well as to a number of biotechnology and pharmaceutical
companies for incorporation into their experimental cell culture media. The
Company developed additional applications data under a University of New
Hampshire cooperative research grant and expects to publish some of this data.
ErythrogenTM Manufacturing, Sales and Marketing
The Company engaged a small unaffiliated manufacturer of biological
products to perform specific manufacturing and product development activities
for the Company. Manufacturing and product development was conducted pursuant to
periodic work orders. The Company owns the primary equipment used to manufacture
ErythrogenTM. This manufacturer has not manufactured ErythrogenTM for the
Company for several years because the Company currently has a sufficient
inventory of ErythrogenTM. Based upon the Company's experience to date,
management believes that the manufacturer has the ability to manufacture
ErythrogenTM within the product specifications established for the utilization
of ErythrogenTM as a cell culture additive. Since June 1995, the Company has
employed no sales or marketing staff, instead relying on an affiliated party
consulting relationship to oversee the sales and product support activities.
Competition
(a) ErythrogenTM's initial testing indicates that ErythrogenTM
increases cell densities and reduces cell doubling time and increases protein
production when added to insect and mammalian cell culture media. Management
believes that these results stem, in part, from ErythrogenTM 's ability to
increase the amount of available oxygen for cell utilization and, possibly,
decrease the level needed of certain additives such as FBS. ErythrogenTM
technically does not compete with FBS because it is a supplement to and not a
replacement for FBS. The Company knows of no other commercially available cell
culture additives that provide oxygenation to culture media; however, a number
of biotech companies have the capability to produce similar products. Most of
the Company's competitors have greater financial and personnel resources than
the Company. In the event that a competitor produces a comparable product, no
assurance can be given that the Company will be able to successfully compete.
24
<PAGE>
Research and Development Policy
The Company is no longer actively pursuing research on its
technologies. The research at University of New Hampshire was the only work
undertaken during the past two fiscal years (1999 and 1998). From October 1989
to June 30, 1999, the Company spent $2,558,041 on research and development (not
including $690,000 to purchase these two technologies).
Pursuant to an earlier agreement with the University of New Hampshire,
UNH conducted research on the application development of ErythrogenTM for
mammalian cells. Pursuant to the UNH Cooperative Agreement, which commenced
December 19, 1994 and ran through December 31, 1997, the Company contributed
$175,000 of "in kind" matching expenditures plus contributing $34,000 of
equipment to UNH for research. The Agreement also called for funding, to the
level of $50,000 contributed by the state of New Hampshire. The agreement ended
December 31, 1997.
Until June 1995, the Company had been utilizing its own in-house
laboratory at its former facilities. However, as a part of the Company's 1995
reorganization and downsizing, this laboratory facility was closed and
laboratory employees terminated. Since that time, all work in development of
application data for ErythrogenTM was conducted under the UNH Cooperative
Agreement.
Manufacturing
Initially, the Company has not established its own manufacturing facilities
for ErythrogenTM. Currently, the Company has engaged a small unaffiliated
manufacturer of biological products to perform specific manufacturing and
product development activities for the Company. The Company owns the primary
equipment used to manufacture ErythrogenTM. Management believes that the
manufacturer has the ability to manufacture ErythrogenTM within the product
specifications established for the utilization of ErythrogenTM as a cell
culture additive. Although it is currently not required that cell culture
additives for the research market be made under GMP guidelines, the Company is
investigating the possible use of a GMP facility for future manufacturing of
ErythrogenTM for pharmaceutical use. However, while there are a number of
contract GMP facilities around the United States, management believes that it
may be difficult to secure a GMP facility that accepts blood products and
supplies bovine red blood cells, the primary raw material for manufacturing
ErythrogenTM . GMP facilities that do not work with blood products may be
hesitant to allow blood products in their facility for fear of contamination of
other products.
Governmental Regulation
Regulation by governmental authorities in the United States and other
countries is a significant factor in the production and marketing of the
Company's future pharmaceutical and/or therapeutic applications and products
derived from its technologies, and in its current and proposed research and
development activities. In order to test clinically and to produce and market
products for human therapeutic use, mandatory procedures and safety standards
established by the FDA and comparable agencies in foreign countries must be
followed.
25
<PAGE>
The standard process required by the FDA before a pharmaceutical agent may
be marketed in the United States includes (i) preclinical tests, (ii) submission
to the FDA of an application for an Investigational New Drug which must become
effective before human clinical trials may commence, (iii) adequate and
well-controlled human clinical trials to establish the safety and efficacy of
the drug in its intended application, (iv) submission to the FDA of a New Drug
Application ("NDA") with respect to drugs and Product License Application
("PLA") with respect to biologics and (v) FDA approval of the NDA or PLA prior
to any commercial sale or shipment of the drug or biologic. In addition to
obtaining FDA approval for each product, each domestic drug-manufacturing
establishment must be registered or licensed by the FDA. Domestic manufacturing
establishments are subject to inspections by the FDA and other Federal, state
and local agencies and must comply with "Good Manufacturing Practice" ("GMP") as
appropriate for production. Compliance with GMP requires that the manufacturing
establishment must follow certain procedures and be inspected and approved by
the FDA.
Clinical trials are typically conducted in three sequential phases, but the
phases may overlap. In Phase I, the initial introduction of the drug to humans,
the drug is tested for safety (adverse effects), dosage tolerance, absorption,
distribution, metabolism and excretion. Phase II involves studies in a limited
population to (i) determine the efficacy of the drug for specific targeted
indications, (ii) determine dosage tolerance and optimal dosage and (iii)
identify possible adverse effects and safety risks. When a product is found to
be effective and to have an acceptable level of safety profile in Phase II
evaluations, Phase III trials are undertaken to evaluate further clinical
efficacy and to test further for safety within an expanded patient population at
geographically dispersed clinical study sites. There can be no assurance that
Phase I, Phase II, or Phase III testing will be completed successfully within
any specific time period, if at all, with respect to any of the Company's future
proposed products subject to such testing. Furthermore, the Company or the FDA
may suspend clinical trials at any time if it is believed that the subjects or
patients are being exposed to an unacceptable health risk. There can be no
assurance that the Company will not encounter problems in clinical trials that
could cause the Company to delay or suspend clinical trials.
The process of completing clinical testing and obtaining FDA approval for a
new product is likely to take a number of years and require the expenditure of
substantial resources. Even after initial FDA approval has been obtained,
further studies may be required to provide additional data on safety or to gain
approval for the use of a product as a treatment for clinical indications other
than those for which the product was initially tested. Also, the FDA may require
post-marketing testing and surveillance programs to monitor the drug's efficacy
and side effects. Results of these post-marketing programs may prevent or limit
the further marketing of the products.
In addition, the Company is subject to regulation under state and Federal
law regarding occupational safety, laboratory practices, environmental
protection and hazardous substance control and to other present and possible
future local, state, federal and foreign regulation.
Patents and Proprietary Technology
The Company's historic working capital deficiency has impacted the
Company's ability to pursue and maintain its patents. During this past fiscal
year ending June 30, 1999, the Company elected to allow its remaining patents to
lapse.
Employees & Outside Consultants
From August 1994 until March 31, 1996, the Company had one full-time
employee, Dr. R. Bruce Reeves, the Company's President. Effective April 1, 1996,
Dr Reeves resigned and the Board of Directors retained R T Robertson
Consultants, Inc., a Reeves family affiliate, as consultants to the Company,
which included the part time services of Dr. Reeves. For approximately nine
months, Dr. Leon Gauci served as President from late 1996 to June 1997. In
February 1998, Dr. Reeves again assumed the role of President and Director. Dr.
Reeves has continued to serve in this capacity as a Director and President of
the Company to the present date. Dr. Victor Chan and Dr. Hiroshi Mizukami have
and continue to serve the Company as scientific consultants on an as needed
basis for the past five years. R T Robertson Consultants Inc. provides corporate
oversight and accounting services as well as office space for the Company. Due
to the Company's current financial position and lack of significant revenues,
the Company expects to continue in this mode of operation without employees for
the indefinite future.
26
<PAGE>
On October 1, 1999, in anticipation of the spin off, the Directors of BIORELEASE
agreed to issue 1,032,849 Company shares it then held to officers and directors.
900,000 Company shares were committed to Dr. Reeves for past service and
continuing oversight of the Company relating to the filing of this registration
statement and continuing to serve as President and CEO through calendar year
2000. At the same time, 100,000 shares were issued to Director Schubert and
32,849 shares issued to Mr. McGuire for past and future services on behalf of
the Company (total shares to be spun off to Officers and Directors - 1,032,849
shares). Each of these shares is subject to a 180 day lock up restriction (see
Certain Transactions).
Facilities
Since October 1997 the Company's principal offices have been located at
340 Granite Street, Suite 200, Manchester, NH, 03102, (603) 641-8443. This
location, in an in-town multi-tenant office building, allows R T Robertson
Consultants, Inc. to provide, on a contract basis, the administrative functions
of the Company and the Company and technical support and shipping for the
ErythrogenTM product line. The Company has no laboratory facilities at present,
instead utilizing facilities at the University of New Hampshire on an as needed
basis. The Company does not pay Robertson for the allocated portion of the
facilities used. From June 1995 through October 1997 the Company rented office
facilities at 10 Chestnut Drive, Unit D, Bedford, NH 03110. The Company
relocated from its former laboratory facilities at 8A Industrial Way, Salem, New
Hampshire 03079 in June of 1995.
Scientific Advisors
The Company consults with two advisors on an as needed basis. Both
scientific advisors serve without compensation. Both advisors are employed by
employers other than the Company and may have commitments to or consulting or
advisory arrangements with other entities that may limit their availability to
the Company. Some of these entities may also be competitors of the Company.
Where a conflict of interest arises, while the conflict may not be resolved to
the benefit of the Company, each Advisor has agreed not to divulge any
information that is proprietary to the Company. Although Scientific Advisors may
devote time and effort on behalf of the Company, no Advisor is expected to
devote more than a small amount of time to the Company's business.
VICTOR T. CHAN, Ph.D., consults for the Company in the field of analytical
chemistry and FDA related research activities. The Company employed Dr. Chan
from March 1993 to October 1994 on a full time basis as Director of Analytical
Chemistry and through September 1994 as Director of Laboratory Operations. Since
October 1994, Dr. Chan has been a part time consultant to the Company. Dr. Chan
consults as needed on all technical functions for the Company's sustained
release research and collaborations. Dr. Chan is currently employed by
Transkaryotic Therapy, Inc. as a Sr. Scientist and Group Leader, Analytical
Chemistry. Prior to joining the Company Dr. Chan was with Ares Serono Group for
five years and was instrumental in setting up their protein chemistry group to
provide analytical support for process development activities and pilot
production. Dr. Chan has experience in both new product discovery and
structure-function determination of recombinant proteins and naturally derived
products. Dr. Chan received his Ph. D. from MIT in 1986 and later served as a
post-doctoral fellow at Dana Farber Institute (Harvard Medical School).
27
<PAGE>
HIROSHI MIZUKAMI, Ph.D., has been a Professor of Biological Sciences at Wayne
State University in Detroit, Michigan since 1974. He holds a Ph.D. in Biophysics
from the University of Illinois. Dr. Mizukami consults for the Company's
sustained release technology based on chondroitin sulfate. In this capacity he
is involved in researching the properties of chondroitin sulfate analogues.
LEGAL PROCEEDINGS
The Company is not presently a party to litigation.
MANAGEMENT
Directors and Executive Officers
The following table sets certain specific information concerning the
directors and executive officers of the Company:
Positions with
Name Age the Company
---- --- -----------------------
R. Bruce Reeves, Ph.D. 60 President, Director and
Chief Executive
Officer
Richard F. Schubert 64 Director
Kevin T. McGuire 49 Treasurer
Directors of the Company are currently appointed by the Directors of
BIORELEASE. Upon completion of this registration statement and the BIORELEASE
spin off, the directors will be initially appointed to serve until the next
annual meeting of stockholders and until their successors have been elected and
have qualified. Officers are appointed to serve until the meeting of the board
of directors following the next annual meeting of stockholders and until their
successors have been elected and have qualified.
28
<PAGE>
A summary of the business experience of each officer and director of
the Company and the Company is as follows:
R. BRUCE REEVES, Ph.D., has been the Chairman, President and Chief Executive
Officer of the Company since February 1998. Previously, he had been a Director
and Officer of the Company from its founding until April 1994. Dr Reeves then
consulted for the Company until his reappointment in 1998 as President. In
August 1995 Dr. Reeves agreed to serve part time as an Officer and Director of
NCPI, Inc., an affiliate of Eastern Nazarene College of which Dr. Reeves is an
alumnus. Dr. Reeves has over twenty-five years of experience in start-up
ventures, and has spent over ten years in high-tech business and product
development, including five years (1964-1969) with General Electric Company on
several business development operations. From 1969 to 1979 Dr. Reeves was a
Principal in a high tech start up company and several syndicated real estate
partnerships. From 1979 to 1989 he served as Chairman and CEO of Monadnock
Partners, Inc., a family owned real estate management and development entity
involved in hotels, commercial office buildings and multi-tenant industrial
projects. Dr. Reeves, along with a corporate affiliate, was a principal in a
number of real estate ventures including four hotel projects in the Northeast.
Dr. Reeves oversaw three of these hotel partnerships through bankruptcy
proceedings in the New Hampshire and Connecticut Districts. As a result of
related litigation and personal guarantees for these partnerships, Dr. Reeves
filed for personal bankruptcy protection in the New Hampshire District in May
1989. From 1989 to 1996, Dr. Reeves devoted his full time to the business of the
Company, its predecessor, Fluid Life Systems, Inc. ("FLS") and BIORELEASE. Dr.
Reeves is currently an officer of RT Robertson Consultants, Inc., a family owned
consulting firm which provides management services to a number of companies,
including the Company, on an as needed basis.
RICHARD SCHUBERT has been Chairman of the Board of Directors of BIORELEASE since
July 1992. Effective October 1, 1999, Mr. Schubert was appointed a Director of
the Company. Mr. Schubert is currently a business consultant. From December 1990
through September 1995, Mr. Schubert was the President of The Points of Light
Foundation, a foundation created to encourage Americans to become directly
involved in consequential community service in respect of critical social
issues. From June 1989 to December 1990 he was a business consultant. He served
as President of the American Red Cross (1983-1989) and was a former Vice
Chairman and President of Bethlehem Steel until 1982. Mr. Schubert has extensive
experience in law, business and government. During his career with Bethlehem
Steel, which began in 1961, he was appointed to serve in the public sector as
Assistant to the Under Secretary of Labor (1970) Solicitor of the Department of
Labor (1971) and Under Secretary of Labor (1973). Mr. Schubert is a member of
the Council of Foreign Relations and he serves as a director of a number of
philanthropic and business organizations. Mr. Schubert graduated Cum Laude from
Eastern Nazarene College in Quincy, Massachusetts with a Bachelor of Arts
degree, and from Yale Law School with a Bachelor of Law degree. Mr. Schubert,
along with Dr. Reeves, serves as an officer of NCPI, Inc., a non-profit
subsidiary of Eastern Nazarene College.
KEVIN T MCGUIRE has been BIORELEASE's and the Company's Treasurer since June
1990. Since April 1994 he has served without compensation on a part time basis.
The Company contracts for accounting and tax services through an accounting firm
owned by the spouse of Mr. McGuire that has assisted BIORELEASE and the Company
to maintain compliance with accounting activities and Securities and Exchange
Commission reporting for BIORELEASE. Both Mr. McGuire and his spouse, Vivian L.
McGuire, are graduates of Bentley College. Mr. McGuire has 23 years of business
experience including 15 years with public accounting firms. Mrs. McGuire has
owned and operated a small business tax and audit practice since 1988.
29
<PAGE>
Executive Compensation
The following table shows all the cash compensation paid or to be paid
by the Company, as well as certain other compensation paid or accrued, during
the fiscal years indicated, to the Chief Executive Officer for such period in
all capacities in which he served. No other Executive Officer received total
annual salary and bonus in excess of $100,000 in any fiscal year. Through June
30, 1997 Dr. Gauci received compensation totaling $30,000 as President of the
Company. Dr. Gauci passed away in 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Annual Restricted All Other
Bonus Compen- Stock Compen-
Name and Principal Payouts sation Award LTIP sation
Position Year Salary ($) ($) ($)SAR's ($) ($)
- ------------------------------ ---- ------ --- --- -------- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. Bruce Reeves 1999 -0- -0- -0- -0- -0- -0- -0-
President and 1998 -0- -0- -0- -0- -0- -0- -0-
Chief Executive 1997(1) 10,000 -0- (2) -0- -0- -0- -0-
Officer 1996 90,000 -0- (2) -0- 913,200(1) -0- -0-
1995 120,000 50,000 (2) -0- 0- -0- -0-
1994 120,000 -0- (1) -0- 200,000(3) -0- -0-
1993 117,000 20,000 (1) -0- -0- -0- -0-
1992 86,000 10,000 -0- -0- -0- -0- -0-
</TABLE>
(1) On April 1, 1996 the direct employment of R. Bruce Reeves, then
President/CEO of the Company ceased. All of Reeves' contractual rights were
terminated. New contractual agreements were negotiated with R T Robertson
Consultants, Inc., a Reeves family affiliate to provide consulting services
including the services of Dr. Reeves. In fiscal years ended June 30, 1999 and
1998, respectively R T Robertson Consultants, Inc. charged the Company $0 and
$1,500 for executive oversight of BIORELEASE and the Company. Between April 1
and June 30, 1996 R. T. Robertson billed the Company $33,300, including expense
reimbursements, for executive oversight of the Corporations. Under the terms of
the R T Robertson Consultants, Inc. agreement with the Company, Dr. Reeves, an
employee of R T Robertson Consultants, Inc., serves as President/CEO of the
Company. In addition to listed compensation from the Company, BIORELEASE awarded
Robertson BIORELEASE options for 913,200 shares at exercise prices from $0.06 to
$0.15 per share.
(2) Value of benefits and other perquisites are less than 10% of the
total annual salary and bonus.
(3) Effective October 4, 1996 these 200,000 options were forfeited by
Dr. Reeves.
The following table sets forth information with respect to the Chief
Executive Officer concerning the grants of options and Stock Appreciation Rights
("SAR") in BIORELEASE during the past fiscal year for combined services to
BIORELEASE and the Company: Currently the Company has no such option plan or SAR
program in place for its employees, officers, and directors.
BIORELEASE OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Options/SARs
Options/ Granted to
SARs Employees in Exercise or Base Expiration
Name Granted Fiscal Year Price ($/Sh) Date
- ---- -------- ------------ ---------------- ----------
<S> <C> <C> <C>
Chief Executive Officer -0- -0- 0%
</TABLE>
30
<PAGE>
The following table sets forth information with respect to the Chief
Executive Officer concerning exercise of options during the last fiscal year and
unexercised options and SARs held as of the end of the fiscal year:
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
--- --- --- --- ---
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Shares at FY-end (#) at FY-end (#)
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable Unexercisable
- ---- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
Chief Executive Officer -0- -0- -0- -0-
</TABLE>
The following table sets forth information with respect to the Chief
Executive Officer concerning awards under long term incentive plans during the
last fiscal year:
Estimated Future Payouts under Non-Stock Price-Based Plans
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f)
Performance
Number of or other
Shares, units Period Until
Or Other Maturation or Threshold Target Maximum
Name Rights (#) Payout ($ or #) ($ or #) ($ or #)
- --------- ------------- ------------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Chief Executive Officer -0- -0- -0- -0- -0-
</TABLE>
Stock Option Plans
The Company has not adopted any qualified plan for its employees or
directors. The Company's Directors issue non-statutory options to consultants as
deemed necessary and in the best interest of the stockholders.
Indemnification of Directors and Officers
The General Corporation Law of the State of Delaware contains provisions
entitling directors and officers of the Company to indemnification by the
Company for liability arising out of certain actions. Additionally, the
Company's Certificate of Incorporation provides that, to the fullest extent
permitted by law, a director of the Company shall not be liable to the Company
or its stockholders for monetary damages for the breach of fiduciary duty as a
director. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
31
<PAGE>
CERTAIN TRANSACTIONS
The BIORELEASE Reorganization
By Agreements dated June 3, 1992 (collectively, the "Agreement"), the
BIORELEASE agreed to acquire up to 100% of the then issued and outstanding
shares of Common and Preferred Stock of the Company in exchange for
approximately 3,030,149 Shares of BIORELEASE Common Stock (the
"Reorganization"), plus certain contingent Shares. In August 1992, the Company,
a California corporation, reincorporated in Delaware.
Effective June 30, 1992, pursuant to the terms of the Agreement, the
Company stockholders owning an aggregate of 4,342,037 shares of Company Common
and/or Preferred Stock, exchanged these Shares for an aggregate of 2,463,711
Shares of BIORELEASE Common Stock (which represents approximately 47.9% of the
BIORELEASE's issued and outstanding Shares). The "Exchange Ratio" was one Share
of Company Common or Preferred Stock for .56741 BIORELEASE Shares of BIORELEASE
Common Stock. An additional 240,085 Company Shares were subsequently exchanged
for 136,225 BIORELEASE Shares (representing 49.2% of the BIORELEASE's issued and
outstanding Shares when aggregated with the other Shares issued in the
Reorganization). The remaining Company Common and Preferred shares (including
Common shares issuable upon the exercise of certain options and warrants) were
not exchanged. The Directors of BIORELEASE have set aside a restricted stock
certificate representing 263,879 shares of BIORELEASE stock on behalf of these
465,058 Company shares held by minority Company shareholders.
The Company
Effective June 1991, the Company acquired FLS' assets including the
Company Technologies in exchange for approximately $595,000 in payments of cash
to and\or on behalf of FLS and through the assumption of specific FLS'
liabilities. In addition, the Company issued 57,437 shares of its Common Stock
directly to certain FLS creditors.
The hemoglobin stabilization technology was acquired by FLS, without
warranty, from the Trustee in Bankruptcy of Pacific Brotherhood Investment Corp.
("PBIC"). George Lofink, president and CEO of FLS, was an officer, director and
principal stockholder of PBIC. The PBIC technology was acquired in exchange for
$50,000 and the assumption of the costs (approximately $115,000 of funding
PBIC's litigation against certain parties previously affiliated with PBIC ("the
Erythro Litigation"). The Erythro Litigation was settled in December 1991.
Pursuant to the settlement and subsequent negotiations, the plaintiffs therein
relinquished any and all claims to the technology in return for $47,000, all of
which has been paid.
The drug release technology rights were initially licensed by FLS from
Valcor Scientific Ltd. ("Valcor") in exchange for future royalty payments. In
April 1992, Norman Eisner, Valcor's successor, agreed to cancel all future
royalty payments and to assign to the Company the Valcor patents and technology
for 327,500 shares of the Company's Common Stock. In addition, Mr. Eisner
accepted 82,073 additional shares of the Company's Common Stock in lieu of
$265,000 of the $350,000 minimum royalty payment called for under the license
agreement. The remaining $85,000 was paid in July 1992, at which time title to
the drug release technology rights was assigned to the Company. A percentage of
the above discussed shares and funds were given to a former Valcor research
consultant.
32
<PAGE>
In connection with the transfer of the Company Technologies to the
Company and in settlement of the termination of FLS' employment agreements with
its then president, George Lofink, and its then Secretary, Linda Carter, the
Company has paid Mr. Lofink $5,000 and executed two notes aggregating $135,000
for services rendered under the employment agreement, and paid Ms. Carter
$5,000, executed a note for $5,000 and issued 500 Shares for services rendered
under the employment agreement. To date, the Company has paid approximately
$128,332 on the two notes to Mr. Lofink (which includes the issuance of 13,333
Shares valued at $60,000) and has paid approximately $4,584 on the note to Ms.
Carter (which includes the issuance of 834 Shares valued at $3,750). The Company
also paid $131,386 and 1,200 Shares in legal fees incurred by Mr. Lofink in his
defense of the Erythro Litigation.
Prior to the Reorganization, the Company owed approximately $173,314
(consisting of $116,852 in loans, and $31,355 owed for services rendered, to its
predecessor, FLS, which were assumed by the Company, and $25,107 in loans to the
Company) to present and former officers and/or directors of the Company
(including certain officers and/or directors of the Company) including Richard
Schubert, who was owed an aggregate of $76,413. With the exception of $1,260,
all of these liabilities were canceled prior to the reorganization in exchange
for the issuance of an aggregate of 62,565 shares of the Company's Common Stock.
All of these 62,565 Company shares were exchanged for 35,500 Shares of
BIORELEASE Common Stock in the Reorganization.
In December 1991, the Company issued 751,000 shares of Preferred Stock
for gross proceeds of $375,500 in a private offering to qualified accredited
investors.
In April 1992, the Company issued 6,858 shares of its Common Stock for
gross proceeds of $10,000 to an unaffiliated accredited investor.
In August 1992, the Company changed its name to Biorelease Technologies,
Inc. and its state of incorporation by merging into a newly formed Delaware
corporation.
The Asset Agreement effective June 30, 1999
On April 1, 1999 and effective June 30, 1999, BIORELEASE entered into
an Asset Agreement with R T Robertson Consultants, Inc. which was acting on
behalf of itself and other creditors of BIORELEASE and the Company under which
Robertson would acquire certain listed assets of the Company including 150,000
Genesis preferred shares held by the Company, 550,000 restricted Company common
shares held in treasury, 175,000 restricted shares of reissued Company stock
originally issued to creditors but not released, all rights to recovery from
Genesis Capital Corp. under a recision action, and an option to acquire up to
60% of the stock interest in the Company held by the BIORELEASE (2,749,273)
shares to be issued for debt offset at the then Company book value) all in
exchange for forgiveness of $67,918 in debt owed by BIORELEASE and the Company
plus an indemnity in the amount of $167,749 for outstanding trade creditors of
both Companies. The bid price of the BIORELEASE shares on April 1, 1999 was
$0.01 per share. As a result of the terms of this Asset Agreement, the Company
was able to eliminate $242,276 in liabilities that will allow it to comply with
the terms of the proposed Polar Molecular transaction for stock and assets then
valued at $7,250. These shares to be spun off to the creditor group and to
Officers and Directors (see next paragraph) cannot be resold for six months
after the effective date of this registration statement at a price below $0.05
per share unless sold subject to this restriction.
33
<PAGE>
Special Stock Grant to Directors and Officers
On October 1, 1999, as a part of the spin off, the Directors of
BIORELEASE agreed to issue 900,000 Company shares held by BIORELEASE to Dr.
Reeves for past service and continuing oversight of the Company relating to the
filing of this registration statement and his continuing to serve as President
and CEO through calendar year 2000. At the same time, 100,000 shares were issued
to Director Schubert and 32,849 shares issued to Mr. McGuire for past and future
services on behalf of the Company for the same period (total shares to be spun
off to Officers and Directors - 1,032,849 shares). Each of these shares is
subject to a six month lock up restriction (see next Sub-section - Holding
Periods).
Holding Periods
Following the completion of this spin off, a total of 4,582,122 Company
shares currently held by BIORELEASE (90.8 % of the outstanding Company shares)
will be registered pursuant to the issue by BIORELEASE of (i) 800,000 of the
Company's unrestricted shares to BIORELEASE stockholders and (ii) 3,782,122
shares issued subject to certain holding period and minimum bid price
restrictions (see "Risk Factors-Depressive Effect of Potential Sales By Company
Stockholders on Market Price of Common Stock" and "Shares Available for Future
Sale; Possible Depressive Effect on Market Price"). These 4,582,122 fully
diluted shares include 2,749,273 shares to be reissued to R T Robertson
Consultants on behalf of itself and other creditors under the Asset Agreement
plus 1,032,849 shares to be reissued to Officers and Directors for consulting
services. These 3,782,122 shares in the dividend spin off, plus up to another
200,932 shares (25%) of the 800,000 to be spun off to the BIORELEASE
stockholders owned by officers and directors and their families, will be subject
to this specific six month holding period plus a minimum price of $.05 per
share. The following summarizes the holding period (commencing upon the
completion of this Registration) related to the public sale of these Shares: 180
day holding period following the completion of this Registration, with regard to
the Shares subject to the 180 day holding period: all Shares may be publicly
sold earlier provided the bid price of the Common Stock at that time is at least
$0.05 per Share or are sold privately subject to this restriction.
Principal Security holders
R T Robertson Consultants, Inc. (Robertson), 340 Granite Street, Suite
200, Manchester, NH 03102, acting on behalf of certain creditors pursuant to an
Asset Purchase Agreement with Biorelease Corp., will acquire at book value
2,279,273 shares currently held by BIORELEASE. (See Certain Transactions -
previous section). Robertson Consultants, Inc. is a consulting business owned by
family members of Dr. R. Bruce Reeves, President of the Company. Under the
agreement, Robertson, on behalf of these creditors, received the interest
BIORELEASE date of this registration statement is 2,890,939 shares representing
57.3 % of the 5,047,180 issued share held in a recision action against Genesis
Capital Corp. On January 13, 2000 a Texas Court awarded recision of this
transaction. Robertson, on behalf of these creditors, will receive an additional
90,000 shares of stock in the Company derived from this previous Genesis Capital
interest in BIORELEASE. Robertson's participation in the creditor pool is
approximately 73%. Taken together, including shares derived from its ownership
of BIORELEASE stock, the maximum number of shares which could be issued to R. T.
Robertson Consultants, Inc. as of the effective date of this registration
statement is 2,890,939 shares representing 57.3 % of the 5,047,180 issued
shares, a controlling interest in the Company.
34
<PAGE>
Sandra J Reeves, 754 Straw Hill, Manchester, NH 03104 owns 1,613,984
shares of Biorelease Corp. representing 107,599 shares of post spin off
Biorelease Technologies, Inc. representing 2.1 % of total issued shares upon
completion of this Registration. Mrs. Reeves is a stockholder in R. T. Robertson
consultants, Inc. and controls ninety percent (90%) of R. T. Robertson
Consultants, Inc.'s common stock. Mrs. Reeves is the spouse of Dr. R. Bruce
Reeves, President of the company. The shares that Mrs. Reeves owns directly or
beneficially, plus the shares owned by R. T. Robertson consultants, Inc. and the
shares held by R. T. Robertson Consultants, Inc. as Trustee for certain
creditors, along with the shares owned by Dr. Reeves represents 77.6% of the
issued shares.
Name and Number of Share Percent of
Address of Beneficially Common Stock
Beneficial Owner Owned* Outstanding(4)
- ---------------- --------------- --------------
R. Bruce Reeves 916,360 (1)(2) 18.2%
Kevin T. McGuire 46,702 (1)(3) 0.9%
Richard F. Schubert 130,176 (1) 2.6%
All Officers and
Directors as a Group
(3 Persons) 1,093,088(1)(2)(3) 21.7 %
* Except as indicated in the footnotes below, each person has sole voting and
dispositive power over the Shares indicated.
(1) Includes 900,000 shares granted to Dr. Reeves, 100,000 shares granted to
Richard F. Schubert & 32,849 shares granted to Kevin McGuire at October
1, 1999 by the Directors of BIORELEASE.
(2) Includes 1,207 Shares held individually by Dr. Reeves' wife, 12,870
Shares held in trust for Dr. Reeves jointly with his wife and 3,427
Shares held in trust for the benefit of Dr. Reeves. Dr. Reeves disclaims
beneficial ownership of the Shares held individually by his wife.
(3) Includes 10,303 shares held by Mr. and Mrs. McGuire jointly with rights
of survivorship.
(4) Based upon 5,047,180 shares of common stock issued and outstanding.
35
<PAGE>
CAPITALIZATION
Preferred Stock
The company is authorized to issue five million (5,000,000) shares of
Preferred Stock, $.001 par value per share. There is no Preferred Stock issued.
Common Stock
The Company is authorized to issue twenty million (20,000,000) Shares of
Common Stock, $.01 par value per Share, of which 5,047,180 Shares are issued and
outstanding as of the date of this Registration Statement. Each outstanding
Share of Common Stock is entitled to one vote, either in person or by proxy, on
all matters that may be voted upon by the owners thereof at meetings of the
stockholders.
The holders of Common Stock (i) have equal ratable rights to dividends
from funds legally available therefor, when, and if declared by the Board of
Directors of the Company; (ii) are entitled to Share ratably in all of the
assets of the Company available for distribution to holders of Common Stock upon
liquidation, dissolution or winding up of the affairs of the Company; (iii) do
not have preemptive, subscription or conversion rights, or redemption or sinking
fund provisions applicable thereto; and (iv) are entitled to one non-cumulative
vote per Share on all matters on which stockholders may vote at all meetings of
stockholders.
All Shares of Common Stock which are the subject of this offering, when
issued, will be fully paid for and non-assessable, with no personal liability
attaching to the ownership thereof. The holders of Shares of Common Stock of the
Company do not have cumulative voting rights, which means that the holders of
more than 50% of such outstanding Shares, voting for the election of directors,
can elect all directors of the Company if they so choose and, in such event, the
holders of the remaining Shares will not be able to elect any of the Company's
directors.
36
<PAGE>
DIVIDEND POLICY
The payment by the Company of dividends, if any, in the future, rests
within the discretion of its Board of Directors and will depend, among other
things, upon the Company's earnings, if any, its capital requirements and its
financial condition, as well as other relevant factors. The Company has not
declared any cash dividends since inception, and has no present intention of
paying any cash dividends on its Common Stock in the foreseeable future, as it
intends to use earnings, if any, to generate increased growth.
LEGAL MATTERS
The firm of John B. Lowy, P.C., 645 Fifth Ave., Suite 403, New York, New
York 10022, Special Securities Counsel to the Company, has rendered an opinion
regarding the validity of the securities offered hereby. The attorneys employed
by John B. Lowy, P.C. beneficially own xx Shares of Common Stock of the Company.
EXPERTS
EXPERTS
The Financial Statements of the Company included in this Registration
Statement have been audited by Ferrari & Associates, P.C. independent certified
public accountants, as stated in their opinion and upon the authority of that
firm as experts in accounting and auditing. Berry Moorman P.C. served as special
tax counsel for issuing a tax opinion for this registration. Berry Moorman P.C.
also serves a counsel to Polar Molecular Corporation with whom BIORELEASE has
agreed to merge. The Company has waived conflict of interest.
37
<PAGE>
BIORELEASE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
FINANCIAL STATEMENTS
June 30, 1999 and 1998
With Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
Biorelease Technologies, Inc.
We have audited the accompanying balance sheet of Biorelease Technologies, Inc.
(a development stage enterprise) as of June 30, 1999 and 1998 and the related
statements of operations, changes in stockholders' deficit, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. The financial statements of the Company from inception
through June 30, 1998, have been audited by other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Biorelease Technologies, Inc.
as of June 30, 1999 and 1998 and the results of their operations and their cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1, the Company is
a development stage enterprise that, since its inception, has incurred operating
losses, and the Company does not have sufficient working capital to support its
future operations on an ongoing basis. Because of these factors, there is
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are discussed in Note 1. These financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Ferarri & Associates, P. C.
- -------------------------------
Ferarri & Associates, P. C.
Litchfield, New Hampshire
December 29, 1999
<PAGE>
BIORELEASE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Balance Sheets
June 30, 1999 and 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
---- ----
Current assets
<S> <C> <C>
Cash $ - $ -
Accounts receivable - trade - 8,455
Inventory 16,366 18,434
Prepaid expenses and other current assets - -
------------ -----------
Total current assets 16,366 26,889
------------ -----------
Equipment, net 4,174 -
------------ -----------
Other assets
Intangible assets, net - 20,449
Other - 300
------------ -----------
Total other assets - 20,749
------------ -----------
Total assets $ 20,540 $ 47,638
============ ===========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Current liabilities
Accounts payable - trade $ - $ 87,380
Accounts payable - affiliate - 16,787
Accrued expenses - 25,402
Current portion of notes payable - stockholders - 46,100
Other current liabilities - 1,549
------------- -----------
Total current liabilities - 177,218
------------- -----------
Notes payable - long-term portion - 16,000
------------- -----------
Total liabilities - 193,218
------------- -----------
Commitments and contingencies (Note 5)
Stockholders' deficit
Preferred stock - $.001 par value, 5,000,000 authorized
and No shares issued - -
Common stock of $.001 par value; 20,000,000 shares
Authorized 5,047,180 shares issued and outstanding
as of June 30, 1999 and 1998 5,047 5,047
Additional paid-in capital 5,809,821 5,727,033
Development stage accumulated deficit (5,794,328) (5,877,660)
------------- -----------
Total stockholders' equity (deficit) 20,540 (145,580)
------------- -----------
Total liabilities and stockholders'
equity (deficit) $ 20,540 $ 47,638
============= ===========
</TABLE>
F-3
<PAGE>
BIORELEASE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Statements of Operations
Years Ended June 30, 1999 and 1998 and the
Cumulative Period from Inception to June 30, 1999
<TABLE>
<CAPTION>
For the Year Ended June 30, Period From
--------------------------- Inception to
1999 1998 June 30, 1999
---- ---- -------------
<S> <C> <C> <C>
Revenues
Sales $ 11,630 $ 15,121 $ 198,306
Sponsored research - 47,154 333,673
Grant revenues - - 33,117
Other income - 1,500
------------ ------------- ----------------
Total revenues 11,630 62,275 566,596
Cost of revenues 2,818 2,041 19,794
------------ ------------- ----------------
Gross profit 8,812 60,234 546,802
------------ ------------- ----------------
Costs and expenses
Research and development - - 2,558,041
Purchased technology - - 690,000
General and administrative 87,715 20,674 2,442,092
Cell culture operations - - 601,116
------------ ------------- ----------------
Total costs and expenses 87,715 20,674 6,291,449
------------ ------------- ----------------
Income (loss) from operations (78,903) 39,560 (5,744,447)
------------ ------------- ----------------
Other income (expense)
Interest, net (4,173) (4,742) (57,442)
Litigation costs - - (92,291)
Offering costs - - -
Option compensation - -
Other income (expense) 393 - (15,456)
Accelerated lease commitment cost - - (315,000)
Recognized loss for decline in value of investment - -
Gain (loss) on sale of equipment - - 64,216
Income recognized on indemnified liabilities 165,860 165,860
Income recognized on settlements 155 - 216,016
------------ ------------- ----------------
Other expense, net 162,235 (4,742) (34,097)
------------ ------------- ----------------
Income (loss) before provision for income taxes
and cumulative
Effect of change in accounting principle 83,332 34,818 (5,778,544)
Provision for income taxes - - 479,224
------------ ------------- ----------------
Income (loss) before cumulative effect of
change in accounting principles 83,332 34,818 (6,257,768)
------------ ------------- ----------------
Cumulative effect of change in accounting principle - - 463,440
------------ ------------- ----------------
Net Income (loss) $ 83,332 $ 34,818 $ (5,794,328)
============ ============= ================
Weighted average shares 5,047,180 5,047,180 4,493,673
============ ============= ================
Basic and diluted profit (loss) per share $ 0.02 $ 0.01 $ (1.29)
============ ============= ================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
BIORELEASE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Statements of Stockholders' Deficit
Years Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
Common Stock
----------------------------- Development
Number Additional Stage Total
of Capital Paid-in Accumulated Stockholders'
Issued Shares Amount Capital Deficit Equity (Deficit)
------------- ------ ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Balance June 30, 1997 5,047,180 $ 5,047 $ 5,727,033 $ (5,912,478) $ (180,398)
Net income - - - 34,818 34,818
--------- ----------- ----------- ------------ -----------
Balance, June 30, 1998 5,047,180 5,047 5,727,033 (5,877,660) (145,580)
Capitalization from parent - - 82,788 - 82,788
Net income - - - 83,332 83,332
--------- ----------- ----------- ------------ -----------
Balance, June 30, 1999 5,047,180 $ 5,047 $ 5,809,821 $ (5,794,328) $ 20,540
========= =========== =========== ============ ===========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
BIORELEASE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Statements of Cash Flows
Years Ended June 30, 1999 and 1998
the Cumulative Period From Inception to June 30, 1999
<TABLE>
<CAPTION>
For the Year Ended June 30, Period From
---------------------------- Inception to
1999 1998 June 30, 1999
---- ---- -------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ 83,332 $ 34,818 $ (5,794,328)
Adjustments to reconcile net loss to net cash provided (used) by
operating
Activities
Depreciation and amortization 22,419 11,898 247,738
Cumulative effect of change in accounting principle - - (463,440)
Gain (loss) on sale of assets - - (38,704)
Loss on extinguishment of debt - - 42,000
Common stock issued in exchange for
Services rendered - - 6,406
(Increase) decrease in current assets:
Accounts receivable 8,455 (356) -
Inventory 2,068 1,247 (16,366)
Prepaid expenses and other current assets - - -
Other receivables - - -
Other assets 300 - -
Deferred tax assets - - -
Increase (decrease) in current liabilities: - - -
Accounts payable - trade (87,380) (4,295) -
Accounts payable - affiliate (16,787) (16,787) -
Accrued expenses (25,402) 5,950 -
Other current liabilities (1,549) - -
Deferred income - (20,000) -
Other liabilities - - 1,212
------- -------- -------------
Net cash provided by(used for) operating activities (14,544) 12,475 (6,015,482)
------- -------- -------------
Cash flows from investing activities
Purchase of fixed assets (6,144) (337,201)
Purchase of intangible assets - - (86,337)
Proceeds from sale of assets - - 189,742
------- -------- -------------
Net cash provided by (used for) investing activities (6,144) (233,796)
------- -------- -------------
Cash flows from financing activities
Advance from and amounts due to stockholders - - 594,385
Repayment of advances - - (159,975)
Notes payable (62,100) (12,475) -
Capitalization from parent 82,788 3,680,148
Issuance of common stock - 2,134,720
------- -------- -------------
Net cash provided (used) by financing activities 20,688 (12,475) 6,249,278
------- -------- -------------
Net increase (decrease) in cash - - -
Cash, beginning of year - - -
------- -------- -------------
Cash, end of year $ - $ - -
======= ======== =============
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
BIORELEASE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Statements
June 30, 1999 and 1998
Organization
Biorelease Technologies, Inc. is a development stage enterprise originally
incorporated in California on February 6,1990 as FLS Acquisition Corp. to
acquire and develop technologies and rights to technologies. In August 1992, the
Company reincorporated in Delaware under the name Biorelease Technologies, Inc.
The company's technologies consist of a hemoglobin stabilization technology and
sustained drug release technology based on chondroitin sulfate. These
technologies had been researched and developed by predecessors and unaffiliated
persons over a four to six year period prior to their acquisition by the
Company.
1. Summary of Significant Accounting Policies
Basis of Presentation
The financial statements are presented on the accrual basis of accounting
in conformity with generally accepted accounting principles. Biorelease
Corp., a publicly traded company (OTCBB-BRLZ) owns 90.8% of the Company
and includes the financial statements of the Company in consolidated
financial statements. These financial statements do not include the
activities of Biorelease Corp and inter-company activities and balances
are included in the accompanying financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Future Operations
These financial statements have been presented on the basis that the
Company is a going concern, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. As
a development stage enterprise, the Company currently does not have
sufficient available funds to support its technology development and
related marketing efforts over any extended period of time. Because the
Company has limited working capital, there is substantial doubt about its
ability to continue as a going concern without additional capital and
attainment of profitable operations. (See Note 5)
Revenues
Revenues from product sales are recorded when shipped.
F-7
<PAGE>
BIORELEASE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Statements
June 30, 1999 and 1998
1. Summary of Significant Accounting Policies (Continued)
Inventory
Inventory is stated at the lower of cost (first-in, first-out) or market.
Management has recently re-tested each batch of biotech product in
inventory and estimates the shelf life of its inventory to remain potent
through June 30, 2002. The shelf life of the product beyond June 30, 2002
will be evaluated at that time, with the potential for an obsolescence
write-down of inventory due to loss of biological activity.
Equipment
Equipment is stated at cost. Depreciation and amortization are provided
using an accelerated method over the estimated useful lives of five to
seven years. Repairs and maintenance are charged to expense when
incurred. Any gain or loss resulting from the disposal of equipment is
included in operations and the cost and related accumulated depreciation
are removed from the respective account balances.
Intangible Assets
Intangible assets consist of costs incurred to obtain and maintain
patents. During the fiscal year ending June 30, 1999 all remaining patent
costs were written off reflecting the expiration or abandonment of all
remaining patents.
Income Taxes
Deferred income taxes are recognized for the tax consequences in future
years for differences between the tax bases of assets and liabilities and
their financial reporting amounts at each year-end based on enacted tax
laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances
are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax payable for
the period and the change during the period in deferred tax assets and
liabilities.
Income (Loss) Per Common Share
Income (loss) per common share is computed using the weighted-average
number of common shares outstanding during each period. The Company has
nothing to dilute basic earnings per share calculation, therefore basic
and diluted earnings per share are the same.
F-8
<PAGE>
BIORELEASE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Statements
June 30, 1999 and 1998
2. Equipment
Equipment consisted of the following as of June 30:
1999 1998
---- ----
Equipment $ 71,016 $ -
Less accumulated depreciation 66,842 -
------ ---------
$ 4,174 $ -
===== =========
Depreciation expense for the years ended June 30, 1999 and 1998 was
$1,970 and $0 respectively.
3. Intangible Assets
Intangible assets consisted of the following as of June 30:
1999 1998
---- ----
Patents $ 80,039 $ 80,039
Less accumulated amortization 80,039 59,590
----------- ---------
Less accumulated amortization - 20,449
=========== =========
During fiscal year ended June 30, 1999 all patents were allowed to
expire.
F-9
<PAGE>
BIORELEASE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Statements
June 30, 1999 and 1998
4. Notes Payable (Also see Note 1 and Note 5)
Notes payable consisted of the following as of June 30:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C>
Stockholders
------------
Unsecured promissory notes, bearing interest at 9%, due date
December 31, 1995. These notes were forgiven in exchange for an
indemnity agreement with a related party.
(See note 5) $ - $ 46,100
Other:
Unsecured promissory note, quarterly payments of interest only.
The balance was due July 1998. This note is party to an indemnity
agreement with a related party. See note 5. - 16,000
---------- ----------
Less current portion - 46,100
---------- ----------
Notes payable, excluding current portion $ - $ 16,000
========== ==========
</TABLE>
BIORELEASE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Statements
June 30, 1999 and 1998
5. Commitments and Contingencies
On July 26, 1999 Biorelease Corp (BIORELEASE) the Company's parent
corporation, signed a definitive agreement under which BIORELEASE will
merge with Polar Molecular Corporation, a Utah corporation ("PMC"). The
proposed merger will be accounted for as a reverse merger, using the
purchase method of accounting. As a result of the proposed merger, if
completed, the name of BIORELEASE will be changed to "Polar Molecular
Corporation" and the current management team of BIORELEASE will resign
and be replaced by PMC's management team. The merger agreement provides,
among other things, that BIORELEASE is to spin-off or otherwise dispose
of its wholly owned subsidiary (and only operating company) Biorelease
Technologies, Inc. Subsequent to or simultaneous with the proposed merger
between BIORELEASE and POLAR, the Company will file a registration
Statement under the Securities Act of 1933, on form S-1, to register the
4,582,122 shares of its common stock owned by Biorelease Corp.
Since July 1, 1997, the Company has had no leased premises. A related
party, without charge has provided office rental space.
The Company does not carry product liability insurance.
F-10
<PAGE>
BIORELEASE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Statements
June 30, 1999 and 1998
6. Income Taxes
The Company has not filed federal or state tax returns for the years
ended December 31, 1993, 1994, 1995, 1996, 1997 and 1998. There will be
no federal tax liability for the years then ended. $4,700 of state
business tax liabilities recorded as of June 30, 1998 were indemnified as
part of the related party agreement entered into as of June 30, 1999.
(See Note 10)
For income tax filing purposes, the Company recognizes revenue and
expenses on the accrual basis and its fiscal year-end is December 31.
The net current and long-term deferred taxes consisted of the following
components as of June 30:
<TABLE>
<CAPTION>
1999 Tax Effect
----------------------------------------------------------------------------------
Asset Liability
--------------------------- ------------------------
Item Total Current Long-Term Current Long-Term
---- ----- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net operating loss deduction $ 868,949 $ - $ 868,949 $ - $ -
Valuation allowance (868,949) - (868,949) - -
-------- ------- --------- ------ -------
$ - $ - $ - $ - $ -
======== ======= ========= ====== =======
</TABLE>
<TABLE>
<CAPTION>
1999 Tax Effect
----------------------------------------------------------------------------------
Asset Liability
--------------------------- ------------------------
Item Total Current Long-Term Current Long-Term
---- ----- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net operating loss deduction $ 881,449 $ - $ 881,449 $ - $ -
Valuation allowance (881,449) - (881,449) - -
-------- ------- --------- ------ -------
$ - $ - $ - $ - $ -
======== ======= ========= ====== =======
</TABLE>
F-11
<PAGE>
BIORELEASE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Statements
June 30, 1999 and 1998
6. Income Taxes (Concluded)
Valuation
Allowance
----------
Balance, June 30, 1997 $ 886,672
Net decrease (5,223)
--------
Balance June 30, 1998 $ 881,449
Net decrease (12,500)
--------
Balance June 30, 1999 $ 868,949
========
A valuation allowance equivalent to 100% of the deferred tax asset has
been established since it is more probable than not that the Company will
not be able to recognize a tax benefit for the asset.
7. Equity
Effective June 30, 1992, the Company, then named FLS Acquisition Corp
(FLSA), exchanged substantially all of the outstanding common and
preferred stock for common stock of OIA, Inc. (OIA). This reorganization
was accounted for as a reverse acquisition of OIA by FLSA under the
purchase method of accounting, as the shareholders of FLSA controlled the
consolidated entity immediately following the reorganization. Subsequent
to the transaction, the OIA, Inc. changed its name to Biorelease Corp.
(BIORELEASE) and the Company (FLSA) changed its name to Biorelease
Technologies, Inc. (BTI).
The terms of the reorganization agreement between the FLSA and OIA called
for the issuance of 2,845,436 shares of OIA, Inc. common stock in
exchange for 5,014,780 shares of FLSA common stock, representing all of
FLSA common stock issued and outstanding at the date of the
reorganization. Currently, all but 465,058 shares of FLSA have been
acquired. A certificate for 263,879 shares reflecting OIA, Inc.'s
remaining obligations under the reorganization agreement has been issued
to a trustee for the benefit of the minority shareholders of FLSA. The
reorganization agreement also called for the issuance of up to 1,022,130
additional shares of BIORELEASE common stock, subject to the achievement
of certain operating results in future years. The Company did not meet
the requirements.
F-12
<PAGE>
BIORELEASE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Statements
June 30, 1999 and 1998
8. Cash Flow Information
<TABLE>
<CAPTION>
For the Year Period From
Ended June 30, Inception to
------------------------ June 30,
1999 1998 1999
---- ---- -----------
<S> <C> <C> <C>
Cash paid for interest or stocks issued
in lieu of cash $ 0 $ 0 $ 57,422
Non-cash investing and financing activities were as follows:
Liabilities repaid through issuance
of common stock 0 0 6,406
</TABLE>
9. Related Party Transactions
On October 4, 1996, R. Bruce Reeves resigned as a member of the Board of
Directors, President, and Chief Executive Officer of the Company.
Effective April 1, 1996, the Company engaged a consulting firm,
controlled by a Reeves' family member, to perform the executive duties of
the Company. The Company paid $0 in contractual fees for these services
in years ended June 30, 1999 and 1998. In February 1998, the Company's
Board of Directors appointed Mr. Reeves as acting President to manage
ongoing business activities of the Company.
As of June 30, 1998, the Company was indebted $15,000 to this related
party. The indebtedness bore no interest and had been deferred for a
period of three years. As of June 30, 1999, the Company and this related
party reached an agreement under which the related party, on behalf of
itself and other creditors of the Company, received an option for one
year to acquire up to 60% of the Company at the then book value in
exchange for (i) forgiving $15,000 in debt owed by the Company to the
related party, (ii) indemnification by the related party for an
additional $165,860 in liabilities plus (iii) rights to offset exercise
price against outstanding indebtedness for certain outstanding options.
10. Disclosure About Fair Value of Financial Instruments
The Company's financial instruments consist of inventory and accounts
payable, affiliate. The carrying value of all instruments approximates
their fair value.
F-13
<PAGE>
PART II
INFORMATION NOT REQUIRED IN REGISTRATION STATEMENT
Item 13. Other Expenses of Issuance and Distribution *
- ---------------------------------------
* All printing, mailing and distribution costs have been agreed to be paid by
Polar Molecular Corporation as part of the Proxy mailing for approval of the
Polar / Biorelease merger. Only NASD filing fees and transfer agent's fees
estimated at less than $10,000 are expected to be incurred by the Company
Item 14. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware
contains provisions entitling directors and officers of the Company to
indemnification from judgments, fines, amounts paid in settlement and reasonable
expenses, including attorney's fees, as the result of an action or proceeding in
which they may be involved by reason of being or having been a director or
officer of the Company provided said officers or directors acted in good faith.
Additionally, Article "8" to the Company's Certificate of Incorporation
provides as follows:
"To the fullest extent permitted by the Delaware General Corporation Law
as the same exists or may hereafter be amended, a director of the Corporation
shall not be liable to the corporation or its stockholders for monetary damages
for the breach of fiduciary duty as a director."
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Company will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Item 16. Exhibits and Financial Statement Schedules
a. Exhibits
The Exhibits filed with the Registration Statement are as follows:
3.a Certificate of Incorporation of Company
3.b Certificate of Merger
3.c By-Laws of Company
16.a Accountants' Letter
21.a Specimen of Common Stock Certificate
<PAGE>
b. Financial Statement Schedules
All schedules have been omitted because they are inapplicable or
not required, or the information is included elsewhere in the financial
statements or notes thereto.
Item 17. Undertakings
(1) The Company hereby undertakes to provide certificates in such
denominations and registered in such names as required to permit prompt delivery
to each recipient.
(2) That, insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(3) Subject to the terms and conditions of Section 15(d) of the Securities
and Exchange Act of 1933, the undersigned Registrant hereby undertakes to file
with the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission hereafter adopted pursuant to authority conferred
in that section.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized in the State of New
Hampshire, City of Manchester on the 4th day of February, 2000
BIORELEASE TECHNOLOGIES, INC.
By /s/ R. Bruce Reeves
--------------------
R. Bruce Reeves, President,
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURES TITLE DATE
- ---------- --------- ------------
/s/ R. Bruce Reeves
- -------------------------
R. Bruce Reeves Director February 4, 2000
/s/ Kevin McGuire
- -------------------------
Kevin McGuire Treasurer and February 4, 2000
Chief Accounting
Officer
/s/ Richard F. Schubert
- -------------------------
Richard F. Schubert Director February 4, 2000
CERTIFICATE OF INCORPORATION
Of
BIORELEASE TECHNOLOGIES, INC.
FIRST. The name of this Corporation is BIORELEASE TECHNOLOGIES, INC.
SECOND. The registered office of BIORELEASE TECHNOLOGIES, INC. (the
"Corporation") in the State of Delaware, shall be 1013 Centre Road, Wilmington,
Delaware 19805, in the County of New Castle. The name of the registered agent at
such office shall be The Company Corporation.
THIRD. The nature of the business and, the objects and purposes proposed to
be transacted, promoted and carried on, are to do any or all the things herein
mentioned, as fully and to the same extent as natural persons might or could do,
and in any part of the world. Viz: "The purpose of the Corporation is to engage
in any lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware."
FOURTH. The amount of the total authorized capital stock of the Corporation
is: (a) Twenty Million (20,000,000) shares of Common Stock, $.001 par value per
share; and (b) Five Million (5,000,000) shares of Preferred Stock, $.001 par
value, with such rights, powers, preferences, designations, limitations,
restrictions and other qualifications as determined by the Board of Directors
pursuant to a resolution or resolutions providing for the issuance of such
Preferred Stock, which power is hereby expressly vested in the Board of
Directors.
<PAGE>
FIFTH. The name and mailing address of the incorporator is as follows:
NAME: ADDRESS:
--------- --------
Kimberly Andras 201 N. Walnut St., Wilmington, DE 19801
SIXTH. The powers of the incorporator are to terminate upon filing of the
Certificate of Incorporation, and the names and mailing addresses of persons who
are to serve as directors until the first annual meeting of stockholders or
until their successors are elected and qualify are as follows:
R. Bruce Reeves, 754 Straw Hill, Manchester, NH 03104
SEVENTH. The Directors shall have power to make and to alter or amend the
By-Laws; and to fix the amount to be reserved as working capital.
The By-Laws shall determine whether and to what extent the accounts and
books of this Corporation, or any of them shall be open to the inspection of the
stockholders; and no stockholder shall have any right of inspecting any account,
or book or document of the Corporation, except as conferred by the law or the
By-Laws, or by resolution of the stockholders.
It is the intention that the objects, purposes and powers specified in the
Third paragraph hereof shall, except where otherwise specified in said
paragraph, be nowise limited or restricted by reference to or inference from the
terms of any other clause or paragraph in this Certificate of Incorporation, but
that the objects, purposed and powers specified in the Third paragraph and in
each of the clauses or paragraphs of this charter shall be regarded as
independent objects, purposes and powers.
EIGHTH. To the fullest extent legally permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a Director of
the Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for the breach of fiduciary duty as a director.
NINTH. The corporation elects not to be governed by Section 203 of the
General Corporation law of Delaware.
<PAGE>
TENTH. The Corporation shall indemnify all persons whom it may indemnify to
the fullest extent allowed by the General Corporation Law of Delaware.
I, THE UNDERSIGNED, for the purpose of forming a Corporation under the
laws of the State of Delaware, do make, file and record this Certificate and do
certify that the facts herein are true; and I have accordingly hereunto set my
hand.
DATED July 22, 1992
State of: Delaware
County of: New Castle
/s/ Kimberly Andras
--------------------
Kimberly Andras
State of Delaware
Office of the Secretary of State
--------------------------------
I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
MERGER OF "FLS ACQUISITION CORP." A CORPORATION ORGANIZED AND EXISTING UNDER THE
LAWS OF THE STATE OF CALIFORNIA, MERGING WITH AND INTO "BIORELEASE TECHNOLOGIES,
INC.", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF
DELAWARE UNDER THE NAME OF "BIORELEASE TECHNOLOGIES, INC." AS RECEIVED AND FILED
IN THIS OFFICE THE TWENTY-SEVENTH DAY OF AUGUST, A.D. 1992, AT 9 O'CLOCK A.M.
AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CORPORATION SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO NEW CASTLE
COUNTY RECORDER OF DEEDS ON THE TWENTY-SEVENTH DAY OF AUGUST, A.D. 1992 FOR
RECORDING.
**********
[SEAL] /s/Michael Ratchford
-------------------------------------
Michael Ratchford, Secretary of State
AUTHENTICATION:*3573090
922405131 DATE: 08/27/1992
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 08/27/1992
922405131 - 2304158
CERTIFICATE OF MERGER
---------------------
(DELAWARE)
1. Pursuant to a Plan and Agreement of Merger ("Plan") FLS ACQUISITION
CORP. ("FLS"), a California Corporation, will merge with and into BIORELEASE
TECHNOLOGIES, INC. ("BTI"), a Delaware Corporation.
2. The Plan was approved, adopted, certified, executed and acknowledged by
each of the constituent corporations in accordance with sections 251 and 252 of
the Delaware General Corporation Law ("GCL") and Sections 1101-1103 of the
California General Corporation Law ("Code").
3. BTI will be the surviving corporation.
4. The Certificate of Incorporation of BTI will be the surviving
corporation's Certificate of Incorporation.
5. An executed copy of the Plan is on file at BTI's office, located at 8B
Industrial Way, Salem, NH 03079 and copies thereof will be furnished to
stockholders of BTI and FLS, without cost, upon written request.
6. The authorized capital of FLS is 20,000,000 shares of common stock,
$.001 par value, and 5,000,000 shares of preferred stock, $.001 par value.
IN WITNESS WHEREOF, BTI and FLS have caused this certificate to be signed
by their Presidents, respectively, R. Bruce Reeves and Paul Calvin Maybury, and
attested by their Secretaries, R. Bruce Reeves, this 4th day of August, 1992.
BIORELEASE TECHNOLOGIES, INC.
By:/s/R. Bruce Reeves
---------------------------------
R. Bruce Reeves, President
ATTEST:
By:/s/R. Bruce Reeves
---------------------------------
R. Bruce Reeves, President
FLS ACQUISITION CORP.
By:/s/Paul Calvin Maybury
---------------------------------
Paul Calvin Maybury, President
ATTEST:
By:/s/R. Bruce Reeves
---------------------------------
R. Bruce Reeves, President
BIOI0001.072
BY-LAWS
OF
BIORELEASE TECHNOLOGIES, INC.
ARTICLE I
Offices
SECTION 1. Registered Office. The registered office of BIORELEASE
TECHNOLOGIES, INC. (the "Corporation") in the State of Delaware, shall be 1013
Centre Road, Wilmington, Delaware 19805, in the County of New Castle. The name
of the registered agent at such office shall be The Company Corporation.
SECTION 2. Other Offices. The Corporation may also have offices at such
other places either within or without the State of Delaware as the Board of
Directors (the "Board") may from time to time determine.
ARTICLE II
Meetings of Stockholders
SECTION 1. Annual Meetings. The annual meeting of the stockholders of
the Corporation for the election of directors and for the transaction of such
other business as may properly come before the meeting shall be held at such
hour and place as the Board may determine on the second Tuesday in October in
each year. If for any reason the annual meeting shall not be held on the date
fixed herein, a special meeting in lieu of the annual meeting may be held, with
all the force and effect of an annual meeting, on such date and at such place
and hour as shall be designated by the Board in the notice thereof. At the
annual meeting any business may be transacted whether or not the notice of such
meeting shall have contained a reference thereto, except where such a reference
is required by law, the Certificate of Incorporation or these By-Laws.
SECTION 2. Special Meetings. A special meeting of the stockholders for
any purpose or purposes may be called at any time by the Board or by the
President, and such meeting shall be held on such date and at such place and
hour as shall be designated in the notice thereof.
SECTION 3. Notice of Meetings. Except as otherwise expressly required
by these By-laws or by law, notice of each meeting of the stockholders shall be
given not less than ten (10) nor more than forty-five (45) days before the date
of the meeting to each stockholder of record entitled to notice of, or to vote
at, such meeting by delivering a typewritten or printed notice thereof to such
stockholder personally or by depositing such notice in the United States mail,
directed to such stockholder at such stockholder's address as it appears on the
stock records of the Corporation. Every such notice shall state the place, date
and hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called. Notice of any adjourned meeting of the
stockholders shall not be required to be given if the time and place thereof are
announced at the meeting at which the adjournment is taken and a new record date
for the adjourned meeting is not thereafter fixed.
1
<PAGE>
SECTION 4. Quorum and Manner of Acting. Except as otherwise expressly
required by law, if stockholders holding of record a majority of the shares of
stock of the Corporation issued, outstanding and entitled to be voted at the
particular meeting shall be present in person or by proxy, a quorum for the
transaction of business at any meeting of the stockholders shall exist. In the
absence of a quorum at any such meeting or any adjournment or adjournments
thereof, a majority in voting interest of those present in person or by proxy
and entitled to vote thereat may adjourn such meeting from time to time until
stockholders holding the amount of stock requisite for a quorum shall be present
in person or by proxy. At any such adjourned meeting at which a quorum is
present any business may be transacted which might have been transacted at the
meeting as originally called.
SECTION 5. Organization of Meetings. At each meeting of the
stockholders, one of the following shall act as chairman of the meeting and
preside thereat, in the following order of precedence:
(a) the President;
(b) any other officer or a stockholder of record designated by
a majority in voting interest of the stockholders present in person or by proxy
and entitled to vote thereat.
The Secretary of the Corporation (the "Secretary") or, if the Secretary shall be
absent from or presiding over the meeting in accordance with the provisions of
this Section, the person whom the chairman of the meeting shall appoint, shall
act as secretary of the meeting and keep the minutes thereof.
SECTION 6. Order of Business. The order of business at each meeting of
the stockholders shall be determined by the chairman of the meeting, but such
order of business may be changed by a majority in voting interest of those
present in person or by proxy at such meeting and entitled to vote thereat.
SECTION 7. Voting. Except as otherwise provided in the Certificate of
Incorporation, each stockholder shall, at each meeting of the stockholders, be
entitled to one vote in person or by proxy for each share of stock of the
Corporation which has voting power on the matter in question held by such
stockholder and registered in such stockholder's name on the stock record of the
Corporation:
(a) on the date fixed pursuant to the provisions of Section 6
of Article VII of these By-laws as the record date for the determination of
stockholders who shall be entitled to receive notice of and to vote at such
meeting; or
2
<PAGE>
(b) if no record date shall have been so fixed, at the close
of business on the day next given or, if notice of the meeting shall be waived,
at the close of business on the day next preceding the day on which the meeting
shall be held.
Any vote of stock of the Corporation may be held at any meeting of the
stockholders by the person entitled to vote the same in person or by proxy. At
all meetings of the stockholders all matters, except as otherwise provided in
the Certificate of Incorporation, in these By-laws or by law, shall be decided
by the vote of a majority in voting interest of the stockholders present in
person or by proxy and entitled to vote thereat, a quorum being present.
SECTION 8. Consent in Lieu of Meeting. Any action required to be taken
or any other action which may be taken at any annual or special meeting of
stockholders, may be taken without a meeting, without prior notice and without a
vote if a consent in writing, setting forth the action so taken, shall be signed
by the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted, provided that
prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
SECTION 9. Inspectors. Either the Board or, in the absence of a
designation of inspectors by the Board, the chairman of the meeting may, in the
discretion of the Board or the chairman, appoint one or more inspectors, who
need not be stockholders, who shall receive and take charge of ballots and
proxies and decide all questions relating to the qualification of those
asserting the right to vote and the validity of ballots and proxies. In the
event of the failure or refusal to serve of any inspector designated by the
Board, the chairman of the meeting shall appoint an inspector to act in place of
each such inspector designated by the Board.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The property, business, affairs and policies
of the Corporation shall be managed by or under the direction of the Board.
SECTION 2. Number and Term of Office. The number of directors which
shall constitute the initial Board shall be three (2) and thereafter the Board
shall consist of not less than one (1) person, the number, within said limits to
be fixed from time to time by a vote of the stockholders at the annual meeting
or at a special meeting called for the purpose by the Board. Each of the
directors of the Corporation shall hold office until the annual meeting after
such director's election and until such director's successor shall be elected
and shall qualify or until such director's earlier death or resignation or
removal in the manner hereinafter provided. Subject to the first sentence of
this Section 2, the Directors in office at any time may increase the number of
directors between stockholders' meetings, and the additional directorships thus
created may be filled by a majority of the directors in office at the time of
the increase or, if not so filled prior to the next annual meeting of
stockholders, by the stockholders. Vacancies in the Board may be filled by the
remaining Directors, although less than a quorum, for the unexpired term or
terms.
3
<PAGE>
SECTION 3. Election. Unless otherwise provided by the Certificate of
Incorporation, at each annual meeting of the stockholders for the election of
directors at which a quorum is present, the persons receiving the greatest
number of votes, up to the number of directors to be elected, shall be the
directors. Directors need not be stockholders of the Corporation.
SECTION 4. Meetings.
(A) Annual Meetings. The annual meeting of the Board, for the
purpose of organization, the election of officers and the transaction of other
business, shall be held at the place of and immediately following final
adjournment of the annual meeting of stockholders or the special meeting in lieu
thereof.
(B) Regular Meetings. Regular meetings of the Board or any
committee thereof shall be held as the Board or such committee shall from time
to time determine.
(C) Special Meetings. Special meetings of the Board
may be called by order of the President or by any two of the directors then
in office.
(D) Notice of Meetings. No notice of regular meetings of the
Board or of any committee thereof or of any adjourned meeting thereof need be
given. The Secretary shall give prior notice to each director of the time and
place of each special meeting of the Board or adjournment thereof. Such notice
shall be given to each director in person or by telephone, telegraph or ordinary
mail, not less than two days before the meeting if given in person or by
telephone or telegraph and, if given by mail, post marked at least four (4) days
prior to the special meeting if given by mail, and sent to such director at the
director's residence or usual business address. Notice of any special meeting of
the Board or any committee thereof shall not be required to be given to any
director who shall attend such meeting. Any meeting of the Board or any
committee thereof shall be a legal meeting without any notice thereof having
been given if all the directors then in office shall be present thereat. The
purposes of a meeting of the Board or any committee thereof need not be
specified in the notice thereof.
(E) Time and Place of Meetings. Regular meetings of the Board
or any committee thereof shall be held at such times and place or places as the
Board or such committee may from time to time determine. Special meetings of the
Board or any committee thereof shall be held at such times and places as the
callers thereof may determine.
(F) Quorum and Manner of Acting.
(a) At all meetings of the Board of Directors, each
Director present shall have one vote, irrespective of the number of shares of
stock, if any, which he may hold.
4
<PAGE>
(b) Except as otherwise expressly required by these
By-laws or by law, a majority of the directors then in office and a majority of
the members of any committee shall be present in person at any meeting thereof
in order to constitute a quorum for the transaction of business at such meeting,
and the vote of a majority of the directors present at any such meeting at which
a quorum is present shall be necessary for the passage of any resolution or for
an act to be the act of the Board or such committee. In the absence of a quorum,
a majority of the directors present thereat may adjourn such meeting either
finally or from time to time to another time and place until a quorum shall be
present thereat. In the latter case notice of the adjourned time and place shall
be given as aforesaid to all Directors.
(G) Organization of Meetings. At each meeting of the Board,
one of the following shall act as chairman of the meeting and preside thereat,
in the following order of precedence:
(a) the President;
(b) any director chosen by a majority of the
directors present thereat.
The Secretary or, in case of the Secretary's absence, the person whom
the chairman of the meeting shall appoint, shall act as secretary of such
meeting and keep the minutes thereof. The order of business at each meeting of
the Board shall be determined by the chairman of such meeting.
(H) Consent in Lieu of Meeting. Any action required or
permitted to be taken at any meeting of the Board or any committee thereof may
be taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in a writing or writings and such writing or writings
are filed with the minutes of the proceedings of the Board or committee. Such
consents shall be treated for all purposes as a vote at a meeting.
(I) Action by Communications Equipment. The directors may
participate in a meeting of the Board or any committee thereof by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other and such participation
shall constitute presence in person at such meeting.
SECTION 5. Compensation. Each director, in consideration of serving as
such, may receive from the Corporation such amount per annum and such fees and
expenses incurred for attendance at meetings of the Board or of any committee,
or both, as the Board may from time to time determine. Nothing contained in this
Section shall be construed to preclude any director from serving the Corporation
in any other capacity and receiving compensation therefor.
SECTION 6. Resignation, Removal and Vacancies. Any director may resign
at any time by giving written notice of such resignation to the President or the
Secretary.
Any such resignation shall take effect at the time specified therein
or, if not specified therein, upon receipt. Unless otherwise specified in the
resignation, its acceptance shall not be necessary to make it effective. Any or
all of the directors may be removed at any time for cause or without cause at a
meeting of stockholders by vote of a majority of shares then entitled to vote at
an election of directors. Any director also may be removed as a director at any
time for cause by vote of a majority of the directors then in office.
5
<PAGE>
If the office of any director becomes vacant at any time by reason of
death, resignation, retirement, disqualification, removal from office or
otherwise, or if any new directorship is created by any increase in the
authorized number of directors, a majority of the directors then in office,
though less than a quorum, or the sole remaining director, may choose a
successor or fill the newly created directorship and the director so chosen
shall hold office, subject to the provisions of these By-laws, until the next
annual election of directors and until his successor shall be duly elected and
shall qualify. In the event that a vacancy arising as aforesaid shall not have
been filled by the Board, such vacancy may be filled by the stockholders at any
meeting thereof after such office becomes vacant. If one or more directors shall
resign from the Board, effective at a future date, a majority of the directors
then in office, including those who have so prospectively resigned, shall have
the power to fill such vacancy or vacancies, the vote thereon to take effect
when such resignation or resignations shall become effective, and each director
so chosen shall hold office as herein provided in the filling of other
vacancies.
SECTION 7. Committees. The directors may, by vote of a majority of the
directors then in office, appoint from their number one or more committees and
delegate to such committees some or all of their powers to the extent permitted
by law, the Certificate of Incorporation or these By-Laws. Except as the board
of Directors may otherwise determine, any such committee may, by majority vote
of the entire committee, make rules for the conduct of its business. The
directors shall have the power at any time to fill vacancies in any such
committee, to change its membership or to discharge the committee.
SECTION 8. Advisory Council. The directors may, by vote of a majority
of the directors then in office, establish an advisory council to the Board of
Directors. The advisory council shall have no duties, but may provide the Board
with advice relating to the business of the Corporation. The members of this
council, in their capacity as advisory council members, shall not be entitled to
vote at any annual, regular, or special meetings of the Board and shall attend
such meetings only at the discretion of the Board of Directors. The directors
shall have the power at any time to fill vacancies in any such council, to
change its membership or to discharge the council. No member of the advisory
council as a result of such capacity shall be deemed to be an officer or a
member of the Board of Directors.
ARTICLE IV
Officers
SECTION 1. Election and Appointment and Term of Office. The officers of
the Corporation shall be a President, such number, if any, of Vice Presidents
(including any Executive or Senior Vice Presidents) as the Board may from time
to time determine, a Secretary and a Treasurer. Each such officer shall be
elected by the Board at its annual meeting and hold office for such term as may
be prescribed by the Board. Two or more offices may be held by the same person.
The President may, but need not, be chosen from among the Directors.
6
<PAGE>
The Board may elect or appoint (and may authorize the President to
appoint) such other officers (including one or more Assistant Secretaries and
Assistant Treasurers) as it deems necessary who shall have such authority and
shall perform such duties as the Board or the President may from time to time
prescribe.
If additional officers are elected or appointed during the year, each
shall hold office until the next annual meeting of the Board at which officers
are regularly elected or appointed and until such officer's successor is elected
or appointed and qualified or until such officer's earlier death or resignation
or removal in the manner hereinafter provided.
SECTION 2. Duties and Functions.
(A) President. The President shall be the chief executive
officer of the Corporation and shall have general direction and supervision over
the business and affairs of the Corporation, subject to the directions and
limitations imposed by the Board and these By-laws, and shall see that all
orders and resolutions of the Board are carried into effect. The President
shall, if present, preside at all meetings of stockholders and of the Board and
shall also perform such other duties and have such other powers as are
prescribed by these By-laws or as may be from time to time prescribed by the
Board, or these By-laws.
(B) Vice Presidents. Each Vice President shall have such
powers and duties as shall be prescribed by the Board.
(C) Secretary. The Secretary shall attend and keep the records
of all meetings of the Stockholders, the Board and all other committees, if any,
in one or more books kept for that purpose. The Secretary shall give or cause to
be given due notice of all meetings in accordance with these By-laws and as
required by law. The Secretary shall notify the several officers of the
Corporation of all action taken by the Board concerning matters relating to
their duties and shall transmit to the appropriate officers copies of all
contracts and resolutions approved by the Board. The Secretary shall be
custodian of the seal of the Corporation and of all contracts, deeds, documents
and other corporate papers, records (except financial and accounting records)
and indicia of title to properties owned by the Corporation as shall not be
committed to the custody of another officer by the Board or by the President.
The Secretary shall affix or cause to be affixed the seal of the Corporation to
instruments requiring the same when the same have been signed on behalf of the
Corporation by a duly authorized officer. The Secretary shall perform all duties
and have all powers incident to the office of Secretary and shall perform such
other duties as shall be assigned by the Board or the President. The Secretary
may be assisted by one or more Assistant Secretaries, who shall, in the absence
or disability of the Secretary, perform the duties and exercise the powers of
the Secretary.
(D) Treasurer. The Treasurer shall have charge and custody of
the corporate funds and other valuable effects, including securities. The
Treasurer shall keep true and full accounts of all assets, liabilities, receipts
and disbursements and other transactions of the Corporation and shall cause
regular audits of the books and records of the Corporation to be made. The
Treasurer shall perform all duties and have all powers incident to the office of
Treasurer and shall perform such other duties as shall be assigned by the Board
or the President. The Treasurer may be assisted by one or more Assistant
Treasurers, who shall, in the absence or disability of the Treasurer, perform
the duties or exercise the powers of the Treasurer.
7
<PAGE>
SECTION 4. Resignation, Removal and Vacancies. Any officer may resign
at any time by giving written notice of such resignation to the President or the
Secretary of the Corporation. Any such resignation shall take effect at the time
specified therein or, if not specified therein, when accepted by action of the
Board.
Any officer, agent or employee may be removed, with or without cause,
at any time by the Board or by the officer who made such appointment.
A vacancy in any office may be filled for the unexpired portion of the
term in the same manner as provided in these By-laws for election or appointment
to such office.
ARTICLE V
Waiver of Notices; Place of Meetings
SECTION 1. Waiver of Notices. Whenever notice is required to be given
by the Certificate of Incorporation, by these By-laws or by law, a waiver
thereof in writing, signed by the person entitled to such notice, or by attorney
thereunto authorized, shall be deemed equivalent to notice, whether given before
or after the time specified therein. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except where the person attends
the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
SECTION 2. Place of Meetings. Any meeting of the Stockholders, the
Board or any committee of the Board may be held within or outside the State of
Delaware.
ARTICLE VI
Execution and Delivery of Documents;
Deposits; Proxies; Books and Records
SECTION 1. Execution and Delivery of Documents; Delegation. The Board
shall designate the officers, employees and agents of the Corporation who shall
have power to execute and deliver deeds, contracts, mortgages, bonds,
debentures, checks, drafts and other orders for the payment of money and other
documents for and in the name of the Corporation and may authorize such
officers, employees and agents to delegate such power (including authority to
redelegate) by written instrument to other officers, employees or agents of the
Corporation.
8
<PAGE>
SECTION 2. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
or otherwise as the Board or the President or any other officer, employee or
agent of the Corporation to whom power in that respect shall have been delegated
by the Board or these By-laws shall select.
SECTION 3. Proxies in Respect of Stock or Other Securities of Other
Corporations. The President or any officer of the Corporation designated by the
Board shall have the authority from time to time to appoint and instruct an
agent or agents of the Corporation to exercise in the name and on behalf of the
Corporation the powers and rights which the Corporation may have as the holder
of stock or other securities in any other corporation, to vote or consent in
respect of such stock or securities and to execute or cause to be executed in
the name and on behalf of the Corporation and under its corporate seal or
otherwise, such written proxies, powers of attorney or other instruments as the
President or such officer may deem necessary or proper in order that the
Corporation may exercise such powers and rights.
SECTION 4. Books and Records. The books and records of the Corporation
may be kept at such places within or without the State of Delaware as the Board
may from time to time determine.
ARTICLE VII
Certificates; Stock Record; Transfer and
Registration; New Certificates; Record Date; etc.
SECTION 1. Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate certifying the number of
shares owned by such stockholder in the Corporation and designating the class of
stock to which such shares belong, which shall otherwise be in such form as the
Board shall prescribe. Each such certificate shall be signed by the President or
a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Corporation. Any of or all such signatures may
be facsimiles. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may nevertheless be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue. Every certificate surrendered to the Corporation for exchange or transfer
shall be canceled and a new certificate or certificates shall not be issued in
exchange for any existing certificate until such existing certificate shall have
been so canceled, except in cases provided for in Section 4 of this Article.
SECTION 2. Stock Record. A stock record in one or more counterparts
shall be kept of the name of the person, firm or corporation owning the stock
represented by each certificate for stock of the Corporation issued, the number
of shares represented by each such certificate, the date thereof and, in the
case of cancellation, the date of cancellation.
9
<PAGE>
SECTION 3. Transfer and Registration of Stock.
(A) Transfer. The transfer of stock and certificates of stock
which represent the stock of the Corporation shall be governed by Article 8 of
the Uniform Commercial Code, as adopted in the State of Delaware and as amended
from time to time.
(B) Registration. Registration of transfers of shares of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by such holder's attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary, and on the surrender of the
certificate or certificates for such shares properly endorsed or accompanied by
a stock power duly executed, with any necessary transfer stamps affixed and with
such proof of authenticity of signatures and such proof of authority to make the
transfer as may be required by the Corporation or its transfer agent.
SECTION 4. New Certificates.
(A) Lost, Stolen or Destroyed Certificates. The Board may
direct a new share certificate or certificates to be issued by the Corporation
for any certificate or certificates alleged to have been lost, stolen, mutilated
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen, mutilated or destroyed. When
authorizing such issue of a new certificate or certificates, the Board may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen, mutilated or destroyed certificate or certificates,
or such owner's legal representative, to give the Corporation a bond in such sum
and in such form as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen, mutilated or destroyed.
SECTION 5. Regulations. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with these By-laws, concerning the
issue, transfer and registration of certificates for stock of the Corporation.
SECTION 6. Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board
may fix, in advance, a record date, which shall not be more than 60 nor less
than 10 days before the date of such meeting, nor more than 60 days prior to any
other action. A determination of stockholders entitled to notice of or to vote
at a meeting of the stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
10
<PAGE>
ARTICLE VIII
Seal
The Board shall provide a corporate seal which shall bear the full name
of the Corporation and the year and state of its incorporation.
ARTICLE IX
Indemnification
SECTION 1. Actions, Etc. Other Than By or in the Right of the
Corporation. The Corporation shall, indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, including a grand jury proceeding, and all appeals (but excluding
any such action, suit or proceeding by or in the right of the Corporation), by
reason of the fact that such person is or was a director, executive officer (as
hereinafter defined) or advisory council member of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the conduct in
question was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that such person did
not act in good faith and in a manner which such person reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, that such person had reasonable cause to
believe that the conduct in question was unlawful. As used in this Article IX,
an "executive officer" of the Corporation is the president, treasurer, a vice
president given the title of executive vice president, or any officer designated
as such pursuant to vote of the Board of Directors.
SECTION 2. Actions, Etc., By or in the Right of the Corporation. To the
fullest extent legally permitted by the Delaware General Corporation Law as the
same exists or may hereafter be amended, a Director of the Corporation shall not
be liable to the Corporation or its stockholders for monetary damages for the
breach of fiduciary duty as a director. The Corporation shall, to the full
extent legally permissible, indemnify any director or other person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit, including appeals, by or in the right of the
Corporation to procure a judgment in its favor, by reason of the fact that such
person is or was a director or executive officer of the Corporation as defined
in Section 1 of this Article, or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
11
<PAGE>
SECTION 3. Determination of Right of Indemnification. Any
indemnification of a director or officer (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that such indemnification is proper in the circumstances because
the director or executive officer has met the applicable standard of conduct as
set forth in Sections 1 and 2 hereof. Such a determination shall be reasonably
and promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (ii) (if such a quorum is not obtainable, or, even if obtainable if a quorum
of disinterested directors so directs) by independent legal counsel in a written
opinion, or (iii) by the stockholders.
SECTION 4. Indemnification Against Expenses of Successful Party.
Notwithstanding any other provision of this Article, to the extent that a
director or officer of the Corporation has been successful in whole or in part
on the merits or otherwise, including the dismissal of an action without
prejudice, in defense of any action, suit or proceeding or in defense of any
claim, issue or matter therein, such person shall be indemnified against all
expenses incurred in connection therewith.
SECTION 5. Advances of Expenses. Expenses incurred by a director or
officer in any action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of thereof, if such person shall undertake to
repay such amount in the event that it is ultimately determined, as provided
herein, that such person is not entitled to indemnification. Notwithstanding the
foregoing, no advance shall be made by the Corporation if a determination is
reasonably and promptly made (i) by the Board of Directors by a majority vote of
a quorum of disinterested directors, or (ii) (if such a quorum is not obtainable
or, even if obtainable, if a quorum of disinterested directors so directs) by
independent legal counsel in a written opinion, that, based upon the facts known
to the Board of Directors or such counsel at the time such determination is
made, such person has not met the relevant standards set forth for
indemnification in Section 1 or 2, as the case may be.
SECTION 6. Right to Indemnification Upon Application; Procedure Upon
Application. Any indemnification or advance under Sections 1, 2, 4 or 5 of this
Article shall be made promptly, and in any event within ninety days, upon the
written request of the person seeking to be indemnified, unless a determination
is reasonably and promptly made by the Board of Directors that such person acted
in a manner set forth in such Sections so as to justify the Corporation's not
indemnifying such person or making such an advance. In the event no quorum of
disinterested directors is obtainable, the Board of Directors shall promptly
appoint independent legal counsel to decide whether the person acted in the
manner set forth in such Sections so as to justify the Corporation's not
indemnifying such person or making such an advance. The right to indemnification
or advances as granted by this Article shall be enforceable by such person in
any court of competent jurisdiction, if the Board of Directors or independent
legal counsel denies the claim therefor, in whole or in part, or if no
disposition of such claim is made within ninety days.
12
<PAGE>
SECTION 7. Other Right and Remedies; Continuation of Rights. The
indemnification and advancement of expenses provided by this Article shall not
be deemed exclusive of any other rights to which any person seeking
indemnification or advancement of expenses may be entitled under any By-law,
agreement, vote of stockholders or disinterested directors, the General
Corporation Law of the State of Delaware or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office. All rights to indemnification or advancement under this Article
shall be deemed to be in the nature of contractual rights bargained for and
enforceable by each director and executive officer as defined in Section 1 of
this Article who serves in such capacity at any time while this Article and
other relevant provisions of the General Corporation Law of the State of
Delaware and other applicable laws, if any, are in effect. All rights to
indemnification under this Article or advancement of expenses shall continue as
to a person who has ceased to be a director or executive officer, and shall
inure to the benefit of the heirs, executors and administrators of such a
person. No repeal or modification of this Article shall adversely affect any
such rights or obligations then existing with respect to any state of facts then
or theretofore existing or any action, suit or proceeding theretofore or
thereafter brought based in whole or in part upon any such state of facts. The
Corporation shall also indemnify any person for attorneys' fees, costs, and
expenses in connection with the successful enforcement of such person's rights
under this Article.
SECTION 8. Other Indemnitees. The Board of Directors may, by general
vote or by vote pertaining to a specific officer, employee or agent, advisory
council member or class thereof, authorize indemnification of the Corporation's
employees and agents, in addition to those executive officers and to whatever
extent it may determine, which may be in the same manner and to the same extent
provided above.
SECTION 9. Insurance. Upon resolution passed by the Board of Directors,
the Corporation may purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee, advisory council member or agent of the
Corporation, or is or was serving at the request of the Corporation, as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such liability under the provisions of this
Article.
SECTION 10. Constituent Corporations. For the purposes of this Article,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporations (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors and officers so that any person who is or was a director or officer of
such a constituent corporation or is or was serving at the request of such
constituent corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as such person would have with respect to such constituent
corporation if its separate existence had continued.
13
<PAGE>
SECTION 11. Savings Clause. If this Article or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director, executive officer,
advisory council member, and those employees and agents of the Corporation
granted indemnification pursuant to Section 3 hereof as to expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement with respect
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative, including a grand jury proceeding, and all appeals, and any
action by the Corporation, to the full extent permitted by any applicable
portion of this Article that shall not have been invalidated or by any other
applicable law.
SECTION 12. Other Enterprises, Fines, and Serving at Corporation's
Request. For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to any employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of any employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article.
ARTICLE X
Dividends
Subject to the applicable provision of the Certificate of
Incorporation, if any, dividends upon the outstanding shares of the Corporation
may be declared by the Board of Directors at any regular or special meeting
pursuant to law and may be paid in cash, in property, or in shares of the
Corporation.
ARTICLE XI
Fiscal Year
The fiscal year of the Corporation shall be determined by resolution of
the Board of Directors.
14
<PAGE>
ARTICLE XII
Amendments
These By-laws may be amended, altered or repealed by the vote of a
majority of the entire Board, subject to the power of the holders of a majority
of the outstanding stock of the corporation entitled to vote in respect thereof,
to amend or repeal any By-law made by the Board.
15
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the inclusion
of our report dated December 29, 1999 on the financial statements of Biorelease
Technologies, Inc. for the years ended June 30, 1999 and 1998, in its form S-1
Registration Statement.
Ferrari & Associates, P.C.
Litchfield, New Hampshire.
January 17, 2000
- --------------------------------------------------------------------------------
[NUMBER] [SHARES]
BIORELEASE TECHNOLOGIES, INC.
OPEN CORPORATION
INCORPORATION UNDER THE LAWS OF THE STATE OF DELAWARE
Authorized Capital Stock 20,000,000 Shares With Par Value $.01
This Certifies that_______________________________________________is the owner
(SEE REVERSE FOR CERTAIN DEFINITIONS)
of____________________________ Shares of the Capital Stock of
BIORELEASE TECHNOLOGIES, INC.
full paid and non-assessable, transferable only on the books of the Corporation
in person or by Attorney, upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers, and its Corporate Seal to be hereunto
affixed
this _________ day of _____________A.D. 19 _____
[SEAL]
_________________________ _________________________
SECRETARY PRESIDENT
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM-as tenants in common UNIF GIFT MIN ACT-.........CUSTODIAN........under
TEN ENT-as tenants by the entireties (Cust) (Minor)
JT TEN- as joint tenants with right of survivorship Uniform Gifts to Minors Act............
and not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For Value Received, ______ hereby sell, assign and transfer unto NOTICE: THE
SIGNATURE OF THIS
PLEASE INSERT SOCIAL SECURITY OR ASSIGNMENT MUST
OTHER IDENTIFYING NUMBER OF ASSIGNEE CORRESPOND WITH THE
- ------------------------------------ NAME AS WRITTEN UPON
____________________________________________ THE FACE OF THE
- ------------------------------------ CERTIFICATE , IN
________________________________________________________________________________ EVERY PARTICULAR,
WITHOUT ALTERATION
OR ENLARGEMENT, OR
Shares represented by the within Certificate, and do hereby ANY CHANGE WHATEVER.
irrevocably constitute and appoint
______________________________________________________________________ Attorney
to transfer the said Shares on the books of the within named
Corporation with full power of substitution in the premises.
Dated_________________ 19 ____
In presence of Signed
______________________________ __________________________________
</TABLE>
