U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended June 30, 2002
-------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________________ to __________________
Commission File No. 000-15260
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BRL Holdings, Inc.
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(Name of Small Business Issuer in its Charter)
Delaware 88-0218411
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(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
200 Perimeter Road, Manchester, NH 03102
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(Address of Principal Executive Offices)
Registrant's Telephone Number: (603) 641-8443
Not Applicable
--------------
(Former name and former address, if changed since last Report)
Securities Registered under Section 12(b) of the Exchange Act: None.
Securities Registered under Section 12(g) of the Exchange Act:
Common Stock, One Cent ($0.01) Par Value
-----------------------------------------
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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.
(1) Yes X No (2) Yes X No
--- --- --- ---
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year: June 30, 2002,
$0.00.
For the Exhibit Index, see Part III, Item 13.
State the aggregate market value of the common voting stock held by non-
affiliates computed by reference to the price at which the stock was sold, or
the average bid and asked prices of such stock, as of a specified date within
the past 60 days.
October 31, 2002 - $6,008,364. There are approximately 40,055,760 shares
of our common voting stock held by non-affiliates.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
Not applicable.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of outstanding shares of each of the Registrant's
classes of common equity, as of the latest practicable date:
October 31, 2002
Common - 47,906,220*
* We have effected a two (2) for one (1) stock split in the form of a
100% stock dividend on all of our outstanding securities that will also result
in similar adjustments to all of our shares of common stock underlying our
outstanding options, with a record date of October 4, 2002, a distribution
date of November 8, 2002, and an ex-dividend date as of the opening of
business on November 12, 2002. As adjusted, there are 6,622,800 shares
underlying our outstanding options. Except as otherwise indicated, all share
and per share data reflected in this Annual Report on Form 10-KSB has been
retroactively restated to reflect this dividend.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
See the Exhibit Index, Part III, Item 13.
Transitional Small Business Issuer Format Yes X No
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PART I
Item 1. Description of Business.
------------------------
Business Development.
---------------------
July 1, 2000, to June 30, 2002.
-------------------------------
Effective November 9, 2001, we acquired 100% of the outstanding common
stock of AssureTec Systems, Inc., a Delaware corporation ("AssureTec"), in a
stock for stock transaction. We issued 6,354,000 shares of our "restricted
securities" (common stock) and assumed AssureTec's obligations under options
to purchase 4,750,000 shares of its common stock. See our 8-K Current Report
dated November 9, 2001, which has been previously filed with the Securities
and Exchange Commission and which is incorporated herein by reference. See
the Exhibit Index, Part III, Item 13.
On April 1, 2002, we divested our majority interest in AssureTec, by
exchanging, with substantially all of the AssureTec founders and consultants
from whom our interest in AssureTec was initially acquired, 4,750,000 shares
of our common stock for 4,750,000 shares of AssureTec and canceling options to
purchase 4,750,000 of our common stock then held by these individuals. 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. See the Exhibit Index, Part III, Item 13.
Events Subsequent to June 30, 2002.
-----------------------------------
Effective October 3, 2002, we acquired 100% of the outstanding common
stock of Element 21 Golf Company, a recently formed Delaware corporation
("Element 21"), in a stock for stock transaction ("the Acquisition"). To
complete the Acquisition, we agreed to issue up to 48,904,420 shares of our
common stock consisting of the issuance of 42,472,420 shares of "restricted
securities" (common stock) and the assumption of Element 21's obligations
under options granted by Element 21 to its officers, directors and consultants
to purchase 6,432,000 shares of our common stock, in recognition of options to
purchase a like amount of shares of Element 21 held by these individuals.
This Acquisition will be accounted for as a "reverse" acquisition using the
purchase method of accounting, as the shareholders of Element 21 controlled
our Company immediately following the Acquisition. We have not yet had an
opportunity to determine the value of the shares issued in this transaction or
to determine an appropriate basis for the allocation of the purchase price.
For further information regarding this Acquisition, see our 8-KA Current
Report dated October 2, 2002, that was filed with the Securities and Exchange
Commission on November 5, 2002, and which included a copy of the Restated
Agreement and Plan of Reorganization, together with all schedules and
exhibits, and which is incorporated herein by reference. See the Exhibit
Index, Part III, Item 13.
Element 21 was formed on September 18, 2002,to acquire highly developed
golf technology and to design, develop and market scandium alloy golf clubs.
Scandium is Element No. 21 in the Periodic Table of Elements. When mixed with
aluminum, scandium alloys are believed to exceed titanium with a higher
strength to weight ratio of up to 25% and a specific density advantage of 55%.
Scandium alloys are simply lighter, stronger and more cost effective than
titanium. We intend to commercialize this advanced metal technology
originally developed in the former Soviet Union for military applications
during the 1980's. Scandium alloys have been used in intercontinental
ballistic missiles, jet aircraft, the Mir space station and most recently, in
the International Space Station. For further information, see our 8-KA
Current Report dated October 2, 2002, which is referenced in the Exhibit
Index, Part III, Item 13.
We have effected a two (2) for one (1) stock split in the form of a 100%
stock dividend on all of our outstanding shares of common stock that will also
result in similar adjustments to all of our shares of common stock underlying
our outstanding options. Except as otherwise indicated herein, all share and
per share data reflected in this Annual Report has been retroactively restated
to reflect this dividend.
We also resolved to effect by exemption from registration under the
Securities Act or by registration under the Securities Act, a spin-off of our
interests in two of our subsidiaries, Tech Ventures, Inc., a Delaware
corporation ("Tech Ventures"), that was recently formed on June 19, 2002, 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.
All holders of shares and options issued or exchanged under the Element
21 Acquisition waived any right to any of the spin-off dividends as a
condition to the Acquisition, but all were accorded the 100% dividend
referenced herein.
Copies of our Forms 10b-17 that were filed by us with the National
Association of Securities Dealers, Inc. (the "NASD") respecting our dividends
that were declared and discussed under this heading were attached to our
8-KA Current Report dated October 2, 2002, which is referenced in the Exhibit
Index, Part III, Item 13.
Historical Information Prior to June 30, 2001.
----------------------------------------------
Historical information from our inception regarding our Company is
contained under the heading "General", Part I, Item 1, of our 10-KSB Annual
Report for the year ended June 30, 2001, which has been previously filed with
the Securities and Exchange Commission and which is incorporated herein by
reference, in the Exhibit Index, Part III, Item 13.
Business.
---------
We presently have investments in five (5) entities which are discussed in
Item 6 under the heading "Results of Operations." Following our divestiture
of a majority control in AssureTec on April 1, 2002, we had no material
business operations in fiscal 2002 and through the date of our Element 21
Acquisition on October 3, 2002, which is referenced above under the heading
"Business Development." In the immediate future, our business operations will
be to design, develop and market scandium alloy golf clubs from the technology
acquired in connection with this Acquisition. See our 8-KA Current Report
dated October 2, 2002, which is referenced in the Exhibit Index, Part III,
Item 13.
Principal Products or Services and their Markets.
-------------------------------------------------
During the fourth quarter of our fiscal year ended June 30, 2002, we
divested ourselves of a majority interest in AssureTec. Since that date, we
have been focusing on technologies that could be compatible with one of
several of our sponsored affiliated companies (as that term is defined in Item
6 under the heading "Results of Operations") and AssureTec. AssureTec has
recently received its first purchase order for its document authentication
technology and products. We are also conducting "due diligence" inquiries on
several power transmission technologies and advanced composite materials which
we expect will allow our Advanced Conductor affiliate to be able to operate on
its own following the planned dividend of these shares to our stockholders
referenced above under the heading "Business Development" of this Item;
however, no assurance can be given that these expectations will come to
fruition.
Distribution Methods of the Products or Services.
-------------------------------------------------
We, independent of our present sponsorship affiliated subsidiaries
companies, do not otherwise independently provide products or services.
AssureTec has not yet established any formal distribution methods of its
product.
Status of Any Publicly Announced New Product or Service.
--------------------------------------------------------
AssureTec has announced a border and document authentication product. It
plans to directly market this product and related services to an indeterminate
number of organizations in both commercial and government markets, including
departments in the U. S. Government. AssureTec's web site, www.AssureTec.com,
contains additional information about its current operations and prospects.
Information about our planned business operations following the Element
21 Acquisition is contained in our 8-KA Current Report dated October 2, 2002,
which is referenced in the Exhibit Index, Part III, Item 13, and as briefly
discussed above under the heading "Business Development" of this Item.
Competitive Business Conditions.
--------------------------------
Each of our sponsored affiliates and AssureTec will compete with larger
companies with far greater resources and financial support; as each of them is
in the early stages of formulating their respective business operations and
none has had any material revenues, it is difficult to ascertain what and who
their direct and indirect competitors will be, with any certainty.
Regarding the Element 21 technology, all major manufacturers of golf
clubs and related equipment will be major competitors of our planned business
operations, and all have greater resources, marketing capabilities and name
recognition, among other factors, that will make it difficult for us to
compete with them.
Sources and Availability of Raw Materials.
------------------------------------------
We believe that each sponsored affiliate and AssureTec have a
satisfactory supply relationship consistent with the stage in which each
currently operates.
We also believe that there are sufficient raw materials available for use
with respect to the Element 21 technology and the development of scandium
alloy golf clubs.
Dependence on One or a Few Major Customers.
-------------------------------------------
None of our sponsored affiliates or AssureTec have reached the stage of
development where the dependency on one or several customers is a significant
issue; that is the same regarding our Element 21 technology.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements or Labor Contracts.
------------------------------
None, except the patents acquired by us in the Element 21 Acquisition,
which are U. S. Patent Nos. 5,597,529 issued on January 28, 1997, and
5.620,662, issued on April 15, 1997, initially filed by Ashurst Technologies,
Inc. and acquired on January 7, 2001, by Dr. Hearn and Mr. Sindalovsky. Dr.
Hearn and Mr. Sindalovsky assigned the golf applications under these patents
to Element 21 immediately prior to our acquisition of 100% of the outstanding
securities of Element 21, as disclosed in our 8-KA Current Report dated
October 2, 2002, which is referenced in the Exhibit Index, Part III, Item 13,
and as briefly discussed above under the heading "Business Development" of
this Item. AssureTec also currently has several patent and trademark
applications pending that are not deemed material to this Annual Report
because of our divestiture of our majority interest in AssureTec in April,
2000, which is discussed above under the heading "Business Development" of
this Item.
Need for any Government Approval of Principal Products or Services.
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None of our sponsored affiliates has yet reached the stage of development
wherein government approval issues have arisen; that is the same regarding our
Element 21 technology. This is not expected to be an issue for AssureTec
outside the normal government procurement process.
Effects of Existing or Probable Governmental Regulations.
----------------------------------------------------------
Sarbanes-Oxley Act.
-------------------
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley
Act of 2002 (the "Sarbanes-Oxley Act"). The Sarbanes-Oxley Act imposes a wide
variety of new regulatory requirements on publicly-held companies and their
insiders. Many of these requirements will affect us. For example:
* Our chief executive officer and chief financial officer must
now certify the accuracy of all of our periodic reports that contain financial
statements;
* Our periodic reports must disclose our conclusions about the
effectiveness of our disclosure controls and procedures; and
* We may not make any loan to any director or executive officer
and we may not materially modify any existing loans.
The Sarbanes-Oxley Act has required us to review our current
procedures and policies to determine whether they comply with the
Sarbanes-Oxley Act and the new regulations promulgated thereunder. We will
continue to monitor our compliance with all future regulations that are
adopted under the Sarbanes-Oxley Act and will take whatever actions are
necessary to ensure that we are in compliance.
Penny Stock.
------------
Our common stock is "penny stock" as defined in Rule 3a51-1 of the
Securities and Exchange Commission. Penny stocks are stocks:
* with a price of less than five dollars per share;
* that are not traded on a "recognized" national exchange;
* whose prices are not quoted on the NASDAQ automated quotation
system; or
* in issuers with net tangible assets less than $2,000,000, if
the issuer has been in continuous operation for at least three years, or
$5,000,000, if in continuous operation for less than three years, or with
average revenues of less than $6,000,000 for the last three years.
Section 15(g) of the Exchange Act and Rule 15g-2 of the Securities
and Exchange Commission require broker/dealers dealing in penny stocks to
provide potential investors with a document disclosing the risks of penny
stocks and to obtain a manually signed and dated written receipt of the
document before making any transaction in a penny stock for the investor's
account. You are urged to obtain and read this disclosure carefully before
purchasing any of our shares.
Rule 15g-9 of the Securities and Exchange Commission requires
broker/dealers in penny stocks to approve the account of any investor for
transactions in these stocks before selling any penny stock to that investor.
This procedure requires the broker/dealer to:
* get information about the investor's financial situation,
investment experience and investment goals;
* reasonably determine, based on that information, that
transactions in penny stocks are suitable for the investor and that the
investor can evaluate the risks of penny stock transactions;
* provide the investor with a written statement setting forth
the basis on which the broker/dealer made his or her determination; and
* receive a signed and dated copy of the statement from the
investor, confirming that it accurately reflects the investors' financial
situation, investment experience and investment goals.
Compliance with these requirements may make it harder for our
stockholders to resell their shares.
Reporting Obligations.
----------------------
Section 14(a) of the Exchange Act requires all companies with
securities registered pursuant to Section 12(g) of the Exchange Act to comply
with the rules and regulations of the Securities and Exchange Commission
regarding proxy solicitations, as outlined in Regulation 14A. Matters
submitted to stockholders of our Company at a special or annual meeting
thereof or pursuant to a written consent will require our Company to provide
our stockholders with the information outlined in Schedules 14A or 14C of
Regulation 14; preliminary copies of this information must be submitted to the
Securities and Exchange Commission at least 10 days prior to the date that
definitive copies of this information are forwarded to our stockholders.
We are also required to file annual reports on Form 10-KSB and
quarterly reports on Form 10-QSB with the Securities Exchange Commission on a
regular basis, and will be required to timely disclose certain material
events (e.g., changes in corporate control; acquisitions or dispositions of a
significant amount of assets other than in the ordinary course of business;
and bankruptcy) in a Current Report on Form 8-K.
Small Business Issuer.
----------------------
The integrated disclosure system for small business issuers adopted
by the Securities and Exchange Commission in Release No. 34-30968 and
effective as of August 13, 1992, substantially modified the information and
financial requirements of a "Small Business Issuer," defined to be an issuer
that has revenues of less than $25,000,000; is a U.S. or Canadian issuer; is
not an investment company; and if a majority-owned subsidiary, the parent is
also a small business issuer; provided, however, an entity is not a small
business issuer if it has a public float (the aggregate market value of the
issuer's outstanding securities held by non-affiliates) of $25,000,000 or
more. We are deemed to be a "small business issuer."
The Securities and Exchange Commission, state securities commissions
and the North American Securities Administrators Association, Inc. ("NASAA")
have expressed an interest in adopting policies that will streamline the
registration process and make it easier for a small business issuer to have
access to the public capital markets.
Research and Development Expenses During Past Two Fiscal Years.
---------------------------------------------------------------
There were no recognized research and development expenses incurred
by us during the past two fiscal years, or by any of our sponsored affiliated
entities, except the recognition of $262,879 in fiscal 2002, all of which was
related to AssureTec. It is anticipated that research and development funds
will be required with respect to our planned business operations of the
development, manufacture and sale of scandium alloy golf clubs.
Costs and Effects of Compliance with Environmental Laws.
--------------------------------------------------------
None of our sponsored affiliates or AssureTec have yet reached the
stage of development wherein environmental issues have arisen; that is the
same regarding our Element 21 technology; however, we cannot yet determine
what, if any, of these types of regulations will affect our planned business
operations of the development, manufacture and sale of scandium alloy golf
clubs.
Number of Employees.
--------------------
As of October 31, 2002, we have no employees, and we conduct our present
and planned business operations with the assistance of independent
consultants, including our former President, Dr. Reeves, who recently resigned
as an officer and director of our Company following the Element 21 Acquisition
referenced in our 8-KA Current Report dated October 2, 2002, which is
referenced in the Exhibit Index, Part III, Item 13.
Item 2. Description of Property.
---------------------------------
We occupy space without expense provided by an affiliate of Dr. Reeves,
our former President. This area, containing approximately 6,000 square feet
of finished office, is shared with the Tech Ventures affiliated companies and
several other affiliates of Dr. Reeves. The value of this space is not
significant.
Item 3. Legal Proceedings.
---------------------------
We are not the subject of any pending legal proceedings; and to the
knowledge of our management, no proceedings are presently contemplated
against us by any federal, state or local governmental agency.
Further, to the knowledge of our management, no director or executive
officer is party to any action in which any has an interest adverse to us.
Item 4. Submission of Matters to a Vote of Security Holders.
-------------------------------------------------------------
No matter was submitted to a vote of our security holders during the
fourth quarter of the fiscal year ended June 30, 2002.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
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Market Information.
-------------------
There has never been any "established trading market" for our shares of
common stock. Our common stock is presently quoted on the OTC Bulletin Board
of the NASD under the symbol "BRLN" as reflected below. No assurance can be
given that any market for our common stock will develop in the future or be
maintained. If an "established trading market" ever develops in the future,
the sale of "restricted securities" (common stock) pursuant to Rule 144 of the
Securities and Exchange Commission by members of our management or others may
have a substantial adverse impact on any such market.
The range of high and low bid quotations for our common stock during
each of the nine quarters in the period ended September 31, 2002, is shown
below. Prices have not been adjusted to reflect the October 2002 stock
dividend, are inter-dealer quotations as reported by the NQB, LLC, and do not
necessarily reflect transactions, retail markups, mark downs or commissions.
STOCK QUOTATIONS
BID
Quarter ended: High Low
-------------- ---- ---
September 30, 2000 $0.11 $0.11
December 31, 2000 $0.11 $0.11
March 31, 2001 $0.20 $0.28
June 30, 2001 $0.02 $0.04
September 30, 2001 $0.15 $0.15
December 31, 2001 $0.15 $0.15
March 31, 2002 $0.25 $0.25
June 30, 2002 $0.30 $0.30
September 30, 2002 $0.17 $0.15
Recent Sales of Restricted Securities.
--------------------------------------
The following "restricted securities" have been sold by us during the
past two years:
Fiscal Year Ended June 30, 2001
-------------------------------
Common Stock Issued for Number of Shares Sold Consideration
----------------------- --------------------- -------------
Services(1) 928,000 $46,400
Fiscal Year Ended June 30, 2002
-------------------------------
Common Stock Issued for Number of Shares Sold Consideration
----------------------- --------------------- -------------
Services(2) 1,414,968 $134,822
Options Exercise(3) 500,000 $ 35,000
Subsidiary Exchange(4) 650,000 $ 45,160
(1) Shares issued for services were to President, R. Bruce Reeves
(560,000); Kevin T. McGuire, Treasurer (40,000); Richard Schubert, Director
(100,000); Richard Whitney, Director (100,000); and legal counsel, John B.
Lowy, Esq. (128,000). All shares were valued at $0.05 per share.
(2) Services shares were issued as follows:
Employees of AssureTec: 1,016,968 shares $86,442
Legal counsel, John B. Lowy: 318,000 shares $34,980
Consulting, Friedland Capital 80,000 shares $13,400
(3) Issued and exercised by Dr. Reeves and Mr. McGuire, our then
President and Treasurer, respectively.
(4) These are the net securities that remained outstanding resulting
from the divestiture of our majority interest in AssureTec as described above
under the heading "Business Development" of Item 1. These securities are
owned by two persons, one of whom is Dr. Reeves' son, Robert T. Reeves.
Holders.
--------
The number of record holders of our common stock as of October 31, 2002,
was approximately 1,800; this number does not include an indeterminate number
of stockholders whose shares are held by brokers in street name.
Dividends.
----------
There are no present material restrictions that limit our ability
to pay cash dividends on common stock or that are likely to do so in the
future. Except as indicated above under the heading "Business Development" of
Item 1, we have not paid any dividends with respect to our common stock, and
do not intend to pay dividends in the foreseeable future. See Item 1 for
information about our two (2) for one (1) stock split in the form of a 100%
stock dividend, and our planned dividend of two of our subsidiaries to our
stockholders. Except as otherwise indicated, all share and per share data
reflected in this Annual Report has been retroactively restated to reflect
this dividend.
Item 6. Management's Discussion and Analysis or Plan of Operation.
-------------------------------------------------------------------
Plan of Operations.
-------------------
During the next 12 months, we plan to design, develop and market scandium
alloy golf clubs, based upon the technology we acquired in the Element 21
Acquisition. We have not yet formulated our business plan in this respect, so
we are unable to determine what funds will be immediately necessary to
implement our planned operations; however, we will need substantial funds, in
either equity or debt investments, or partners, who can fund our planned
research and development once our business plan has been formulated. There
are no present arrangements or understandings with anyone to provide this
required funding.
Results of Operations.
----------------------
General.
--------
We presently have investments in several entities all of which are
briefly discussed below and are held in our 100% subsidiary, Tech Ventures.
We have had no operations or revenues independent of these investments, except
planned operations regarding our Element 21 golf technology, and currently, we
rely on our business arrangements with Dr. Reeves, our former President and
one of our former directors who is now a consultant to us, or his associates
and affiliates, to evaluate possible merger and acquisition opportunities and
other strategies to optimize value for our shareholders.
Effective as of December 31, 2000, we reduced our ownership interest in
Biorelease Technologies, Inc. ("BTI") from 92.5% to 15.9% through the transfer
of 76.6% of its shares to an affiliate of Dr Reeves. During fiscal years
ended June 30, 2002 and 2001, BTI's operations were minimal, as outlined in
Note 1 to our Consolidated Financial Statements. This entity is referred to
throughout this Annual Report as a sponsored affiliate.
In July 2001, we formed Advanced Conductor and I-JAM Entertainment, Inc.
("I-JAM") as wholly owned subsidiaries. These entities were formed in
anticipation of two certain identified merger and acquisition transactions
that were never consummated. These entities currently have no material
operations and no sources of revenue, also as outlined in Note 1 to our
Consolidated Financial Statements. These entities are also referred to
throughout this Annual Report as sponsored affiliates.
In November, 2001, following our acquisition of 100% of AssureTec, we
began reporting as a development stage enterprise. We terminated this
reporting basis effective April 1, 2002, upon our divestiture of a majority
interest in that entity. At June 30, 2002, our ownership interest in
AssureTec was 32.4%. AssureTec is a development stage company that has
proprietary technologies in authenticating documents used for identification
and to prevent fraud and terrorism. It has incurred research and development
and general and administrative expenses, but has no revenues at this time.
The management of AssureTec is currently seeking to raise capital sufficient
to fund its operations during its development stage; it has not yet commenced
its principal operations, has limited working capital; and no current sources
of revenue, also as outlined in Note 1 to our Consolidated Financial
Statements.
In June 2002, we formed Tech Ventures at which time we transferred
substantially all of our assets, subject to certain liabilities, to Tech
Ventures, in exchange for both 100% of its outstanding common stock and its
assumption of substantially all of our liabilities. This entity is also
referred to throughout this Annual Report as a sponsored affiliate. Tech
Ventures has had no operations or revenues independent of its investments in
BTI, AssureTec, Advanced Conductor and I-JAM, also as outlined in Note 1 to
our Consolidated Financial Statements.
Fiscal 2001 Compared to Fiscal 2002.
------------------------------------
As further discussed in Note 1 to our Consolidated Financial Statements,
during the two years ended June 30, 2002 and 2001, we consolidated BTI's
operations through December 31, 2000, and accounted for it on an equity basis
thereafter, and we consolidated AssureTec's operations from the date of its
acquisition, November 9, 2001, through March 31, 2002 (the date of its
divestiture), and accounted for it on an equity basis thereafter.
During fiscal 2002, we had no revenues and no gross profits. The
decrease from fiscal 2001 levels is associated with the fact that we now
account for BTI on an equity basis of accounting and there were no revenues
recorded by AssureTec during the period of in which its operations are
consolidation with our operations. General and administrative expenses for
the year were $605,701, of which $134,822 represented compensation recorded on
the issuance of common stock for services performed by employees and
consultants working for the benefit of AssureTec. The increase in general and
administrative expenses of $518,250 over fiscal 2001 was primarily the result
of activity at AssureTec that was not a component of our consolidated
operations in fiscal 2001. Research and development expenses during this
period were $262,879 representing activity at AssureTec. There were no such
activities in the prior fiscal year. During fiscal 2002, we also recorded a
loss from investee of $1,644 representing a $4,648 change from fiscal 2001.
This change was a result of changes in activity within BTI that was accounted
for on an equity basis of accounting for all of fiscal 2002. We also
recognized other income of $13,000 during this period representing
reimbursements of expenses from a third party. During the year ended June 30,
2001, we had revenues of $14,315; cost of revenues of 2,698; gross margin of
$11,617; general and administrative expenses were 87,451; income from the
entities in which we had invested of $3,004; other income of $6,602 and other
costs of $10,159. As a result of this activity, we had a net loss of
$(857,224) for the year ended June 30, 2002, as compared to a net loss of
$(76,387) during the year ended June 30, 2001.
As further discussed in Note 7 of our Consolidated Financial Statements,
during fiscal 2002, we recorded approximately $618,000 of losses associated
with our investment in AssureTec and our interest in AssureTec's operations
subsequent to its acquisition by us. This amount would not have been
significantly different had the acquisition of AssureTec occurred at the
beginning of fiscal 2002. AssureTec was formed shortly before its acquisition
by our Company and, accordingly, there would have been no effect on our
Company's Consolidated Statement of Operations for the fiscal year ended June
30, 2001.
Liquidity and Capital Resources.
--------------------------------
From our inception and as of the date of this Annual Report, our primary
source of funds has been the proceeds from private offerings of our common
stock and the common stock of our subsidiaries and advances from affiliates of
Dr. Reeves to AssureTec. This trend is expected to continue until we are able
to achieve profitable operations, if ever. Management's plans for our Company
include securing a merger or acquisition and other strategies designed to
optimize shareholder values. Subsequent to June 30, 2002, the Element
21 Acquisition was completed, with a plan to effect a distribution by
dividend of our interest in Advanced Conductor and Tech Ventures, as discussed
above under the heading "Business Development" of Item 1. However, no
assurance that management will be successful in fulfilling all elements of it
plans. The failure to achieve these plans will have a material adverse effect
on our Company's financial position, results of operations and ability to
continue as a going concern. As noted in our auditor's report dated November
12, 2002, there is substantial doubt about our Company's ability to continued
as a going concern.
New Accounting Pronouncements.
------------------------------
Effective as of November, 2001, with the acquisition of AssureTec we
adopted Statement of Financial Accounting Standards No. 141, "Business
Combinations" (SFAS 141). The statement requires the use of the purchase
method of accounting, requires the purchase price to be allocated to assets
acquired and liabilities assumed, including intangible assets and specifies
the types of intangible assets to be recorded.
Effective with the adoption of SFAS 141, we adopted SFAS 142 "Goodwill
and Other Intangible Assets." Under the terms of SFAS 142, goodwill
and other intangible assets that have indefinite lives are no longer
amortized. Rather, they are assessed for impairment at the date of adoption
and then on an annual basis. Intangible assets with finite lives continue to
be amortized over such lives.
In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which supersedes previous
guidance on financial accounting and reporting for the impairment or disposal
of long-lived assets and for segments of a business to be disposed of.
Adoption of SFAS No. 144 is required no later than the beginning of fiscal
2003. Management does not expect the adoption of SFAS No. 144 to have a
significant impact on our Company's financial position or results of
operations.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". SFAS No. 146 nullifies Emerging
Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)."
SFAS No. 146 requires that a liability be recognized for those costs only
when the liability is incurred, that is, when it meets the definition of a
liability in the FASB's conceptual framework. SFAS No. 146 also establishes
fair value as the objective for initial measurement of liabilities related to
exit or disposal activities. SFAS No. 146 is effective for exit or disposal
activities that are initiated after December 31, 2002, with earlier adoption
encouraged. Management does not expect the adoption of SFAS No. 146 will have
a material impact on our Company's financial position or results of
operations.
Critical Accounting Policies and Estimates.
-------------------------------------------
The use of the following accounting policies, each of which are further
discussed in Note 1 of our Consolidated Financial Statements, had a
significant effect on our Company's Consolidated Financial Statements.
* Our Company's investment in AssureTec was accounted for on the
consolidated basis through March 31, 2002, and on the equity method of
accounting thereafter.
* Our Company's Consolidated Financial Statements have been
prepared on the basis we will continue as a going concern.
The following estimates used in the preparation of our Company's
Consolidated Financial Statements had a significant effect on those
statements.
* Our Company has established a reserve against our deferred tax
asset reducing the carrying value to $0 at June 30, 2002 and 2001.
* Our Company has established reserves against amounts due from
related parties reducing the carrying value to $0 at June 30, 2002.
Item 7. Financial Statements.
------------------------------
For the years ended June 30, 2002 and 2001.
Independent Auditors' Report
Consolidated Balance Sheet
Consolidated Statements of Operations
Consolidated Statements of Changes in Stockholders' Deficit
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
BRL HOLDINGS, INC.
FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2002 AND 2001
INDEPENDENT AUDITORS' REPORT
To: BRL Holdings, Inc.;
We have audited the accompanying consolidated balance sheet of BRL Holdings,
Inc. (formerly Biorelease Corp.) and subsidiaries as of June 30, 2002 and the
related consolidated statements of operations, changes in stockholders'
deficit, and cash flows for the years ended June 30, 2002 and 2001.These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above,
present fairly, in all material respects, the consolidated financial position
of BRL Holdings, Inc. as of June 30, 2002 and the results of their
consolidated operations and their cash flows for the years ended June 30, 2002
and 2001, in conformity with accounting principles generally accepted in the
United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to
the consolidated financial statements, as of June 30, 2002, the Company has no
business operations, has negative working capital of $32,303, an accumulated
deficit of $8,042,722 and a total stockholders' deficit of $32,303 and for the
year ended June 30, 2002 incurred a net loss of $857,224, all of which raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Good Swartz Brown & Berns LLP
Los Angeles, California
November 12, 2002
F-1
BRL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 2002
ASSETS
2002
Current assets ----
Cash $ 1,148
Prepaid expenses 1,050
-----
Total assets $ 2,198
=====
See notes to consolidated financial statements.
F-2
BRL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 2002
LIABILITIES AND STOCKHOLDERS' DEFICIT
2002
Current liabilities ----
Accounts payable $ 8,814
Due to related party 20,687
Accrued expenses 5,000
------
Total current liabilities 34,501
Commitments (Note 4)
Stockholders' deficit
Preferred stock of $.10 per share value,
authorized 5,000,000 shares, no
shares issued and outstanding at -
Common stock of $.01 par value;
50,000,000 shares authorized
5,433,800 shares issued and outstanding 54,338
Additional paid-in capital 7,956,081
Accumulated deficit (8,042,722)
-----------
Total stockholders' deficit (32,303)
Total liabilities and
stockholders' deficit $ 2,198
=====
See notes to consolidated financial statements.
F-3
BRL HOLDINGS, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
2002 2001
Revenues
Sales $ - $ 14,315
--------- --------
Cost of revenues - 2,698
Gross profit - 11,617
Costs and expenses
General and administrative 605,701 87,451
Research and development 262,879 -
--------- --------
Total costs and expenses 868,580 87,451
--------- --------
Loss from operations (868,580) (75,834)
--------- --------
Other income (expense)
Income (loss) from investee (1,644) 3,004
Offering costs - (9,543)
Other income 13,000 6,602
Loss on sale of assets - ( 616)
--------- --------
Other income (expense), net 11,356 (553)
Loss before provision for income taxes (857,224) (76,387)
Provision for income taxes - -
Net Loss $ (857,224) $ (76,387)
========= ========
Basic and diluted weighted average shares 6,725,982 2,562,718
========= =========
Basic and diluted loss per share $ ( 0.13) $ (0.03)
========= =========
See notes to consolidated financial statements.
F-4
BRL HOLDINGS, INC
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
YEARS ENDED JUNE 30, 2002 AND 2001
Common Common Additional
Stock Stock Paid- in
Shares Amount Capital
------ ------ -------
Balance, June 30, 2000 1,939,878 $ 9,699 $ 7,095,522
Issuance of common stock for
services 928,000 4,640 41,760
Expense of deferred offering costs - - -
Net loss - - -
------- ----- ------
Balance, June 30, 2001 2,867,878 14,339 7,137,282
Rounding adjustment from reverse 954 5 (5)
stock split
Issuance of common stock for services 1,414,968 7,075 127,747
Exercise of common stock options 500,000 2,500 32,500
Issuance of common stock to a quire
stock of subsidiary 6,354,000 31,770 498,230
Company shares received and retired as
consideration for sale of interest
in subsidiary (5,704,000) (28,520) 28,520
Net effect of subsidiary transaction
(Note 1) - - 131,807
Stock split in the form of a dividend 27,169
(Note 10)
Net loss - - -
---------- ------- --------
Balance, June 30, 2002 5,433,800 54,338 7,956,081
BRL HOLDINGS, INC
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
YEARS ENDED JUNE 30, 2002 AND 2001
(continued)
Total
Deferred Stockholders'
Accumulated Offering Equity
Deficit Costs (Deficit)
------- ----- ---------
Balance, June 30, 2000 $ (7,081,942) $ (13,376) $ 9,903
Issuance of common stock for
services 46,400
Expense of deferred offering costs - 13,376 13,376
Net loss (76,387) - (76,387)
--------- ------- ---------
Balance, June 30, 2001 (7,158,329) - (6,708)
Rounding adjustment from reverse
stock split -
Issuance of common stock for services 134,822
Exercise of common stock options 35,000
Issuance of common stock to a quire
stock of subsidiary 530,000
Company shares received and retired as
consideration for sale of interest
in subsidiary -
Net effect of subsidiary transaction
(Note 1) 131,807
Stock split in the form of a dividend
(Note 10) (27,169) -
Net loss (857,224) (857,224)
--------- --------- ---------
Balance, June 30, 2002 $ (8,042,722) $ - $ (32,303)
========= ========= =========
See notes to consolidated financial statements.
F-5
BRL HOLDINGS, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
2002 2001
Cash flows from operating activities
Net loss $(857,224) $ (76,387)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities
Depreciation and amortization 110,813 353
Net effect of subsidiary transactions 131,807 -
Income (loss) from investee 1,644 (3,004)
Common stock issued in exchange for
services rendered 134,822 59,776
Write off of subsidiary investment
due to conversion to equity
method accounting 423,925 -
Provision for uncollectable note
receivable 13,624 -
(Increase) decrease in
Inventory - 885
Prepaid expenses and other
current assets (70) (980)
Other receivables - 29,447
Increase (decrease) in
Accounts payable 4,139 (10,117)
Other liabilities-related party (10,124) -
Accrued expenses (26,986) 10,014
-------- ------
Net cash provided by (used in)
operating activities (19,658) 9,987
Cash flow from investing activities
Notes receivable - (13,624)
Investment - (5,397)
-------- -------
Net cash used in investing activities - (19,021)
-------- -------
Cash flows from financing activities
Due to related party 20,687 9,124
Net cash provided from financing activities 20,687 9,124
-------- -------
Net increase in cash 1,029 90
Cash, beginning of year 119 29
Cash, end of year $ 1,148 $ 119
See notes to consolidated financial statements.
F-6
BRL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2002 AND 2001
1.Organization and Summary of Significant Accounting Policies
-----------------------------------------------------------
Reporting Entity
----------------
The financial statements and related notes have been prepared from the
books and records of BRL Holdings, Inc., (the "Company" or "BRL" formerly
Biorelease Corp or Biorelease). As further discussed in Note 10, as of the
consummation of the transactions and events discussed therein, the reporting
entity will change from the Company to Element 21 Golf Company.
Organization and Basis of Presentation
--------------------------------------
The Company has investments in several entities all of which are
discussed below. It has no operations and revenues independent of these
investments and currently relies on business arrangements with Dr. Reeves, its
President as of June 30, 2002, or his affiliates to evaluate possible merger
and acquisition opportunities. In November 2001 following it's acquisition of
100% AssureTec Systems, Inc. ("AssureTec"), the Company began reporting as a
development stage enterprise. The Company terminated this reporting basis
effective April of 2002 upon the divestiture of a majority interest in that
entity.
In December of 2000 the Company transferred substantially all of its
ownership interest in Biorelease Technologies, Inc. ("BTI") to R T Robertson
Consultants ("Consultants") an affiliate of Dr. Reeves (see Note 9) in
exchange for the assumption of certain liabilities of BTI and the Company. BTI
and the Company had common management and common Board of Directors. Following
this, Consultants exercised an existing option to acquire shares of BTI. As a
result of these transactions the Company's ownership interest in BTI decreased
from 92.5% at June 2000 to 15.9% at June 2001. Through December of 2000 the
Company consolidated its financial statements with those of BTI. Beginning
January 1, 2001, the Company adopted the equity method of accounting for its
investment in BTI. The equity method was adopted in recognition of the
commonality of management between the Company and BTI. .
In May of 2001 of the Company declared a reverse split of the then
outstanding common stock of the Company on a one-for-12.5 basis. This split
has been reflected retroactively in the accompanying financial statements and
accordingly all share and per share amounts have been restated.
In July of 2001 the Company formed Advanced Conductor Technologies, Inc
("ACT") and I-JAM Entertainment, Inc. (I-JAM) as wholly owned subsidiaries.
These entities were formed in anticipation of certain merger and acquisition
transactions, which were never consummated. These entities currently have no
operating business and no sources of revenue. The Company's financial
statements include those of both entities on a consolidated basis.
F-7
In November 2001, the Company issued 6,354,000 shares of its common stock
under an Acquisition Agreement (the "Acquisition") with AssureTec wherein the
Company received 100% of AssureTec's common stock. Effective April 1, 2002 the
Company repurchased 5,704,000 shares of its common stock issued in connection
with the Acquisition from founding stockholders of AssureTec in exchange for a
like number of AssureTec common stock held by the Company. As a result of
these transactions and the issuance of additional shares of AssureTec to
employees on the exercise of stock options the Company's ownership fell to
34.2 % of AssureTec as of June 30, 2002. Immediately prior to the Acquisition
Dr Reeves and his Affiliates owned 48.5% of AssureTec.
During the period from the date of the Acquisition through March 31, 2002
the Company's financial statements included those of AssureTec on a
consolidated basis. Beginning April 1, 2002, the Company adopted the equity
method of accounting for its investment in AssureTec. The equity method was
adopted in recognition of the reduction of its ownership interest below 50%.
Upon adopting the Equity method of accounting, the Company recorded an
adjustment in Additional Paid In Capital in the amount of $131,807
representing the excess of the losses of AssureTec recorded prior to adopting
this method over the Company's net unamortized cost of its investments. This
adjustment is reflected as "Net effect of subsidiary transaction" in the
accompanying Statement of Changes in Stockholders Deficit. As further
discussed in Note 7 the Company has recorded approximately $618,000 of losses
associated with its investment in AssureTec and its interest in AssureTec's
operations subsequent to the Company's acquisition. This amount would not
have been significantly different had the acquisition of AssureTec occurred at
the beginning of fiscal 2002. AssureTec was formed shortly before its
acquisition by the Company and, accordingly, there would have been no effect
on the Company's statement of operations for the fiscal year ended June 30,
2001.
In June of 2002, the Company formed Tech Ventures, Inc., ("TVI") to which
it transferred substantially all of the Company's assets in exchange for the
assumption by TVI of substantially all of the Company's liabilities and an
indemnity in favor of the Company. The Company's financial statements included
those of TVI on a consolidated basis.
As further discussed in Note 10, in October of 2002 of the Company
declared a 2 for 1 stock split in the form of a stock dividend. This has been
reflected retroactively in the accompanying financial statements and
accordingly all share and per share amounts have been restated.
F-8
BRL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2002 AND 2001
1.Summary of Significant Accounting Policies - Continued
------------------------------------------
Principles of Consolidation
-------------------------
The accompanying consolidated financial statements include the accounts
of the company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Equity Method Accounting
------------------------
The Company uses the equity method of accounting for all unconsolidated
subsidiaries when management determines it has the ability to exercise
significant influence over the subsidiary. Accordingly, the recognition of
net losses will be discontinued when the net losses exceed the Company's
investment and funding commitment to that subsidiary. Net income from that
subsidiary will be recognized after the subsidiary's net income exceeds the
Company's investment and funding commitment in that subsidiary.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
Future Operations/Going Concern
-------------------------------
These financial statements have been presented on the basis that the
Company is a going concern, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. As discussed
earlier the Company has no business operations of its own and has no sources
of revenue. Its investment in its subsidiaries is not expected to produce a
significant amount of cash or revenue for the Company. Further, as of June 20,
2002, the Company has negative working capital of $32,303, an accumulated
deficit of $8,042,722 and a total stockholders' deficit of $32,303 and for the
year ended June 30, 2002 incurred a net loss of $857,224, all of which raise
substantial doubt about the Company's ability to continue as a going concern.
Managements' plans for the Company include securing a merger or
acquisition and other strategies designed to optimize shareholder values..
Subsequent to June 30, 2002, management has located a reverse merger candidate
and has proposed a plan to spinout the pre-reverse merger assets and
liabilities. Those plans are described below, however, no assurance can be
made that management will be successful in fulfilling all elements of it plan.
The failure to achieve these plans will have a material adverse effect on the
Company's financial position, results of operations and ability to continue as
a going concern.
As further discussed in Note 10 to the financial statements, in October
of 2002 the Company acquired Element 21 Golf Company ("Element 21"), a
development stage company recently formed to design, develop and market
scandium alloy golf clubs. This acquisition will be accounted for as a reverse
acquisition using the purchase method of accounting, as the shareholders of
Element 21 will control the Company immediately following the acquisition.
Consequently, as of the acquisition date the reporting entity will consist of
the operations of Element 21. Element 21 had not yet commenced its principal
operations.
As discussed in Note 10 to the financial statements, in October of 2002
the Company plans to distribute its ownership in AssureTec and substantially
all other assets, excluding its investment in Element 21 Golf Company, to
shareholders of the Company.
Fair Value of Financial Instruments
-----------------------------------
The Company's financial instruments consist of cash, short-term
receivables and payables. The carrying value of all instruments approximates
their fair value.
Revenue recognition
-------------------
Revenues from product sales are recorded when shipped.
Stock-Based Compensation
------------------------
Statements of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS No. 123) establishes a fair value method of
accounting for stock-based compensation plans and for transactions in which an
entity acquires goods or services from non employees in exchange for equity
instruments. SFAS 123 also encourages, but does not require companies to
record compensation cost for stock-based employee compensation. The Company
has chosen to continue to account for stock-based compensation utilizing the
intrinsic value method prescribed in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees". Accordingly, compensation
cost for stock options is measured as the excess, if any, of the fair market
price of the Company's stock at the date of grant over the amount an employee
must pay to acquire the stock.
BRL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2002 AND 2001
1.Summary of Significant Accounting Policies - Continued
------------------------------------------
Equipment
---------
Equipment is stated at cost. Depreciation and amortization are provided
using an accelerated method over the estimated useful lives of three to seven
years. Repairs and maintenance are charged to expense when incurred. Any gain
or loss resulting from the disposal of equipment is included in operations and
the cost and related accumulated depreciation are removed from the respective
account balances.
Income Taxes
------------
Deferred income taxes are recognized for the tax consequences in future
years for differences between the tax bases of assets and liabilities and
their financial reporting amounts at each year-end based on enacted tax laws
and statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
Income tax expense is the tax payable for the period and the change during the
period of deferred tax assets and liabilities.
Loss Per Common Share
---------------------
Loss per common share is computed using the weighted-average number of
common shares outstanding during each period. Options to purchase 190,800 and
222,116 shares of common stock outstanding as of June 30, 2002 and 2001,
respectively are not included in the Company's computation of loss per share
for the periods included in the accompanying financial statements, as the
inclusion of these shares would be anti-dilutive; therefore, diluted loss per
share is equal to basic loss per share.
As of June 30, the net loss per share was calculated as follows:
2002 2001
---- ----
Net loss $ (857,224) $ (76,387)
Weighted Average Shares 6,725,982 2,562,718
Basic and diluted loss per share $ (0.13) $ (0.03)
====== ======
The weighted average shares outstanding for this calculation has been
retroactively re-stated for the stock dividend referred to in Note 10.
New Accounting Pronouncements
-----------------------------
In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which supersedes previous
guidance on financial accounting and reporting for the impairment or disposal
of long-lived assets and for segments of a business to be disposed of.
Adoption of SFAS No. 144 is required no later than the beginning of fiscal
2003. Management does not expect the adoption of SFAS No. 144 to have a
significant impact on the Company's financial position or results of
operations.
In July 2002 the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". SFAS No. 146 nullifies Emerging
Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)."
SFAS No. 146 requires that a liability be recognized for those costs only
when the liability is incurred, that is, when it meets the definition of a
liability in the FASB's conceptual framework. SFAS No. 146 also establishes
fair value as the objective for initial measurement of liabilities related to
exit or disposal activities. SFAS No. 146 is effective for exit or disposal
activities that are initiated after December 31, 2002, with earlier adoption
encouraged. Management does not expect the adoption of SFAS No. 146 will have
a material impact on the company's financial position or results of
operations.
BRL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2002 AND 2001
2. Note receivable
---------------
The Company has a note receivable from a former merger candidate. The
principal amount of the note is $13,624 and bears interest at 12%. The note
is unsecured, but is personally guaranteed by the president of the merger
candidate. The note was due June 24, 2001 and then extended until December
31, 2001. During fiscal 2002 the Company recorded a valuation reserve against
this asset equal to the entire amount due.
3. Equipment
---------
Equipment consisted of the following as of June 30:
2002
----
Equipment $ 9,185
Furniture and fixtures -
-----
9,185
Less accumulated depreciation (9,185)
$ -
=====
Depreciation expense for the year ended June 30, 2001 was $353.
4.Commitments
-----------
The Company has had no leased premises since 1997. Through June 30, 2002
the Company was provided office space by R T Robertson Consultants, a related
party, without charge. Effective July 1, 2002, the Company is occupying space
provided by AssureTec. The Company expects to maintain its offices in this
location without charge. The estimated fair value of the space is not
significant.
BRL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2002 AND 2001
5.Income Taxes
------------
The Company has not filed federal or state tax returns for any of the
calendar years subsequent to December 31, 1993. Management expects there will
be no federal tax liability for these years then ended.
The net current and long-term deferred taxes consisted of the following
components as of June 30:
2002 Tax Effect
---------------
Asset Liability
----- ---------
Item Total Current Long-Term Current Long-Term
---- ----- ------- --------- ------- ---------
Book to tax adjustment $ (4,172) $ - $ - $(4,172) $ -
Net operating loss
deduction 550,180 - 550,180 - -
------- -------- -------- ------- ---------
546,008 - 550,180 (4,172) -
Valuation allowance (546,008) ( -) (550,180) 4,172 -
$ - $ - $ - $ - $ -
======= ======== ======== ======== =========
2001 Tax Effect
---------------
Asset Liability
----- ---------
Item Total Current Long-Term Current Long-Term
---- ----- ------- --------- ------- ---------
Book to tax adjustment $(1,699) $ 135 $ - $ (1,834) $ -
Net operating loss
deduction 427,457 - 427,457 - -
------- ------- -------- --------- ---------
425,758 135 427,457 (1,834) -
Valuation allowance (425,758) 135 (427,457) 1,834 -
$ - $ - $ - $ - $ -
======= ======== ======== ======== =========
Changes in the valuation allowance were as follows:
Balance June 30, 2000 $ 1,110,850
Net decrease (685,092)
---------
Balance June, 30, 2001 425,758
Net increase 120,250
---------
Balance June 30, 2002 $ 546,008
=========
A valuation allowance equivalent to 100% of the deferred tax asset has
been established since it is more probable than not that the Company will not
be able to recognize a tax benefit for the asset. The net operating losses
expire at various dates through 2022.
BRL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2002 AND 2001
6. Equity
------
As of June 30, 2002 there are two stock option plans in effect, the 1992
Directors' Stock Option Plan (Directors' Plan) and the 1992 Stock Option Plan
(Option Plan). The Directors' Plan allows for the grant of options to purchase
up to 250,000 shares of the Company's common stock at an exercise price no
less than the stock market price at the date of grant. Options granted under
this Plan vest immediately and expire 10 years from the date of grant. The
Option Plan allows for the grant of options to employees purchase up to 10% of
the issued and outstanding shares of the Company, not to exceed 1,000,000
shares, at an exercise price equal to the stocks market price at the date of
grant. Vesting and expiration dates are set by the Board
During fiscal 2002 Dr. Reeves the Company's President and a consultant
who serves as the Company's Treasurer were granted options to purchase up to
450,000 and 50,000 shares of common stock, respectively at an exercise price
of $.07. In March 2002 these options were exercised.
BRL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2002 AND 2001
6. Equity - Continued
A summary of the Company's stock option plans as of June 30, 2002 and
2001 and changes during the year are presented below:
Options Granted to
Director Plan Option Plan Service Providers
------------- ----------- -----------------
Weighted Weighted Weighted
Number Average Number Average Number Average
of Exercise of Exercise of Exercise
Options Price Options Price Options Price
------- ----- ------- ----- ------- -----
Options
outstanding,
June 30, 2000 22,000 $ 17.19 $ 226,100 $ 4.32
Options Granted
September 30,
2000 3,200 .625 -
Options expired
June 30, 2001 - (29,184) 4.32
Options
outstanding
June 30, 2001 25,200 8.63 196,916 4.32
Options granted
September 2001 40,000 .16
Options granted
October 2001 500,000 .07
Options exercised
March 2002 (500,000) .07
Options expired
June 30, 2002 - - - - (71,316) 4.32
----- ----- ----- ----- ------ -----
Options outstanding
June 30, 2002 65,200 $ 5.90 $ 0 $ - 125,600 $ 4.32
====== ===== ===== ===== ======= =====
As of June 30, 2002 all outstanding options are currently exercisable.
The range of exercise prices is $.17 to $37.50 as of June 30, 2002 and 2001,
respectively. The weighted average remaining contractual life of options
outstanding under the director plan and those granted to service providers was
7.3 years and 1.8 years respectively at June 30, 2002 and 2001.
The weighted average fair value of the options granted during the years
ended June 30, 2002 and 2001 is presented below:
2002 2001
---- ----
Director Plan $0.17 $.05
Option Plan $0.06 N/A
Options granted to service providers N/A N/A
At June 30, 2002 shares available for grant under the Directors Plan and
the Option Plan were 211,000 shares and 21,690, respectively.
BRL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2002 AND 2001
6.Equity - Continued
During fiscal 2002 and 2001, the Company issued 1,414,968 and 928,000
shares of common stock to Directors, officers, consultants and the Company's
legal counsel for services rendered by them and recorded expenses of $134,822
and $46,400, respectively.
Had the Company recorded compensation cost under the alternative
accounting method provided for under SFAS 123 the net loss for fiscal 2002
would have been approximately $891,000 and the net loss per share would have
been $.13. The assumptions employed in calculating these amounts include a
risk free interest rate of 6%, expected volatility of 230% and the assumption
no dividends will be paid
7. Investment in subsidiaries
--------------------------
As discussed in Note 1 to the accompanying financial statements, in
November of 2001, the Company acquired AssureTec. This transaction was
accounted for as a purchase. The Company recorded its investment in this
entity at $530,000 the fair market value of the Company's shares issued in
the transaction. The purchase price was allocated to the following assets:
Uncompleted technology $ 92,500
Non-compete agreements 370,000
Developed software 60,000
Patent costs 7,500
-------
$530,000
=======
During fiscal 2002 the Company reduced this investment by approximately
$200,000 representing the value assigned to the uncompleted technology and
amortization of the intangibles assets acquired in the transaction and
recorded approximately $418,000 of losses associated with AssureTec's
operations. During fiscal 2002 the Company also paid approximately $126,000 of
expenses on behalf of AssureTec. These amounts were recorded as a receivable
from AssureTec. The Company recorded a valuation reserve against this asset
equal to the entire amount due.
A summary of the unaudited balance sheet and statement of operations as
of and for the period ended June 30, 2002 is as follows:
( Unaudited)
Assets $ 34,848
Liabilities $839,213
Stockholders deficit ($804,365)
Revenues $ 0
Expenses and costs, net. $804,369
Net loss ($804,369)
As also discussed in Note 1 to the accompanying financial statements, the
Company has an investment in BTI, TVI, I-JAM and ACT. The Company's investment
in AssureTec and BTI are accounted for under the equity method of accounting
whereas the financial statements of the other subsidiaries are consolidated
with those of the Company.
BRL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2002 AND 2001
8.Cash Flow Information
---------------------
For the Year
Ended June 30,
-------------
2002 2001
---- ----
Cash paid for interest $ 0 $ 0
Cash paid for taxes $ 0 $ 0
Non-cash investing and financing
activities were as follows:
Liabilities repaid through an
offset of the proceeds from
the exercise of stock options $ 35,000 $ 0
Liabilities repaid through issuance
of common stock $ 0 $7,600
Common stock issued in acquisition
of subsidiary $530,000 $ 0
9.Related Party Transactions
--------------------------
Since April of 1996, the Company engaged R T Robertson Consultants, a
consulting firm, controlled by a family member of Dr. R. Bruce Reeves, to
perform the executive duties of the Company without specific compensation. Mr.
Reeves was a member of the Board of Directors, President, and Chief Executive
Officer of the Company. In this capacity and as an employee of the consulting
firm Dr. Reeves manages ongoing business activities of the Company. During
fiscal year end June 30, 2002 and 2001, the Company paid no fees for these
services and incurred approximately $0 and $2,350 of expenses to R T Robertson
Consultants for storage services. No amounts were owed to as of June 30, 2002
and 2001.
During fiscal 2001 an affiliate of Dr. Reeves acquired substantially all
of the Company's ownership interest in BTI Inc. (see Note 1).
Dr. Reeves, his Affiliates and other Officers and Directors of the
Company owned approximately 8% of Element 21 Golf Company (see Note 11) and
approximately 48.5% of AssureTec (see Note 1) immediately prior their
acquisition by the Company.
During fiscal 2002 and 2001 the Company and its subsidiaries paid or
accrued $344,442 and $2,350 to Affiliates of Dr. Reeves for services performed
and for reimbursement of expenses incurred by the Affiliates for the benefit
of the Company and its subsidiaries. Approximately $201,000 of these amounts
was incurred after the Company adopted the equity method of accounting for the
effected subsidiary and accordingly is not included in the expenses reflected
in the accompanying Statement of Operations. As of June 30, 2002 $309,572 was
owed to these Affiliates by the Company and its subsidiaries, of which
$288,885 is owed by subsidiaries accounted for on the equity method of
accounting and accordingly are not reflected as a liability to related parties
in the accompanying balance sheet.
BRL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2002 AND 2001
10.Subsequent Events
-----------------
In October of 2002 the Company acquired Element 21 Golf Company (Element
21) under an Amended and Restated Agreement (the "Agreement") wherein BRL will
issue 42,472,420 shares of its common stock to shareholders of Element 21 and
assume Element 21 obligations under option agreements allowing for the
purchase of 6,432,000 additional shares of common stock. Element 21 is a
development stage company recently formed to design, develop and market
scandium alloy golf clubs. As of the date of the Agreement, Element 21 had
not yet commenced its principal operations. This acquisition will be accounted
for as a reverse acquisition using the purchase method of accounting, as the
shareholders of Element 21 will control the Company immediately following the
acquisition. The Company has not yet had an opportunity to determine the
value of the shares issued in this transaction or to determine an appropriate
basis for the allocation of the purchase price.
Dr. Reeves, his Affiliates and the Company's Treasure owned approximately
8% of Element 21 prior to the Agreement.
Immediately following the closing of the Element 21 acquisition the
Company declared: 1) a 2 for 1 split of its common stock effected in the form
of a dividend and 2) a dividend of 100% of its ownership of TVI and ACT which
collectively represent substantially all of the Company's assets prior to its
acquisition of Element 21 (the "Spin-Off") and the Officers and Directors
immediately prior to the acquisition resigned The stockholders who received
common stock in connection with the Element 21 acquisition will receive the
stock dividend, but have waived their rights to receive distributions
associated with the planned Spin-Off. The Spin-Off will only occur after the
compliance with Security and Exchange Commission regulations.
As of the consummation of these transactions and events, the reporting
entity will consist of the operations of Element 21.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
--------------------
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------
Identification of Directors and Executive Officers.
---------------------------------------------------
The following table sets forth the names and the nature of all positions
and offices held by all directors and executive officers of our Company for
the fiscal year ended June 30, 2002 and to the date of this Annual Report, and
the period or periods during which each such director or executive officer has
served in his or her respective positions.
At June 30, 2002
----------------
Date of Date of
Positions Election or Termination
Name Held Designation or Resignation
---- ----------- ----------- --------------
R. Bruce Reeves, President & 1993 October 4, 2002
Ph.D. Director
Richard F. Director 1992 October 4, 2002
Schubert
Kevin T. McGuire Treasurer,Secretary 1995 October 4, 2002
Richard Whitney Director 1992 October 4, 2002
Presently
---------
Nataliya Hearn, President, CEO October 4, 2002 *
Ph.D. Director
Jim Morin Secretary, October 4, 2002 *
Treasurer,
CFO &
Director
Gerald Enloe Director October 4, 2002 *
* These persons presently serve in the capacities indicated
opposite their respective names.
Term of Office.
---------------
The term of office of the current directors shall continue until
the annual meeting of our stockholders, which is scheduled in accordance with
the direction of the Board of Directors. The annual meeting of our Board of
Directors immediately follows the annual meeting of our stockholders, at which
officers for the coming year are elected.
Business Experience.
--------------------
R. Bruce Reeves is our former President, a director and presently our
consultant.
Kevin T. McGuire is our former Treasurer and Secretary and
presently our consultant.
Richard F. Schubert is our former director.
Richard Whitney is our former director.
Nataliya Hearn, Ph.D., age 35, is the President and CEO of our Company. Dr.
Hearn is a Canadian citizen with her Ph.D. in Civil Engineering from Cambridge
University in the United Kingdom. She is also a registered professional
engineer. Dr. Hearn is currently a tenured Associate Professor at the
University of Windsor and an Adjunct Professor at the University of Toronto;
and she is currently a Director of Magnesium Alloy Corporation, Director of
New Product Development and Marketing at Link-Pipe Inc. and Director of R&D at
Materials Service Life LLC. She also has considerable experience in technology
transfer, evaluation and government/industry grants.
Jim Morin, age 53, of Mission Viejo, California, serves as Executive Vice
President of Product Development, Treasurer and Secretary of our Company. He
has been associated with the golf industry for the past 20 years. Mr. Morin
is an owner and officer of Hyper Industries, a golf development and marketing
company. In his capacity with Hyper Industries, Mr. Morin has worked with
Tommy Armour, Cleveland, Echelon, Calloway, Cobra, McHenry Metals Golf, Taylor
Made, Lynx and other golf companies. Mr. Morin has extensive experience in
high performance golf alloys, design, testing and production of clubs and
shafts that will be of particular value to us in our planned operations.
Gerald Enloe, age 54, of Houston, Texas, serves as a Director and the
Chairman of our Board. Mr. Enloe has served as President and CEO of Houston
Industrial Materials, Inc. since 1991.
Involvement in Certain Legal Proceedings.
-----------------------------------------
To the knowledge of management and during the past ten years, no present
or former director, person nominated to become a director, executive officer,
promoter or control person of the Company:
(1) Was a general partner or executive officer of any business
by or against which any bankruptcy petition was filed,
whether at the time of such filing or two years prior
thereto;
(2) Was convicted in a criminal proceeding or named the subject
of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3) Was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining
him from or otherwise limiting, the following activities:
(i) Acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool
operator, floor broker, leverage transaction merchant,
associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or
employee of any investment company, bank, savings and
loan association or insurance company, or engaging in
or continuing any conduct or practice in connection
with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the
purchase or sale of any security or commodity or
in connection with any violation of federal or
state securities laws or federal commodities laws;
(4) Was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal
or state authority barring, suspending or otherwise limiting
for more than 60 days the right of such person to engage in
any activity described above under this Item, or to be
associated with persons engaged in any such activity;
(5) Was found by a court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission to have
violated any federal or state securities law, and the
judgment in such civil action or finding by the Securities
and Exchange Commission has not been subsequently reversed,
suspended, or vacated; or
(6) Was found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to
have violated any federal commodities law, and the judgment
in such civil action or finding by the Commodity Futures
Trading Commission has not been subsequently reversed,
suspended or vacated.
Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------
The following reports on Forms 3 or 4 or Schedule 13D were required to be
filed by our directors, executive officers, 10% and/or 5% stockholders under
the rules and regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), on the following dates; and as indicated, were filed later
than required by the applicable rules and regulations:
Description of Form Required Filing Filing
Name or Schedule Date Date
---- ----------- ---- ----
R. Bruce Reeves, 4 10/06/02 *
Ph.D.
Kevin T. McGuire 4 10/06/02 *
Natalyia Hearn, 3 10/14/02 *
Ph.D. 13D 10/14/02 *
Gerald Enloe 3 10/14/02 *
13D 10/14/02 *
Tom Sawyer, Esq. 3 10/14/02 *
13D 10/14/02 *
Randy Renken, Esq. 3 10/14/02 *
13D 10/14/02 *
Dimitry Sindalovsky 3 10/14/02 *
13D 10/14/02 *
Paul Whitton 3 10/14/02 *
13D 10/14/02 *
* Management believes that all of these Forms or Schedules will be
filed no later than 10 days from the date of this Annual Report.
Item 10. Executive Compensation.
--------------------------------
Cash Compensation.
------------------
The following table sets forth the aggregate executive compensation paid
by our Company for services rendered during the periods indicated:
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Years or Other All
principal periods Annual Restricted Option/ LTIP Other
position Ended $ $ Compen- Stock SAR's Payouts Compen-
Salary Bonus sation Awards$ # $ sation
------------------------------------------------------------------------------
R. Bruce 6/30/02 0 0 0 (1) 0 0 0
Reeves, 6/30/01 0 0 0 (2) 0 0 0
Ph.D.,
President
& CEO &
Director
Richard F. 6/30/02 0 0 0 (3) 0 0 0
Schubert, 6/30/01 0 0 0 (2) 0 0 0
Director
Richard 6/30/02 0 0 0 (3) 0 0 0
Whitney, 6/30/01 0 0 0 (2) 0 0 0
Director
Kevin T. 6/30/02 0 0 0 (1) 0 0 0
McGuire 6/30/01 0 0 0 (2) 0 0 0
Secretary/
Treasurer
(1) Our President, R. Bruce Reeves, and the Treasurer/Secretary, Kevin T.
McGuire, serve our Company without salaried compensation. As part of the
AssureTec acquisition, they were granted options of 450,000 and 50,000 shares,
respectively, to acquire shares of our common stock, to complete this
transaction. These options were granted at a value of $0.07 per share and
were exercised in fiscal year 2002.
(2) Shares issued for services were to President, R. Bruce Reeves
(560,000); Kevin T. McGuire, Treasurer (40,000); Richard Schubert, Director
(100,000); and Richard Whitney, Director (100,000). All shares were valued at
$0.05 per share.
(3) Messrs. Schubert and Whitney were respectively granted options to
acquire shares of our common stock during fiscal 2002 (20,000 shares each at
$0.16 per share) and fiscal 2001 (1,600 shares each at $0.625 per share).
Except as indicated above, no cash compensation, deferred compensation or
long-term incentive plan awards were issued or granted to our Company's
management during the years ended June 30, 2002, or 2001, or the period ending
on the date of this Annual Report. Further, except as indicated above, no
member of our Company's management has been granted any option or stock
appreciation right; accordingly, no tables relating to such items have been
included within this Item.
Compensation of Directors.
--------------------------
There are no standard arrangements pursuant to which our Company's
directors are compensated for any services provided as director. No
additional amounts are payable to our Company's directors for committee
participation or special assignments.
There are no arrangements pursuant to which any of our Company's
directors was compensated during our Company's last completed fiscal year or
the previous two fiscal years for any service provided as director. See the
Summary Compensation Table of this Item.
Termination of Employment and Change of Control Arrangement.
------------------------------------------------------------
There are no compensatory plans or arrangements, including payments to be
received from our Company, with respect to any person named in the Summary
Compensation Table set out above which would in any way result in payments to
any such person because of his or her resignation, retirement or other
termination of such person's employment with our Company or our subsidiaries,
or any change in control of our Company, or a change in the person's
responsibilities following a change in control of our Company.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
-----------------------------------------------------------------------
Security Ownership of Certain Beneficial Owners.
------------------------------------------------
The following table sets forth the share holdings of those persons
who owned more than 5% of our Company's common stock as of June 30, 2002
(which only included members of our management), and presently:
At June 30, 2002
----------------
Security Ownership of Management.
---------------------------------
Number and Percentage
Name and Address of Shares Beneficially Owned
---------------- ---------------------------
R. Bruce Reeves, Ph.D. 2,688,312-49.5%
Richard F. Schubert 154,422-2.9%
Richard Whitney 139,964-2.5%
Kevin T. McGuire 122,886-2.2%
Presently
---------
Gerald Enloe Director & Chairman 2,950,460(1)- 6.2%
PO Box 14391
Humble TX 77347
Nataliya Hearn, Ph.D. President & Director 4,900,000(1)-10.2%
3173 Sandwich Street, 37
Windsor, Ontario H3A P7S
Canada
Jim Morin Vice President, Secretary/ -0-(1)
27672 Pasatiempo Drive Treasurer, Directors
Mission Viejo, CA 92692
All Officers, Directors
as a Group (3 Persons) 7,850,460-16.4%
Tom Sawyer, Esq. Stockholder 3,450,000(2)(3)-7.2%
1151 CR 325
Lexington, TX 78947
Randy Renken, Esq. Stockholder 4,455,396(2)(3)(4)-9.3%
316 Main Street, Suite L
Humble, TX 77338
R. Bruce Reeves, Ph.D. Stockholder 4,508,308(2)(3)(5)-9.4%
754 Straw Hill
Manchester, NH 03104
Dimitry Sindalovsky Stockholder 4,455,396(2)(3)-9.3%
99 Harbour Square,
Suite 3106
Toronto, Ontario M5J 2H2
Paul Whitton Stockholder 4,005,396(2)(6)-8.4%
2415 Shakespeare #3
Houston, TX 77030
Total: 20,874,496-43.5%
(1) Denotes new directors elected to fill vacancies, effective October
4, 2002, created by resignations following the change of control
described under the heading "Contractual Arrangements Regarding
Changes in Control," below, under this caption.
(2) Except as indicated in other footnotes, each person has sole voting
and dispositive power over the shares indicated.
(3) Excludes shares underlying unexercised options, none of which are
deemed to be owned by persons who are our "affiliates."
(4) Includes 2,655,396 shares owned by Profit Consultants, Inc., a
consulting company controlled by Mr. Renken.
(5) Consists of2,948,526 shares owned by Mr. Reeves directly, and
284,000 shares held by Robertson Financial Advisors, LLC of which Mr.
Reeves is the Managing Member; it also includes 538,818 shares owned
by Sandra J. Reeves, his wife, and 1,016,968 shares owned by
Robertson Consultants, Inc. of which Ms. Reeves is an officer and 90%
owner.
(6) Includes 2,655,396 shares owned by Element 21, Inc., a privately
held company controlled by Mr. Whitton.
Changes in Control.
-------------------
Effective October 3, 2002, we acquired 100% of the outstanding common
stock of Element 21 in a stock for stock transaction. To complete the
Acquisition, we agreed to issue up to 42,904,420 shares of our common stock
consisting of the issuance of 42,472,420 shares of "restricted securities"
(common stock) and the assumption of certain options granted by Element 21 to
its officers, directors and consultants to purchase 6,432,000 shares of common
stock, in recognition of options to purchase a like amount of shares of
Element 21 held by these individuals.
Element 21 was formed to acquire highly developed golf technology
and to design, develop and market scandium alloy golf clubs. Scandium is
Element No. 21 in the Periodic Table of Elements. When mixed with aluminum,
scandium alloys are believed to exceed titanium with a higher strength to
weight ratio of up to 25% and a specific density advantage of 55%. Scandium
is simply lighter, stronger and more cost effective than titanium. We intend
to commercialize this advanced metal technology originally developed in the
former Soviet Union for military applications during the 1980's. Scandium
alloys have been used in intercontinental ballistic missiles, jet aircraft,
the Mir space station and most recently, in the International Space Station.
Prior to the closing of the Acquisition, excluding shares underlying
outstanding options, none of which are deemed to be owned by our "affiliates,"
Dr. R. Bruce Reeves, our then President and CEO, including the shares owned by
Sandra J. Reeves, his wife, beneficially owned 2,688,312 shares or 49.5% of
our outstanding voting securities. Immediately following the Acquisition, and
also excluding shares underlying outstanding options, none of which are not
deemed to be owned by our "affiliates," Dr. Reeves controlled 9.4% of our
outstanding voting securities. Dr. Reeves was the founding director of
Element 21, and was instrumental in its acquisition of the Element 21 golf
technology. For these services, he was issued 2,100,000 shares of "restricted
securities" (common stock") of Element 21, and was granted options to acquire
an additional 900,000shares of common stock for aggregate consideration of
$900, payable in cash or services. All of these Element 21 shares and options
were exchanged for like shares and options of our Company under the Element 21
Acquisition. None of the options of Dr. Reeves could be exercised for a
period of 120 days. Dr. Reeves abstained from any voting on the Element 21
Acquisition. Dr. Reeves is currently a consultant to our Company.
Also prior to our closing of the Acquisition, Richard F. Schubert,
our Chairman, Richard Whitney, one of our directors, and Kevin T. McGuire, our
Secretary/Treasurer, respectively owned, 144,422 shares or approximately 2.6%;
131,564 shares or approximately 2.4%; and 122,886 shares or approximately
2.3%.
Management and directors of our Company immediately following the
Acquisition resigned effective October 4, 2002, and designated the members of
management and directors and executive officers of Element 21 as directors and
executive officers of our Company who now hold all three seats on our Board of
Directors and comprise all of our officers.
Following the Acquisition, Dr. Nataliya Hearn, our new President and
a director, owned 4,950,000 shares or 10.2% of our outstanding voting
securities; and Gerald Enloe, a director and our Chairman, owned 2,950,460
shares or 6.15% of our outstanding voting securities. Jim Morin, our third
director and Secretary/Treasurer, does not own any of our securities. These
securities were acquired in exchange for securities of Element 21 under the
Acquisition. The control of the present members of our management is based
upon stock ownership and their present respective positions with us, as
directors and executive officers. No loans of any kind were a part of the
consideration for the Acquisition, or any of the securities previously issued
to the stockholders of Element 21 that were exchanged under the Acquisition.
For additional information regarding the principal stockholders of our Company
following the closing of the Element 21 Acquisition, see the table above under
this Item 11.
For further information regarding the Acquisition, see our 8-KA
Current Report dated October 2, 2002, filed with the Securities and Exchange
Commission on November 5, 2002, which is incorporated herein and referenced in
the Exhibit Index, Part III, Item 13.
Item 12. Certain Relationships and Related Transactions.
--------------------------------------------------------
Transactions with Management and Others.
----------------------------------------
The only material transactions between any director, executive officer,
any security holder who is known to us to own of record or beneficially more
than 5% of any class of our common stock, or any member of the immediate
family of any of the foregoing persons, or in which any promoter had a
material interest is discussed in Item 1, the heading "Recent Sales of
Unregistered Securities" of Item 5, the heading "General" of Item 6, our
Consolidated Financial Statements referenced in Item 7, the Summary
Compensation Table of Item 10 and the heading "Changes of Control" of Item 11.
There were no other material transactions, or series of similar transactions,
during our last two fiscal years, or any currently proposed transactions, or
series of similar transactions, to which we or any of our subsidiaries was or
is to be a party, in which the amount involved exceeded $60,000 and in which
any director executive officer, any security holder who is known to us to own
of record or beneficially more than 5% of any class of our common stock, or
any member of the immediate family of any of the foregoing persons, or any
promoter had a material interest.
Item 13. Exhibits and Reports on Form 8-K.
------------------------------------------
Reports on Form 8-K.
--------------------
8-K Current Report dated April 2, 2002, and filed with the
Securities and Exchange Commission on November 7, 2002.**
8-K Current Report dated October 2, 2002, and filed with the
Securities and Exchange Commission on October 4, 2002.**
8-KA Current Report dated October 2, 2002, and filed with the
Securities and Exchange Commission on November 5, 2002.**
Exhibit*
No.
--
(i) Exhibits:
21 Subsidiaries
(ii) Exhibits Incorporated by Reference:
Where Incorporated
In This Report**
----------------
10-KSB for the year fiscal ended June 30, 2001 Part 1, Item 1
8-K Current Report dated November 9, 2001 Part I, Item 1
8-K Current Report dated April 2, 2002 Part I, Item 1
8-K Current Report dated October 2, 2002 Part I, Item 1
8-KA Current Report dated October 2, 2002 Part I, Item 1
* A summary of any Exhibit is modified in its entirety by
reference to the actual Exhibit.
** These documents and related Exhibits have
previously been filed with the Securities and Exchange
Commission and are incorporated herein by this
reference.
Item 14. Controls and Procedures.
-------------------------
We currently have no employees, and the consultants that have been
engaged by us in connection with our planned business operations report
directly to our President, Nataliya Hearn, PhD, who reports all material
information to our Board of Directors that consists of Dr. Hearn, Gerald Enloe
and Jim Morin. Under these circumstances, Dr. Hearn, who is our CEO, and Jim
Morin, who is our Secretary/Treasurer and CFO, have evaluated our disclosure
controls and procedures and have concluded that these controls and procedures
are effective.
There are no significant changes in the internal controls or other
factors that could significantly affect these controls subsequent to the date
of our Annual Report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, hereunto duly authorized.
BRL HOLDINGS, INC.
Date: By/s/Nataliya Hearn, Ph.D.
President and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this Report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated:
BRL HOLDINGS, INC.
Date: By/s/Nataliya Hearn, Ph.D.
President and Director
Date: By/s/Gerald Enloe
Director
Date: By/s/Jim Morin
Secretary/Treasurer,
CFO and Director
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 Annual Report on Form 10-KSB of the Registrant;
2. Based on my knowledge, this Annual 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 Annual Report;
3. Based on my knowledge, the financial statements, and other
financial information included in this Annual 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
Annual 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
Annual 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 Annual Report (the "Evaluation Date"); and
c) presented in this Annual 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);
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 Annual 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: By/s/Nataliya Hearn, Ph.D.
President and Director
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 Annual Report on Form 10-KSB of the Registrant;
2. Based on my knowledge, this Annual 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 Annual Report;
3. Based on my knowledge, the financial statements, and other
financial information included in this Annual 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
Annual 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
Annual 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 Annual Report (the "Evaluation Date"); and
c) presented in this Annual 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);
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 Annual 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: By/s/Jim Morin
Secretary/Treasurer,
CFO and Director
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 Annual Report of BRL Holdings, Inc. (the
"Registrant") on Form 10-KSB for the fiscal year ended June 30, 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, to the best of our knowledge and belief:
(1) The Annual 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 Annual Report fairly presents, in
all material respects, the financial condition and result of operations of the
Registrant.
Date: By/s/Nataliya Hearn, Ph.D.
President and Director
Date: By/s/Jim Morin
Secretary/Treasurer,
CFO and Director