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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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
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 May 08, 2000.
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Transitional Small Business Disclosure Format (Check One) Yes No X
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<PAGE>
BIORELEASE CORP.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
Number
------
<S> <C>
Item 1. Financial Statements .........................................................................3
Consolidated balance sheets as of March 31, 2000 (unaudited) and
June 30, 1999.................................................................................3
Consolidated Statements of Operations for the Three Months and Nine
Months Ended March 31, 2000 (unaudited) and 1999 (unaudited), and
from October 20, 1989 (inception) to March 31, 2000 (unaudited) ..............................4
Consolidated Statements of Cash Flows for the Nine Months Ended March
31, 2000 (unaudited) and 1999 (unaudited), and from October 20, 1989
(inception) to March 31, 2000 (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
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statement
BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
March 31, 2000 and June 30, 1999
<TABLE>
<CAPTION>
March June 30,
31, 2000 1999
-------- -----------
ASSETS (Unaudited)
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<S> <C> <C>
Current Assets:
Cash $ 5,350 $ 12,232
Accounts receivable - -
Inventories 16,012 16,366
Other receivables 10,503 -
Prepaid expenses and other current assets - -
---------- ----------
Total current assets 31,865 28,598
---------- ----------
Equipment and leasehold improvements, net 3,965 5,055
---------- ----------
Other assets:
Intangible assets, net - -
Other non current assets - -
---------- ----------
Total assets $ 35,830 $ 33,653
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCIES)
Current liabilities:
Notes payable - -
Accounts payable 5,095 1,820
Accrued expenses 11,305 16,000
Notes payable stockholders,current - -
Deferred Income - -
Other current liabilities - -
---------- ----------
Total current liabilities 16,400 17,820
Notes payable stockholders, long term - -
Notes payable others, long term - -
Other liabilities 2,369 7,200
---------- ----------
Total liabilities 18,769 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 March 31, 2000 and June 30, 1999 121,242 119,977
Additional paid-in capital 9,114,116 9,112,069
Development stage accumulated deficit (9,204,921) (9,215,339)
Stock subscriptions receivable - (8,074)
---------- ----------
30,437 8,633
Less: Deferred offering costs (13,376) -
---------- ----------
Total Stockholder's Equity (Deficiencies) 17,061 8,633
---------- ----------
Total liabilities and stockholders' equity (deficiencies) $ 35,830 $ 33,653
========== ==========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
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<PAGE>
BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended March 31, 2000 and 1999,
and the Cumulative Period from Inception to March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Inception
Three Months Ended March 31, Nine Months Ended March 31, (October 20, 1989)
---------------------------- ---------------------------- To
2000 1999 2000 1999 March 31, 2000
---- ---- ---- ---- --------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues $ 4,200 $ 5,350 $ 4,200 $ 6,956 $ 575,051
Cost of goods sold 398 (1,354) 398 (1,531) (28,553)
------------ ---------- ------------ ---------- -------------
Gross profit 3,802 3,996 3,802 5,425 546,498
------------ ---------- ------------ ---------- -------------
Costs and expenses:
Research and development - - - - (2,558,041)
Purchased technology - - - - (690,000)
General and administrative (6,693) (11,260) (22,000) (35,284) (4,312,308)
Biotech selling expenses (1,065) - (1,065) - (602,181)
------------ ---------- ------------ ---------- -------------
Total costs and expenses (7,758) (11,260) (23,065) (35,284) (8,162,530)
------------ ---------- ------------ ---------- -------------
(Loss)/Gain from operations (3,956) (7,264) (19,263) (29,859) (7,616,032)
------------ ---------- ------------ ---------- -------------
Other Income (Costs):
Interest, net - (1,728) - (5,182) 66,824
Lease commitment costs - - - - (315,000)
Litigation costs - - - (99,242)
Offering costs - - - - (336,446)
Option compensation - - - - (219,375)
Other income (cost) 10,817 - 30,502 - 17,337
Realized loss for decline in value
Gain on equipment sale - - - - 62,616
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Income recognized on indemnified - - - - 242,276
liabilities
Income recognized on settlements - - 821 154 372,555
------------ ---------- ------------ ---------- -------------
Total other income (cost) 10,817 (1,728) 29,681 (5,528) (1,708,455)
------------ ---------- ------------ ---------- -------------
Gain (loss) before provision for
Provision for income taxes - - - - 343,873
------------ ---------- ------------ ---------- -------------
Gain (loss) before cumulative effect of 6,861 (8,992) 10,418 (35,387) (9,668,360)
Cumulative effect of change in - - - - 463,440
------------ ---------- ------------ ---------- -------------
Net gain (loss) $ 6,861 $ (8,992) $ 10,418 $ (35,387) $ (9,204,920)
============ ========== ============ ========== ============
Weighted average shares 13,654,858 9,736,659 13,654,858 9,736,659 6,811,758
Basic and fully diluted loss per share $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (1.35)
</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 Nine Months Ended March 31, 2000 and 1999
and the Cumulative Period from Inception to March 31, 2000
(Unaudited)
------------
<TABLE>
<CAPTION>
Inception
Nine Months ended March 31, (October 20, 1989)
2000 1999 March 31, 2000
---- ---- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss)/Gain $ 10,418 $ (35,387) $ (9,204,921)
Adjustments to reconcile net loss to net cash used
in development activities:
Depreciation and amortization 1,089 14,193 283,383
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 - 6,085 -
Inventories 354 1,531 (16,012)
Other receivables (10,503) 745 (10,503)
Prepaid expenses and other current assets - - 360
Deferred tax asset - - 463,440
Other non-current assets - - -
Increase (Decrease) in current liabilities:
Accounts payable 3,275 8,255 76,046
Accrued expenses (4,695) 3,586 18,773
Other current liabilities - - -
Other liabilities (4,831) - 2,369
--------- ----------- ------------
Net cash used in operating activities $ (4,893) $ (492) $ (6,342,080)
--------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
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<PAGE>
BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Nine Months Ended March 31, 2000 and 1999 and
the Cumulative Period from Inception to March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Inception
Nine Months ended March 31, (October 20, 1989)
2000 1999 March 31, 2000
---- ---- --------------
<S> <C> <C> <C>
Cash flows from investing activities: $ $ $
Purchase of collateralized mortgage obligations
- - (1,000,000)
Proceeds from collateralized mortgage - - 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 - (12,475) -
Issuance of common stock, net 11,387 - 2,153,870
Payment of deferred offering costs (13,376) (13,376)
Purchase of treasury stock - - (10,000)
Re-capitalization - - 4,031,176
---------- ----------- ------------
Net cash provided by investing activities (1,989) (12,475) 6,596,080
---------- ----------- ------------
Net increase (decrease) in cash (6,882) (10,065) 5,350
Cash at beginning of period 12,232 15,278 -
---------- ----------- ------------
Cash at end of period $ 5,350 $ 5,213 $ 5,350
========== =========== ============
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
of common stock - - 1,500,000
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
7 of 11
<PAGE>
BIORELEASE CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND 1999
AND CUMULATIVE FROM INCEPTION (OCTOBER 20, 1989) TO MARCH 31, 2000
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 nine months ended March 31, 2000
are not necessarily indicative of the results that may be expected for the year
ended June 30, 2000.
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<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The following discussion includes the business of Biorelease
Technologies, Inc. (the "Subsidiary"), since the Company, prior to its
acquisition of the Subsidiary, had no operations other than raising capital and
searching for an acquisition candidate (i.e., the Subsidiary). Where relevant,
all numbers retroactively take into account the acquisition of the Subsidiary by
the Company.
Three Months Ended March 31, 2000 and 1999
For the three months ended March 31, 2000, the Company had revenues
of $4,200, costs of goods sold of $398, general and administrative expenses of
$6,693, selling expenses of $1,065, other income of $10,817, costs on
settlements of $0 and no income taxes, resulting in a income of $6,861 as
compared to the three months ended March 31, 1999 in which the Company had
revenues of $5,350, costs of goods sold of $1,354, general and administrative
expenses of $11,260, interest expense of $1,728, and no income taxes resulting
in a net loss of $8,992.
Nine Months Ended March 31, 2000 and 1999
For the nine months ended March 31, 2000, the Company had revenues of
$4,200, cost of goods sold of $398, general and administrative expenses of
$22,000, selling expenses of $1,065, other income of $30,502, a loss on
settlements of $821 and no income taxes resulting in an income of $10,418 as
compared to the nine months ended March 31, 1999 in which the Company had
revenues of $6,956, cost of goods sold of $1,531, general and administrative
expenses of $35,284, interest expense of $5,182, a loss on sale of assets of
$500, income recognized on settlements of $154 and no income taxes resulting in
a net loss of $35,387.
Inception to March 31, 2000
From October 20, 1989, the initial date of the Subsidiary's activity,
through March 31, 2000, the Company, including the Subsidiary, had revenues of
$575,051, cost of goods sold of $28,553, research and developmental expenses of
$2,558,041, purchased technology costs of $690,000, general and administrative
expenses of $4,312,308, selling expenses of $602,181,other costs in the
aggregate of $1,708,455, income taxes of $343,873 and a cumulative effect of
change in accounting principle of $463,440 thereby yielding an accumulated net
loss of $9,204,920.
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.
9 of 11
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of matters to a Vote of Securities Holders
None (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. Because of the respective fiscal year ends
for Polar and Biorelease Corp., it appears certain that audits
will have to be performed for both corporations before the S-4 can
be declared effective. Accordingly, the record date for the
Company's stockholders to be eligible to approve or disapprove the
PMC transaction has been postponed until at least August, 2000 by
the Company's Board of Directors (See Item 6).
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 BTI shares will be distributed to Biorelease Corp
shareholders of record and certain creditors, officers and
directors. The postponed record date will also apply to
eligibility to receive this BTI stock distribution.
Item 6. Exhibits and Reports on form 8-K.
On March 14, 2000 the Company filed on Form 8-K notice changing
the proposed record date for the PMC transaction from March 15,
2000 to April 30, 2000 pending the review and acceptance of the
re-filed registration statement on Form S-4 for the merger between
Biorelease Corp and Polar Molecular Corporation. The Company's
board of directors now believes this record date will be
reestablished for sometime in August 2000, following the
completion of audits for the respective corporations.
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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.
May 9, 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> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,350
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 16,012
<CURRENT-ASSETS> 31,865
<PP&E> 3,965
<DEPRECIATION> 363
<TOTAL-ASSETS> 35,830
<CURRENT-LIABILITIES> 16,400
<BONDS> 0
0
0
<COMMON> 121,242
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 35,830
<SALES> 4,200
<TOTAL-REVENUES> 4,200
<CGS> 398
<TOTAL-COSTS> 398
<OTHER-EXPENSES> 7,758
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,861
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,956)
<DISCONTINUED> 10,817
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,861
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
