SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB-A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
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
incorporation or organization) Employer 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, 5,568,423 shares of
common stock, par value $.01 per share as of May 13, 2002.
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Transitional Small Business Disclosure Format (Check One) Yes No X
---- -----
1
BRL HOLDINGS, INC..
INDEX
PART I. FINANCIAL INFORMATION
Page
Number
Item 1. Financial Statements .........................................................................3
Balance Sheet as of March 31, 2002 (unaudited) and Balance Sheet at June 30, 2001.............3
Consolidated Statements of Operations for the Three Months Ended
March 31, 2002 and 2001 and for the nine months ended March 31, 2002
and 2001 and from inception of development stage (November 9, 2001)
until March 31, 2002
(unaudited)...................................................................................4
Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2002 and 2001 and from
inception of development stage (November 9, 2001) until March 31, 2002 (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
March 31, 2002 and June 30, 2001
March 31, June 30,
2002 2001
---- ----
(Unaudited)
ASSETS
Current Assets:
Cash $ 3,163 $ 119
Notes Receivable - 13,624
Other receivables 995 -
Prepaid expenses and other current assets 1,575 980
------ ---
Total current assets 5,733 14,723
----- ------
Property, software and equipment 66,015
Other assets:
Intangible assets, patent costs 8,161 -
Intangible assets-non compete agreements, net 259,187 -
Investments in related party securities 6,382 6,382
----- -----
Total assets $ $ 345,478 $ $ 21,105
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCIES)
Current liabilities:
Accounts payable $ 204,276 $ 4,675
Accrued expenses 36,530 13,014
------ ------
Total current liabilities 240,806 17,689
Long term debt - notes to stockholders 140,755 -
Other liabilities - related party - 10,124
------- ------
Total liabilities 381,561 27,813
------- ------
Stockholders' equity (Deficiency):
Preferred stock of $.10 per share value, authorized 5,000,000 shares, no
shares outstanding at March 31, 2002 and June 30, 2001
- -
Common stock of $.01 par value, authorized
50,000,000 shares, 5,568,423 and 1,433,939 issued
and outstanding at March 31, 2002 and June 30, 2001
respectively 55,684 14,339
Additional paid-in capital 7,755,759 7,137,282
Accumulated deficit prior to development stage
activities (7,168,117) (7,158,329)
Development stage accumulated earnings (deficit) ( 666,009) -
----------- -----------
(22,683) (6,708)
Less: Deferred offering costs (13,400) -
------------ -----------
Total Stockholder's Equity (Deficit) (36,083) (6,708)
-------- -----------
Total liabilities and stockholders' equity (deficit) $ 345,478 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 Nine Months Ended March 31, 2002
and the Cumulative Period (November 9,2001) to March 31, 2002
(Unaudited)
Inception
(November
9,
2001)
Three Months Ended March 31, Nine Months Ended March 31,
--------------------------- ---------------------------
To
2002 2001 2002 2001 March 31, 2002
---- ---- ---- ---- --------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues $ - $ - $ - $ 14,315 $ -
Cost of goods sold - - - 2,698 -
--------- ------- -------- --------- ----------
- - 11,617 -
Gross profit
Costs and expenses:
Research and development (169,501) - (262,879) - (262,879)
General and administrative income (186,736) (2,071) (425,918) (3,715) (416,130)
--------- ------- --------- -------- ---------
(expense)
Total costs and expenses (356,237) (2,071) (688,797) (3,715) (679,009)
--------- ------- --------- ------- ---------
(Loss)/Gain from operations (356,237) (2,071) (688,797) 7,902 (679,009)
--------- ------- --------- ------ ---------
Other Income (Costs):
Offering costs - - - (10,441) -
Option compensation - (135,000) (135,000)
Other income (cost) 3,000 - 13,000 - 13,000
Realized loss for decline in value
of investment - - - (3,659,141) -
Gain on sale of assets -
-
(8,331) (6,198) -
------- --------- ------- -
-
Total other income (cost) 3,000 (143,331) 13,000 (3,810,780) (13,000)
----- --------- ------ ----------- --------
Gain (loss) before provision for (benefit (353,237) (145,402) (675,797) (3,802,878) (666,009)
from) income taxes
Provision for income taxes - - - - -
- - - -
Net gain (loss) $(353,237) $(145,402) $ (675,797) $(3,802,878) ($ 666,009)
========= ======== ========= ========= =========
Weighted average shares 5,401,756 17,379,125 3,577,878 14,902,680 3,577,878
Basic and fully diluted loss per share $ (.07) $ (0.01) $ ($0.19) $ ($0.26) $ ($.19)
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 Nine Months Ended March 31, 2002 and 2001 and
the Cumulative Period from Inception to March 31, 2002
(Unaudited)
------------
Inception
Nine Months Ended (November 9,
2001)
March 31, To March 31,
2002 2001 2002
---- ---- ----
Cash flows from operating activities:
Net (loss)/Gain $ (675,797) $ (3,802,878) $ (666,009)
Adjustments to reconcile net loss to net cash used
in development activities:
Depreciation and amortization 110,813 334 110,813
Recognized loss on investment - 3,659,141 -
(Gain) Loss on sale of assets - (2,133) -
Common Stock issued in exchange for
services rendered 156,422 135,000 156,422
Common stock issued in purchase of subsidiary
technologies 52,500 - 52,500
(Increase) Decrease in current assets:
Notes receivable 13,624 - 13,624
Inventories - 16,012 -
Other receivables (995) 898 -
Prepaid expenses and other current assets (595) - (1,125)
Related party securities - (800) -
Other non-current assets - - -
Increase (Decrease) in current liabilities:
Notes payable, stockholders for services 83,755 - 83,755
Accounts payable 199,601 (13,696) 183,012
Accrued expenses 23,516 (7,000) 27,680
Other liabilities (10,124) 500 (10,124)
---------- ----------- --------
Net cash used in operating activities $ (47,280) $ (14,622) $(49,452)
------------- ----------- ---------
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 Nine Months Ended March 31,
2002 and 2001 and the Cumulative Period from
Inception (November 9, 2001) to March 31, 2002
(Unaudited)
Inception
Nine Months Ended (November 9, 2001)
March 31, To March 31,
2002 2001 2002
---- ---- ----
Cash flows from investing activities:
Purchase of fixed assets (6,015) - (6,015)
Purchase of intangible assets (661) - (661)
Proceeds from sale of assets - 14,571 -
Net cash used in investing activities (6,676) 14,571 (6,676)
----------- ---------- -------------
Cash flows from financing activities:
Notes payable 57,000 - 57,000
Issuance of common stock - - -
Issuance of common stock - - -
----------- ---------- -------------
Net cash provided from financing activities 57,000 - 57,000
----------- ---------- -------------
Net increase (decrease) in cash 3,044 (51) 872
Cash at beginning of period 119 502 2,291
----------- ---------- -------------
Cash at end of period $ 3,163 $ 451 $ 3,163
========== ========= ==========
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 $121,442 - $169,822
6
BRL HOLDING, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002
(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 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 nine months ended March 31, 2002 are not necessarily indicative
of the results that may be expected for the year ended June 30, 2002.
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, Biorelease Technologies, Inc.
("BTI"), 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 CEO. A onetime charge to the
statement of operations at December 31, 2001 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" or "BRL")) 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 of BRL at a
discounted value of $490,000. The purchases 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.
Consolidation of financial statements
For six months and the nine months ended March 31, 2002 the Company was
consolidated with AssureTec Systems, Inc. Consolidation commenced on the
purchase date, November 9, 2001. The Company is in the development stage and is
being presented as such. 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 that was not considered development
stage. In November 2001 the Company acquired AssureTec Systems, Inc. as a wholly
owned subsidiary of the Company and began reporting as a development stage
enterprise. 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
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 off over the
estimated life of 3-5 years. As of March 31, 2002 the Company has approximately
$66,000 of equipment and software that has not been placed in service therefore
no depreciation or amortization was recorded in these financial statements.
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 end and the nine months ended March 31, 2002 was $63,573 and
$110,813 respectively.
Notes Payable
Notes payable, in the aggregate of $140,755 are due to the Company's
wholly owned subsidiary by shareholders of the Company. In November 2001 a
stockholder loaned the Company's subsidiary $57,000 that is due within one year
at a rate of 5 percent per annum payable in either cash or stock. The remaining
$83,755 represents notes issued in March 2002 to certain stockholders for
services. These notes are without interest and are due when the Company's
subsidiary reaches a capitalization of one million.
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 March 31, 2002 and 2001
For the three months ended March 31, 2002, the Company, including the
Subsidiary had no revenues, research and development costs of $169,501, general
and administrative expenses of $186,736 other income of $3,000 for a net loss of
$353,237 as compared with the three months ended March 31, 2001 wherein the
Company had administrative expenses of $2,071, option compensation of $135,000,
a loss on the sale of assets of $8,331 therein yielding a net loss of $145,402.
Nine Months Ended March 31, 2002 and 2001
For the nine months ended March 31, 2002 the Company, including the
subsidiary from November 9, 2001 through March 31, 2002 had research and
development costs of $262,879, general and administrative expenses of $425,918,
other income of $13,000 yielding a net loss of $675,797 as compared with the
nine months ended March 31, 2001 wherein the Company, including its previous
subsidiary had revenues of $14,315, cost of goods sold of $2,698, administrative
expenses of $3,715, offering costs of $10,441, option compensation cost of
$135,000, a realized loss for decline in value of investment of $3,659,141, a
loss on sale of assets of $6,198 and no income taxes resulting in a net loss of
$3,802,878. Without the one time charge off of the decline in value of
investment in the subsidiary totaling $0 at March 31, 2002 and $3,659,141 at
March 31, 2001 the Company, including the subsidiary had a loss of $675,797 and
$143,737 for the nine months ended March 31, 2002 and 2001, respectively.
Inception to March 31, 2002
From November 9, 2001, the initial date of the consolidation of the
Company with AssureTec Systems, Inc.'s activity, through March 31, 2002, the
Company, including the Subsidiary, had revenues of $0, cost of goods sold of $0,
research and developmental expenses of $262,879, general and administrative
expenses of $416,130, other income of $13,000 thereby yielding an accumulated
net loss of $666,009.
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 from the funds of a party related to the Company and notes from
stockholders to the Company's subsidiary.
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.
Effect of Inflation
Management believes that inflation has not had a material effect on its
operations for the periods presented.
9
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
The Company originally filed this Form 10-QSB for the nine months
ended March 31, 2002 on May 14, 2002. The Company's outside
auditors had not reviewed that filing, on form 10-QSB. An amended
return was filed on May 31, 2002 that reflected the oversight of
an auditor's review. The Company's outside accounting firm has
reviewed this filing. Certain disclosures and classifications have
been corrected but there was no changes to the balance sheet or
income statements on any of these filings.
Item 6. Exhibits and Reports on form 8-K.
None
10
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.
June 19, 2002 By: /s/ R. Bruce Reeves
-------------------
R. Bruce Reeves, CEO and
Principal Financial Officer
11