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, 2001
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
BRL Holdings, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 88-0218411
(State or other jurisdiction of (Internal Revenue Service Employer
incorporation or organization) Identification No.)
340 Granite St. Suite 200, Manchester, NH 03102-4004
(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, 5,378,423 shares of
common stock, par value $.01 per share as of February 14, 2001.
-----------------------------------------------------------------
Transitional Small Business Disclosure Format (Check One) Yes No X
---- -----
BRL HOLDINGS, INC.
INDEX
PART I. FINANCIAL INFORMATION Page
Number
Item 1. Financial Statements ...............................................3
Consolidated Balance Sheet as of December 31, 2001 (unaudited)
and Balance Sheet at June 30, 2001..................................3
Consolidated Statements of Operations for the Three Months Ended
December 31, 2001 and Statement of Operations for the six months
ended December 31, 2001and from inception of development stage
(November 9, 2001) until December 31,
2001(unaudited).....................................................4
Consolidated Statements of Cash Flows for the Six Months Ended
December 31, 2001 and from inception
of development stage (November 9, 2001) until
December 31, 2001 (unaudited) ......................................5
Notes to Unaudited Consolidated Financial Statements ...............7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation................................................9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................11
Item 2. Changes in Securities .............................................11
Item 3. Defaults Upon Senior Securities ...................................11
Item 4. Submission of Matters to a Vote of Security Holders................11
Item 5. Other Information..................................................11
Item 6. Exhibits and Reports on Form 8-K. .................................11
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statement
BRL HOLDINGS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
December 31, 2001 and June 30, 2001
December 31, June 30,
(Consolidated)
2001 2001
---- ----
(Unaudited)
ASSETS
Current Assets:
Cash $ 768 $ 119
Notes Receivable 13,624 13,624
Other receivables 995 -
Prepaid expenses and other current assets 2,100 980
------ ---
Total current assets 17,487 14,723
------ ------
Property, software and equipment, net 61,602 -
Other assets:
Intangible assets, patent costs 8,161 -
Intangible assets - non compete agreements, net 322,760 -
Investments in related party securities 6,382 6,382
----- -----
Total assets $ $ 416,392 $ $ 21,105
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCIES)
Current liabilities:
Loans payable - related party $ 20,687 $ -
Accounts payable 128,630 4,675
Accrued expenses 59,739 13,014
------ ------
Total current liabilities 209,056 17,689
Other liabilities - related party 11,624 10,124
------ ------
Total liabilities 220,680 27,813
------- ------
Stockholders' equity (Deficiency):
Preferred stock of $.10 per share value, authorized 5,000,000 shares, no
shares outstanding at December 31, 2001 and June 30, 2001
- -
Common stock of $.01 par value,
authorized 50,000,000 shares, 4,869,939 and 48,699 14,339
1,433,939 issued and outstanding at December 31, 2001
and June 30, 2001 respectively
Additional paid-in capital 7,694,902 7,137,282
Accumulated deficit prior to development stage activities
(7,168,117) (7,158,329)
Development stage accumulated earnings (deficit) (312,772)
----------- --------------
262,712 (6,708)
Less: Deferred offering costs (67,000) -
----------- --------------
Total Stockholder's Equity (Deficit) 195,712 (6,708)
------- --------------
Total liabilities and stockholders' equity (deficit) $ 416,392 21,105
======= ======
The accompanying notes are an integral part of the
consolidated financial statements.
3
BRL HOLDINGS, INC.
(A DEVELOPMENT STAGE ENTERPRISE
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended December 31, 2001
and the Cumulative Period (October 2,2001) to December 31, 2001
(Unaudited)
Inception
(November 9,
2001)
Three Months Ended December 31, Six Months Ended December 31, to
------------------------------- -----------------------------
2001 2000 2001 2000 December 31, 2001
---- ---- ---- ---- -----------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues $ - $ 6,060 $ - $ 14,315 $ -
Cost of goods sold - 353 - 2,698 -
- ------ - ----------- -------------
Gross profit - 5,707 - 11,617 -
Costs and expenses:
Research and development (93,378) - (93,378) - (93,378)
General and administrative income (expense) (229,394) 4,451 (239,182) (1,644) (229,394)
--------- ----- --------- -------- ---------
Total costs and expenses (322,772) 4,451 (332,560) (1,644) (322,772)
--------- ----- --------- ------- ---------
(Loss)/Gain from operations (322,772) 10,158 (332,560) 9,973 (322,772)
--------- ------ --------- ------ ---------
Other Income (Costs):
Offering costs - (1,697) - (10,441) -
Other income (cost) 10,000 - 10,000 - 10,000
Realized loss for decline in value
of investment - (3,659,141) (3,659,141) -
Gain on sale of assets 2,133 -
---------- ----------- -
2,133
- -
------- -
Total other income (cost) 10,000 (3,658,705) 10,000 (3,667,449) 10,000
------ ----------- ------ ----------- ------
Gain (loss) before provision for (benefit
from) income taxes (312,772) (3,648,547) (322,560) (3,657,476) (312,772)
Provision for income taxes - - - - -
-------- - --------- ------------ --------------
Net gain (loss) $ (312,772) $(3,648,547) $ (322,560) $ (3,657,476) $ ($ 312,772)
======== ======== ========= ========= =========
Weighted average shares 3,724,606 13,634,058 2,579,272 13,664,458 2,579,272
Basic and fully diluted loss per share $ (.08) $ (0.27) $ ($0.13) $ ($0.27) $ ($.12)
The accompanying notes are an integral part of the
consolidated financial statements.
4
BRL HOLDINGS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended December 31, 2001 and 2000 and
the Cumulative Period from Inception to December 31, 2001
(Unaudited)
------------
Inception
Six Months Ended (November 9,
2001)
December 31, To December 31,
2001 2000 2001
---- ---- ----
Cash flows from operating activities:
Net (loss)/Gain $(322,560) $ (3,657,476) $(312,772)
Adjustments to reconcile net loss to net cash used in
development activities:
Depreciation and amortization 47,240 314 47,240
Recognized loss on investment - 3,659,141 -
(Gain) Loss on sale of assets - (2,133) -
Common Stock issued in exchange for
services rendered - - -
(Increase) Decrease in current assets:
Accounts Receivable - - -
Inventories - 16,012 -
Other receivables (995) 898 -
Prepaid expenses and other current assets (1,120) - (1,650)
Related party securities - (9,131) -
Other non-current assets - - -
Increase (Decrease) in current liabilities:
Accounts payable 144,642 (13,758) 128,053
Accrued expenses 46,725 (7,000) 50,889
Other liabilities 1,500 (1,000) 1,500
---------- --------- -----
Net cash used in operating activities $ (84,568) $ (14,133) $(86,740)
------------- ----------- ---------
The accompanying notes are an integral part of the
consolidated financial statements.
5
BRL HOLDINGS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended December 31, 2001 and 2000 and
the Cumulative Period from Inception to December 31, 2001
(Unaudited)
Inception
Six Months Ended (November 9, 2001)
December 31, To December 31,
2001 2000 2001
---- ---- ----
Cash flows from investing activities:
Purchase of fixed assets (61,602) - (61,602)
Purchase of intangible assets (378,161) - (378,161)
Proceeds from sale of assets - 14,571 -
-------- ------ ------
Net cash used in investing activities (439,763) 14,571 (439,763)
--------- ------ ---------
Cash flows from financing activities:
Notes receivable - - -
Notes payable - - -
Issuance of common stock, net 591,980 - 591,980
Payment of deferred offering costs (67,000) - (67,000)
------- ------- --------
Net cash provided by investing activities 524,980 - 524,980
------- ------- --------
Net increase (decrease) in cash 649 438 (1,523)
Cash at beginning of period 119 502 2,291
--- --- -----
Cash at end of period $ 768 $ 940 $ 768
======== ======== =========
The accompanying notes are an integral part of the
consolidated financial statements.
Supplemental disclosure of non-cash transactions:
Cash paid for interest - - -
Stock issued for acquisition of subsidiary 490,000 - 490,000
Liabilities repaid through issuance of common stock 101,980 - 101,980
6
BRL HOLDING, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(UNAUDITED)
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, 2001. In the opinion of management, all adjustments (consisting
only of normal recurring accruals and adjustments associated with the AssureTec
acquisition) considered necessary for a fair presentation have been included.
Operating results for the six months ended December 31, 2001 are not necessarily
indicative of the results that may be expected for the year ended June 30, 2002.
ITEM 2 Investment in related parted securities
Under the terms of the Asset Purchase Agreement an option to acquire
sixty percent (60%) of the Company's subsidiary was exercised effective December
31, 2000. Of the 4,582,122 shares of the subsidiaries common stock owned by the
Company, 1,032,749 were given to certain directors and officers of the Company
for services to the Subsidiary through June 30, 2000 and 2,749,373 shares were
sold to an entity that is controlled by family members of the Company's
President. A onetime charge to the statement of operations in the amount of
$3,659,141 represents the original cost of Biorelease's investment in the
subsidiary. The remaining basis of the 800,000 shares of common stock of the
subsidiary, Biorelease Technology, Inc., is computed utilizing the equity
method.
In November 2001, BRL Holdings, Inc. ("the Company") acquired 100% of
the stock of AssureTec Systems, Inc. ("AssureTec") in a stock for stock
transaction ("the Acquisition"). The transaction was computed using the purchase
method of accounting by issuing 3,177,000 shares of common stock at a discounted
value of $490,000. The purchase price consisted of $60,000 of software, $7,500
of patent costs, $370,000 of non compete assets and $92,500 of purchased
research and development costs net of $40,000 of liabilities assumed. (See Item
4)
Item 3. Consolidation of financial statements
For the three month period ended December 31, 2001 the Company was
consolidated with AssureTec Systems, Inc. consolidation commenced on the
purchase date, November 9, 2001. From January 2001 through October 2001 the
Company had no business activities other than administrative costs necessary for
remaining a publicly reporting entity.
Through December 31, 2000 the financial statements of the Company were
consolidated with its subsidiary, Biorelease Technologies, Inc. ("BTI"). From
January 1, 2001 through October 31, 2001 the financial statements of the
Company only included the business of the Company. In November 2001 the Company
acquired AssureTec Systems, Inc. as a wholly owned subsidiary of the Company.
(See Item 6. Exhibits and Reports on Form 8-K). In comparing the results of
operations for 2000 the subsidiary, Biorelease Technologies, Inc. was a
development stage company that had limited revenues and costs. The Company in
divesting itself of substantially all of its investment in BTI recorded as a
realized loss on investment of $3,659,141 at December 31, 2000.
7
Item 4. Property, software and equipment, net
The Company, with its acquisition of its subsidiary acquired $60,000 of
computer software for its security technology that will be written over the
estimated life of 3-5 years. No amortization was recorded in these financial
statements.
Item 4 Non compete agreements
The Company and its subsidiary had allocated $370,000 of the purchase
price of the subsidiary as non compete agreement costs which will be amortized
over the term of the contract and the non compete period subsequent to the
termination of the various contracts that run for a period between 30 and 42
months. The amortization charged to the consolidated financial statements for
the three months ended December 31, 2001 was $47,240.
8
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The following discussion includes the business of AssureTec Systems,
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, 2001 and 2000
For the three months ended December 31, 2001, the Company, including
the Subsidiary had no revenues, research and development costs of $93,378,
general and administrative expenses of $229,394 and other income of $10,000 for
a net loss of $312,772 as compared with the three months ended December 31, 2000
wherein the Company and its prior Subsidiary (BTI) had revenues of $6,060, cost
of goods sold of $353, a reduction of administrative expenses of $4,451,
offering costs associated with a terminated merger agreement with POLAR of
$1,697, a realized loss for the decline in value of its investment in the
subsidiary of $3,659,141, a gain in the sale of assets of $2,133 therein
yielding a net loss of $3,648,547.
Six Months Ended December 31, 2001 and 2000
For the six months ended December 31, 2001 the Company, including the
subsidiary from November 9, 2001 through December 31, 2001 had research and
development costs of $93,378, general and administrative expenses of $239,182,
other income of $10,000 yielding a net loss of $322,560 as compared with the six
months ended December 31, 2000 wherein the Company, including its previous
subsidiary had revenues of $14,315, cost of goods sold of $2,698, net
administrative expenses of $1,644, offering costs of $10,441, a realized loss
for decline in value of investment of $3,659,141, a gain on sale of assets of
$2,133 and no income taxes resulting in a net loss of $3,657,476. Without the
one time charge off of the decline in value of investment in the subsidiary
totaling $3,659,141 the Company would have a net income of $1,665 for the six
months ended December 31, 2000.
Inception to December 31, 2001
From November 9, 2001, the initial date of the consolidation of the
Company with AssureTec Systems, Inc.'s activity, through December 31, 2001, the
Company, including the Subsidiary, had revenues of $0, cost of goods sold of $0,
research and developmental expenses of $93,378, general and administrative
expenses of $229,394, other income of $10,000 thereby yielding an accumulated
net loss of $312,772.
Liquidity and Capital Resources
The Company including the subsidiary has a negative working capital.
It's liquidity from inception until the closing of the Reorganization was
primarily the funds of the Company and parties related to the Company.
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 subsidiary's
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.
9
Effect of Inflation
Management believes that inflation has not had a material effect on its
operations for the periods presented.
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
None
Item 6. Exhibits and Reports on form 8-K.
Effective November 9th, 2001, BRL Holdings, Inc. ("the Company") acquired 100%
of the stock of AssureTec Systems, Inc. ("AssureTec") in a stock for stock
transaction ("the Acquisition"). To complete the Acquisition, the Company issued
3,177,000 restricted shares of restricted common stock. Further, 2,325,000
options for a like number of shares of common stock were issued to employees and
consultants of AssureTec to replace options issued by AssureTec. 1,050,000 of
these options are subject to continuing employment of the management team and
the remaining 1,275,000 are subject to the management team meeting specific
technical and financial milestones. Under terms of the Acquisition, all persons
receiving shares and options issued under the Acquisition waived any rights to
spin-off shares, if any such shares are issued by the Company, resulting from
the Company's continuing sponsorship of three independent business units.
Prior management of the Company continues to hold three seats of four seats on
the Company's Board of Directors and the Company's shareholders prior to the
Acquisition, including shares issued to them in the Acquisition, now own 64% of
the Company's common stock on a fully diluted basis. The Company believes the
Acquisition does not represent a change of control of the Company.
11
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.
BRL Holdings, Inc.
February 19, 2001 By: /s/ R. Bruce Reeves
-------------------
R. Bruce Reeves, CEO and
Principal Financial Officer
12