SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________________
Commission File No. 0-15260
Biorelease Corp.
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(Exact name of small business issuer as specified in its charter)
Delaware 88-0218411
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(State or other jurisdiction of (Internal Revenue Service
incorporation or organization) Employer Identification No.)
340 Granite St. Suite 200, Manchester, NH 03102
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(Address of principal Executive offices Zip Code)
(603) 641-8443
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Issuer's telephone number, including area code
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Former name, former address and formal fiscal year,
if changed since last report.
Indicate, by check mark, whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the last practicable date, 12,124,238 shares of
common stock, par value $.01 per share as of February 17, 2000.
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Transitional Small Business Disclosure Format (Check One) Yes No X
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BIORELEASE CORP.
INDEX
PART I. FINANCIAL INFORMATION Page
Number
------
Item 1. Financial Statements .............................................3
Consolidated balance sheets as of December 31, 1999 (unaudited)
and June 30, 1999.................................................3
Consolidated Statements of Operations for the Three Months
and Six Months Ended December 31, 1999 (unaudited) and 1998
(unaudited), and from October 20, 1989 (inception) to
December 31, 1999 (unaudited).....................................4
Consolidated Statements of Cash Flows for the Six Months
Ended December 31, 1999 (unaudited) and 1998 (unaudited), and
from October 20, 1989 (inception) to December 31, 1999
(unaudited).......................................................5
Notes to Unaudited Consolidated Financial Statements .............7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation..........................................8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................9
Item 2. Changes in Securities ............................................9
Item 3. Defaults Upon Senior Securities ..................................9
Item 4. Submission of Matters to a Vote of Security Holders...............9
Item 5. Other Information.................................................9
Item 6. Exhibits and Reports on Form 8-K. ................................9
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statement
BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and June 30, 1999
<TABLE>
<CAPTION>
December June 30,
31, 1999 1999
-------- --------
(Unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 2,352 $ 12,232
Accounts receivable - -
Inventories 16,366 16,366
Other receivables 19,685 -
Prepaid expenses and other current assets - -
----------- ------------
Total current assets 38,403 28,598
----------- ------------
Equipment and leasehold improvements, net 4,328 5,055
----------- ------------
Other assets:
Intangible assets, net - -
Other non current assets - -
----------- ------------
Total assets $ 42,731 $ 33,653
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCIES)
Current liabilities:
Notes payable $ - $ -
Accounts payable 14,696 1,820
Accrued expenses 11,305 16,000
Notes payable stockholders,current - -
Deferred Income - -
Other current liabilities - -
----------- ------------
Total current liabilities 26,001 17,820
Notes payable stockholders, long term - -
Notes payable others, long term - -
Other liabilities - 7,200
----------- ------------
Total liabilities 26,001 25,020
----------- ------------
Stockholders' equity (Deficiency):
Common stock of $.01 par value, 50,000,000 shares
authorized, 12,124,238 and 12,124,238 issued and
11,997,738 and 11,997,738 Outstanding at December 31, 1999
and June 30, 1999
121,242 119,977
Additional paid-in capital 9,114,729 9,112,069
Development stage accumulated deficit (9,211,782) (9,215,339)
Stock subscriptions receivable - (8,074)
----------- ------------
24,189 8,633
Less: Deferred offering costs (7,459) -
----------- ------------
Total Stockholder's Equity (Deficiencies) 16,730 8,633
----------- ------------
Total liabilities and stockholders' equity (deficiencies) $ 42,731 $ 33,653
=========== ============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
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BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended December 31, 1999 and 1998,
and the Cumulative Period from Inception to December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Inception
Three Months Ended December 31, Six Months Ended December 31, (October 20, 1989)
------------------------------- ----------------------------- To
1999 1998 1999 1998 December 31, 1999
---- ---- ---- ---- -----------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues $ - $ (1,524) $ - $ 1,606 $ 570,851
Cost of goods sold - - - (177) (28,155)
----------- ------------ ----------- ------------- --------------
Gross profit - (1,524) - 1,429 542,696
Costs and expenses:
Research and development - - - - (2,558,041)
Purchased technology - - - - (690,000)
General and administrative (9,670) (10,492) (15,307) (24,025) (4,305,615)
Biotech selling expenses - - - - (601,116)
----------- ------------ ----------- ------------- --------------
Total costs and expenses (9,670) (10,492) (15,307) (24,025) (8,154,772)
----------- ------------ ----------- ------------- --------------
(Loss)/Gain from operations (9,670) (12,016) (15,307) (22,596) (7,612,076)
----------- ------------ ----------- ------------- --------------
Other Income (Costs):
Interest, net - (1,728) - (3,455) 66,824
Lease commitment costs - - - - (315,000)
Litigation costs - - - (99,242)
Offering costs - - - - (336,446)
Option compensation - - - - (219,375)
Other income (cost) 19,685 - 19,685 - 6,520
Realized loss for decline in value
of investment - - - - (1,500,000)
Gain on equipment sale - (500) - (500) 62,616
Income recognized on indemnified - - - - 242,276
liabilities
Income recognized on settlements (821) - 821 154 372,555
----------- ------------ ----------- ------------- --------------
Total other income (cost) 18,864 (2,228) 18,864 (3,801) (1,719,272)
----------- ------------ ----------- ------------- --------------
Gain (Loss) before provision for provision
(benefit From) income taxes and Cumulative
effect of Change in accounting principle 9,194 (14,244) 3,557 (26,397) (9,331,348)
Provision for income taxes - - - - 343,873
----------- ------------ ----------- ------------- --------------
Gain (Loss) before cumulative effect
Of change in accounting principle 9,194 (14,244) 3,557 (26,397) (9,675,221)
Cumulative effect of change in
Accounting principle - - - - 463,440
----------- ------------ ----------- ------------- --------------
Net gain (loss) $ 9,194 $ (14,244) $ 3,557 $ (26,397) $ (9,211,781)
=========== ============ =========== ============ =============
Weighted average shares 13,654,858 9,736,659 13,654,858 9,736,659 6,686,210
Basic and fully diluted loss per share $ (0.00) $ (0.00) $ ($0.00) $ ($0.00) $ (1.38)
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
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BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended December 31, 1999 and 1998
and the Cumulative Period from Inception to December 31, 1999
(Unaudited)
------------
<TABLE>
<CAPTION>
Inception
Six Months Ended (October 20, 1989)
December 31, to December 31,
1999 1998 1999
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss)/Gain $ 3,557 $ (26,397) $ (9,211,782)
Adjustments to reconcile net loss to net cash used in
development activities:
Depreciation and amortization 726 9,463 283,020
Cumulative effect of change in accounting principle - - (463,440)
Recognized loss on investment - - 1,500,000
(Gain) Loss on sale of assets - 500 (38,703)
Loss on extinguishment of debt - - 42,000
Common Stock issued in exchange for
Purchased technologies - - 605,000
Common Stock issued in exchange for
services rendered - - 128,453
Common stock options issued in exchange of
services rendered - - 52,300
Amortization of unearned compensation - - 140,625
Re-pricing of A Warrants - - 78,750
(Increase) Decrease in current assets:
Accounts Receivable - 8,260 -
Inventories - 177 (16,366)
Other receivables (19,685) 745 (19,685)
Prepaid expenses and other current assets - - 360
Deferred tax asset - - 463,440
Other non-current assets - - -
Increase (Decrease) in current liabilities:
Accounts payable 12,876 9,256 85,647
Accrued expenses (4,695) (1,492) 18,773
Other current liabilities - - -
Other liabilities (7,200) - -
---------- ------- ------------
Net cash used in operating activities $ (14,421) $ 512 $ (6,351,608)
---------- ------- ------------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
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BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended December 31, 1999 and 1998 and
the Cumulative Period from Inception to December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Inception
Three Months Ended (October 20, 1989)
December 31, To December 31,
1999 1998 1999
---- ---- ----
<S> <C> <C> <C>
Cash flows from investing activities:
Purchase of collateralized mortgage obligations - - (1,000,000)
Proceeds from collateralized mortgage obligations - - 1,000,000
Purchase of fixed assets - - (333,187)
Purchase of intangible assets - - (105,205)
Proceeds from sale of assets (-) (-) 189,742
-------- ----------- ----------
Net cash used in investing activities (-) (-) (248,650)
-------- ----------- ----------
Cash flows from financing activities:
Advances from and amounts due to
Stockholders - - 594,385
Payments of advances from stockholders - - (159,975)
Notes receivable - - -
Notes payable - - -
Issuance of common stock, net 12,000 - 2,154,483
Payment of deferred offering costs (7,459) (7,459)
Purchase of treasury stock - - (10,000)
Re-capitalization 4,031,176
-------- ----------- ----------
Net cash provided by investing activities 4,541 - 6,602,610
-------- ----------- ----------
Net increase (decrease) in cash (9,880) 512 2,352
Cash at beginning of period 12,232 1,320 -
-------- ----------- ----------
Cash at end of period $ 2,352 $ 1,832 $ 2,352
======== =========== ==========
The accompanying notes are an integral part of the
consolidated financial statements.
Supplemental disclosure of non-cash transactions:
Cash paid for interest - - 7,752
Issuance of common stock for subscription receivable - - 50,000
Liabilities repaid through issuance of common stock - - 652,731
Non-marketable security acquired through the issuance - - 1,500,000
Of common stock
</TABLE>
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BIORELEASE CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
AND CUMULATIVE FROM INCEPTION (OCTOBER 20, 1989) TO DECEMBER 31, 1999
ITEM 1. Basis of presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and Rule
310 of Regulation S-B. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
consolidated financial statements and should be read in conjunction with the
Company's audited consolidated financial statements at and for the fiscal year
ended June 30, 1999. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the six months ended December 31, 1999
are not necessarily indicative of the results that may be expected for the year
ended June 30, 2000.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The following discussion includes the business of Biorelease
Technologies, Inc. (the "Subsidiary"), since the Company, prior to its
acquisition of the Subsidiary, had no operations other than raising capital and
searching for an acquisition candidate (i.e., the Subsidiary). Where relevant,
all numbers retroactively take into account the acquisition of the Subsidiary by
the Company.
Three Months Ended December 31, 1999 and 1998
For the three months ended December 31, 1999 the Company had revenues
of $0, costs of goods sold of $0, general and administrative expenses of $9,670,
other income of $19,685, costs on settlements of $821 and no income taxes,
resulting in a income of $9,194 as compared to the three months ended December
31, 1998 in which the Company had adjustments to revenues of $1,524, costs of
goods sold of $0, general and administrative expenses of $10,492, interest
expense of $1,728, a loss on sale of assets of $500 and no income taxes
resulting in a net loss of $14,244.
Six Months Ended December 31, 1999 and 1998
For the six months ended December 31, 1999 the Company had no revenues,
no cost of goods sold, general and administrative expenses of $15,307, other
income of $19,685, a loss on settlements of $821 and no income taxes resulting
in an income of $3,557 as compared to the six months ended December 31, 1998 in
which the Company had revenues of 1,606, cost of goods sold of $177, general and
administrative expenses of $24,025, interest expense of $3,455, a loss on sale
of assets of $500, income recognized on settlements of $154 and no income taxes
resulting in a net loss of $26,397.
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Inception to December 31, 1999
From October 20, 1989, the initial date of the Subsidiary's activity,
through December 31, 1999, the Company, including the Subsidiary, had revenues
of $570,851, cost of goods sold of $28,155, selling expenses of $601,116,
research and developmental expenses of $2,558,041, purchased technology costs of
$690,000, general and administrative expenses of $4,305,615, other costs in the
aggregate of $1,719,272, income taxes of $343,873 and a cumulative effect of
change in accounting principle of $463,440 thereby yielding an accumulated net
loss of $9,211,781.
Liquidity and Capital Resources
From inception until the closing of the Reorganization, the
Subsidiary's primary source of funds has been the proceeds from private
offerings of its Common and Preferred Stock. Since the Reorganization, the
primary sources of current capital have been the Company's funds and revenues.
Dividend Policy
The Company has not declared or paid any cash dividends on its common
stock since its inception and does not anticipate the declaration or payment of
cash dividends in the foreseeable future. The Company intends to retain
earnings, if any, to finance the development and expansion of its business.
Future dividend policy will be subject to the discretion of the Board of
Directors and will be contingent upon future earnings, if any, the Company's
financial condition, capital requirements, general business conditions and other
factors. Therefore, there can be no assurance that dividends of any kind will
ever be paid.
Effect of Inflation
Management believes that inflation has not had a material effect on
its operations for the periods presented.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of matters to a Vote of Securities Holders
None (See Item 5)
Item 5. Other Information
On January 18, 2000 Biorelease Corp filed the Form S-4
registration statement required as a part of the proposed merger
with POLAR MOLECULAR CORPORATION, a Utah corporation ("PMC"). This
S-4 registration statement is pending review by the Securities and
Exchange Commission. The record date has been established as March
15, 2000 by the Company's Board of Directors to be eligible to
vote on the approval or disapproval of the PMC transaction.
On February 7, 2000 the Company's subsidiary, Biorelease
Technologies, Inc. (BTI), filed a registration statement on Form
S-1 to register 4,582,122 shares of BTI common stock currently
held by the Company. These shares represent ninety and eight
tenths percent (90.8%) of BTI's issued and outstanding common
stock. The registration statement was filed as part of the merger
agreement between the Company and Polar Molecular Corporation
wherein these shares will be distributed to Biorelease Corp
shareholders of record and certain creditors, officers and
directors. The March 15, 2000 record date will also apply to
eligibility to receive this BTI stock distribution.
Item 6. Exhibits and Reports on form 8-K.
None
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BIORELEASE CORP.
February 18, 2000 By: /s/ R. Bruce Reeves .
--------------------------------------
R. Bruce Reeves, President and
Principal Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,352
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 16,366
<CURRENT-ASSETS> 38,403
<PP&E> 4,329
<DEPRECIATION> 363
<TOTAL-ASSETS> 42,731
<CURRENT-LIABILITIES> 26,001
<BONDS> 0
0
0
<COMMON> 121,242
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 42,731
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,670
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,194
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,670)
<DISCONTINUED> 18,864
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,194
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
