SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                   FORM 10-KSB

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the fiscal year ended June 30, 2000          Commission File No. 33-43976
                                                                     --------

              Delaware                                   88-0218411
--------------------------------------      ------------------------------------
   (State or other jurisdiction of          (I.R.S. Employer Identification No.)
    Incorporation or organization)

                                BIORELEASE CORP.
                      ------------------------------------
             (Exact name of Registrant as specified in its charter)

                   340 Granite Street, Suite 200, Manchester,
                         NH 03102 (Address of principal
                          executive offices) (Zip Code)

Registrant's telephone number, including area code:        (603) 641-8443
                                                           ---------------

Securities registered pursuant to Section 12(b) of the Act:         None
                                                                   -----
Securities registered pursuant to Section 12(g) of the Act:Common Stock, Class A
                                                          ----------------------
                         Common Stock Purchase Warrants

Indicate  by check  mark  whether  the  registrant  has:  (1) filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934,  during the  preceding  12 months  (or for such  shorter  period  that the
registrant  was required to file such  reports) and has (2) been subject to such
filing requirements for the past 90 days.

                             Yes       X             No
                                     ------

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-B is not contained herein, and will not 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 ( X )

                             Yes       X             No
                                     ------

The aggregate market value of the voting common stock held by non-affiliates (1)
of the registrant, based on the average of high bid ($0.10) and low bid ($ 0.10)
prices of the Company's  Common Stock as of September 26, 2000, is approximately
$899,225.  This is based upon an average  of $0.10  multiplied  by the number of
shares of registrant's Common Stock held by non-affiliates (8,992,254 shares).

The number of shares  outstanding  of the  Registrant's  Common Stock,  $.01 par
value, as of September 26, 2000 is 12,124,238.

(1)  "Affiliates"  solely for purposes of this item refers to those persons who,
during the 3 months  preceding  the filing of this Form  10-KSB  were  officers,
directors and/or  beneficial  owners of 5% or more of the Company's  outstanding
stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                  See Item 13.

Transitional Small Business Disclosure Format (check one):    Yes       No    X
                                                                  ----       ---



<PAGE>

                                 BIORELEASE CORP

                                   Form 10-KSB

                         Fiscal Year Ended June 30, 2000

                                Table of Contents

         PART I

       Item 1. Business: ..................................................    3
              General .....................................................    3
              The Subsidiary (Biorelease Technologies, Inc.) ..............    4
              Description of the Subsidiary's Technologies ................    4
              ErythrogenTM Cell Culture Product and Business Opportunity ..    4
              ErythrogenTM Manufacturing, Sales and Marketing .............    5
              Competition .................................................    5
              Research and Development Policy .............................    5
              Patents and Proprietary Technology ..........................    5
              Employees & Outside Consultants .............................    5
      Item 2. Properties: .................................................    5
      Item 3. Legal Proceedings ...........................................    6
      Item 4. Submission of Matters to a Vote of Security Holders .........    6
PART II

      Item 5. Market for Company's Common Equity and Related Stockholde
                 Matters ..................................................    6
      Item 6. Management's Discussion and Analysis of Financial
                 Condition and Results of Operations: .....................    7
               Results of Operations ......................................    7
               General ....................................................    7
               Year Ended June 30, 2000 compared to the Years Ended
                 June 30, 1999 ............................................    7
               Liquidity and Capital Resources ............................    7
               Dividend Policy ............................................    8
               Effect of Inflation ........................................    8
               Litigation and Related Matters .............................    8
       Item 7. Financial Statements .......................................    8
       Item 8. Changes in and Disagreements with Accountants on
                 Accounting and Financial Disclosures .....................    9
       PART III

       Item 9. Directors, Executive Officers, Promoters and
                 Control Persons; Compliance with Section 16(a) of
                 the Exchange Act .........................................   10
              Compliance with Section 16(a) of The Securities Exchange
                 Act of 1934 ..............................................   11
       Item 10. Executive Compensation ....................................   11
       Item 11. Security Ownership of Certain Beneficial Owners
                  and Management ..........................................   13
       Item 12. Certain Relationships and Related Transactions ............   14
              The Reorganization ..........................................   14
              The Company .................................................   15
              The Subsidiary ..............................................   17
              The Selling Securityholders' Offering .......................   18
              The Exchange Offering .......................................   18
              Terminated Public Offering ..................................   18
       Item 13. Exhibits and Reports on form 8-K ..........................   18
              Reports on form 8-K .........................................   18
              Exhibits ....................................................   19
              Exhibits incorporated by reference ..........................   19
       SIGNATURES .........................................................   20
       SUPPLEMENTAL INFORMATION AND EXHIBITS ..............................   21

<PAGE>

PART I

Item 1.       Business

General

         The Company,  Biorelease  Corp.  ("BIO")  including  its  biotechnology
subsidiary,  Biorelease  Technologies,  Inc. (the "Subsidiary") is a development
stage company. The Subsidiary holds technology in the field of blood substitutes
and sustained release drug delivery technology based on chondroitin sulfate. Dr.
R. Bruce Reeves served as an officer and director of the Company from  inception
in 1989 to  October  4, 1996  after  which he served as a  consultant  through a
family affiliate.  Dr. Reeves was re-appointed on February 11, 1998 as President
to  effectuate  merger  activity  for  the  Company  (See  Item 5  -Stockholders
Matters). R T Robertson Consultants, Inc., a corporation wholly-owned by members
of Dr. Reeves'  family,  entered into a consulting  agreement with the Company's
subsidiary to oversee the business  activities of the Company's  subsidiary from
April 1, 1996 through February 11, 1998.

         The Subsidiary began its biotechnology  activities in 1989 by acquiring
the hemoglobin  stabilization  and processing  technologies of  Oxygenetics,  an
early stage California based company to allow Biorelease to become a participant
in the $3 to $5 billion  synthetic blood  business.  The  Subsidiary's  founders
included Richard Schubert, the Company's present Chairman, past President of the
American Red Cross,  Dr. R. Bruce Reeves and Dr. Paul Maybury,  a Director until
September 30, 1997. The Subsidiary  subsequently acquired sustained release drug
delivery technology based on chondroitin sulfate in order to expand its business
franchise  into other  therapeutic  areas.  Drug  delivery has become one of the
fastest growing areas in the pharmaceutical industry with companies increasingly
turning to novel delivery  systems to extend the patent life of existing  drugs,
increase  product  portfolios,  enhance  safety and  efficacy,  reduce  unwanted
side-effects,  improve  patient  compliance  and maintain  product sales against
competition.  Products  utilizing novel drug delivery  technologies have already
captured a significant share of several therapeutic markets and some systems may
be able  to  provide  new  therapies  by  modifying  the  activity  of  existing
compounds.

         The Company  became  listed on NASDAQ  (Small cap) in 1992  following a
business  combination  with the Subsidiary.  The Company's stock was delisted in
April,  of 1994 for  failing  to meet net asset  requirements  and its stock has
since  been  trading on the OTC  Electronic  Bulletin  Board.  During the fourth
quarter of fiscal year ended June 30, 1998, NASDAQ changed the Company's trading
symbol from BREL to BRLZ.

         The  Company  has  invested  approximately  nine  million  dollars  ($9
million) in the Subsidiary's  technologies  including support and administrative
expenses. By mid 1994, following the delisting,  it was clear that the Company's
ability to raise capital was  insufficient to allow it to become a self-standing
synthetic  blood producer in light of the large costs  necessary to bring such a
product to market.  For the past five  fiscal  years the  Company  has  operated
without  employees,  using  consultants  and  research  affiliations  to achieve
limited sales of the Subsidiary's cell culture product, Erythrogen(TM).

         On October 8, 1996, the Company's  Board of Directors  announced it had
executed a letter of intent for the proposed  acquisition of TheraMed  Partners,
Inc.  ("TheraMed"),  a then recently formed,  privately-held company focusing on
acquiring   and   consolidating    late-stage    biotechnology   companies   and
pharmaceutical  synergistic  technologies.  The  letter of intent  provided  the
general  terms and  conditions  of a proposed  acquisition  of  TheraMed  by the
Company, whereby the management of TheraMed would receive a substantial interest
in BIO.  When  taken  together  with  shares  held by  existing  management  and
directors of the Company,  TheraMed stockholders and the Company's then existing
management  and  directors  together  would hold a  controlling  interest in BIO
following the  acquisition.  In February 1997, the Company  terminated the Stock
Purchase  Agreement  with  TheraMed.  Under  the terms of the  termination,  the
Company agreed to reimburse  TheraMed for up to $27,500  advanced by TheraMed to
the Company.

         The  Subsidiary  received  notice from Baxter  Healthcare  Corp.  that,
effective January 1, 1998, Baxter would not renew its exclusive licensing rights
to the Subsidiary's  chondroitin  sulfate  technology for blood  substitutes but
rather convert to a non-exclusive  license.  Following the loss of future Baxter
exclusivity  payments  and the lack of adequate  working  capital  necessary  to
exploit the Subsidiary's  technology,  the Company has limited its activities to
selling its cell culture product  Erythrogen(TM)  and seeking a strategic merger
or acquisition. On February 19, 1998, the Company announced that it had signed a
definitive agreement to acquire Xenix Resources, Inc., a privately owned Alabama
corporation,  pursuant to which the  Company  would  acquire  Xenix in a reverse
acquisition.  A Proxy Statement was prepared shortly thereafter  describing this
transaction.  On April 15, 1998,  before this Proxy  Statement was filed,  Xenix
notified  the Company that it had  experienced  material  adverse  change in its
financial  condition.  The Company did not file the Proxy Statement and withdrew
from the agreement on March 28, 1999.

         On  August  2,  1999 the  Company  announced  the  signing  of a merger
agreement  pursuant  to which  Biorelease  agreed to merge with POLAR  MOLECULAR
CORPORATION,  a Utah  corporation  ("PMC").  On January  18, 2000 a Form S-4 was
filed with the Securities and Exchange Commission.  The Sec has issued a comment
letter on that  filing.  The  Company  has  deferred  its  response to these SEC
comments in order to complete year end 2000  financials for the Company and PMC.
On June 30, 2000 the Company and PMC amended and restated the agreement and plan
of  reorganization  to include  updated  audited  financial  statements  of both
companies  and to state that PMC shall have a net worth of at least  $2,300,000.
The extension  provided that PMC would make specific  payments to the Company on
specific dates and that PMC would provide PMC's audited financials for inclusion
into the revised  Form S-4 by August 31,  2000.  PMC failed to make the payments
called  for  and  has  not  released  its  audited  financials  to the  Company.
Accordingly,  the Company has  provided  notice of its intent to  terminate  the
merger  agreement  effective  October 13,  2000.  The Company  is,  however,  in
discussions with PMC to reinstate the merger on substantially similar terms.

<PAGE>

The Subsidiary (Biorelease Technologies, Inc.)

         Since acquisition by the Company in 1992, the Subsidiary has focused on
development  and  promotion of its  proprietary  hemoglobin  based  cell-culture
additive,  ErythrogenTM,  along with  developing  applications  of its sustained
release  drug  technology.  During  fiscal year 1993,  the  Subsidiary  began to
generate  minimal  revenues  ($7,942)  from the first sales of  ErythrogenTM  in
non-FDA  regulated  applications.  ErythrogenTM  sales were  $4,200 and  $11,630
during the years ended June 30, 2000 and 1999,  respectively  and $177,264  from
inception to June 30, 2000. The  Subsidiary  received $0 in fiscal 2000 and 1999
for  licensing  revenues  inclusive  of patent  cost  reimbursement  from Baxter
Healthcare (see Next Paragraph) related to their use of chondroitin sulfate drug
delivery for blood  substitutes.  At this time,  the  Subsidiary has no products
approved  by the FDA or in  clinical  trials  and does  not  intend  to  conduct
clinical trials or to develop a pharmaceutical marketing unit.

         The  Subsidiary  had  invested  substantially  all of  its  development
resources into two core proprietary  technologies:  hemoglobin stabilization and
sustained drug release technology based on chondroitin sulfate. The Subsidiary's
cell culture additive,  ErythrogenTM,  uses hemoglobin stabilizing technology to
produce a proprietary  cell culture  additive.  The Subsidiary has  discontinued
direct promotion of ErythrogenTM to the research and laboratory  markets because
of the high cost of promotion. Instead, the Subsidiary is focusing on industrial
applications.  From  August,  1994 to  December,  1995 the  Subsidiary  received
financial  support  to  demonstrate  the  benefit of its  chondroitin  sustained
release technology as applied to a blood substitute product under development by
Baxter  Healthcare  (Baxter).  The Company was given notice that these exclusive
licensing  rights held by Baxter  Healthcare would not be renewed after December
31, 1997, instead converting into a non-exclusive license resulting in cessation
of future  payments.  Through June 30, 2000,  the Company  received  $355,620 of
revenues under the Baxter agreement.

         Since closing its research  facilities in June 1995,  the  Subsidiary's
primary  technical  support  activities  were conducted at the University of New
Hampshire ("UNH") pursuant to a research agreement.  Research at UNH has focused
on cell culture application development of ErythrogenTM.

Description of the Subsidiary's Technologies

              CHONDROITIN SULFATE SUSTAINED DRUG RELEASE TECHNOLOGY

         While the subsidiary was pursuing its own blood substitute  product, it
acquired a sustained  release  drug  delivery  technology  based on  chondroitin
sulfate,  a naturally  occurring  compound found in the cartilage  tissue of all
cartilage  containing animals (including humans).  This technology,  patented in
the U.S. and abroad, has been applied by the subsidiary to a number of drugs and
biological compounds with the effect of extending the drug's in vivo dwell time.
This  technology  has received  development  support from Baxter  Healthcare and
resulted  in an  initial  licensing  agreement  in April  1996 with  Baxter  for
Baxter's  blood  substitute   application,   such  recently  revised  to  become
non-exclusive.  Chondroitin  sulfate enjoys key advantages that differentiate it
within  the drug  delivery  marketplace.  Unlike a number  of  competitive  drug
delivery  technologies,  chondroitin sulfate is naturally occurring in the body,
is highly  biocompatible  and is  readily  available  from a number  of  natural
sources. The subsidiary has complexed  chondroitin sulfate,  derived from bovine
sources, to various drugs and proteins. Commercial applications could enable the
Subsidiary to  participate,  with  corporate  partners,  in a new  generation of
sustained-release  drug delivery  applications for the  pharmaceutical  industry
with emphasis on large dose and chronically used drugs,  actively competing in a
drug delivery market that is currently estimated at tens of billions of dollars.
Because of the limited working capital  position of the Company,  the Subsidiary
will  seek  either a buyer for this  technology  or find a  partner  willing  to
provide the  resources to develop this  technology  further.  During fiscal year
ending June 30, 1999 the Subsidiary allowed its remaining patents to expire.

ErythrogenTM Cell Culture Product and Business Opportunity

         The Subsidiary's focus, in the non-regulated  biologics  industry,  has
been to develop a cell culture  product  based on its blood  technology  for the
cell culture additive market.  Cell culture is the process by which living cells
(bacterial,  plant,  yeast,  insect,  and mammal) are propagated in a controlled
environment (medium).  Cell culture is maintained at the proper bath temperature
and supplemented with nutrients and salts, and is utilized by the pharmaceutical
and  biotechnology  industries  to generate  recombinant  products.  Agents that
enhance the  efficiency  and  productivity  of cell culture can be developed for
markets that are both sizable and  independent  of FDA  clinical  trials.  Fetal
bovine serum (FBS), the serum component of blood obtained from calf fetuses,  is
the cell culture additive used most commonly  (represents  approximately  50% of
the additive market) to provide nutrition and enhance the growth of cells. Cells
grown  in  culture  can  be  used  to  produce  biological  materials  including
antibiotics, antibodies,  biopesticides, and genetically engineered proteins and
viruses.

         In  academic  and  industrial  laboratories,  cells are  propagated  in
vessels ranging from plastic flasks to large stainless steel bioreactors.  Cells
can be maintained  more easily in flasks in research  laboratories.  Scale-up of
cell  cultures  into large  volume  spinner/shaker  flasks and  bioreactors  has
encountered  difficulty  in  supplying  oxygen  uniformly to  high-density  cell
cultures.  No method has been wholly  satisfactory  in addressing  this problem.
Biorelease  has  developed  purified,   stabilized  tetrameric  hemoglobin  that
utilizes hemoglobin's oxygen carrying capability to increase the oxygen delivery
to cells  contained in the media.  ErythrogenTM  enhances the growth of cultured
cells,  especially  those of  high-density  cultures  and  reduces the amount of
nutrients  that  must be added.  Most  importantly,  ErythrogenTM  significantly
increases protein expression and production.

<PAGE>

         The   Subsidiary   introduced   its  first   cell   culture   additive,
ErythrogenTM,  in late 1993.  ErythrogenTM has been sold to a number of research
laboratories,  including  the NIH, as well as to a number of  biotechnology  and
pharmaceutical  companies for incorporation into their experimental cell culture
media.  The  Subsidiary   recently  developed  new  applications  data  under  a
University of New Hampshire  cooperative  research  grant and expects to publish
some of this data.

ErythrogenTM Manufacturing, Sales and Marketing

         The Subsidiary engaged a small unaffiliated  manufacturer of biological
products to perform specific  manufacturing and product  development  activities
for the Subsidiary. Manufacturing and product development was conducted pursuant
to periodic  work orders.  The  Subsidiary  owns the primary  equipment  used to
manufacture  ErythrogenTM.  This manufacturer has not manufactured  ErythrogenTM
for the  Subsidiary  for several  years because the  Subsidiary  currently has a
sufficient inventory of ErythrogenTM.  Based upon the Subsidiary's experience to
date,  management  believes that the manufacturer has the ability to manufacture
ErythrogenTM within the product  specifications  established for the utilization
of ErythrogenTM as a cell culture additive.  Since June 1995, the Subsidiary has
employed no sales or marketing staff.

Competition

         (a)   ErythrogenTM's   initial  testing   indicates  that  ErythrogenTM
increases  cell  densities and reduces cell doubling time and increases  protein
production  when added to insect and mammalian  cell culture  media.  Management
believes  that these  results stem,  in part,  from  ErythrogenTM  's ability to
increase  the amount of available  oxygen for cell  utilization  and,  possibly,
decrease  the  level  needed  of  certain  additives  such as FBS.  ErythrogenTM
technically  does not compete with FBS because it is a  supplement  to and not a
replacement  for FBS. The Subsidiary  knows of no other  commercially  available
cell culture  additives that provide  oxygenation to culture media;  however,  a
number of biotech  companies  have the capability to produce  similar  products.
Most of the  Subsidiary's  competitors  have  greater  financial  and  personnel
resources  than the  Subsidiary.  In the  event  that a  competitor  produces  a
comparable  product,  no assurance can be given that the Subsidiary will be able
to successfully compete.

Research and Development Policy

         The  Subsidiary  is  no  longer  actively   pursuing  research  on  its
technologies.  Research  at  University  of New  Hampshire  was  the  only  work
undertaken  during the past two fiscal years (2000 and 1999).  From October 1989
to June 30, 2000, the Subsidiary  spent  $2,558,041 on research and  development
(not including $690,000 to purchase these two technologies).

         Pursuant to an earlier  agreement with the University of New Hampshire,
UNH  conducted  research on the  application  development  of  ErythrogenTM  for
mammalian  cells.  Pursuant to the UNH  Cooperative  Agreement,  which commenced
December 19, 1994 and ran through December 31, 1997, the Subsidiary  contributed
$175,000  of "in  kind"  matching  expenditures  plus  contributing  $34,000  of
equipment to UNH for  research.  The Agreement  also called for funding,  to the
level of $50,000 contributed by the state of New Hampshire.  The agreement ended
December 31, 1997.

         Until June 1995,  the  Subsidiary  had been  utilizing its own in-house
laboratory at its former facilities. However, as a part of the Subsidiary's 1995
reorganization  and  downsizing,   this  laboratory   facility  was  closed  and
laboratory  employees  terminated.  See  "Item  2.  Properties".   All  work  in
development of application  data for  ErythrogenTM  was conducted  under the UNH
Cooperative Agreement.

Patents and Proprietary Technology

         The Company's  working  capital  deficiency  has impacted the Company's
ability to pursue and maintain its patents.  During  fiscal year ending June 30,
1999, the Subsidiary elected to allow its remaining patents to lapse.

Employees & Outside Consultants

         From August 1994 until March 31,  1996,  the Company had one  full-time
employee,  Dr. R. Bruce Reeves,  the Company's  President (see Part iii, item 10
and 11).  Effective April 1, 1996 the Board of Directors  retained R T Robertson
Consultants,  Inc. as consultants to the Company,  including the services of Dr.
Reeves.  Dr. Reeves continued to serve through October 4, 1996 as a Director and
President of the Company. R T Robertson Consultants,  Inc. agreed to consult for
the  Subsidiary for up to six months through June 1997. On February 11, 1998 the
Company  appointed  Dr.  Reeves as President of the Company until a successor is
elected and qualified.  Due to the Company's current financial position and lack
of significant revenues,  the Company expects to continue this mode of operation
for the near future.

Item 2.       Properties

         Since October 20, 1997 the principal offices are located at 340 Granite
Street, Suite 200, Manchester,  NH, 03102, (603) 641-8443.  This location, in an
in-town multi-tenant office building, allows R T Robertson Consultants,  Inc. to
provide,  on a contract basis, the  administrative  functions of the Company and
the Subsidiary and technical  support and shipping for the ErythrogenTM  product
line.  The Company has no laboratory  facilities at present,  instead  utilizing
facilities at the University of New Hampshire on an as needed basis. The Company
does not pay Robertson for the allocated  portion of the facilities  used.  From
June 1995  through  October  1997 the Company  rented  office  facilities  at 10
Chestnut Drive, Unit D, Bedford, NH 03110. The Company relocated from its former
laboratory  facilities at 8A Industrial Way, Salem,  New Hampshire 03079 in June
of 1995.

<PAGE>

Item 3.       Legal Proceedings

         On May 17, 1994, Mr. Lofink,  a shareholder  and former employee of the
Subsidiary, filed a law suit in Superior Court in California to recover certain,
then  remaining,  sums  due  (approximately  $40,000),  relating  to his  former
employment.  In April, 1995 the Company entered into a court approved settlement
with Mr.  Lofink in the amount of $43,475  calling  for  payment of $5,000  upon
signing and $1,000 monthly until December,  1996 when any remaining  balance was
to become due. This agreement was further  amended in fiscal 1996 to provide for
an extension in the due date to December  1997 by the  Subsidiary  continuing to
pay $1,000 monthly  through this extended  period.  In February 1998 the Company
paid $8,000 and agreed to issue 20,000 of its shares in final settlement of this
obligation.  The  Company  had $1,000  accrued on its  financial  statements  to
reflect this stock issuance. At June 30, 2000 the 20,000 shares were included as
authorized  and  outstanding  and in  transit  (see Item 7 - Notes to  Financial
Statements). Except as set forth herein, the Company is not presently a party to
any material litigation.

Item 4.       Submission of Matters to a Vote of Security Holders

          During the past five fiscal years no matters were  submitted to a vote
of  security  holders  through the  solicitation  of proxies or  otherwise.  The
transaction  with Polar Molecular  Corporation,  as described  earlier (see Item
1Business),  will be voted on by the Company's stockholders following the filing
by PMC and effectiveness of a Form S-4.

PART II

Item 5.      Market for Company's Common Equity and Related Stockholder Matters.

         (a)  Market  Information  -- The  principal  U.S.  market  in which the
Company's  common  shares  are traded  (all of which are of one class,  $.01 par
value Common Stock) is the Over-the-Counter  market. In August 1986, the Company
completed its initial public offering. In April 1991, the Company issued 450,000
Class A common stock purchase  warrants,  400,000 of which have been  exercised.
The Class A common stock purchase  warrants was  exercisable at $1.375 per Share
and  expired  July 5,  1995.  The Common  Stock was  listed  for  trading on the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
under the symbol "BREL" until April 27, 1994  (excluding  from February 28, 1994
through March 17, 1994),  at which time it was  delisted.  The Company's  common
Stock is now  traded  in the  Over-the-Counter  market  and is listed on the OTC
Bulletin Board. In July 1997 NASDAQ assigned the Company a new symbol "BRLZ". On
September 18, 2000,  the average  between the high and low reported bid price of
the Common Stock on the OTC Bulletin  Board was $0.10 per Share.  The  following
table  sets forth the range of quoted  high and low bid prices of the  Company's
Common  Stock on a quarterly  basis for the fiscal years ended June 30, 2000 and
1999 as published on commercial  web sites.  These quotes  reflect  inter-dealer
prices without retail  mark-up,  markdown or commission and may not  necessarily
represent actual transactions.

<TABLE>

                                  Bid Price                                           Bid Price
Fiscal 2000                    Low      High        Fiscal 1999                      Low     High
-----------                  ------  ------         -----------                    -----   ------
<S>                         <C>       <C>           <C>                             <C>      <C>
First Quarter,                                      First Quarter
Ended September 30, 1999    $ .05    $ .11          Ended September 30, 1998       $ .01   $ .0125
Second Quarter,                                     Second Quarter
Ended December 31, 1999     $ .11    $ .11          Ended December 31, 1998        $ .01   $ .01
Third Quarter                                       Third Quarter
Ended March 31, 2000        $ .20    $ .39          Ended March 31, 1999           $ .005  $ .01
Fourth Quarter                                      Fourth Quarter
Ended June 30, 2000         $ .08    $ .10          Ended June 30, 1999            $ .01   $ .015

</TABLE>

         (b)  Holders -- The number of record  holders of the  Company's  Common
Stock as of June 30, 2000 was 1,687  inclusive of those  brokerage  firms and/or
clearing  houses holding the Company's  common shares for their  clientele (with
each such brokerage house and/or clearing house being considered as one holder).
Effective  June 30, 1999  1,447,200  shares were issued upon  exercise of a like
number of  options,  263,879  shares were issued in trust for the benefit of the
minority-interest  holders and 550,000 shares  previously  held in treasury were
issued.  The  aggregate  number  of  shares  of  Common  Stock  outstanding  was
12,124,238 shares of common stock as of June 30, 2000.

<PAGE>

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
of Operations1

Results of Operations

General

         In April,  1994,  following a failed  financing and delisting by NASDAQ
for falling below required asset levels,  the Company  experienced a severe cash
flow  shortage  and had to  severely  curtail  its  funding of  research  on the
Subsidiary's technologies. In May 1994, the Company terminated substantially all
remaining laboratory personnel,  professional staff and administrative personnel
except for one remaining  research  scientist and Dr. Reeves.  Late in June 1995
the Company  moved to  facilities  in Bedford,  NH. In October  1997 the Company
moved  to  its  current   location  in  Manchester,   NH.  As  a  part  of  this
consolidation,  the Subsidiary sold all non-essential  equipment,  destroyed all
non-essential  inventory of  Erythrogen(TM)  and settled its  outstanding  lease
obligations with both its equipment and facilities lessors.  The Subsidiary also
reached settlement with a number of the Subsidiary's  creditors by issuing stock
in the Company in exchange for creditor  releases (see  Financial  Statements at
Note  6).  Currently,   the  Subsidiary   continues  to  maintain  inventory  of
Erythrogen(TM),  its cell  culture  additive  product,  in order to provide  for
supply of the product to existing and new customers. For the past several years,
the Company and the  Subsidiary  have focused  primarily on  ErythrogenTM  sales
activities.  All other operating activities have now ceased. Other than possible
licensing opportunities, therapeutic products which could have been derived from
the Subsidiary's  technologies are years away from market introduction and would
require  significant  additional  research and development,  including extensive
preclinical  and  clinical  testing  and  regulatory   approval  and  additional
resources the Subsidiary presently does not possess. See "Item 1. Business."

         Sales from ErythrogenTM for the year ended June 30, 2000 and 1999, were
$4,200 and $11,630,  respectively.  During year end June 30, 1995 the Subsidiary
ceased promoting direct sales to research and laboratory  markets because of the
extremely high promotion costs necessary to access these markets.  Instead,  the
Subsidiary  has  focused  on  supplying  a  single  industrial   client,   which
incorporates   ErythrogenTM  in  a  proprietary   media  sold  to  biotechnology
companies.

         In 1995,  the  Subsidiary  obtained  its  first  significant  sponsored
research  revenues.  This revenue  amounted to $0 in 2000 and 1999.  Chondroitin
sulfate  sales  were $0 in 2000 and 1999.  Total  revenues  were  $4,200 in 2000
compared to $11,630 for the year ended June 30, 1999.  Because of the closing of
the Subsidiary's  laboratory facilities,  it is unlikely sponsored research will
continue until the Subsidiary re-establishes new laboratory facilities, if ever.
Following its  restructuring  and  consolidation,  the  Subsidiary  has and will
continue  to focus on  industrial  ErythrogenTM  sales  and  continue  to pursue
licensing and/or sale of its chondroitin sulfate  therapeutic  sustained release
drug  technology.  The Company  expects to spin-off or otherwise  dispose of the
respective  technologies as part of the proposed Polar Molecular  transaction if
and when such is  concluded  and seek  acquisition  or strategic  alliance  with
another company.

Year Ended June 30, 2000 compared to the Year Ended June 30, 1999

         For the year ended June 30, 2000 the Company,  including the Subsidiary
had  revenues of $4,200,  cost of revenues of $398,  general and  administrative
expenses of 43,527,  other income of $44,447  from PMC to offset  administrative
costs,  a cost of  $640  recognized  on  indemnified  liabilities  and a loss on
recognized  settlements  of $821 as  compared to the year ended June 30, 1999 in
which the Company,  including the Subsidiary,  had revenues of $11,630,  cost of
revenues of $2,818,  research and development costs of $0, purchased  technology
costs of $0, general and  administrative  costs of $22,794,  interest expense of
$5,183,  other  income of  $9,869,  a loss on the sale of  assets of $1,  income
recognized  on  indemnified  liabilities  of  $242,276,   Income  recognized  on
settlements  of $79,770 and no income  taxes.  This  resulted in a net income of
$3,261 for the year ended June 30, 2000 as compared with the year ended June 30,
1999 in  which  the  Company,  including  the  Subsidiary  had a net  income  of
$312,749.   The  income  for  year  ended  June  30,   2000  was  from   minimal
Erythrogen(TM)  revenues and other income from PMC to reimburse  the Company for
general and administrative expenses. The income for year ended June 30, 1999 was
primarily as a result of income recognized on indemnified liabilities ($242,276)
and income recognized on settlements ($79,770).

         Other non-operational  income in fiscal year ended June 30, 2000 in the
aggregate of $44,447 resulted from  reimbursements  of  administrative  costs by
POLAR MOLECULAR CORPORATION under the PMC merger agreement.

Liquidity and Capital Resources

         From   inception   until  the  closing  of  the   Reorganization,   the
Subsidiary's  primary  source  of  funds  has  been the  proceeds  from  private
offerings  of  its  Common  Stock  and  Stock  in  the  Subsidiary.   Since  the
Reorganization, the primary source of capital has been the Company's funds.

         At June 30, 2000, the Company had working capital of $9,169 as compared
with the Company's  working  capital of $10,778 at June 30, 1999.  The change in
the  Company's  working  capital  between  June 30,  2000  and June 30,  1999 is
primarily   attributable  to  net  revenues  from   Erythrogen(TM)   sales  plus
reimbursements from PMC.

-------------------
1 The primary focus of the following discussion is on the business of Biorelease
Technologies,  Inc. (the "Subsidiary"), as the Company, prior to its acquisition
of the  Subsidiary,  had no operations  other than raising capital and searching
for an acquisition candidate (i.e., the Subsidiary). Where relevant, all numbers
retroactively  take  into  account  the  acquisition  of the  Subsidiary  by the
Company.

<PAGE>

         During  fiscal  years 1998 and 1997,  the  Company  benefited  from the
exclusive  licensing  agreement relating to research revenues from the Company's
sustained  release  technology  sponsored by Baxter  Healthcare.  This exclusive
agreement  ended  December  31,  1997.  The Company has  announced it expects to
spin-off the Subsidiary or it's  technologies as a part of the transaction  with
Polar  Molecular  Corporation.  The  Company  can give no  assurance  that these
activities will be consummated.

         The drastic  restructuring of its operations during the past five years
has allowed the Company to operate at  significantly  lower expense  levels than
those of the previous  years.  Revenues  from  ErythrogenTM  sales have exceeded
direct costs for the last five fiscal  years,  but they are not  sufficient,  to
carry all other expenses not relating to ErythrogenTM.

Dividend Policy

         The Company made a dividend distribution of shares of Vegas Chips, Inc.
in January 1992. However,  the Company has not declared any cash dividends since
inception,  and has no present  intention  of paying any cash  dividends  on its
Common Stock in the foreseeable  future, as it intends to use earnings,  if any,
to generate  increased growth.  The Company has announced,  as part of the Polar
Molecular transaction,  that it shall spin-off its interest in the Subsidiary to
its  stockholders.  The Board of Directors has not  established a date of record
for this proposed spin-off.  Otherwise, the Company has not declared or paid any
dividends on its commons stock since its inception and does not  anticipate  the
declaration or payment of cash dividends in the foreseeable  future. The Company
intends to retain earnings,  if any, to finance the development and expansion of
its business.  Future  dividend  policy will be subject to the discretion of the
Board of Directors  and will be  contingent  upon future  earnings,  if any, the
Company's financial condition, capital requirements, general business conditions
and other  factors.  Therefore,  it is unlikely that  dividends of any kind will
ever be paid.

Effect of Inflation

         Management believes that inflation has not had a material effect on its
operations for the periods presented.

Litigation and Related Matters

         See "Item 3. Legal  Proceedings."  There are no other  matters  pending
against the Company as of the date of this report.








<PAGE>



Item 7.           Financial Statements

         The  following  financial  statements  have been prepared in accordance
with the requirements of Item 310(a) of Regulation S-B.


                              INDEX                                  Page Number
INDEPENDENT AUDITORS' REPORT                                              F-1

CONSOLIDATED FINANCIAL STATEMENTS


Consolidated Balance Sheets

June 30, 2000 and 1999                                                    F-2

Consolidated statements of Operations
Two years ended June 30, 2000 and for the cumulative
period from Inception to June 30, 2000                                    F-3



Consolidated Statements of Stockholders' Equity (Deficit)
for the two years ended June 30, 2000

And the cumulative period from inception to June 30, 2000                 F-4

Consolidated Statements of Cash Flows

Two years ended June 30, 2000 and for the
cumulative period from inception to June 30, 2000                         F-5

Notes to Consolidated Financial Statements                                F-6

              All  other   schedules   have  been   omitted   because  they  are
inapplicable or not required,  or the  Information is included  elsewhere in the
financial statements or notes thereto.
<PAGE>


                         BIORELEASE CORP. AND SUBSIDIARY
                        (A Development Stage Enterprise)

                        CONSOLIDATED FINANCIAL STATEMENTS

                                  June 30, 2000

                        With Independent Auditors' Report

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


The Stockholders and Board of Directors
Biorelease Corp.

We have audited the accompanying consolidated balance sheets of Biorelease Corp.
and  Subsidiary (a development  stage  enterprise) as of June 30, 2000 and 1999,
and the related consolidated statements of operations,  changes in stockholders'
equity, and cash flows for the years then ended.  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  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that  our  audit
provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above, present
fairly, in all material respects, the financial position of Biorelease Corp. and
Subsidiary as of June 30, 2000a and 1999 and the results of their operations and
their cash flows for the year then ended, in conformity with generally  accepted
accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going  concern.  As discussed in Note 1, the
Company  is a  development  stage  enterprise  that,  since its  inception,  has
incurred  operating  losses,  and the Company does not have  sufficient  working
capital to support its future  operations on an ongoing basis.  Because of these
factors,  there is  substantial  doubt  about its ability to continue as a going
concern.  Management's plans in regard to these matters are discussed in Note 1.
The consolidated  financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

The consolidated  financial  statements of Biorelease Corp. and Subsidiary,  for
the period from  inception  to June 30,  2000 have been  audited by us and other
auditors.  Those reports  expressed an unqualified  opinion on those statements,
with an explanatory  paragraph regarding the uncertainty of the entity's ability
to continue as a going concern.



----------------------------------
/s/ Ferarri & Associates, P. C.
Manchester, New Hampshire
October 13, 2000


                                      F-1
<PAGE>

                BIORELEASE CORP. AND SUBSIDIARY D/B/A BIORELEASE
                        (A Development Stage Enterprise)

                           Consolidated Balance Sheets

                             June 30, 2000 and 1999

                                     ASSETS

                                                2000             1999
                                             -----------      -----------
Current assets
   Cash                                     $        502     $     12,232
   Due from merger candidate                      29,447                -
   Inventory                                      16,012           16,366
                                             -----------      -----------
           Total current assets                   45,961           28,598
                                             -----------      -----------
Equipment, net                                     1,734            5,055
                                             ===========      ===========





















           Total assets                      $    47,695     $     33,653
                                              ==========      ===========




--------------------------------------------------------------------------------

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                      F-2
<PAGE>



                      LIABILITIES AND STOCKHOLDERS' DEFICIT


                                                 2000             1999
                                              -----------      ----------
Current liabilities

   Accounts payable                          $     14,792     $     1,820
   Accrued expenses                                17,000          16,000
   Other current liabilities                        5,000               -
                                              -----------      ----------
           Total current liabilities               36,792          17,820
                                              -----------      ----------


Other liabilities - related party                   1,000           7,200
                                              -----------      ----------
           Total liabilities                       37,792          25,020
                                              -----------      ----------

Commitments and contingencies (Note 5)

Stockholders' equity

   Common stock of $.01 par value;
       50,000,000 shares Authorized,
       12,124,238 and 11,997,738 shares
       issued and 12,124,238 and 11,997,738
       shares outstanding as of
       June 30, 2000 and 1999, respectively       121,242          119,977
   Additional paid-in capital                   9,114,115        9,112,069
   Development stage accumulated deficit       (9,212,078)      (9,215,339)
   Stock subscriptions receivable on
       exercise of stock options                       (-)          (8,074)
                                              -----------      -----------
                                                   23,279            8,633
   Deferred offering costs                        (13,376)               -
                                              -----------      -----------
           Total stockholders' equity               9,903            8,633
                                              -----------      -----------
           Total liabilities and
              stockholders' equity            $    47,695     $     33,653
                                              ===========      ===========

--------------------------------------------------------------------------------

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                      F-3
<PAGE>

                BIORELEASE CORP. AND SUBSIDIARY D/B/A BIORELEASE
                        (A Development Stage Enterprise)

                      Consolidated Statements of Operations

                     Years Ended June 30, 2000 and 1999 and

              the Cumulative Period from Inception to June 30, 2000

<TABLE>

                                                                                                       Period From
                                                                         For the Year Ended June 30,  Inception to
                                                                             2000           1999      June 30, 2000
                                                                         -----------    -----------    -----------
<S>                                                                      <C>            <C>           <C>
Revenues
   Sales .............................................................   $     4,200    $    11,630    $   177,264
   Sponsored research ................................................          --             --          355,620
   Grant revenues ....................................................          --             --           33,117
   Other income ......................................................          --             --            8,500
                                                                         -----------    -----------    -----------
        Total revenues ...............................................         4,200         11,630        574,501

Cost of revenues .....................................................           398          2,818         28,553
        Gross profit .................................................         3,802          8,812        545,948
                                                                         -----------    -----------    -----------
Costs and expenses
   Research and development ..........................................          --             --        2,558,041
   Purchased technology ..............................................          --             --          690,000
   General and administrative ........................................        43,527         22,794      4,333,835
   Cell culture operations ...........................................          --             --          601,116
                                                                         -----------    -----------    -----------
        Total costs and expenses .....................................        43,527        (22,794)     8,182,992
                                                                         -----------    -----------    -----------
        Loss from operations .........................................       (39,725)       (13,982)    (7,637,044)
                                                                         -----------    -----------    -----------
Other income (expense)
   Interest, net .....................................................          --           (5,183)        66,824
   Litigation costs ..................................................          --             --          (99,242)
   Offering costs ....................................................          --             --         (336,446)
   Option compensation ...............................................          --             --         (219,375)
   Other income (expense) ............................................        44,447          9,869         31,832
   Accelerated lease commitment cost .................................          --             --         (315,000)
   Recognized loss for decline in value of investment ................          --             --       (1,500,000)
   Gain (loss) on sale of equipment ..................................          --               (1)        62,615
   Income (loss) recognized on indemnified liabilities ...............          (640)       242,276        241,636
   Income (loss) recognized on settlements ...........................          (821)        79,770        372,555
                                                                         -----------    -----------    -----------
        Other expense, net ...........................................        42,986        326,731     (1,694,601)
                                                                         -----------    -----------    -----------
        Income (loss) before provision for income taxes
            and cumulative effect of change in
            accounting principle .....................................         3,261        312,749     (9,331,645)

Provision for income taxes ...........................................          --             --          343,873
                                                                         -----------    -----------    -----------
        Income (loss) before cumulative effect of
           change in accounting principle ............................         3,261        312,749     (9,675,518)

Cumulative effect of change in accounting principle ..................          --             --          463,440
                                                                         -----------    -----------    -----------
Net Income (loss) ....................................................   $     3,261    $   312,749    $(9,212,078)
                                                                         ===========    ===========    ===========
Weighted average shares ..............................................     12,103,15      9,925,082      6,931,467
                                                                         ===========    ===========    ===========

Basic and diluted profit (loss) per share ............................   $      0.00    $      0.03    $     (1.33)


--------------------------------------------------------------------------------
              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                      - 4 -

<PAGE>


                BIORELEASE CORP. AND SUBSIDIARY D/B/A BIORELEASE
                        (A Development Stage Enterprise)

            Consolidated Statements of Stockholders' Equity (Deficit)

                       Years Ended June 30, 2000 and 1999



                                            Common Stock
                                      ----------------------             Development                                        Stock-
                                        Number               Additional     Stage       Stock                  Deferred    holders'
                                          of       Capital    Paid-in    Accumulated Subscription  Treasury    Offering    Equity
                                  Issued Shares   Amount    Capital      Deficit      Receivable    Stock       Costs     (Deficit)
                                    ----------  ---------- ----------  -----------   ----------  ----------  ----------  ----------
<S>                                 <C>         <C>        <C>         <C>           <C>         <C>         <C>         <C>
Balance, June 30, 1998              10,286,659     102,867  9,140,088   (9,528,088)     (50,000)     (5,500)       --      (340,633)
   Issuance of treasury
     stock for:
       Settlement of liabilities .        --          --       (5,500)        --            --        5,500                     --
   Cancellation of stock
      subscription ...............                            (50,000)                   50,000                                 --
   Issuance of common stock to
      minority interest holders...     263,879       2,638     (2,638)        --            --          --                      --
   Issuance of common stock upon
      exercise of stock options...     397,611       3,976      4,098         --         (8,074)        --
   Issuance of common stock upon
      exercise of options in
      settlement of liabilities...   1,049,589      10,496     26,021         --            --          --                   36,517
   Net income ....................         --          --         --       312,749          --          --          --      312,749
                                    ----------  ---------- ----------   ----------   ----------  ----------  ----------  ----------
Balance, June 30, 1999 ...........  11,997,738     119,977  9,112,069   (9,215,339)      (8,074)        --          --        8,633
Issuance of common stock on
   exchange options ..............     126,500       1,265      2,046                     8,074                              11,385
Deferred offering costs ..........                                                                              (13,376)    (13,376)
Net income .......................         --           --         --        3,261          --          --          --        3,261
                                    ----------  ---------- ----------  -----------   ----------  ----------  ----------  ----------
Balance, June 30, 2000 ...........  12,124,238  $  121,242 $9,114,115  $(9,212,078)  $      --          --   $  (13,376)  $   9,903
                                    ==========  ========== ==========  ===========   ==========  ==========  ==========  ==========



--------------------------------------------------------------------------------
              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                      - 4 -
<PAGE>


                BIORELEASE CORP. AND SUBSIDIARY D/B/A BIORELEASE
                        (A Development Stage Enterprise)

                      Consolidated Statements of Cash Flows

                       Years Ended June 30, 2000 and 1999

              the Cumulative Period From Inception to June 30, 2000


                                                                                                           Period From
                                                                            For the Year Ended June 30,   Inception to
                                                                               2000           1999       June 30, 2000
                                                                           -----------    -----------    -----------
<S>                                                                        <C>            <C>            <C>
Cash flows from operating activities
   Net loss ............................................................   $     3,261    $   312,749    $(9,212,078)
   Adjustments to reconcile net loss to net cash provided (used) by
       operating activities
           Depreciation and amortization ...............................         3,321         26,364        285,615
           Cumulative effect of change in accounting principle .........          --             --         (463,440)
           Recognized loss on investment ...............................          --             --        1,500,000
           Gain (loss) on sale of assets ...............................          --                1        (38,703)
           Loss on extinguishment of debt ..............................          --             --           42,000
           Common stock issued in exchange for
                Purchased technology ...................................          --             --          605,000
                Services rendered ......................................          --             --          128,453
           Common stock options issued in exchange for services rendered          --             --           52,300
           Amortization of unearned compensation .......................          --             --          140,625
           Repricing of A warrants .....................................          --             --           78,750
           (Increase) decrease in

                Accounts receivable ....................................          --            8,455           --
                Inventory ..............................................           354          2,068        (16,012)
                Prepaid expenses and other current assets ..............          --             --              360
                Other receivables ......................................       (29,447)           745        (29,447)
                Other assets ...........................................          --              300           --
                Deferred tax assets ....................................          --             --          463,440
           Increase (decrease) in

                Accounts payable .......................................        12,972       (111,695)        85,743
                Accrued expenses .......................................         1,000        (77,954)        24,468
                Other current liabilities ..............................         5,000         (1,549)         5,000
                Deferred income ........................................          --             --             --
                Other liabilities ......................................        (6,200)       (80,534)         1,000
                                                                           -----------    -----------    -----------
                   Net cash provided (used) by operating activities ...         (9,739)        78,950     (6,346,926)
                                                                           -----------    -----------    -----------
Cash flows from investing activities
   Purchase of collateralized mortgage obligation ......................          --             --       (1,000,000)
   Proceeds from collateralized mortgage obligation ....................          --             --        1,000,000
   Purchase of fixed assets ............................................          --             --         (333,187)
   Purchase of intangible assets .......................................          --             --         (105,205)
   Proceeds from sale of assets ........................................          --             --          189,742
                                                                           -----------    -----------    -----------
                      Net cash used by investing activities                       --             --         (248,650)
                                                                           -----------    -----------    -----------
Cash flows from financing activities
   Advance from and amounts due to stockholders ........................          --             --          594,385
   Repayment of advances ...............................................          --             --         (159,975)
   Notes payable .......................................................          --         (104,555)          --
   Issuance of common stock ............................................        11,385         36,517      2,153,868
   Deferred offering costs .............................................       (13,376)          --          (13,376)
   Treasury stock acquisition ..........................................          --             --          (10,000)
   Re-capitalization ...................................................          --             --        4,031,176
                                                                           -----------    -----------    -----------
                    Net cash provided (used) by financing activities            (1,991)       (68,038)     6,596,078
                                                                           -----------    -----------    -----------
                    Net increase (decrease) in cash ....................       (11,730)        10,912            502

Cash, beginning of year ................................................        12,232          1,320           --
                                                                           -----------    -----------    -----------
Cash, end of year ......................................................   $       502    $    12,232    $       502
                                                                           ===========    ===========    ===========

</TABLE>

--------------------------------------------------------------------------------
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                      - 5 -


<PAGE>


                BIORELEASE CORP. AND SUBSIDIARY D/B/A BIORELEASE
                        (A Development Stage Enterprise)

                   Notes to Consolidated Financial Statements

                             June 30, 2000 and 1999



Organization

Biorelease Corp. (the Company) and Biorelease  Technologies,  Inc.  (Subsidiary)
are being presented as a development  stage  enterprise  engaged in facilitating
the development, licensing, and marketing of biotech product lines.

1. Summary of Significant Accounting Policies

       Basis of Presentation

         The  financial  statements  of the  parent,  Biorelease  Corp.  and its
         subsidiary,  Biorelease Technologies,  Inc., which is approximately 90%
         owned by Biorelease  Corp., are presented on a consolidated  basis. All
         inter-company  balances and  transactions  have been  eliminated in the
         accompanying consolidated financial statements.

       Use of Estimates

       The  preparation  of financial  statements in conformity  with  generally
       accepted accounting  principles 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

       These consolidated  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 a development stage enterprise,  the Company currently does
       not have sufficient available funds to support its technology development
       and related marketing  efforts over any extended period of time.  Because
       the Company has limited working capital, there is substantial doubt about
       its ability to continue as a going concern without additional capital and
       attainment of profitable operations.

       On July 26, 1999 the Company  signed a definitive  agreement  under which
       Biorelease   will  merge  with  Polar  Molecular   Corporation,   a  Utah
       corporation ("PMC").  This agreement was amended and restated on December
       20, 1999 and further  amended as of June 30, 2000 to extend to a date not
       later than March 31, 2001.  (See Note 3) The agreement  contains  certain
       performance criteria which PMC has not adhered to. As of October 13, 2000
       the Company has  provided  notice of its intent to  terminate  the merger
       agreement.  The Company is, however, in discussions with PMC to reinstate
       the merger on substantially similar terms.

       Revenues

       Revenues from product sales are recorded when shipped.

                                      - 6 -
<PAGE>

1. Summary of Significant Accounting Policies (Continued)

       Inventory

       Inventory is stated at the lower of cost (first-in, first-out) or market.
       Management  has  recently  re-tested  each  batch of  biotech  product in
       inventory  and estimates the shelf life of its inventory to remain potent
       through June 30, 2002. The shelf life of the product beyond June 30, 2002
       will be evaluated at that time,  with the potential  for an  obsolescence
       write-down of inventory due to loss of biological activity.

       Equipment

       Equipment is stated at cost.  Depreciation  and amortization are provided
       using an  accelerated  method over the estimated  useful lives of five 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 in  deferred  tax assets and
       liabilities.

       Income (Loss) Per Common Share

       Income  (loss) per common  share is computed  using the  weighted-average
       number of common shares  outstanding during each period. For all net loss
       fiscal  years  presented,  common  stock  options are not included in the
       Company's  computation of diluted net loss per share, as the inclusion of
       these shares would be anti-dilutive; therefore, diluted loss per share is
       equal to basic loss per share.

                                      - 7 -
<PAGE>

1. Summary of Significant Accounting Policies (Concluded)

       As of June 30, the net income (loss) per share was calculated as follows:

                                                              Period from
                                                             inception to
                                      2000          1999    June 30, 2000
                                 -----------   -----------   ------------
Net income(loss)..............   $     3,261   $   317,749   $(9,212,078)
Shares .......................    12,103,155     9,925,082     6,931,467
                                 -----------   -----------   -----------
Per share amount..............   $      0.00   $      0.03   $     (1.33)
                                 ===========   ===========   ===========

2. Equipment

       Equipment consisted of the following as of June 30:

                                             2000           1999
                                            -------       -------
Equipment ...............................   $80,201       $80,701
Less accumulated depreciation ...........    78,467        75,146
                                            =======       =======
                                            $ 1,734       $ 5,055

       Depreciation  expense  for the  years  ended  June 30,  2000 and 1999 was
$3,321 and $5,915, respectively.

3.       Commitments and Contingencies

       On July 26, 1999 the Company  signed a definitive  agreement  under which
       Biorelease   will  merge  with  Polar  Molecular   Corporation,   a  Utah
       corporation  ("PMC").  The  proposed  merger will be  accounted  for as a
       reverse merger,  using the purchase method of accounting.  As a result of
       the proposed merger, if completed, the name of Biorelease will be changed
       to "Polar  Molecular  Corporation"  and the  current  management  team of
       Biorelease  will  resign and be replaced by PMC's  management  team.  The
       merger  agreement  provides,  among other things,  that  Biorelease is to
       reverse split its outstanding  common shares on a one-for-25 basis and is
       to spin-off or otherwise dispose of its wholly-owned subsidiary (and only
       operating  company)  Biorelease   Technologies,   Inc.  To  acquire  PMC,
       Biorelease  has  agreed  to  issue  to the  PMC  shareholders  13,620,000
       post-reverse  split  shares.  After the reverse  stock split and upon the
       issuance of common shares to the  shareholders  of PMC,  Biorelease  will
       have   approximately   14,880,000  shares  of  common  stock  issued  and


                                      - 8 -
<PAGE>

       outstanding,  of which  approximately  91.5% will be owned by the current
       shareholders  of PMC and  approximately  8.5%  will be  owned by the then
       current  shareholders  of  Biorelease.  The  completion  of the  proposed
       transaction  is subject  to,  among other  things,  PMC filing a Form S-4
       registration  statement  with the  Securities  and  Exchange  Commission,
       approval by the  shareholders  of both  companies,  the  completion  of a
       private  offering  pursuant to which PMC is to raise at least  $2,000,000
       before  closing,  and  other  matters.  The  registration  statement  was
       originally  filed on January  18,  2000.  Since then the  Securities  and
       Exchange   Commission  has  requested  certain   clarifications  and  the
       inclusion  of  current  annual  audited  financial   statements  of  both
       Biorelease and Polar for the filing to become effective. The registration
       will be re-filed with the inclusion of this  financial  statement and the
       audited  financial   statements  of  Polar  Molecular   Corporation  when
       completed.

       Since July 1, 1997, the Company has had no leased premises. Office rental
       space has been provided by a related party without charge (see Note 10).

       During  1994,  a note  holder had  brought  suit  against the Company for
       repayment  of $40,000 of  principal  and costs of  collection.  Under the
       terms of the note, at the Company's  option,  the note could be satisfied
       by the note holder receiving  Company stock of equivalent value. The note
       holder is a stockholder of the Company.  A court-approved  settlement was
       reached during 1995 in the amount of $43,475. The Company agreed to pay a
       monthly amount of $1,000  through  December 1996 where upon the remaining
       balance is due.  Interest on late payments is accrued at the rate of 10%.
       In  February  1998,  the Company  paid $8,000 and agreed to issue  20,000
       shares  of the  Company's  common  stock  in  final  settlement  of  this
       obligation.  The Company has accrued $1,000 for the remaining  obligation
       under this settlement,  which is accounted for as common stock in transit
       at June 30, 2000.

       The Company does not carry product liability insurance.

4.       Income Taxes

       The  Company  has not filed  federal or state tax  returns  for the years
       ended December 31, 1993,  1994, 1995, 1996, 1997 and 1998 and 1999. There
       will be no federal  tax  liability  for the years then  ended.  $4,700 of
       state  business  tax  liabilities  recorded  as of  June  30,  1998  were
       indemnified  as part of the related  party  agreement  entered into as of
       June 30, 1999. (See Note 10)


                                      - 9 -
<PAGE>

       For income tax  filing  purposes,  the  Company's  subsidiary  recognizes
       revenue and  expenses on a cash basis and the Company and its  Subsidiary
       have a tax year-end of December 31.

       The net current and long-term  deferred taxes  consisted of the following
components as of June 30:

<TABLE>

                                                             2000 Tax Effect
                               ----------------------------------------------------------------------
                                                        Asset                      Liability
                                              --------------------------     ------------------------
        Item                        Total        Current      Long-Term        Current    Long-Term
        -----                  -----------    -----------    -----------     ----------    ----------
<S>                            <C>            <C>            <C>             <C>           <C>
Accrual to cash adjustment .   $    (2,321)   $    (4,417)   $      --      $     2,096    $       --
Net operating loss deduction     1,113,171           --        1,113,171           --              --
                               -----------    -----------    -----------     ----------    ----------
                                 1,110,850         (4,417)     1,113,171          2,096            --
Valuation allowance ........    (1,110,850)         4,417     (1,113,171)        (2,096)           --
                               -----------    -----------    -----------     ----------    ----------
                               $       --     $      --      $      --       $      --     $       --
                               ===========    ===========    ===========     ==========    ==========



                                                             1999 Tax Effect
                               ----------------------------------------------------------------------
                                                        Asset                      Liability
                                              --------------------------     ------------------------
        Item                        Total        Current      Long-Term        Current    Long-Term
        -----                  -----------    -----------    -----------     ----------    ----------
<S>                            <C>            <C>            <C>             <C>           <C>
Accrual to cash adjustment .   $   (27,179)   $     1,268    $      --      $   (28,447)   $       --
Net operating loss deduction     1,113,621           --        1,113,621           --              --
                               -----------    -----------    -----------     ----------    ----------
                                 1,086,442          1,268      1,113,621        (28,447)           --
    Valuation allowance ....    (1,086,442)        (1,268)    (1,113,621)       (28,447)           --
                               -----------    -----------    -----------     ----------    ----------
                               $       --     $        --    $       --      $      --     $       --
</TABLE>




                                      Valuation
                                      Allowance

Balance June 30, 1998 ..........    $ 1,123,700
    Net decrease ...............       (32,258)
                                    ----------
Balance June, 30, 1999 .........     1,086,442
     Net increase ..............        24,408
                                    ----------
Balance June 30, 2000  .........    $1,110,850
                                    ==========


                                      - 10 -
<PAGE>

       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.

6. Equity

       Effective June 30, 1992, the Company  acquired  substantially  all of the
       outstanding common and preferred stock of FLS Acquisition Corp. (FLSA) in
       exchange for common stock of OIA. This  reorganization  was accounted for
       as a reverse  acquisition  of OIA by FLSA  under the  purchase  method of
       accounting,  as the  shareholders  of FLSA  controlled  the  consolidated
       entity  immediately  following  the  reorganization.  Subsequent  to  the
       transaction,  the Company  changed its name to Biorelease  Corp. and FLSA
       changed its name to Biorelease Technologies, Inc.

       The terms of the  reorganization  agreement  between  the Company and the
       Subsidiary  called for the  issuance  of  2,845,436  shares of OIA,  Inc.
       common  stock in exchange  for  5,014,780  shares of FLSA  common  stock,
       representing  all of FLSA common stock issued and outstanding at the date
       of the  reorganization.  Currently,  all but 433,105  shares of FLSA have
       been acquired.  A certificate for 263,879 shares reflecting the Company's
       remaining obligations under the reorganization  agreement has been issued
       to a trustee for the benefit of the minority Subsidiary shareholders. The
       reorganization  agreement also called for the issuance of up to 1,022,130
       additional  shares  of  the  Company's  common  stock,   subject  to  the
       achievement of certain operating results in future years. The Company did
       not meet the  requirements.  No accounting  recognition has been given to
       the minority  ownership interest in the subsidiary because the subsidiary
       is a deficit corporation and the minority shareholders have no obligation
       to fund their share of such deficit.

       Effective  September  1, 1992,  the Board of  Directors  adopted the 1992
       Directors' Stock Option Plan (Directors'  Plan) and the 1992 Stock Option
       Plan  (Option  Plan).  Under the  Directors'  Plan,  a maximum  number of
       100,000 shares are reserved for option grants. The option price per share
       will be its market price at the date of grant,  provided however, that at
       no time will the  option  price be less than  $6.00  per  share.  Options
       granted  under  this Plan vest  immediately  and expire 10 years from the
       date of grant.  The Plan was  modified by a proxy vote during  1994.  The
       maximum  number of shares  pursuant  to this Plan has been  increased  to
       250,000 shares,  and the requirement  that the minimum  exercise price be
       $6.00 per share has been removed.

       Under the Option  Plan, a maximum  number of 500,000  shares are reserved
       for option grants. The option price per share will be its market value at
       the date of grant,  provided  however,  that at no time  will the  option
       price be less than $6.00 per share.  Vesting  and  expiration  dates will
       vary based upon individual agreement with the option holder. The Plan was
       modified  by a proxy  vote  during  1994.  The  maximum  number of shares
       pursuant  to this  Plan  has  been  increased  to 10% of the  issued  and
       outstanding  shares of the Company,  not to exceed 1,000,000 shares,  and
       the  requirement  that the minimum  exercise price be $6.00 per share has
       been removed.  Under the Plan, an incentive  stock option plan benefiting
       its President  provides for an option to purchase up to 200,000 shares of
       common stock at $1.40 exercise price if certain operational  criteria are
       met.


                                      - 11 -
<PAGE>

       A summary of the  Company's  stock  option  plans as of June 30, 2000 and
1999 and changes during the year are presented below:

<TABLE>


                                                                             Options Granted to
                                              Director Plan                  Service Providers
                                          --------------------             ----------------------
                                                       Weighted                          Weighted
                                          Number       Average               Number        Average
                                             of        Exercise                of         Exercise
                                          Options      Price                Options        Price
                                          -------      -------             ---------      -------
<S>                                       <C>          <C>                 <C>            <C>
Options outstanding, June 30, 1998 ..     157,500        2.75              3,244,320        0.69
Options Granted September 30, 1998 ..      40,000        0.03                    --
Options exercised June 30, 1999 .....     (80,000)                        (1,347,200)
Options expired June 30, 1999 .......        --                             (357,500)
                                          -------                          ---------
    Options outstanding June 30, 1999     117,500                          1,539,620
Options Granted September 30, 1999 ..      20,000         .05                    --
                                          -------       ------             ---------
Options outstanding, June 30, 2000 ..     137,500        2.75              1,539,620        0.69
                                          =======       ======             =========       ======
Currently exercisable ...............     137,500                          1,539,620        0.69
                                          =======       ======             =========       ======

</TABLE>

       The range of  exercise  prices  is $.03 to $7.50 as of June 30,  2000 and
1999, respectively.

         The weighted average fair value of the options granted during the years
ended June 30, 2000 and 1999 is presented below:

                                                         2000          1999
                                                     -----------   -----------
            Director Plan  .........................    $0.05          $.03
            Option Plan ............................ Non Granted   Non Granted
            Options granted to service providers     Non Granted   Non Granted

       The  Company  applies  APB  Opinion  25 and  related  interpretations  in
       accounting for certain options granted. Accordingly, no compensation cost
       has been  recognized for those  options.  Had  compensation  cost for the
       Company plans been determined based on the fair value at the grant dates,
       consistent  with the method of FASB  Statement  123,  the  Company's  net
       income or loss would not have been  affected for the years ended June 30,
       2000 and 1999,  and there would have been no impact on the profit or loss
       per share for those years.


                                      - 12 -
<PAGE>

5. Equity (Continued)

                Due to the  immateriality of the options granted in fiscal years
ended June 30, 2000 and 1999,  the fair market  value of the options was assumed
to be the fair market  value of the stock at the grant  date.  In  addition,  no
compensation costs were recorded by the Company as a result of the immateriality
of the options granted.

6. Investment

       The  Company  acquired  150,000  shares  of  6%  cumulative,  convertible
       preferred  stock of Genesis  Farms,  Inc.  (Genesis) on March 31, 1994 in
       consideration for issuing 1,500,000 shares of the Company's common stock.
       The preferred  stock can be converted  into common stock at a ratio of 10
       shares of  common  stock for each  share of the  preferred.  On March 31,
       1994,  the  Company's  stock had a fair market value of $1. In accordance
       with  generally  accepted  accounting  principles  (the  cost  method  of
       accounting  for  non-marketable  investments),  the Company  recorded the
       investment  in Genesis at  $1,500,000.  Management  believes the value of
       Genesis stock has been  permanently  impaired and has reduced the carried
       value of its investment in the Genesis preferred stock to $-0- as of June
       30, 999. As mentioned  in the next  paragraph,  as of June 30, 2000,  the
       company no longer owns the stock.

       In fiscal year ended June 30, 2000 a related  party  litigated the return
       of  1,400,000  shares of the  1,500,000  shares of the  Company's  common
       stock.  These shares were awarded to that party in partial  consideration
       of the  sale of  certain  assets  and the  settlement  and  indemnity  of
       liabilities of the Company. (See Related Party Transactions. Note 10).

7. Cash Flow Information

                                                                     Period From
                                                    For the Year      Inception
                                                   Ended June 30,         to
                                                  ---------------      June 30,
                                                    2000    1999         2000
                                                  ------   ------     ----------
Cash paid for interest .........................  $  0     $    0     $   7,752

Non-cash investing and financing activities
   were as follows:

         Liabilities repaid through issuance
             of common stock ...................      0    36,517       652,731
         Issuance of common stock for
             subscription receivable ...........     --        --        50,000
         Non-marketable security acquired
             through the issuance of common
             stock .............................     --        --     1,500,000


                                      - 13 -
<PAGE>

8. Related Party Transactions

       On October 4, 1996, R. Bruce Reeves  resigned as a member of the Board of
       Directors,  President,  and  Chief  Executive  Officer  of  the  Company.
       Effective  April  1,  1996,  the  Company  engaged  a  consulting   firm,
       controlled by a Reeves' family member, to perform the executive duties of
       the  Company.  In fiscal  year end June 30,  2000,  the  Company  accrued
       $11,200 in contractual fees for these services as compared to fiscal year
       ended June 30, 1999,  wherein the Company paid $7,200 for these services.
       In February 1998, the Company's  Board of Directors  appointed Mr. Reeves
       as acting President to manage ongoing business activities of the Company.

       As of June 30,  1998,  the Company was  indebted  $87,734 to this related
       party.  The  indebtedness  bore no interest  and had been  deferred for a
       period of three  years.  The Company had incurred  $16,827 of  additional
       accrued  expenses payable to the related party as of June 30, 1998. As of
       June 30, 1999 the Company and this related party reached  agreement under
       which the related party,  on behalf of itself and other  creditors of the
       Company,  received  625,000  shares of the Company's  stock,  the Genesis
       preferred shares held by the Company,  all rights to recover 1,400,000 of
       the shares  previously  issued to Genesis  Capital in the March 31,  1994
       exchange  transaction  along with an option for one year to acquire up to
       60% of the  Subsidiary  at the  then  book  value  in  exchange  for  (i)
       forgiving  $67,918 in debt owed by the Company and the  Subsidiary to the
       related party and other creditors,  (ii)  indemnification  by the related
       party for an  additional  $242,276 in  liabilities  plus (iii)  rights to
       offset  exercise  price  against  outstanding  indebtedness  for  certain
       outstanding options.

11.    Disclosure About Fair Value of Financial Instruments

       The Company's  financial  instruments  consist of cash,  short-term trade
       receivables  and payables,  and long-term debt. The carrying value of all
       instruments approximates their fair value.

                                     - 14 -
<PAGE>




Item 8.     Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosures.

         The Company's directors appointed Ferrari & Associates, P.C. to perform
the audit for the most recently  completed  fiscal  periods ending June 30, 2000
and 1999, terminating the previous auditors,  Berry Dunn McNeil & Parker. Except
as set  forth  below,  there  have  been no  changes  in or  disagreements  with
accountants with respect to accounting and/or financial disclosure. On September
26, 1994, the Company terminated Coopers & Lybrand  ("Coopers") as its certified
public  accountant and retained Smith,  Batchelder & Rugg.  Until June 30, 1998,
Smith  Batchelder & Rugg, now affiliated  with Berry,  Dunn,  McNeil and Parker,
have expressed their opinion on the Company's Financial Statements.

         In  connection  with the  audits  of the  financial  statements  of the
Company, for the fiscal years ended June 30, 1992 and 1993 and during the period
commencing  July  1,  1993  through  the  date  of this  report,  there  were no
disagreements with Coopers on any matter of accounting  principles or practices,
financial  statement   disclosure,   or  auditing  scope  or  procedure,   which
disagreements, if not resolved to the satisfaction of Coopers, would have caused
them to make  reference  to the  subject  matter  of the  disagreement  in their
report.

         Except for an explanatory paragraph concerning the Company's ability to
continue as a going concern,  none of the Company's  accountants  reports on the
Company's  financial  statements  contained an adverse  opinion or disclaimer of
opinion,  nor was it  qualified  as to  uncertainty,  audit scope or  accounting
principles.  However,  there were  certain  reportable  events in the  Company's
Annual report for the year ended June 30, 1993 as follows:

         (i) The Company's  Annual report on Form 10-KSB for the year ended June
30, 1993 ("1993 Form  10-KSB") was filed with the  Commission  on September  28,
1993. Coopers' report on the financial statements contained therein contained an
explanatory  paragraph relating to uncertainty  concerning the Company's ability
to continue as a going  concern  which  situation  was  further  discussed  in a
footnote to the financial statements.  During the period of preparation of these
financial  statements,  the  Company  was  engaged  in a "best  efforts"  public
offering to raise additional capital.

         Two unsigned  draft reports and  associated  footnotes were prepared by
Coopers,  one without a going  concern  explanatory  paragraph to be used if the
offering was completed  before  Coopers'  report was released,  the other with a
going concern  explanatory  paragraph if the offering was not completed.  By the
release date of Coopers'  report,  the offering had been  terminated and Coopers
released their signed report with the going concern  explanatory  paragraph.  As
noted above, the Company's 1993 Form 10-KSB contained the explanatory  paragraph
and related footnote disclosure.

         Sometime  later,  the  Company's  annual  report to  shareholders  (the
"Annual  Report")  was  printed  and,  on or about  January  4, 1994 was sent to
shareholders.  Through an administrative  oversight,  a disk containing a report
(unsigned)  which did not  include a going  concern  explanatory  paragraph  and
financial  statements  which did not contain  related  footnote  disclosure  was
released to the printer.  The oversight was discovered by the Company during the
preparation  of the 1994  Financial  Statements,  in  reviewing  its past Annual
Report with its then newly retained auditors, Smith Bachelder & Rugg.

         The Company  immediately  notified  Coopers  who, in turn,  advised the
Company that, in their  opinion,  the Company  should inform the  Commission and
anyone who may be relying on the Annual  Report of this  situation.  The Company
informed  the  former  accountant  that,  due to the  length  of time  since the
distribution of Annual Reports to  shareholders,  the filing with the Commission
of the correct  information  in the  Company's  1993 Form 10-KSB and  subsequent
filings  with the  Commission,  the Company was of the opinion that no one could
reasonably  still be relying  on the Annual  Report.  Accordingly,  the  Company
informed the Commission and  shareholders  of this situation in connection  with
the filing and distribution to shareholders of this Annual Report on Form 10-KSB
for the year ended June 30, 1994.

         (ii) In  connection  with  consultations  with Coopers  concerning  the
Company's March 1994 purchase of preferred stock of Genesis Capital  Corporation
(now  Genesis  Farms,  Inc.) (See "Item 12.  Certain  Relationships  and Related
Transactions  - The  Company"),  Coopers  informed  the  Company  that the value
assigned to the Company's  holding of that stock as presented in the Form 10-QSB
for the quarter  ended March 31, 1994 would need to be evaluated  in  connection
with  an  audit  of the  Company's  financial  statements  and  that  additional
documentation  might  be  necessary   concerning  the  value  assigned  to  that
investment if the Company's existing documentation proved to be inadequate.

         Neither  of the  above  two  issues  was  considered  in the  Company's
decision to terminate  Coopers.  The decision to change accountants was approved
by the Board of Directors of the Company.

         On July 28, 1992, the Company had engaged  Coopers to be its certifying
accountant  in place of Bradshaw,  Smith & Co.  ("former  accountant"),  who was
dismissed effective July 28, 1992.

         During the fiscal years ended June 30, 1991 and 1990 (periods for which
the former accountant audited the Company's financial statements) and during the
period from July 1, 1991  through the date hereof,  there were no  disagreements
with the former accountant on any matter of accounting  principles or practices,
financial  statement   disclosure,   or  auditing  scope  or  procedure,   which
disagreements,  if not resolved to the  satisfaction  of the former  accountant,
would have caused it to make reference to the subject matter of the disagreement
in connection with its reports.


                                      - 15 -
<PAGE>



         The former accountant's  report on the Company's  financial  statements
for either of the two fiscal  years ended June 30, 1991 and 1990 did not contain
any  adverse  opinion or  disclaimer  of  opinion,  nor was it  qualified  as to
uncertainty, audit scope or accounting principles.

         The  decision  to engage  Coopers as set forth above and to dismiss the
former  accountant  was  made by the  new  Board  of  Directors  of the  Company
subsequent to the June 1992  reorganization  of the Company and the  Subsidiary.
Cooper's was the Subsidiary's independent auditors.

PART III

Item 9.       Directors,  Executive  Officers,  Promoters and Control  Persons;
              Compliance with Section 16(a) of the Exchange Act

         The following  table  delineates  certain  information  concerning  the
directors and executive officers of the Company:

<TABLE>

                                                  Positions with                   Positions with
         Name                       Age           the Company                      the Subsidiary
         ----------------          ----           ----------------------------     -------------------
         <S>                       <C>            <C>                              <C>
         Richard Schubert           63            Chairman, Board of Directors      Director

         R. Bruce Reeves            60            President, Principal Financial    President & Director
                                                  Officer (1)

         Kevin T. McGuire           50            Treasurer (2)                     Treasurer (2)

         Richard Whitney            61            Director

</TABLE>

(1)      Dr. Reeves served as President, CEO and Director until October 4, 1996.
         He was  re-appointed as acting President of the Company on February 11,
         1998 until a successor is duly qualified and elected.

(2)      Kevin T. McGuire  served as the  Company's and  Subsidiaries  full time
         Treasurer  from June 1992 until  April  1994.  Since  April  1994,  Mr.
         McGuire  has  served  without  compensation  on an  as  needed  and  as
         available basis

         Directors  are  elected  by the  stockholders  to serve  until the next
annual meeting of stockholders  or until their  successors have been elected and
have duly  qualified.  Officers are  appointed to serve until the meeting of the
Board of Directors  following the next annual meeting of stockholders  and until
their  successors  have been  elected and have  qualified.  Richard  Whitney was
appointed a Director of the Company  following the  Reorganization in accordance
with the  provisions of an investment  agreement  between the Subsidiary and The
Venture Fund of  Washington  (see "Item 12.  Certain  Relationships  and Related
Transactions-The Subsidiary").

         A summary  of the  business  experience  of each  current  officer  and
director of the Company and the Subsidiary is as follows:

         RICHARD  SCHUBERT  has been  Chairman of the Board of  Directors of the
Company since July 1992. Mr. Schubert is currently a business  consultant.  From
December  1990 through  September  1995,  Mr.  Schubert was the President of The
Points of Light  Foundation,  a  foundation  created to  encourage  Americans to
become  directly  involved  in  consequential  community  service  in respect of
critical  social  issues.  From June  1989 to  December  1990 he was a  business
consultant. He served as President of the American Red Cross (1983-1989) and was
a former Vice Chairman and President of Bethlehem Steel until 1982. Mr. Schubert
has extensive experience in law, business and government. During his career with
Bethlehem  Steel,  which began in 1961,  he was appointed to serve in the public
sector as  Assistant to the Under  Secretary  of Labor  (1970)  Solicitor of the
Department of Labor (1971) and Under Secretary of Labor (1973).  Mr. Schubert is
a member of the  Council of Foreign  Relations  and he serves as a director of a
number of philanthropic and business  organizations.  Mr. Schubert graduated Cum
Laude from Eastern Nazarene College in Quincy,  Massachusetts with a Bachelor of
Arts  degree,  and from Yale Law  School  with a  Bachelor  of Law  degree.  Mr.
Schubert,  along  with  Dr.  Reeves,  serves  as an  officer  of NCPI,  Inc.,  a
non-profit subsidiary of Eastern Nazarene College.

         R BRUCE  REEVES,  Ph.D.,  has been the  President  and Chief  Executive
Officer of the Company since May 1993.  He has been  Secretary and a Director of
the  Company  since  July  1992 and Chief  Executive  Officer,  Secretary  and a
Director of the  Subsidiary  until June 1995 when  operations of the  Subsidiary
were  curtailed.  In August  1995 Dr.  Reeves  agreed  to serve  part time as an
Officer and Director of NCPI,  Inc., an affiliate of Eastern Nazarene College of
which  Dr.  Reeves is an  alumnus.  Dr.  Reeves  has over  twenty-five  years of
experience  in  start-up  ventures,  and has spent  over ten years in  high-tech


                                     - 16 -
<PAGE>

business and product development,  including five years (1964-1969) with General
Electric Company on several business development  operations.  From 1969 to 1979
Dr.  Reeves  was a  Principal  in a high  tech  start  up  company  and  several
syndicated real estate partnerships. From 1979 to 1989 he served as Chairman and
CEO of  Monadnock  Partners,  Inc., a family  owned real estate  management  and
development   entity  involved  in  hotels,   commercial  office  buildings  and
multi-tenant  industrial projects. Dr. Reeves, along with a corporate affiliate,
was a  principal  in a number  of real  estate  ventures  including  four  hotel
projects in the Northeast.  Dr. Reeves oversaw three of these hotel partnerships
through bankruptcy  proceedings in the New Hampshire and Connecticut  Districts.
As  a  result  of  related   litigation   and  personal   guarantees  for  these
partnerships,  Dr.  Reeves filed for personal  bankruptcy  protection in the New
Hampshire  District in May 1989.  From 1989 to 1996, Dr. Reeves devoted his full
time to the business of the Company, its predecessor,  Fluid Life Systems,  Inc.
("FLS") and the  Subsidiary.  Dr. Reeves is currently an officer of RT Robertson
Consultants,  Inc., a family owned  consulting  firm which  provides  management
services to a number of companies, including the Company, on an as needed basis.

         KEVIN T MCGUIRE has been the Company's and Subsidiary's Treasurer since
June 1992.  Since April 1994 he has served without  compensation  on a part time
basis.  The  Company  contracts  for  accounting  and tax  services  through  an
accounting firm owned by the spouse of Mr. McGuire that has assisted the Company
to maintain  compliance with  accounting  activities and Securities and Exchange
Commission reporting for the Company. Both Mr. McGuire and his spouse, Vivian L.
McGuire,  are graduates of Bentley College. Mr. McGuire has 28 years of business
experience  including 16 years with public  accounting  firms.  Mrs. McGuire has
owned and operated a small business tax and audit practice since 1988.

         RICHARD  WHITNEY has been a Director of the Company since July 1992. He
is  currently  a  Principal  in a  Snelling  &  Snelling  franchise  located  in
Washington D.C.  Formerly Mr. Whitney served as a general partner of The Venture
Fund of  Washington  (the "Fund")  from 1989 until August of 1994.  The Fund has
investments  that  include  pension  funds,  insurance  companies,   banks,  and
corporations.  It has, as a corporate general partner, ICF International that is
a consulting  and  engineering  firm based in  Washington,  DC. Mr.  Whitney has
managed venture funds since 1972,  beginning with direct  responsibility for the
management  of  the  Direct  Investment  Fund  at  Overseas  Private  Investment
Corporation.  In the  mid-1970's,  he  served as  Executive  Vice  President  of
Narragansett  Capital. In 1977, with others, Mr. Whitney purchased a controlling
interest in Columbia  Ventures,  Inc.,  an SBIC located in  Washington,  DC. Mr.
Whitney has served as President and a Director of that company  since 1978.  Mr.
Whitney is a past director of the Alumni  Association  and Sports  Foundation of
Brown University.

Compliance with Section 16(a) of The Securities Exchange Act of 1934

         Based  solely  on a  review  of  such  materials,  as  required  by the
Securities  and  Exchange  Commission,  the  Company has no  knowledge  that any
officer, director or beneficial holder of more than ten percent of the Company's
issued  and  outstanding  shares  of  Common  Stock  failed  to  file,  with the
Securities and Exchange  Commission,  any form or report required to be so filed
pursuant  to Section  16(a) of the  Securities  Exchange  Act of 1934 during the
fiscal year ended June 30, 1999.

Item 10.      Executive Compensation

         The following table shows all the cash  compensation paid or to be paid
by the Company or any of its subsidiaries, as well as certain other compensation
paid or  accrued,  during the fiscal  years  indicated,  to the Chief  Executive
Officer for such period in all capacities in which he served. No other Executive
Officer  received total annual salary and bonus in excess of $100,000 during the
fiscal  years ended June 30,  1995 and 1994.  Through  June 30,  1997 Dr.  Gauci
received compensation totaling $30,000 as President of the Subsidiary. Dr. Gauci
passed away in 1998.

<TABLE>

                           SUMMARY COMPENSATION TABLE

                                                                                  Long-Term Compensation

                               Annual Compensation                        Awards            Payouts
       (a)             (b)       (c)         (d)         (e)          (f)      (g)        (h)     (i)
                                                        Other
                                                       Annual     Restricted                   All Other
                                           Bonus       Compen-       Stock                      Compen-
Name and Principal                        Payouts      sation        Award               LTIP   sation
Position              Year      Salary      ($)         ($)          ($)         SAR's    ($)     ($)
------------------    ----      ------    ------        ---        --------     ------   ----   ------
<S>                   <C>       <C>       <C>           <C>        <C>          <C>      <C>    <C>
R. Bruce Reeves       2000         -0-       -0-         -0-          -0-         -0-     -0-     -0-
President and         1999         -0-       -0-         -0-          -0-         -0-     -0-     -0-
Former Chief          1998         -0-       -0-         -0-          -0-         -0-     -0-     -0-
Executive Officer     1997(1)   10,000       -0-         (2)          -0-         -0-     -0-     -0-
                      1996      90,000       -0-         (2)          -0-     913,200(1)  -0-     -0-
                      1995     120,000    50,000         (2)          -0-         -0-     -0-     -0-
                      1994     120,000       -0-         (1)          -0-     200,000(3)  -0-     -0-
                      1993     117,000    20,000         (1)          -0-         -0-     -0-     -0-
                      1992      86,000    10,000         -0-          -0-         -0-     -0-     -0-

</TABLE>


                                     - 17 -
<PAGE>


(1)      On April  1,  1996 the  direct  employment  of R.  Bruce  Reeves,  then
         President/CEO of the Company ceased. All of Reeves'  contractual rights
         were  terminated.  New contractual  agreements were negotiated with R T
         Robertson  Consultants,  Inc.,  a Reeves  family  affiliate  to provide
         consulting  services  including the services of Dr.  Reeves.  In fiscal
         years  ended  June  30,  2000  and  1999,  respectively  R T  Robertson
         Consultants,  Inc. charged the Company $11,280 and $8,700 for executive
         oversight of the Company and its  Subsidiary.  Between April 1 and June
         30, 1996 R. T. Robertson billed the Company $33,300,  including expense
         reimbursements,  for executive oversight of the Corporations. Under the
         terms  of  the R T  Robertson  Consultants,  Inc.  agreement  with  the
         Company,  Dr. Reeves,  an employee of R T Robertson  Consultants,  Inc.
         serves  as  President/CEO  of  the  Company.  During  this  period,  RT
         Robertson  was  awarded by the Company  options  for 913,200  shares at
         exercise prices from $0.02 to $0.045 per share.

(2)      Value of benefits and other  perquisites are less than 10% of the total
         annual salary and bonus.

(3)      Effective  October 4, 1996 these 200,000 options have been forfeited by
         Dr. Reeves.

                  The following table sets forth information with respect to the
Chief Executive Officer  concerning the grants of options and Stock Appreciation
Rights ("SAR") during the past fiscal year:

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

                                Individual Grants

        (a)                (b)        (c)            (d)              (e)
                                  Options/SARs
                         Options/  Granted to
                           SARs   Employees in  Exercise or Base   Expiration
Name                     Granted  Fiscal Year     Price ($/Sh)        Date
----------------------  --------- ------------ -----------------  -------------

Chief Executive Officer    -0-         -0-                   0%
--------------------



         The following  table sets forth  information  with respect to the Chief
Executive Officer concerning exercise of options during the last fiscal year and
unexercised options and SARs held as of the end of the fiscal year:

             Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR

<TABLE>

        (a)                   (b)            (c)           (d)              (e)
        ---                   ---            ---           ---              ---
                                                                         Value of
                                                        Number of       Unexercised
                                                       Unexercised      In-the-Money
                                                       Options/SARs     Options/SARs
                            Shares                     at FY-end (#)    at FY-end (#)
                          Acquired on       Value      Exercisable/      Exercisable/
Name                      Exercise(#)     Realized($)  Unexercisable    Unexercisable
-----------------------   -----------     -----------  -------------    -------------
<S>                       <C>             <C>          <C>              <C>
Chief Executive Officer      -0-             -0-             -0-             -0-


                  The following table sets forth information with respect to the
Chief Executive Officer concerning awards under long term incentive plans during
the last fiscal year:


                                      - 18 -
<PAGE>


      Estimated Future Payouts under Non-Stock Price-Based Plans
        (a)                        (b)              (c)              (d)         (e)         (f)
                                               Performance
                               Number of         or other
                            Shares, units      Period Until
                                Or Other       Maturation or       Threshold    Target     Maximum
Name                          Rights (#)          Payout            ($ or #)   ($ or #)   ($ or #)
---------                     -------------    -------------       ---------   --------   --------
<S>                           <C>              <C>                 <C>         <C>        <C>
Chief Executive Officer            -0-             -0-                -0-         -0-        -0-

</TABLE>

                  Directors are not  compensated for acting in their capacity as
Directors except for options granted pursuant to the 1992 Directors Option Plan.
Directors are reimbursed for their expenses  incurred in attending  meetings and
conducting their duties. In April 1995, the Directors, Messrs. Schubert, Maybury
and Whitney were awarded  129,000  options  exercisable  into 129,000  shares of
common stock at $.08 per share. In September 1995,  Directors Messrs.  Schubert,
Maybury and Whitney were awarded an additional  50,000 options  exercisable into
50,000  shares  of  common  stock  at $.17 per  share.  These  options  were for
consulting  services  unrelated  to their  position  as  directors.  The options
originally  were  to  expire  on  December  31,  1997  and  December  31,  1999,
respectively.  On February 11, 1997 the  exercise  period of these and all other
issued and non-exercised options were extended by three additional years.

         Though March 31, 1996 R. Bruce Reeves,  President  and Chief  Executive
Officer had an employment agreement with the Company. Pursuant to the agreement,
Dr. Reeves received an annual salary of $120,000. Pursuant to the Agreement, Dr.
Reeves also received  options to purchase 200,000 shares of the Company (see the
"Option/SAR  Grants in Last Fiscal  Year" table  above).  These  200,000  option
shares were voluntarily  forfeited by Dr. Bruce Reeves effective October 4, 1996
on which date he resigned as  President  and CEO.  The  Company  entered  into a
consulting agreement with R T Robertson Consultants,  Inc. to provide consulting
services including the services of Dr. Reeves through the end of the fiscal year
ending June 30, 1997.  Robertson  consulted  for the Company  through the end of
fiscal year June 30, 1997 and, on an as needed basis, from July 1997 to present.
On February 11, 1998,  Dr. Reeves was appointed by the board of Directors to act
as President of the Company until a successor is duly qualified and elected. Dr.
Reeves serves without compensation.  During this consulting period, RT Robertson
received  options to acquire  913,200 shares at a conversion  price ranging from
$0.06 to $0.15 per share.

Item 11.      Security Ownership of Certain Beneficial Owners and Management

(a)           Security Ownership of Certain Beneficial Owners -- The persons set
              forth on the  charts  below  are  known to the  Company  to be the
              beneficial  owners  of more than 5% of the  Company's  outstanding
              voting Common Stock as of the date hereof.

         Genesis Farms,  Inc.  (Formerly  Genesis Capital,  Inc), 507 North Belt
East,  Suite 240,  Houston,  TX 77060 was issued 1.5 million  shares of Rule 144
stock in March 1994.  The Company  initiated an agreement  with R. T.  Robertson
Consultants,  Inc., 340 Granite  Street,  Manchester,  NH 03102 to recover these
shares. R. T. Robertson Consultants,  Inc. recovered 1.4 million of these shares
and the Company,  under terms of the Asset  Agreement has assigned these shares,
to Robertson (see page 19 - The Asset Agreement  effective June 30, 1999).  This
recovery activity does not involve the Company in any litigation related to this
transaction.  R. T. Robertson  Consultants,  Inc. owns 1,250,000 shares,  net of
legal consideration, which represents 10.3% of issued shares and 10.3% of issued
shares plus exercisable options for named security owners.

         Sandra J. Reeves, 754 Straw Hill,  Manchester,  NH 03104 owns 1,513,984
shares  individually  and/or  beneficially  including  621,880  derived  from RT
Robertson  options for a like number of shares that were  exercised  at June 30,
1999. It does not include 725,000 shares issued to R. T. Robertson  Consultants,
Inc  Trustee  under the  Asset  Agreement  of June 30,  1999.  Mrs.  Reeves is a
stockholder in RT Robertson Consultants,  Inc. and controls ninety percent (90%)
of the shares of R T Robertson  Consultants  Inc.'s common stock. Mrs. Reeves is
the spouse of Dr. R. Bruce  Reeves,  President of the  Company.  The shares that
Mrs. Reeves owns directly or beneficially,  plus the shares held by RT Robertson
Consultants as Trustee for certain  creditors,  represent 26.4% of issued shares
(26.3% of issued shares plus exercisable options) for named security owners.

         (b) Security  Ownership of Management  --  Information  concerning  the
number and  percentage  of shares of voting Common Stock of the Company owned of
record and beneficially by management, is set forth on the charts below.


                                      - 19 -
<PAGE>

<TABLE>

Name and                            Number of Shares                            Percent of
Address of                           Beneficially                              Common Stock
Beneficial Owner                          Owned*                               Outstanding**
----------------                          ------                              --------------
<S>                                  <C>                                       <C>
R. Bruce Reeves                       245,393(1)(6)                                 2.0%
754 Straw Hill
Manchester, NH 03104

Richard Schubert                      362,639(1)(5)                                 3.0%
7811 Old Dominion Drive
McLean, VA 22102

Kevin T. McGuire                      205,539(1)(3)                                 1.7%
148 Robinson Road
Hudson, NH 03051

Richard Whitney                       239,771(1)(2)(4)                              1.9%
1612 K St. N.W. #308
Washington, DC 20006

All Officers and
Directors as a Group

  (3 Persons)                       1,053,342 (1)(2)(3)(4)(5)                       8.6%

---------------------------
</TABLE>


         * Except as  indicated  in the  footnotes  below,  each person has sole
voting and dispositive power over the Shares indicated.

         ** Based  upon  12,124,238  shares  issued and  outstanding  and 65,000
exercisable options for the above named persons, as of the date hereof.

         Notes:

(1)      Excludes possible  subsequent  issuance of additional Shares based upon
         performance  criteria (see "Item 12. Certain  Relationships and Related
         Transactions-The Reorganization").

(2)      Includes 50,000 shares each for Mr. Whitney that are issued at June 30,
         1999 upon  exercise  of a like number of options  that are  pursuant to
         consulting agreements with this individual.

(3)      Includes  154,539 shares that are held by Mr. and Mrs.  McGuire jointly
         with rights of survivorship.

(4)      All  Shares  are owned by The  Venture  Fund of  Washington,  a limited
         partnership.  Mr. Whitney is a limited partner owning approximately 19%
         of the limited partnership.

(5)      Includes  22,500 and 42,500  options  currently  exercisable  under the
         Company's Directors' Stock Option Plan to Mr. Schubert and Mr. Whitney,
         respectively.

(6)      Excludes  725,000  shares  held by R T Robertson  Consultants,  Inc. as
         Trustee for certain  creditors  under terms of the Asset  Agreement and
         1,513,984 shares owned by Mrs. Reeves. Dr. Reeves disclaims  beneficial
         ownership  and  personal  interest  in  shares  held by  these  related
         parties.

Item 12.      Certain Relationships and Related Transactions

The Reorganization

         By Agreements dated June 3, 1992 (collectively,  the "Agreement"),  the
Company agreed to acquire up to 100% of the then issued and  outstanding  shares
of Common and Preferred  Stock of the  Subsidiary in exchange for  approximately
3,030,149 Shares of Common Stock (the "Reorganization"), plus certain contingent
Shares.  The Agreement  has been filed with the  Commission as an Exhibit to the
Registration  Statement (of which this Prospectus is a part) and is incorporated
herein  by  this  reference.  In  August  1992,  the  Subsidiary,  a  California
Corporation,  then named FLS Acquisition Corp (FLS)  reincorporated  in Delaware
and changed the name to Biorelease Technologies, Inc. (BTI).



                                      - 20 -
<PAGE>

         The  purpose of the  Reorganization  was to provide  the  Company  with
substantive   operations  and  to  provide  the  Subsidiary  funds  to  commence
substantive operations.

         Effective June 30, 1992,  pursuant to the terms of the  Agreement,  the
Subsidiary  stockholders  owning an aggregate of 4,342,037  shares of Subsidiary
Common  and/or  Preferred  Stock,  exchanged  these  Shares for an  aggregate of
2,463,711  Shares of Company Common Stock. The "Exchange Ratio" was one Share of
Subsidiary  Common or Preferred Stock for .56741 Company Shares of Common Stock.
An additional 240,085 Subsidiary Shares were subsequently  exchanged for 136,225
Company Shares (now  representing  26.7% of the Company's issued and outstanding
Shares when aggregated with the other Shares issued in the Reorganization).  The
remaining  Subsidiary stock (including  Common shares issuable upon the exercise
of certain  options and  warrants)  were not exchanged  because such  additional
exchange  would have  deprived the Company of the  exemption  from  registration
relied upon to effect the initial  exchanges (Rule 506 of Regulation D under the
Act).

         Although the Exchange Ratio is the same for all the  Subsidiary  Stock,
there are two  categories  of  Subsidiary  stockholders,  each  category  having
different  registration  rights.  The first category  holders have  registration
rights with regards to 10% of their  shares.  Further  and,  pro rata,  they are
entitled to a percentage of an aggregate of up to an additional 1,022,130 Shares
of  restricted  Common Stock (the  "Contingent  Shares"),  the actual  aggregate
number of  Contingent  Shares to be determined  based upon  formulas  related to
annual gross revenues or profits.  The rights to the  Contingent  Shares are not
transferable. These Contingent Share rights have been expired.

         None of the shares with  registration  rights were registered (see "The
Selling Security holders'  Offering" below) and all of the shares have been held
in excess of three years  making them  eligible  for resale,  subject to certain
limitations, under Rule 144.

Temporary Reduction in Option Exercise Price

         Effective  June 30,  1999,  the  Directors  of the  Company  approved a
temporary  reduction in the exercise  price per share of all stock  options then
held in the Company by former  employees,  directors and consultants.  Under the
terms of the  temporary  reduction,  the strike  price was reduced to 30% of the
then existing strike price on all respective  issued options for a period ending
August  31,  1999.  This  action had the  effect to move the  exercise  price of
certain  issued  options into the then current  trading  range for the Company's
stock.  During this temporary reduction period 1,553,700 of the then outstanding
3,084,320  options  shares were  converted  for $ 11,999 in cash and $ 35,517 in
exchange for liabilities of the Company or Subsidiary.

The Company

         On January 17, 1992,  the Company  distributed a majority of its shares
of Vegas Chips,  Inc.,  to the  Company's  stockholders  of record on a pro rata
basis as a dividend. The dividend was distributed at the rate of .6 (6/10) share
of Vegas Chips,  Inc.'s Common Stock for each one Share of Company  Common Stock
owned.

         On April 20, 1992,  the Company sold 591,600  Shares of its  restricted
Common Stock at $2.50 per Share for gross  proceeds of $1,479,000  (net proceeds
of  $1,304,000)  in a private  offering.  These Shares were to be registered for
sale to the  public;  however,  none of the  shares  were  registered  (see "The
Selling Security holders'  Offering" below) and all of the shares have been held
in excess of three years  making them  eligible  for resale,  subject to certain
limitations,  under Rule 144. Union Equity Partners ("UEP") holds 2,400 options,
each option  entitling  the holder to purchase one Share at a price of $6.00 per
Share  through  January 20,  1999.  UEP was a broker  involved in the April 1992
private offering.  The Company has agreed to notify the holders of these options
anytime  it  intends  to file a  registration  statement  under the Act and,  if
requested by such  holders,  to register the Shares  issuable  upon  exercise of
these options in such registration statement.

         In May and July  1994,  the  Company  issued  options  to  purchase  an
aggregate of 1,202,250  shares to current and former officers and consultants in
lieu of cash,  including  200,000  options to Grayson (see next  paragraph)  and
496,500 options to R. Bruce Reeves (see "Item 10. Executive Compensation").

         In July 1994,  the Company  engaged  Gerald Grayson and F. J. Daugherty
d/b/a Grayson & Associates ("Grayson") of Denver, Colorado to assist the Company
in corporate  development  activities,  on an exclusive  basis.  Their  services
include  finding one or more corporate  partners or others to provide funding or
otherwise assist in the further  development,  commercialization or distribution
of  the  Company's  products  and  technologies.   Grayson,   founded  in  1986,
specializes in assisting  merging growth and development  stage companies in the
healthcare industry. For its first year of services, Grayson received options to
purchase up to 200,000  shares of Company  Common Stock at an exercise  price of
$.20 per share. The agreement  initially ran for one year and is continuing on a
month to month basis  under an  informal  extension  without  compensation.  The
agreement can be terminated on one month's prior notice.  Under the terms of the
agreement, when Grayson secures financing or provides introductions that lead to
other  business  transactions,  Grayson will be entitled to a finder's  fee. The
finders fee is based upon 8% of the first $1,000,000 of financing secured,  and,
thereafter  descending 1% per $1,000,000 for the next  $2,000,000 and 5% of each
$1,000,000  thereafter.  Other  business  transactions  carry a fee of 5% of the
first $2,000,000 in transaction value, descending 1% per $2,000,000 for the next
$6,000,000 and 1% of amounts in excess of $8,000,000.


                                      - 21 -
<PAGE>

         On  March  31,  1994,  the  company   acquired  150,000  shares  of  6%
cumulative,  convertible  preferred  stock of Genesis Farms,  Inc. (then Genesis
Capital  Corporation)  ("Genesis") in consideration for issuing 1,500,000 shares
of the Company's Common Stock. On March 31, 1994, the Company's stock had a fair
market value of one dollar.  In accordance  with generally  accepted  accounting
principles (the cost method of accounting for non-marketable  investments),  the
Company  recorded the investment in Genesis at $1,500,000.  Management  believes
the value of Genesis  stock has been  permanently  impaired  and has reduced the
basis of the  Genesis  preferred  stock to  $180,000  at June 30,  1995.  Due to
further impairment, the asset was written down to $0 at June 30, 1996, the value
of which remains unchanged at June 30, 1997 through June 30, 2000. The amount of
the permanent  impairment  was  determined by reviewing  recent trading price of
Genesis  common  stock  and  relating  such  via the  conversion  rights  of the
Preferred stock since the underlying common stock will be salable under Rule 144
within six months (as required by SFAS No. 115). The value differs significantly
from  its  historical  cost  value.  See Note 11 to the  Consolidated  Financial
Statements.  On  September  16, 1996,  the company  entered into an agreement to
advance  $10,000 in legal fees to a party  claiming  to have an  interest in the
shares exchanged by the Company for the Genesis shares. Under this agreement, if
the Company  were  successful,  it would  recover 1.4 million of its own shares.
These recovery rights were assigned under the Asset Agreement (see Page 19. -The
Asset Agreement effective June 30, 1999.

         In May 1994, the Company borrowed  $12,000 from a  Director/Stockholder
for one year at 9% interest secured by 3,600 shares of Genesis  preferred stock.
At June 30, 1996 the  Company  owed R T Robertson  Consultants,  Inc.  $87,734).
Robertson and Mr.  Schubert  agreed to defer payment of these  amounts,  without
interest,  for a period of up to three years ending 12/31/99.  This indebtedness
was eliminated effective June 30, 1999 by conversion of options held by Schubert
and RT Robertson and through terms of the Asset Agreement.

         In December  1996,  the  Company was  advanced  $27,500  from  TheraMed
partners, Inc. that was settled under terms of the Asset Agreement.

         Between  December 1997 and January 1998 the Company issued an aggregate
of 365,000 shares of it's common stock in settlement of $33,441 of the Company's
and the Subsidiary's liabilities.

Proposed merger with Polar Molecular Corporation

         On  August  2,  1999,  the  Company  announced  it had  entered  into a
definitive  agreement  to merge  with  Polar  Molecular  Corporation  subject to
certain  conditions  being  met  by  both  companies.  Under  the  terms  of the
definitive  agreement,  the  Company  will  change  its name to Polar  Molecular
Corporation,  split  back  its  shares  25 to one,  authorize  the  issuance  of
preferred  stock and the  current  officers  and  directors  will  resign and be
replaced by the Polar  management  and  directors.  After the merger and reverse
stock split, the Company will have approximately 14,880,000 common shares issued
of  which  8 1/2 % will  be  owned  by  the  then  current  pre  merger  Company
stockholders.  The Company expects to spin-off its interest in the Subsidiary if
and when it  completes  the Polar  Molecular  transaction.  On June 30, 2000 the
Company and PMC amended and restated the agreement and plan of reorganization to
include updated audited financial statements of both companies and to state that
PMC shall have a net worth of at least $2,300,000.  The extension  provided that
PMC would make specific  payments to the Company on specific  dates and that PMC
would provide PMC's audited  financials  for inclusion into the revised Form S-4
by August  31,  2000.  PMC  failed to make the  payments  called for and has not
released its audited  financials  to the Company.  Accordingly,  the Company has
provided  notice of its  intent to  terminate  the  merger  agreement  effective
October 13, 2000. The Company is, however,  in discussions with PMC to reinstate
the merger on substantially similar terms.


                                      - 22 -
<PAGE>

The Asset Agreement effective June 30, 1999

         On April 1, 1999 and effective June 30, 1999, the Company  entered into
an Asset  Agreement  with R T Robertson  Consultants,  Inc.  acting on behalf of
itself  and other  creditors  of the  Company  and the  Subsidiary  under  which
Robertson  would  acquire  certain  listed  assets of the Company  including the
150,000 Genesis preferred shares held by the Company, 550,000 restricted Company
common shares held in treasury,  175,000  restricted  shares of reissued Company
stock  originally  issued to creditors but not released,  all rights to recovery
from Genesis Capital, and an option to acquire up to 60% of the interest held by
the Company in the Subsidiary at the then book value in exchange for forgiveness
of $67,918 in debt owed by the Company and the  Subsidiary  plus an indemnity in
the amount of $167,749 for  outstanding  trade  creditors of the Company and the
Subsidiary. The bid price of the Company's shares on April 1, 1999 was $0.01 per
share. As a result of the terms of this Asset Agreement, the Company was able to
eliminate $242,276 in liabilities that will allow it to comply with the terms of
the proposed Polar Molecular transaction.

The Subsidiary

         Effective  June 1991,  the  Subsidiary  acquired  the assets Fluid Life
Systems,  Inc.  (FLS)  including  the  Subsidiary  Technologies  in exchange for
approximately  $595,000  in  payments of cash to and/or on behalf of FLS and the
assumption of specific FLS'  liabilities.  In addition,  the  Subsidiary  issued
57,437 shares of its Common Stock directly to certain FLS creditors.

         The hemoglobin  stabilization  technology was acquired by FLS,  without
warranty, from the Trustee in Bankruptcy of Pacific Brotherhood Investment Corp.
("PBIC").  George Lofink, president and CEO of FLS, was an officer, director and
principal  stockholder of PBIC. The PBIC technology was acquired in exchange for
$50,000  and the  assumption  of the costs  (approximately  $115,000  of funding
PBIC's litigation against certain parties previously  affiliated with PBIC ("the
Erythro  Litigation").  The Erythro  litigation  was  settled in December  1991.
Pursuant to the settlement and subsequent  negotiations,  the plaintiffs therein
relinquished any and all claims to the technology in return for $47,000,  all of
which has been paid.

         The drug release  technology rights were initially licensed by FLS from
Valcor Scientific Ltd.  ("Valcor") in exchange for future royalty  payments.  In
April  1992,  Norman  Eisner,  Valcor's  successor,  agreed to cancel all future
royalty  payments and to assign to the Company the Valcor patents and technology
for 327,500 shares of the  Subsidiary's  Common Stock.  In addition,  Mr. Eisner
accepted 82,073  additional  shares of the Subsidiary's  Common Stock in lieu of
$265,000 of the $350,000  minimum  royalty  payment called for under the license
agreement.  The remaining  $85,000 was paid in July 1992, at which time title to
the drug release  technology rights was assigned to the Company. A percentage of
the above  discussed  shares and funds were  given to a former  Valcor  research
consultant.

         In  connection  with the  transfer of the certain  Technologies  to the
Subsidiary  and, in settlement of the FLS'  employment  agreements with its then
president,  George Lofink, and its then Secretary, Linda Carter, the Company has
paid approximately  $91,582 to Mr. Lofink and has paid  approximately  $2,500 to
Ms. Carter.  In addition,  the Company has delivered notes to Mr. Lofink and Ms.
Carter.  The  combined  balance due on these notes at June 30, 1995 was $38,975.
(see "Item 3. Legal Proceedings" for further discussion  regarding these notes).
The Subsidiary also paid $131,386 and 1,200 Shares in legal fees incurred by Mr.
Lofink in his defense of the Erythro litigation.

         Prior to the Reorganization the Subsidiary owed to its predecessor, FLS
approximately $173,314 (consisting of $116,852 in loans and $31,355 for services
from its  predecessor and $25,107 in loans to present and former officers and/or
directors of the Subsidiary  and/or officers  and/or  directors of the Company).
With the exception of $1,260,  all of these  liabilities  were canceled prior to
the reorganization in exchange for the issuance of an aggregate of 62,565 shares
of the  Subsidiary's  Common Stock. All of these 62,565  Subsidiary  shares were
exchanged for 35,500 Shares of the Company's Common Stock in the  Reorganization
and were to be registered in the Selling Security holders' Offering. None of the
shares were registered (see "The Selling Security holders'  Offering" below) and
all of the shares have been held in excess of two years making them eligible for
resale, subject to certain limitations, under Rule 144.

         In December  1991,  the  Subsidiary  issued 751,000 shares of Preferred
Stock for gross proceeds of $375,500 in a private  offering to investors who are
accredited.

         In March 1992, the Subsidiary issued 171,430 shares of its Common Stock
for gross  proceeds of $250,000 to The Venture Fund of Washington  (the "Fund").
Pursuant to the terms of the investment agreement between the Subsidiary and the
Fund,  the  Subsidiary  agreed to nominate  two Fund  designees  to the Board of
Directors  of the  Subsidiary  and  any of its  successors.  In  addition,  each
Subsidiary  Director  agreed to vote in favor of the appointment of the two Fund
designees.  In accordance  with the investment  agreement,  Richard  Whitney and
Walter Flamenbaum, M.D., the two Fund designees, were appointed Directors of the
Company  following  the  reorganization  which  appointments  were  confirmed by
stockholders at the Company's  October 29, 1992 annual meeting.  Dr.  Flamenbaum
resigned from the Board in June 1993.


                                      - 23 -
<PAGE>

         In April 1992, the  Subsidiary  issued 6,858 shares of its Common Stock
for gross proceeds of $10,000 to an unaffiliated accredited investor.

         The shares  issued to the Fund and to the  unaffiliated  investor  were
exchanged  for Shares of Common Stock of the Company in the  Reorganization  and
were to be registered in the Selling Security holders'  Offering.  None of these
shares were registered (see "The Selling Security holders'  Offering" below) and
all of the shares have been held in excess of two years making them eligible for
resale, subject to certain limitations, under Rule 144.

         In June 1992, the Subsidiary  issued Common Stock purchase  warrants to
purchase up to 153,313  shares of the  Subsidiary's  Common Stock at an exercise
price of $1.40 per share (the price  equivalent  to the  Company's  Common Stock
offering price in its April 1992 private  offering).  These warrants were issued
to Paul Calvin  Maybury,  Richard F. Schubert,  R. Bruce Reeves,  Glen Urquhart,
Richard Whitney and Walter Flamenbaum, as a group. These warrants have expired.

         In  August  1992,  the  Subsidiary  changed  its  name  to  "BIORELEASE
Technologies,  Inc."  and its state of  incorporation  by  merging  into a newly
formed Delaware corporation.

         In June 1996,  the Company  issued  509,396  shares of its Common Stock
(inclusive of 41,305 shares that were issued effective July, 1996) in settlement
of,  $5,783 in 1997,  $29,366 in 1996 and $286,283 in 1995 of the  Company's and
the Subsidiary's liabilities.

The Selling Securityholders' Offering

         The Company had filed a  registration  statement to register  1,093,973
Shares on behalf of certain Selling Security holders for sale to the public.  Of
the  1,093,973  shares  462,373  shares  were being  registered  pursuant to the
Company's  commitments under the Reorganization  Agreement and certain creditors
(see "The Reorganization"  above). 40,000 shares were registered pursuant to the
settlement  of the Raab  litigation  (see  "Item  3.  Legal  Proceedings").  The
remaining  591,600 Shares were registered  pursuant to the Company's  commitment
under the terms of a  private  offering  conducted  in April  1992  prior to the
consummation of the Reorganization  (see "The Company" above). In addition,  the
Company  was  registering  250,000  shares  issuable  upon  exercise  of 250,000
options.  In June 1994,  the Company  determined not to proceed with the Selling
Security  holders' offering because all of the shares being registered on behalf
of Selling  Security  holders  therein became eligible for resale under Rule 144
and all of the options  (exercisable into the other shares  registered  therein)
had expired.

The Exchange Offering

         As  noted  above,  in "The  Reorganization,"  4,582,122  shares  of the
Subsidiary  were  exchanged  for  2,599,936  Shares of the Company.  In order to
acquire the remaining 767,071 shares of the Subsidiary's Common Stock (including
shares issuable upon exercise of certain options and warrants),  the Company had
filed a  registration  statement to register  435,244 Shares for issuance to the
remaining  Subsidiary  Stockholders in exchange for their Subsidiary shares. The
Company believes this exchange of shares will be postponed  indefinitely because
the Company  believes it cannot  meet State and Federal  securities  regulations
related to this exchange.

Terminated Public Offering

         In July 1993,  the  Company  registered  160,000  Units for sale to the
public at a price of $15.00  per Unit on a "40,000  Unit-or-none  best  efforts"
basis.  Each Unit  consisted  of five  shares of Common  Stock and three Class B
Common Stock to Purchase Warrants.  During the offering period, prior to sale of
the  minimum  offering,  there was a decline  in the bid price of the  Company's
Common  Stock.  As a result,  the Company  and the  Underwriter  terminated  the
offering in September 1993.


                                      - 24 -
<PAGE>

PART IV

Item 13.      Exhibits and Reports on form 8-K.

Reports on Form 8-K

         The Company has filed the following Reports on Form 8-K during the year
ended June 30, 1995 with the  principal  office of the  Securities  and Exchange
Commission in  Washington,  DC. Form 8-K filed with the  Securities and Exchange
Commission  on September  29, 1994;  Amendment  No. 1 thereto (Form 8-K/A) filed
with the Securities and Exchange  Commission on November 3, 1994. Form 8-K filed
with the  Securities  and Exchange  Commission on September  20, 1999.  Form 8-K
filed with the Securities and Exchange Commission on March 14, 2000 and July 26,
2000.

Exhibits

         NONE

Exhibits incorporated by reference

         3a         Certificate of Incorporation of Company (1)
         3b         Amendment  to  Certificate  of   Incorporation   of
                    Company (1)
         3c         By-Laws of the Company (1)
         10c        Stock Reorganization  Agreement between the Company
                    and the Subsidiary (2)
         10d        1992 Stock Option Plan (3)
         10e        1992 Directors' Stock Option Plan (3)
         10f        Patent-Chondroitin Drug Complexes (4)
         10g        Patent-Stabilization  of Proteins  and  Peptides by
                    Chemical Binding with Chondroitin (4)
         10i        Consulting  Agreement with Wall Street  Consultants

                    (4)

         10j        Options  with  USA,  Wall  Street  Consultants  and
                    Union Equity Partners (4)
         10l        TSI Agreement (4)
         10m        Cell Trends Agreement (4)
         10n        Dr. Reeves' Employment Agreement (5)
         10o        Chestnut Drive lease
         14a        Canadian    patent   for    "Method   for   Protein

                    Stabilization"(4)

         14b        European  patent  for  "Continuous   Processes  for
                    Modifying  Biologically  Active  Materials  and the

                    Products Therefrom"(4)
         16a        Accountants' Letter (6)(7)
         22c        Subsidiaries (see "Item 1. Business")

---------------------------

(1)      Previously  filed with the Commission as an Exhibit to the Registration
         Statement  on Form S-1,  as  amended,  file No.  33-43976  and, by this
         reference,  incorporated  herein.


(2)      Previously filed as an exhibit to the Company's Form 8-K filed with the
         Commission  June 8, 1992,  file No.  0-15260,  and, by this  reference,
         incorporated herein.

(3)      Previously  filed as an Exhibit to the Company's Form 10-K for the year
         ended June 30, 1992 filed with the  Commission  on September  28, 1992,
         file No. 0-15260, and, by this reference, incorporated herein.

(4)      Previously  filed with the Commission as an Exhibit to the Registration
         Statement  on Form S-1,  as  amended,  file No.  33-59902  and, by this
         reference,   incorporated   herein.

(5)      Previously  filed with the  Commission  as an Exhibit to the  Company's
         Form 10-KSB for the year ended June 30, 1993 filed with the  Commission
         on  September  28, 1994,  file no.  33-43976,  and, by this  reference,
         incorporated herein.

(6)      Previously filed as an exhibit to the Company's Form 8-K filed with the
         Commission  July 30, 1992,  file No.  0-15260,  and, by this reference,
         incorporated herein.

(7)      Previously  filed as an exhibit to the Company's  Form 8-K/A filed with
         the  Commission  November  3,  1994,  file No.  0-15260,  and,  by this
         reference, incorporated herein.


                                      - 25 -
<PAGE>
[
         Statements  contained  in this Form  10-KSB as to the  contents  of any
agreement or other document  referred to are not complete.  Where such agreement
or other  document  is an  exhibit  to the  Report or is  included  in the forms
indicated  above,  each such statement is deemed  amplified and qualified in all
respects by such provisions.


                                      - 26 -
<PAGE>

                                   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, thereunto duly authorized.

                                 BIORELEASE CORP

Dated: September 30, 1999           By   /s/Richard F. Schubert
                                        -----------------------
                                        Richard F. Schubert, Chairman

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.

SIGNATURES                          TITLE                  DATE
----------------------              -------------------    ------------------
/s/Richard F. Schubert              Chairman,              September 29, 1999
----------------------              Director
Richard F. Schubert



/s/R. Bruce Reeves                  President              September 29, 1999
------------------                  Principal Financial
R. Bruce Reeves                     Officer





<PAGE>








                      SUPPLEMENTAL INFORMATION AND EXHIBITS

Supplemental  Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act.


                                 Does not apply.