SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from July 1, 2000 to September 30, 2000
Commission File No. 0-15260
Biorelease Corp.
(Exact name of small business issuer as specified in its charter)
Delaware 88-0218411
(State or other jurisdiction of (Internal Revenue Service
incorporation or organization) Employer Identification
No.)
340 Granite St. Suite 200, Manchester, NH 03102
(Address of principal Executive offices Zip Code)
(603) 641-8443
Issuer's telephone number, including area code
Former name, former address and formal fiscal year, if changed since
last report.
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 November 15, 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
<S> <C>
Item 1. Financial Statements .........................................................................3
Consolidated balance sheets as of September 30, 2000 (unaudited) and
June 30, 2000.................................................................................3
Consolidated Statements of Operations for the Three Months Ended
September 30, 2000 (unaudited) and 1999 (unaudited), and from October
20, 1989 (inception) to September 30, 2000 (unaudited)........................................4
Consolidated Statements of Cash Flows for the three Months Ended
September 30, 2000 (unaudited) and 1999 (unaudited), and from October
20, 1989 (inception) to September 30, 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
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statement
BIORELEASE CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
September 30, 2000 and June 30, 2000
September June 30,
30, 2000 2000
(Unaudited)
ASSETS ------------ ------------
<S> <C> <C>
Current Assets:
Cash ........................................................................ $ 428 $ 502
Accounts receivable ......................................................... 6,125 --
Due from merger candidate ................................................... 28,549 29,447
Inventories ................................................................. 15,218 16,012
Other receivables ........................................................... -- --
Prepaid expenses and other current assets ................................... -- --
------------ ------------
Total current assets ........................................................... 50,320 45,961
------------ ------------
Equipment and leasehold improvements, net ...................................... 1,577 1,734
------------ ------------
Other assets:
Intangible assets, net ...................................................... -- --
Other non current assets .................................................... -- --
------------ ------------
Total assets ................................................................... $ 51,897 $ 47,695
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCIES)
Current liabilities:
Notes payable ............................................................... $ -- $ --
Accounts payable ............................................................ 17,215 14,792
Accrued expenses ............................................................ 18,350 17,000
Notes payable stockholders,current .......................................... -- --
Deferred Income ............................................................. -- --
Other current liabilities ................................................... 5,000 5,000
------------ ------------
Total current liabilities ................................................... 40,565 36,792
Notes payable stockholders, long term ....................................... -- --
Notes payable others, long term ............................................. -- --
Other liabilities ........................................................... 2,513 1,000
------------ ------------
Total liabilities .............................................................. 43,078 37,792
------------ ------------
Stockholders' equity (Deficiency):
Common stock of $.01 par value, 50,000,000 shares authorized, 12,124,238
and 12,124,238 issued and 12,124,238 and 12,124,238
Outstanding at September 30, 2000 and June 30, 2000 ....................... 121,242 121,242
Additional paid-in capital ..................................................... 9,114,114 9,114,115
Development stage accumulated deficit .......................................... (9,221,007) (9,212,078)
------------ ------------
14,349 23,279
Less: Deferred offering costs ............................................... (5,530) (13,376)
------------ ------------
Total Stockholder's Equity (Deficiencies) ...................................... 8,819 9,903
------------ ------------
Total liabilities and stockholders' equity (deficiencies) ...................... $ 51,897 $ 47,695
============ ============
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 September 30, 2000 and 1999,
and the Cumulative Period from Inception to September 30, 2000
(Unaudited)
Three Months Ended
September 30, Inception
---------------------------- (October 20,1989)
2000 1999 To September 30, 1999
------------ ------------ ------------
<S> <C> <C> <C>
Revenues ............................. $ 8,255 $ -- $ 582,756
Cost of goods sold ................... 2,345 -- (30,898)
------------ ------------ ------------
Gross profit ......................... 5,910 -- 551,858
Costs and expenses:
Research and development .......... -- -- (2,558,041)
Purchased technology .............. -- -- (690,000)
General and administrative ........ (6.095) (5,637) (4,339,930)
Biotech selling expenses .......... -- -- (601,116)
------------ ------------ ------------
Total costs and expenses ..... (6,095) (5,637) (8,189,087)
------------ ------------ ------------
(Loss)/Gain from operations ....... (185) (5,637) (7,637,229)
------------ ------------ ------------
Other Income (Costs):
Interest, net .................. -- -- 66,824
Litigation costs ............... -- -- (99,242)
Offering costs ................. (7,846) -- (344,292)
Option compensation ............ -- -- (219,375)
Other income (cost) ............ (898) -- 30,934
Lease commitment costs ......... -- -- (315,000)
Realized loss for decline in
value of investment ........... -- -- (1,500,000)
Gain on equipment sale .......... -- -- 62,615
Income recognized on indemnified -- --
liabilities ................... 241,636
Income recognized on settlements -- -- 372,555
------------ ------------ ------------
Total other income (cost) ............ (8,744) -- (1,703,345)
------------ ------------ ------------
(Loss)/Gain before provision for
(benefit from) income taxes and
Cumulative effect of change in
Accounting principle .............. (8,929) (5,637) (9,340,574)
Provision for income taxes ........... -- -- 343,873
------------ ------------ ------------
(Loss)/Gain before cumulative effect
Of change in accounting principle . (8,929) (5,637) (9,684,447)
Cumulative effect of change in
Accounting principle .............. -- -- 463,440
------------ ------------ ------------
Net (loss)/gain ...................... $ (8,929) $ (5,637) ($ 9,221,007)
============ ============ ============
Weighted average shares .............. 12,124,238 12,082,071 8,330,976
Basic and fully diluted loss per share ($0.00) ($0.00) ($1.11)
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 three Months Ended September, 2000 and 1999
and the Cumulative Period from Inception to September 30, 2000
(Unaudited)
Inception
Three Months Ended (October 20,
September 30, 1989)
-------------------------- to September 30,
2000 1999 2000
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss)/Gain ........................................ $ (8,929) $ (5,637) $(9,221,007)
Adjustments to reconcile net loss to net cash used in
development activities:
Depreciation and amortization ..................... 157 363 285,772
Cumulative effect of change in accounting principle -- -- (463,440)
Recognized loss on investment ..................... -- -- 1,500,000
(Gain) Loss on sale of assets ..................... -- -- (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 ............................... (6,125) -- (6,125)
Inventories ....................................... 794 -- (15,218)
Other receivables ................................. 898 -- (28,549)
Prepaid expenses and other current assets ......... -- -- 360
Deferred tax asset ................................ -- -- 463,440
Other non-current assets .......................... -- -- --
Increase (Decrease) in current liabilities:
Accounts payable .................................. 2,423 3,329 88,166
Accrued expenses .................................. 1,350 (8,581) 25,818
Other current liabilities ......................... -- -- 5,000
Other liabilities ................................. 1,513 -- 2,513
----------- ----------- -----------
Net cash used in operating activities .................. $ (7,919) $ (10,526) $(6,354,845)
----------- ----------- -----------
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 Three Months Ended September 30, 2000 and 1999 and
the Cumulative Period from Inception to September 30, 2000
(Unaudited)
Inception
Three Months Ended (October 20,
September 30, 1989)
------------------------- to September 30,
2000 1999 2000
----------- ----------- -----------
<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 ................... (1) 3,925 2,153,867
Payment of deferred offering costs .............. 7,846 (2,958) (5,530)
Purchase of treasury stock ...................... -- -- (10,000)
Re-capitalization ............................... -- -- 4,031,176
----------- ----------- -----------
Net cash provided by investing activities .......... 7,845 967 6,599,036
----------- ----------- -----------
Net increase (decrease) in cash .................... (74) (9,559) 428
Cash at beginning of period ........................ 502 12,232 --
----------- ----------- -----------
Cash at end of period .............................. $ 428 $ 2,673 $ 428
=========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements.
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BIORELEASE CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
AND CUMULATIVE FROM INCEPTION (OCTOBER 20, 1989) TO SEPTEMBER 30, 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, 2000. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three months ended September 30,
2000 are not necessarily indicative of the results that may be expected for the
year ended June 30, 2001.
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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The following discussion includes the business of Biorelease
Technologies, Inc. (the "Subsidiary"), since the Company, prior to its
acquisition of the Subsidiary, had no operations other than raising capital and
searching for an acquisition candidate (i.e., the Subsidiary). Where relevant,
all numbers retroactively take into account the acquisition of the Subsidiary by
the Company.
Three Months Ended September 30, 2000 and 1999
For the three months ended September 30, 2000 the Company had
revenues of $8,255, costs of goods sold of $2,345, general and administrative
costs of $6,095, offering costs of $7,846 related to the terminated merger
agreement with Polar Molecular Corporation, other costs adjustment of $898
resulting in a net loss of $8,929 as compared with the three months ended
September 30, 1999 in which the Company had revenues of $0, costs of goods sold
of $0, general and administrative expenses of $5,637, no other costs or income
and no income taxes, resulting in a loss of $5,637.
Inception to September 30, 2000
From October 20, 1989, the initial date of the Subsidiary's activity,
through September 30, 2000, the Company, including the Subsidiary, had revenues
of $582,756, cost of goods sold of $30,898, research and developmental expenses
of $2,558,041, purchased technology costs of $690,000, general and
administrative expenses of $4,339,930, selling expenses of $601,116, other costs
in the aggregate of $1,703,345, income taxes of $343,873 and a cumulative effect
of change in accounting principle of $463,440 thereby yielding an accumulated
net loss of $9,221,007.
Liquidity and Capital Resources
From inception until the closing of the Reorganization, the
Subsidiary's primary source of funds has been the proceeds from private
offerings of its Common and Preferred Stock. Since the Reorganization, the
primary source of current capital has 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
Item 5. Other Information
On October 12, 2000 the Company terminated its agreement to merge
with Polar Molecular Corporation (Polar). As of this date no
further discussions have occurred between the Company and Polar.
The Company is exploring other merger opportunities. The plan for
the Company to spin off its subsidiary is still in effect. The
timing for the spin off is delayed due to the termination of the
Polar transaction.
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.
November 16, 2000 By: /s/ R. Bruce Reeves
--------------------------------------
R. Bruce Reeves, President and
Principal Financial Officer
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