-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TP+Ah2xX1RSCG8NMvuvGNXJW7LknfRNICUns/6q7cYtI+7JMIczOra3DMClPRYdr i9l31I3cNJD2YPewkgUcsw== 0001005444-97-000025.txt : 19970222 0001005444-97-000025.hdr.sgml : 19970222 ACCESSION NUMBER: 0001005444-97-000025 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970219 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIORELEASE CORP CENTRAL INDEX KEY: 0000797662 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 880218411 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-15260 FILM NUMBER: 97538558 BUSINESS ADDRESS: STREET 1: 10 CHESTNUT DRIVE STREET 2: UNIT D CITY: BEDFORD STATE: NH ZIP: 03110 BUSINESS PHONE: 6033711255 MAIL ADDRESS: STREET 1: 10 CHESTNUT DRIVE STREET 2: UNIT D CITY: BEDFORD STATE: NH ZIP: 03110 FORMER COMPANY: FORMER CONFORMED NAME: OIA INC DATE OF NAME CHANGE: 19920703 10QSB 1 10-QSB FOR BIORELEASE CORP. 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, 1996 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. (Exact name of small business issuer as specified in its charter) Delaware 88-0218411 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 10 Chestnut Drive #D Bedford, NH 03110 (Address of principal Executive offices) (Zip Code) (603) 471-1255 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. 9,471,659 shares of common stock, par value $.01 per share as of February 12, 1997. Transitional Small Business Disclosure Format (Check One) Yes _____ No __X__ 1 of 10 BIORELEASE CORP. INDEX PART I. FINANCIAL INFORMATION Page Number Item 1. Financial Statements Consolidated balance sheets as of December 31, 1996 (unaudited) and June 30, 1996 .................................. 3 Consolidated Statements of Operations for the three months and six months ended December 31, 1996 (unaudited) and 1995 (unaudited), and from October 20, 1989 (inception) to December 31, 1996 (unaudited) ........... 4 Consolidated Statements of Cash Flows for the six Months Ended December 31, 1996 (unaudited) and 1995 (unaudited), and from October 20, 1989 (inception) to December 31, 1996 (unaudited) ................................ 5 Notes to Unaudited Financial Statements ......................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation ................. 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings ..................................... 10 Item 2. Changes in Securities ................................. 10 Item 3. Defaults Upon Senior Securities ....................... 10 Item 4. Submission of Matters to a Vote of Security Holders ... 10 Item 5. Other Information ..................................... 10 Item 6. Exhibits and Reports on Form 8-K ...................... 10 2 of 10 PART I. FINANCIAL INFORMATION Item 1. Financial Statement BIORELEASE CORP. (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED BALANCE SHEETS December 31, 1996 and June 30, 1996
December 31, June 30, ASSETS 1996 1996 ------ ----- -------- (Unaudited) Cash ........................................ $ 71,175 $ 1,200 Accounts receivable ......................... 28,163 563 Inventories ................................. 27,138 27,679 Other receivables ........................... 1,015 -- Prepaid expenses and other current assets ... 1,470 1,679 -------- -------- Total current assets ............... $128,961 $ 31,121 Equipment and leasehold improvements, net .. 24,316 30,040 Intangible assets, net ..................... 33,621 38,947 Other noncurrent assets .................... 698 699 -------- -------- Total assets ............................... $187,596 $110,807 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable ........................... $130,213 $ 90,637 Accrued expenses ........................... 108,029 70,642 Notes payable - stockholders, current ...... 55,600 85,530 Loans payable - other ...................... 75,000 -- Income taxes payable ....................... 1,549 1,549 Other current liabilities .................. 1,500 1,500 -------- -------- Total current liabilities .................. 371,891 249,858 Notes payable - stockholders,long term ..... 23,930 -- Notes payable - other, long term ........... 16,000 16,000 Other liabilities .......................... 87,734 87,734 -------- -------- Total liabilities .......................... 499,555 353,592 Stockholders' equity: Common stock of $.01 par value, 50,000,000 shares authorized, 9,921,659 shares issued and 9,471,659 outstanding at December 31, 1996 and 9,880,354 issued and 9,430,354 outstanding at June 30, 1996 99,217 98,803 Additional paid-in capital 9,119,296 9,113,927 Stock warrants outstanding -- -- Development stage accumulated deficit(9,475,972)(9,411,015) Stock subscription receivable ( 50,000)( 50,000) ---------- --------- ( 307,459)( 248,285) Less: Treasury stock ( 4,500)( 4,500) ---------- --------- Total stockholders' equity (deficit) ( 311,959)( 252,785) ---------- --------- Total liabilities and stockholders' equity (deficiency) $ 187,596 $ 110,016 =========== ==========
The accompanying notes are an integral part of the consolidated financial statements. 3 of 10 BIORELEASE CORP. (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months and Six Months Ended December 31, 1996 and 1995, and the Cumulative Period from Inception to December 31, 1996
Three Months Ended Six Months Ended December 31, December 31, Inception (October 20, 1989 to 1996 1995 1996 1995 1996 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) ----------- ----------- ---------- ----------- ------------- Revenues ...................... $ 32,960 $ 48,374 $ 45,651 $ 62,483 $ 432,763 Cost of Goods Sold ............ (541) (3,067) (541) (3,073) (15,838) ----------- ----------- ------- ------- ---------- Gross Profit ............... 32,419 45,307 45,110 59,410 416,925 Operating expenses: Cell culture operations ...... (--) (--) (--) (--) (601,116) Research and development ..... (--) (12,500) (--) (25,000) (2,558,041) Purchased Technologies ....... -- -- -- -- (690,000) General and administrative ... (33,390) (59,929) (77,707) (120,713) (4,113,339) Other ........................ 0 0 0 0 0 ----------- ----------- ----------- ----------- ----------- Loss from operations .......... (971) (27,122) (32,597) (86,303) (7,545,571) ----------- ----------- ----------- ----------- ----------- Other costs: Interest, net ................ (981) (1,212) (1,962) (2,405) 85,389 Lease commitment cost ........ -- -- -- -- (315,000) Litigation costs ............. (--) (650) (--) (5,474) (99,242) Other income (costs) ......... -- -- -- -- (23,024) Gain(Loss) on sale of assets . -- (--) -- 1,100 62,616 Offering costs ............... (30,396) -- (30,396) -- (321,830) Option compensation .......... -- -- -- -- (219,375) Income on settlements ........ -- 29,361 -- 29,361 280,500 Realized loss for decline in value of investment ...... (--) (--) (--) (--) (1,500,000) ----------- ----------- ------- ------- ---------- Total other costs ........ (31,377) (31,377) (32,358) (22,582) (2,049,966) ----------- ----------- ------- ------- ---------- Income (loss) before provision for (benefit from income taxes cumulative effect of change in accounting principle (32,348) 377 (64,955) (63,721) (9,595,537) Provision for income taxes .... -- -- -- -- (343,873) ----------- ----------- ------- ------- ---------- Income (loss) before cumulative effect of accounting principle (32,348) 377 (64,955) (63,721) (9,939,410) Cumulative effect of change in accounting principle ......... -- -- -- -- 463,440 ----------- ----------- ------- ------- ---------- Net income (loss) ............. $ (32,348) $ 377 $ (64,955) $ (63,721) $(9,475,970) =========== =========== =========== =========== =========== Weighted average shares ....... 9,471,659 8,962,263 9,471,659 5,962,263 5,316,606 Income (Loss) per share ....... (.01) .01 (.01) (.01) (1.78)
The accompanying notes are an integral part of the consolidated financial statements. 4 of 10 BIORELEASE CORP. (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED STATEMENT OF CASH FLOWS For the Six Months Ended December 31, 1996 and 1995 and the Cumulative Period from Inception to December 31,1996 (Unaudited)
Inception Six Months Ended (October 20, 1989) December 31, to December 31, 1996 1995 1996 ----------- ----------- ----------- Cash flows from operating activities: Net loss ............................ $ (64,957) $ (63,721) $(9,475,972) Adjustments to reconcile net loss to net cash used in development activities: Depreciation and amortization .................. 12,816 13,081 222,246 Cumulative effect of change in accounting principle ....... -- -- (463,440) (Gain) Loss on sale of assets ........................ (--) -- (38,704) Recognized loss on investment ..................... -- -- 1,500,000 Loss on extinguishment of debt ....................... -- -- 42,000 Common stock issued in exchange for pur- chased technology ............. -- -- 605,000 Common stock issued in exchange for services rendered ............. -- -- 52,300 Common stock options issued in exchange of services rendered ...................... -- -- 89,228 Amortization of unearned compensation .................... -- -- 140,625 Repricing of A warrants ........... -- -- 78,750 Changes in current assets: Cash - escrow ................... -- -- -- Accounts receivable ............. (27,600) 35,731 (28,163) Other receivables ............... (1,015) 3,073 (1,015) Inventories ..................... 541 -- (27,138) Prepaid expenses and other current assets .......... 210 95 (1,469) Deferred tax asset .............. -- -- 463,440 Other non-current assets ........ (1) 403 (698) Changes in current liabilities: Accounts payable ................ 39,576 403 201,164 Accrued expenses ................ 37,387 (19,186) 115,857 Other current liabilities ......... (--) (--) 90,781 ----------- ----------- ----------- Net cash used in operating activities .................. (3,043) (31,185) (6,435,208) ----------- ----------- ----------- Cash flows from investing activities: Purchase of government backed securities ...................... -- 1,594 (1,000,000) Proceeds from collateralized mortgage obligations ............ -- 1,210 1,000,000 Purchase of fixed assets .......... (--) (244) (331,587) Proceeds from sale of assets ...... -- -- 189,742 Purchase of intangible assets .......................... (2,726) (13,297) (84,752) ----------- ----------- ----------- Net cash used in investing activities ........ (4,096) 10,737 (226,597) ----------- ----------- -----------
The accompanying notes are an integral part of the consolidated financial statements. 5 of 10 BIORELEASE CORP. (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED STATEMENT OF CASH FLOWS For the Six Months Ended December 31, 1996 and 1995 and the Cumulative Period from Inception to December 31, 1996
Inception Six Months Ended (October 20, 1989) December 31, to December 31, 1996 1995 1996 (Unaudited) (Unaudited) (Unaudited) ----------- ----------- ----------- Cash flows from financing activities: Advances from stockholders ............... -- -- 594,385 Payments of advances from stockholders .......... -- -- (159,975) Loans payable ................ 75,000 -- 75,000 Notes payable ................ (6,000) (--) 95,530 Issuance of common stock,net . 5,784 18,835 3,611,750 Purchase of investments in issuance of common stock .... -- -- (1,500,000) Notes receivable ............... -- -- -- Recapitalization ............... 0 0 4,031,176 ----------- ----------- ----------- Net cash provided by investing activities ............... 74,784 18,835 6,747,866 ----------- ----------- ----------- Net increase (decrease) in cash ...................... 69,975 (100,088) 71,175 Cash at beginning of period .................... 1,200 103,975 0 ----------- ----------- ----------- Cash at end of period .......... $ 71,175 $ 3,887 $ 71,175 =========== =========== =========== Supplemental disclosure of non-cash transactions: Interest ..................... 1,962 2,405 85,389 Marketable securities acquired through issuance of common stock ........................ -- -- 1,500,000 Issuance of common stock for subscription receivable . (--) (125,000) 50,000 Liabilities repaid through issuance of common stock ..... 5,784 31,950 582,773
The accompanying notes are an integral part of the consolidated financial statements. 6 of 10 BIORELEASE CORP. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 AND CUMULATIVE FROM INCEPTION (OCTOBER 20, 1989) TO DECEMBER 31,1996 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, 1996. 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, 1996 are not necessarily indicative of the results that may be expected for the year ended June 30, 1997. 2. Loan payable A Private Placement was undertaken by the Company to raise up to $500,000 in the form of unsecured notes from accredited individuals relating to a then pending business combination between the Company and TheraMed Partners, Inc.. At December 31, 1996 $75,000 in unsecured notes had been subscribed for. An additional $12,500 was subscribed for in January 1997 for an aggregate of $87,500. The Subscription Notes are payable on demand with no interest costs. [SEE Part II Item 5. Other Information]. 3. Subsequent Events On February 12, 1997 the Company announced that TheraMed Partners and the Company had terminated their previously announced agreement to undertake the business combination and a related spin-off of the Subsidiary to the Company's stockholders. As a result of the termination, the Company plans to offer recision rights to the holders of the Subscription Notes. Further, on February 12, 1997 the Company announced that Dr. Leon Gauci had assumed the role of President of the Subsidiary (Biorelease Technologies, Inc.). 7 of 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Three Months Ended December 31, 1996 and 1995 For the three months ended December 31, 1996, the Company, including its subsidiary Biorelease Technologies, Inc. ("the Subsidiary") had revenues of $32,960 consisting of $28,420 of continuing revenues relating to licensing rights to its chondroitin sulfate technology, $0 of grant research revenues and $4,540 from product sales, cost of goods sold of $541, expenses of its cell culture operations of $0, research and development expenses of $0, costs for purchased technology of $0, general and administrative operation costs of $33,390, interest expense of $981, costs related to the terminated business combination and offering costs of $30,396 resulting in a net loss of $32,348 compared to the three months ended December 31, 1995 in which the Company had revenues of $48,374 consisting of $12,778 of continuing chondroitin sulfate licensing revenues, $12,500 of grant research revenues, $21,596 from cell culture product sales and $1,500 of equipment rental income, cost of goods sold of $3,067, expenses of its cell culture operations of $0, research and development expenses of $12,500, no costs for purchased technology, general and administrative operation costs of $59,929, interest expense of $1,212, litigation costs of $650, income from the sale of assets of $0, no costs related to public offerings, no option compensation charges, income recognized on settlements of $29,361 and income taxes of $0, resulting in a net income of $377. The increase in net loss was attributed to a decrease in product sales and a decrease in research and development and administrative costs. Also, $30,396 related to Private Placement offering costs and costs associated with a terminated business combination were charged to the three months ended December 31, 1996 as compared to $0 in the quarter ended December 31, 1995. Six Months Ended December 31, 1996 and 1995 For the six months ended December 31, 1996, the Company had revenues of $32,960, cost of goods sold of $541, no cell culture costs, no research and development costs, no purchased technology costs, general and administrative costs of $33,390, interest of $981, offering and termination costs of $30,396 and no income taxes resulting in a net loss of $32,348 of as compared to the six months ended December 31, 1995 in which the Company had revenues of $62,483, cost of goods sold of $3,073, cell culture operation costs of $0, research and development costs of $25,000, no purchased technology costs, general and administrative operational costs of $120,713, interest expense of $2,405, litigation costs of $5,474, gain on sale of assets of $1,100, costs related to public offerings of $0, option compensation expense of $0, income recognized on settlements of $29,361 and income taxes of $0 resulting in a net loss of $63,721. The decrease in net loss over the previous fiscal year's six months resulted primarily from the reduction of administrative costs. Inception (October 20, 1989) to December 31, 1996 From October 20, 1989, the date of the Subsidiary's initial activity, through December 31, 1996, the Company had revenues of $432,763, cost of goods sold of $15,838, cell culture expenses of $601,116, research and developmental expenses of $2,558,041, purchased technology costs of $690,000, general and administrative expenses of $4,113,339, interest income of $85,389, lease commitment cost of $315,000, litigation costs of $99,242, other costs of $23,024, gain on sale of assets of $62,616, offering cost of $321,830, Option Compensation of $219,375, income recognized on settlements of $280,500, realized loss for decline in value of investment of $1,500,000, income tax expense of $343,873 and a cumulative effect of change in accounting principle of $463,440 thereby resulting in an accumulated net loss of $9,475,970. 8 of 10 Liquidity and Capital Resources From inception until the date on which the subsidiary was combined with the Company (the Reorganization), the Subsidiary's primary source of funds was the proceeds from private offerings of its Common Stock and Stock in the Subsidiary. Since the Reorganization, the primary source of capital has been the Company's funds and revenues. At December 31, 1996, the Company had negative working capital of $242,930 as compared with the Company's negative working capital of $218,737 at June 30, 1996. The change in the Company's working capital between June 30, 1996 and December 31, 1996 is attributable to operating expenses in excess of revenues net of settlements. With the termination of the TheraMed business combination, the Company expects to operate within the limited cash flow generated by its product sales and its licensing revenue for the remainder of this fiscal year. In this scaled back configuration, the Company will focus on prepaid research at the University of New Hampshire and limited outside research funded by its limited cash. Depending in large part on results of this limited research, the Company may be in a position to raise additional funds within the next several quarters. Dividend Policy The Company has not declared or paid any dividends on its common stock since its inception and does not anticipate the declaration or payment of cash dividends in the foreseeable future. The Company intends to retain earnings, if any, to finance the development and expansion of its business. Future dividend policy will be subject to the discretion of the Board of Directors and will be contingent upon future earnings, if any, the Company's financial condition, capital requirements, general business conditions, and other factors. Therefore, there can be no assurance that dividends of any kind will ever be paid. Effect of Inflation Management believes that inflation has not had a material effect on its operations for the periods presented. 9 of 10 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 8, 1996 the Company announced it had agreed in principle to enter into a reorganization with TheraMed Partners, Inc. Between November, 1996 and January, 1997 the Company placed $87,500 in Subscription Notes under a Private Placement related to this reorganization. On February 12, 1997 the Company announced it had terminated this agreement and planned to offer recision to the Private Placement investors. Item 6. Exhibits and Reports of Form 8-K. None 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 19, 1997 By: /s/ Richard F. Schubert ------------------------- Richard F. Schubert, Chairman and Principal Financial Officer 10 of 10 EX-27 2
5 3-MOS JUN-30-1996 DEC-31-1996 71,175 0 28,163 0 27,138 128,961 24,316 0 187,596 371,891 0 0 0 99,217 0 187,596 32,960 32,960 541 541 33,390 0 (981) (32,348) 0 (1,952) 0 30,396 0 (32,348) (0.01) (0.01)
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