United States Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly ended December 31, 2002
-----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 000-15260
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BRL HOLDINGS, INC.
------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 88-0218411
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
200 Perimeter Road
Manchester, NH 03130
--------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (603) 641-8443
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.
Yes No
--- ---
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date, 47,906,220 shares of common
stock, par value $.01 per share as of February 14, 2003.
Transitional Small Business Disclosure Format (Check One) Yes No X
--- ---
BRL Holdings, Inc.
INDEX
Page
Number
Item 1. Financial Statements 3
Consolidated Balance sheets as of December 31, 2002
(unaudited) and Balance Sheet June 30, 2002 3
Consolidated Statements of Operations for the Three
Months Ended December 31, 2002 and Statement of Operations
for the six months ended December 31, 2002 and from
inception of development stage (October 4, 2002) until
December 31, 2002 (unaudited) 4
Consolidated Statements of Cash Flows for the Six Months
Ended December 31, 2002 and from inception of development
stage (October 4, 2002) until December 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
Item 3. Controls and Procedures 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
PART I. FINANCIAL INFORMATION
Item 1. Financial Statement
BRL HOLDINGS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
December 31, 2002 and June 30, 2002
December June 30,
31, 2002 2002
(Consolidated)
(Unaudited)
--------- ----------
ASSETS
Current Assets:
Cash $ 701 $ 1,148
Other receivables 20,084 -
Prepaid expenses and other current assets 2,100 1,050
--------- ----------
Total current assets 22,885 2,198
--------- ----------
Other assets:
Investments in related party securities - -
--------- ----------
Total assets $ 22,885 $ 2,198
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCIES)
Current liabilities:
Accounts payable $ 89,292 $ 8,814
Accounts payable related party 20,687 20,687
Accrued expenses 274,268 5,000
--------- ----------
Total current liabilities 384,247 34,501
--------- ----------
Other liabilities-related party 109,173 -
--------- ----------
Total liabilities 493,420 34,501
--------- ----------
Stockholders' equity (Deficiency):
Preferred Stock of $.10 per share value,
authorized 5,000,000 shares, no shares
outstanding at December 31, 2002 and
June 30, 2002, respectively - -
Common stock of $.01 par value,
50,000,000 shares authorized, 47,906,220
and 5,433,800 issued and outstanding at
December 31, 2002 and June 30, 2002 479,062 54,338
Additional paid-in capital 7,743,720 7,956,081
Accumulated deficit prior to development stage
activities (7,980,499) (8,042,772)
Development stage accumulated earnings (deficit) (712,818) -
---------- ----------
Total Stockholder's Equity (deficit) (470,535) (32,303)
---------- ----------
Total liabilities and stockholders' equity
(deficit) $ 22,885 $ 2,198
========== ==========
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, 2002 and the
Cumulative Period (October 4, 2002) to December 31, 2002
(Unaudited)
Inception
(October 4,
Three Months Ended Six Months Ended 2002) to
December 31, December 31, December 31,
2002 2001 2002 2001 2002
(Unaudited) (Unaudited) (Unaudited)
------------------ ----------------- -----------
Revenues $ - $ - $ - $ - $ -
Cost of goods sold - - - - -
--------- -------- --------- -------- ---------
Gross profit - - - - -
Costs and expenses:
Research and development - (93,378) - (93,378) -
Purchased technologies
cost (2,445) - (2,445) - (2,445)
General and
administrative (511,973) (229,394) (550,795) (239,182) (511,973)
--------- -------- --------- --------- --------
Total costs and
expenses (514,418) (332,772) (553,240) (332,560) (514,418)
--------- -------- --------- --------- --------
(Loss)/Gain from
operations (514,418) (332,772) (553,240) (332,560) (514,418)
--------- -------- --------- --------- --------
Other Income (Cost):
Loss from investments (288,585) - (288,585) - (288,585)
Other income (cost) 90,017 10,000 90,017 10,000 90,017
--------- -------- --------- --------- --------
Total other income (cost) (198,568) 10,000 (198,568) 10,000 (198,568)
--------- -------- --------- --------- --------
Gain (loss) before
provision for (benefit
from) income taxes (712,986) (312,772) (751,808) (322,560) (712,986)
Provision for income taxes - - - - -
--------- -------- --------- --------- --------
Net gain (loss) $ (712,986)$(312,772)$(751,808)$(322,560)$(712,986)
========= ======== ========= ========= ========
Weighted average shares 36,039,486 3,724,606 11,763,475 2,579,272 36,039,486
Basic and fully diluted
loss per share $ (0.00) $ (0.27)$ (0.06)$ (0.13)$ (0.00)
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, 2002 and 2001 and
the Cumulative Period from Inception to December 31, 2002
(Unaudited)
Inception
Six Months Ended (October 4, 2002)
December 31, To December 31,
2002 2001 2002
------------------ ----------------
Cash flows from operating
activities:
Net (loss)/Gain $(751,808) $(322,560) $(712,986)
Adjustments to reconcile net
loss to net cash used in
development activities:
Depreciation and amortization - 47,240 -
Common stock issued in exchange
for purchased technology 2,445 - 2,445
Net effect of subsidiary
transactions 97,769 98,231
Common stock issued in
exchange for common stock
of subsidiary 212,362 - 212,362
(Increase) Decrease in current
assets:
Accounts Receivable - - -
Inventories - - -
Other receivables (20,084) (995) (19,320)
Prepaid expenses and other
current assets (1,050) (1,120) (1,575)
Related party securities - - -
Other non-current assets - - -
Increase (Decrease) in current
liabilities:
Accounts payable 80,478 144,642 44,209
Accrued expenses 269,268 46,725 267,768
Other liabilities 109,173 1,500 109,173
--------- -------- ---------
Net cash used in
operating activities $ (447) $(84,568) $ 307
--------- -------- ---------
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, 2002 and 2001 and
the Cumulative Period from Inception to December 31, 2002
(Unaudited)
Inception
Six Months Ended (October 4, 2002)
December 31, To December 31,
2002 2001 2002
------------------ ----------------
Cash flows from investing activities:
Purchase of fixed assets $ - $ (61,602) $ -
Purchase of intangible assets - (378,161) -
Proceeds from sale of assets - - -
-------- ---------- ------------
Net cash used in investing
activities - (493,763) -
-------- ---------- ------------
Cash flows from financing activities:
Notes receivable - - -
Notes payable - - -
Issuance of common stock, net - 591,980 -
Payment of deferred offering costs - (67,000) -
-------- --------- ------------
Net cash provided by
investing activities $ - $ 524,980 $ -
-------- --------- ------------
Net increase (decrease) in cash (447) 649 307
Cash at beginning of period 1,148 119 394
-------- --------- ------------
Cash at end of period $ 701 $ 768 $ 701
======== ========= ============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
Supplemental Schedule of Non cash Investing and Financing Activities:
Cash paid for interest - - -
Stock issued for acquisition of
subsidiary 212,362 - 212,362
Liabilities repaid through
issuance of common stock - - -
The accompanying notes are an integral part of these consolidated financial
statements.
6
BRL HOLDINGS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(UNAUDITED)
Note 1 Basis of presentation
The accompanying unaudited consolidated financial statements have been
prepared from the books and records of BRL Holdings, Inc. (the "Company") or
"BRL") 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, 2002. In the opinion of management, all adjustments
(consisting only of normal recurring accruals and adjustments associated with
the Element 21 acquisition) considered necessary for a fair presentation have
been included. Operating results for the six months ended December 31, 2002
are not necessarily indicative of the results that may be expected for the
year ended June 30, 2003.
Note 2 Investment in related parted securities
On April 1, 2002 we divested our majority interest in the AssureTec
Systems subsidiary by exchanging with AssureTec founders and consultants
shares in AssureTec held by the Company. After divesting these shares
previously held, the Company currently holds as an investment through its Tech
Ventures subsidiary of 2,716,900 shares of AssureTec stock carried at a
nominal value equal to the par value of the stock. (See our 8-K Current
Report dated April 1, 2002, which has been previously filed with the
Securities and Exchange Commission and which is incorporated herein by
reference.)
Note 3 Consolidation of financial statements
Since June 30, 2002 the Company has been consolidated with Tech
Ventures, Inc. and Tech Venture's wholly owned subsidiaries IJAM
Entertainment, Inc. and Advanced Conductor Technologies, Inc. For the period
of October 4, 2002 to December 31, 2002 the Company was also consolidated with
both Tech Ventures, Inc. and Element 21 Golf Company. For the three month
period ended December 31, 2001 and prior to the formation of Tech Ventures,
the Company was consolidated with AssureTec Systems, Inc., which consolidation
commenced on the purchase date, November 9, 2001. Prior to November 9, 2001,
from January 1 2001 through October 2001 the Company had no business
activities other than administrative costs necessary for remaining a publicly
reporting entity. On April 1, 2002 the Company divested itself of its
controlling interest in AssureTec Systems, Inc. retaining an investment
interest carried at nominal value (see Item 2).
7
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
---------------------
The following discussion includes the business of Element 21 Golf
Company (the "Subsidiary"), since the Company, prior to its acquisition of
the Subsidiary, had recently divested its majority interest in AssureTec
Systems, Inc., retaining only an investment interest carried at a nominal
value through a newly formed subsidiary Tech Ventures, Inc. Otherwise the
Company 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 operations of both Tech Ventures and
Element 21. The Company has announced its plans to spin off Tech Ventures as
an independent company, but such is still pending.
Three Months Ended December 31, 2002 and 2001
---------------------------------------------
For the three months ended December 31, 2002 the Company, including the
Subsidiaries had no revenues, general and administrative costs of $550,795,
purchased technology costs of $2,445 loss from investments of $288,585 and
miscellaneous income from the acquisition of the subsidiary of $90,017
resulting in a loss of $751,808 as compared with 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 $239,182 and other income of $10,000 for a net loss of $322,560.
Six Months Ended December 31, 2002 and 2001
-------------------------------------------
For the six months ended December 31, 2002 the Company, including the
subsidiaries had no revenues, $2,445 of purchased technology costs,
administrative costs of $550.795, loss on investment of $288,585, other income
of $90,017 resulting in a net loss of $751,808 as compared with 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.
Inception to December 31, 2002
------------------------------
From inception of the consolidation of the Company with Element 21 Golf
Company, (October 4, 2002), through December 31, 2002, the Company, including
the Subsidiary, had revenues of $0, cost of goods sold of $0, purchased
technology costs of $2,445, administrative costs of $511,973, loss from
investments of $288,585 and other income of $90,017 yielding an accumulated
net loss of $712,986.
Liquidity and Capital Resources
-------------------------------
The Company including its subsidiary Element 21 Golf Company has a
negative working capital. It's liquidity from inception until the closing of
the Reorganization was primarily the funds of the Company and stockholders of
the Company. Absent continued accruals by consultants retained by the Company
to manage its operations and further advances by stockholders of the Company,
the Company cannot continue to develop
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.
8
Effect of Inflation
-------------------
Management believes that inflation has not had a material effect on its
operations for the periods presented.
Item 3. Controls and Procedures.
----------------------------------
(a) Evaluation of Disclosure Controls and Procedures.
Our President and Secretary/Treasurer have evaluated our Company's
disclosure controls and procedures as of November 14, 2002, and they concluded
that these controls and procedures are effective.
(b) Changes in Internal Controls.
There are no significant changes in internal controls or in other
factors that could significantly affect these controls subsequent to November
14, 2002.
9
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities.
We proposed to effect by exemption from registration under the
Securities Act or by registration there under, a spin-off of our
interests in two of our subsidiaries, Tech Ventures, Inc., a
Delaware corporation, ("Tech Ventures"), that was recently formed to
hold substantially all of our assets and business that we owned prior
to the closing of the Element 21 Acquisition, and of Advanced
Conductor Technologies, Inc., a Delaware corporation ("Advanced
Conductor"), both with ex-dividend dates of October 25, 2002, and
distribution dates to be set once it has been determined whether these
distributions can be made without registration under the Securities
Act or must be subject to a prior registration statement filed with
the Securities and Exchange Commission under the Securities Act.
Holders of beneficial interests acquired after October 25, 2002 and
all holders of shares and options issued or exchanged under the
Element 21 Acquisition will not have any right to any of the spin-off
dividends as a condition to the Acquisition, but all were accorded the
100% share for share dividend with a distribution date of November 8,
2002.
Item 3. Default 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.
On November 20, 2002 immediately following the filing of our Annual
Report on Form 10KSB, we terminated Good Schwartz Brown & Berns as our
independent accountant and retained Stephen A. Diamond as our certifying
accountant. (See our 8-K Current Report dated November 20, 2002, which has
been previously filed with the Securities and Exchange Commission and which is
incorporated herein by reference.)
10
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BRL Holdings, INC
Date: February 19, 2003 By/S/ Nataliya Hearn, Ph.D.
------------------ -------------------------------------
Nataliya Hearn, Ph.D.
President and Director
Date: February 19, 2003 By/S/ Jim Morin
------------------ ----------------------
Jim Morin
Secretary/Treasurer,
CFO and Director
11
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Nataliya Hearn, Ph.D., President and Chief Executive Officer of BRL
Holdings, Inc. (the "Registrant"), certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of the
Registrant;
2. Based on my knowledge, this Quarterly Report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Quarterly Report;
3. Based on my knowledge, the financial statements, and other
financial information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
Quarterly Report;
4. The Registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
Quarterly Report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this Quarterly Report (the "Evaluation Date"); and
c) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the Registrant's auditors and the
audit committee of Registrant's board of directors (or persons performing the
equivalent function);
12
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal controls; and
6. The Registrant's other certifying officer and I have indicated in
this Quarterly Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: February 19, 2003 By/s/Nataliya Hearn, Ph.D.
President and Director
13
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jim Morin, Secretary/Treasurer and Chief Financial Officer of BRL
Holdings, Inc. (the "Registrant"), certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of the
Registrant;
2. Based on my knowledge, this Quarterly Report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Quarterly Report;
3. Based on my knowledge, the financial statements, and other
financial information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
Quarterly Report;
4. The Registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
Quarterly Report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this Quarterly Report (the "Evaluation Date"); and
c) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the Registrant's auditors and the
audit committee of Registrant's board of directors (or persons performing the
equivalent function);
14
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal controls; and
6. The Registrant's other certifying officer and I have indicated in
this Quarterly Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: February 19, 2003 By/s/Jim Morin
Secretary/Treasurer,
CFO and Director
15
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of BRL Holdings, Inc. (the
"Registrant") on Form 10-QSB for the quarter ended December 31, 2002, as
filed with the Securities and Exchange Commission on the date hereof, we,
Nataliya Hearn, Ph.D., President and Chief Executive Officer, and Jim Morin,
Secretary/Treasurer and Chief Financial Officer of the Registrant, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Quarterly Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Quarterly Report fairly presents,
in all material respects, the financial condition and result of operations of
the Registrant.
Date: 2/19/03 By/s/Nataliya Hearn, Ph.D.
President and Director
Date: 2/19/03 By/s/Jim Morin
Secretary/Treasurer,
CFO and Director
16