-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QgOLmCw5LPaaU+BmhKF3uSXFx0fvK1XZYx9jK+arLZhPWRGOhDf76em0ZZc6zCkh krmhd2SIqj8etrgNKdkenw== 0000936392-98-001467.txt : 19981109 0000936392-98-001467.hdr.sgml : 19981109 ACCESSION NUMBER: 0000936392-98-001467 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOLLIS EDEN PHARMACEUTICALS INC /DE/ CENTRAL INDEX KEY: 0000899394 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 133697002 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24672 FILM NUMBER: 98739925 BUSINESS ADDRESS: STREET 1: 9333 GENESEE AVENUE STREET 2: SUITE 110 CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6195879333 MAIL ADDRESS: STREET 1: 9333 GENESEE AVENUE STREET 2: SUITE 110 CITY: SAN DIEGO STATE: CA ZIP: 92121 FORMER COMPANY: FORMER CONFORMED NAME: INITIAL ACQUISITION CORP DATE OF NAME CHANGE: 19930329 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark one) [X] Quarterly Report Under Section 13 or 15 (d) Of the Securities Exchange Act of 1934 For Quarterly Period Ended September 30, 1998 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act 1934 for the period from ___________ to ___________. HOLLIS-EDEN PHARMACEUTICALS, INC (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation) 000-24672 13-3697002 (Commission File No.) (I.R.S. Employer Identification No.) 9333 Genesee Ave., Suite 110 SAN DIEGO, CALIFORNIA 92121 (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (619) 587-9333 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] As of November 4, 1998 there were 8,571,014 shares of registrant's Common Stock, $.01 par value, outstanding. 2 HOLLIS-EDEN PHARMACEUTICALS, INC. Form 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998 INDEX
PAGE ---- PART I FINANCIAL INFORMATION ITEM 1 Financial Statements................................................................3 Balance Sheet - September 30, 1998 and December 31, 1997............................3 Statements of Operations for the Three-Month and Nine-Month Periods Ended September 30, 1997 and 1998 and Period from August 15, 1994 to September 30, 1998..................................................................4 Statements of Cash Flows for the Nine-Month Periods Ended September 30, 1997 and 1998 and Period of August 15, 1994 to September 30, 1998................................................................................5 Notes To Financial Statements.......................................................6 ITEM 2 Management's Discussion and Analysis of Results of Operations and Financial Condition................................................................6 PART II OTHER INFORMATION ITEM 1 Legal Proceedings.................................................................10 ITEM 2 Changes in Securities.............................................................10 ITEM 3 Defaults Upon Senior Securities...................................................10 ITEM 4 Submission of Matters to a Vote of Security Holders...............................10 ITEM 5 Other Information.................................................................10 ITEM 6 Exhibits and Reports on Form 8-K..................................................10
3 PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS HOLLIS-EDEN PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, 1998 1997 ------------ ------------ ASSETS: Current Assets: Cash and cash equivalents .............................. $ 24,838,497 $ 7,102,620 Prepaid expenses ....................................... 216,841 53,009 Deposits ............................................... 9,163 9,163 Other receivable - tax refund .......................... -- 105,436 Other receivable from related party .................... 58,206 46,679 ------------ ------------ Total current assets .............................. 25,122,707 7,316,907 Property and equipment, net of accumulated depreciation of $22,074 and $6,602 ............... 91,435 82,941 Other Assets: Loan receivable from related party .................. 203,912 -- ------------ ------------ Total assets ...................................... $ 25,418,054 $ 7,399,848 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable and accrued expenses ................ $ 215,729 $ 128,631 R & D fees payable to related party .................. -- 338,000 ------------ ------------ Total liabilities ................................. 215,729 466,631 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value, 10,000,000 shares authorized; 4,000 shares issued and outstanding .... 40 -- Common stock, $.01 par value, 30,000,000 shares authorized; 8,369,614 and 6,772,023 shares issued and outstanding ............ 83,696 67,720 Paid-in capital ...................................... 37,865,972 16,325,338 Deferred compensation-stock options, net of accumulated amortization of $513,000 and $282,000 .. (1,335,000) (1,566,000) Deficit accumulated during development stage ......... (11,412,383) (7,893,841) ------------ ------------ Total stockholders' equity ........................ 25,202,325 6,933,217 Total liabilities and stockholders' equity ........ $ 25,418,054 $ 7,399,848 ============ ============
The accompanying notes are an integral part of these financial statements. 3 4 HOLLIS-EDEN PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
Period from Inception (Aug.15,1994) to 3 months ended September 30, 9 months ended September 30, September 30, 1997 1998 1997 1998 1998 ------------ ------------ ------------ ------------ ------------ Operating expenses: Research and development .....$ 109,378 $ 737,543 $ 3,006,319 $ 1,922,076 $ 7,224,472 General and administrative ... 433,805 741,855 1,559,717 2,216,940 5,046,106 ------------ ------------ ------------ ------------ ------------ Total operating expenses ...... 543,183 1,479,398 4,566,036 4,139,016 12,270,578 Other income (expense): Interest income .............. 100,844 327,389 188,649 622,200 907,744 Interest expense ............. 0 0 (199) (1,726) (49,549) ------------ ------------ ------------ ------------ ------------ Total other income ............ 100,844 327,389 188,450 620,474 858,195 ------------ ------------ ------------ ------------ ------------ Net loss ......................$ (442,339) $ (1,152,009) $ (4,377,586) $ (3,518,542) $(11,412,383) ============ ============ ============ ============ ============ Net loss per share ............$ (0.07) $ (0.14) $ (0.73) $ (0.46) Weighted average number of common shares outstanding .... 6,702,613 8,358,625 6,020,778 7,623,927
The accompanying notes are an integral part of these financial statements. 4 5 HOLLIS-EDEN PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS (UNAUDITED) - --------------------------------------------------------------------------------
PERIOD FROM INCEPTION (AUG. 15, 1994) TO 9 MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1997 1998 1998 ------------ ------------ ------------ Cash flows from operating activities: Net loss ....................................... $ (4,377,586) $ (3,518,542) $(11,412,383) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation ............................... 1,810 15,472 22,074 Common stock issued as consideration for amendments to the license agreements .. -- -- 32,540 Common stock issued as consideration for termination of a finance agreement .... -- -- 33,962 Expense related to options and warrants issued as consideration to consultants .... 6,018 312,018 326,059 Expense related to warrants issued to director for successful closure of merger . 570,000 -- 570,000 Deferred compensation expense related to options issued ......................... 205,000 231,000 513,000 Common stock issued as consideration for license fees and services ................ -- 595,000 595,000 Changes in assets and liabilities: Prepaid expenses ............................... 17,031 (67,850) (110,831) Deposits ....................................... 90,837 -- (9,163) Other receivable - tax refund .................. (105,436) 105,436 -- Other receivable from related party ............ (46,679) (11,527) (58,206) Loan receivable from related party ............. -- (203,912) (203,912) Accounts payable and accrued expenses .......... (57,217) 87,097 215,729 Wages payable .................................. (96,771) -- -- License fees payable to related party .......... (499,700) -- -- R & D fees payable to related party ............ -- (338,000) -- ------------ ------------ ------------ Net cash used in operating activities ...... (4,292,693) (2,793,808) (9,486,131) Cash flow provided by investing activities: Purchase of property and equipment ............. (46,778) (23,965) (113,509) ------------ ------------ ------------ Net cash used in investing activities ...... (46,778) (23,965) (113,509) Cash flows from financing activities: Borrowings from related party .................. 92,000 -- 342,000 Payments on note payable to related party ...... (92,000) -- (342,000) Contributions from stockholder ................. -- -- 103,564 Net proceeds from sale of preferred stock ...... -- 4,000,000 4,000,000 Net proceeds from sale of common stock ......... -- 15,889,829 17,399,328 Proceeds from issuance of debt ................. -- -- 371,164 Net proceeds from recapitalization ............. 6,270,782 -- 6,270,782 Net proceeds from warrants and options exercised 5,457,763 663,821 6,293,299 ------------ ------------ ------------ Net cash from financing activities ......... 11,728,545 20,553,650 34,438,137 Net increase in cash ............................. 7,389,074 17,735,877 24,838,497 Cash at beginning of period ...................... 17,914 7,102,620 -- ------------ ------------ ------------ Cash at end of period ............................ $ 7,406,988 $ 24,838,497 $ 24,838,497 ============ ============ ============
Supplemental disclosure cash flow information: 1) In 1998, the Company issued warrants for services in lieu of cash with an estimated value of $408,000. The accompanying notes are an integral part of these financial statements. 5 6 HOLLIS-EDEN PHARMACEUTICALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The information at September 30, 1998, and for the three and nine month periods ended September 30, 1998 and 1997, is unaudited. In the opinion of management, these financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with Hollis-Eden Pharmaceuticals (the "Company") Annual Report on Form 10-K for the year ended December 31, 1997, which was filed with the United States Securities and Exchange Commission on March 31, 1998, and the Company's Form 8-K which was filed on May 12, 1998. 2. ISSUANCE OF WARRANTS During February 1998, the Company entered into an agreement with an investors relations firm, which expires on December 31, 1998. The Company agreed to issue as part of the compensation for services, 150,000 warrants with an exercise price of $14.75 per share and an expiration date of February 4, 1999. The warrants were estimated to have a value of $408,000, which amount will be expensed $102,000 per quarter during 1998. 3. FINANCING During May 1998, the Company completed a private financing totaling $20.6 million in gross proceeds. The Company issued 1,329,201 shares of Common Stock, 4,000 shares of 5% Series A Convertible Preferred Stock and Warrants to purchase 1,437,475 shares of Common Stock in the financing. The Convertible Preferred Stock has an initial conversion price of $20.30 for the first seven months, after which it can be adjusted, either up or down, based on the future stock prices of the Company's Common Stock. The Warrants are exercisable for three years and entitle the holders to purchase up to a total of 1,437,475 shares of Common Stock at a price of $17.00 per share. Terms of the Warrants and the Convertible Preferred Stock are set forth in the Form of Warrant and the Certificate of Designation, respectively, copies of which are attached to the Form 8-K filed May 12, 1998 as exhibits 4.1 and 4.2, respectively. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The forward-looking comments contained in the following discussion involve risks and uncertainties. The Company's actual results may differ materially from those discussed here. Factors that could cause or contribute to such differences can be found in the following discussion, as well as in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. 6 7 While management believes that the discussion and analysis in this report is adequate for a fair presentation of the information, management recommends that this discussion and analysis be read in conjunction with Management's Discussion and Analysis of Results of Operations and Financial Condition included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997 which was filed with the United States Securities and Exchange Commission (the "SEC") on March 31, 1998. GENERAL Hollis-Eden Pharmaceuticals, a development-stage pharmaceutical company, is engaged in the discovery, development and commercialization of products for the treatment of a number of targeted disease states caused by viral, bacterial, parasitic or fungal infections, including HIV/AIDS, hepatitis B and C, and malaria. The Company has three technology platforms, one based on cellular energy regulation, the second on a unique immune system modulation technology, and the third on biochemical synthesis regulators. The Company believes that certain of its drug candidates may provide the first long-term treatment for HIV without the development of viral strain resistance to the drugs' effectiveness, significant toxicity or severe side effects. The Company has not yet generated any operating revenues. The Company has experienced significant operating losses due to substantial expenses incurred to acquire and fund development of its drug candidates and, as of September 30, 1998, had an accumulated deficit of $11.4 million. When and if any of the Company's drug candidates have been approved for commercial sale, the Company plans to market them in the United States. For international markets, the Company intends to develop strategic alliances with major pharmaceutical companies that have foreign regulatory expertise and established distribution channels, and will also consider corporate strategic partnerships and co-marketing agreements. No assurances can be given that any of the Company's drug candidates will be approved for commercial sale or that any of the foregoing proposed arrangements will be implemented or prove to be successful. The Company has been unprofitable since inception and expects to incur substantial additional operating losses for at least the next few years as it increases expenditures on research and development and begins to allocate significant and increasing resources to its clinical testing and other activities. In addition, during the next few years, the Company will have to meet the substantial new challenge of developing the capability to market products. Accordingly, the Company's activities to date are not as broad in depth or scope as the activities it must undertake in the future, and the Company's historical operations and financial information are not indicative of the Company's future operating results or financial condition or its ability to operate profitably as a commercial enterprise when and if it succeeds in bringing any drug candidate to market. During March 1997, Hollis-Eden, Inc. ("Hollis-Eden"), a Delaware corporation, was merged with and into the Company (then known as Initial Acquisition Corp. ("IAC")). Upon the consummation of the merger, Hollis-Eden ceased to exist, and IAC changed its name to Hollis-Eden Pharmaceuticals. For accounting and financial reporting purposes, the merger was treated as a recapitalization of Hollis-Eden. As used herein, unless otherwise indicated, for periods prior to March 1997 the terms "Company" and "Hollis-Eden Pharmaceuticals" shall refer to Hollis-Eden, not IAC. RESULTS OF OPERATIONS The Company has not generated any revenues for the period from August 15, 1994 (inception of Hollis-Eden) through September 30, 1998. The Company has devoted substantially all its resources to the payment of licensing fees and research and development fees plus expenses related to the startup of its business. From inception until September 30, 1998, the Company incurred expenses of approximately $7.2 7 8 million in research and development fees, $5.1 million in general and administrative expenses, and $900,000 in net interest income, resulting in a loss of $11.4 million for the period. Research and Development expenses increased to $737,000 from $109,000 and decreased to $1.9 million from $3.0 million for the three- and nine-month periods ended September 30, 1998, respectively, as compared to the same periods for the previous year. The research and development expenses were larger in 1997 due to the funding of the development of the Company's second drug candidate, HE317. During 1997, this expense totaled $2.7 million for the nine-month period. The 1998 research and development expenses relate primarily to the ongoing development of the Company's first drug candidate, HE2000. General and administrative expenses increased to $742,000 from $434,000 and increased to $2.2 million from $1.6 million for the three- and nine-month periods ended September 30, 1998 compared to 1997. During 1997, expenses included one-time costs associated with the merger of IAC, including a $570,000 charge relating to the issuance of warrants to a certain director and former officer. The 1998 general and administrative expenses include: (i) the non-cash charges for the issuance of warrants to an investors relations group (described above) and (ii) increased expenses as a public company such as legal and accounting fees, filing and reporting fees, public relations, and directors and officers insurance. Net interest income increased to $620,000 from $188,000 in the first nine months of 1998 compared to 1997 due to higher balances in cash and cash equivalents. LIQUIDITY AND CAPITAL RESOURCES The Company has financed its operations since inception through the sale of shares of Common Stock and with loans from the Company's founder, Richard B. Hollis. The Company repaid Mr. Hollis in January 1996. During the year ended December 31, 1995, the Company received cash proceeds of $250,000 from the sale of its securities. In May 1996, the Company completed a private placement of shares of Common Stock, from which it received aggregate gross proceeds of $1.3 million. In March 1997, the Merger of IAC and Hollis-Eden provided the Company with $6.5 million in cash and other receivables. During May 1998, the Company closed a private placement of shares of Common Stock and Preferred Stock with gross proceeds totaling $20.6 million. Under its license agreements with Dr. Patrick T. Prendergast, Colthurst and Edenland, the Company is obligated to pay certain minimum license fees to maintain its rights to its drug candidates. Under these agreements, the Company was obligated to pay the licensors an aggregate of two and one-half percent of all such proceeds raised within 24 months of the $350,000 license payment, which was made on April 5, 1996. An annual renewal license fee of $500,000 became due under the Colthurst License Agreement upon the closing of the private placement during May 1998. This license fee was paid in shares of the Company's Common Stock. As of September 30, 1998, the Company is current on all license fee obligations under these agreements. Under its Research and Development Agreement with Edenland and Dr. Patrick T. Prendergast, the Company was committed to pay $3.0 million for the development costs related to HE317. An amount of $1.5 million was recorded as a charge to operations upon the closing of the Merger and was paid in April 1997. An additional $1.2 million was paid in May 1997 and recorded as a charge to operations. The remaining $300,000 was accrued as an expense during the fourth quarter of 1997 and was paid during April 1998. The Company's operations to date have consumed substantial capital without generating any revenues, and the Company will continue to require substantial and increasing amounts of funds to conduct necessary research and development and preclinical and clinical testing of its drug candidates, and to market 8 9 any drug candidates that receive regulatory approval. The Company does not expect to generate revenue from operations for the foreseeable future, and the Company's ability to meet its cash obligations as they become due and payable is expected to depend for at least the next several years on its ability to sell securities, borrow funds or some combination thereof. Based upon its current plans, the Company's management believes that its existing capital resources, together with interest thereon, will be sufficient to meet the Company's operating expenses and capital requirements through at least the next twelve months. There can be no assurance, however, that changes in the Company's research and development plans or other events affecting the Company's operating expenses will not result in the expenditure of such cash before that time. No assurance can be given that the Company will be successful in raising necessary funds. The Company's future capital requirements will depend upon many factors, including progress with preclinical testing and clinical trials, the number and breadth of the Company's programs, the time and costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other proprietary rights, the time and costs involved in obtaining regulatory approvals, competing technological and market developments, the ability of the Company to establish collaborative arrangements and effective commercialization and marketing activities and other arrangements. In any event, the Company will continue to incur increasing negative cash flows and net losses for the foreseeable future. YEAR 2000 Many currently installed computer systems and software products are coded to accept only two-digit entries in the date code field. Beginning in the year 2000, these date code fields will need to accept four-digit entries to distinguish the 21st century dates from 20th century dates. As a result, in less than two years, computer systems and/or software used by many companies may need to be upgraded to comply with such "Year 2000" requirements. The Company upgraded its accounting software this quarter with a version that is Year 2000 compliant. In addition, the Company has upgraded some of its computer operating systems with the balance scheduled for upgrading before yearend. Once the upgrades are completed, the Company believes that its computer systems and applications will be Year 2000 compliant. The Company has recently commenced the process of reviewing its communications systems and other non-information technology systems to ascertain whether they are Year 2000 compliant. The Company expects to complete this review by December 1998. The Company does not expect that the costs associated with achieving Year 2000 compliance will have a material adverse effect on its future results of operations, liquidity or capital resources. The Company has spent less than one thousand dollars in connection with its Year 2000 compliance efforts to date. The Company believes that the costs to be incurred in reviewing its non-information technology systems will be immaterial. The Company has begun contacting its material suppliers and third party service providers to identify Year 2000 problems and provide solutions to prevent the disruption of business activities. At present, the Company has very little information regarding the extent of Year 2000 compliance by its suppliers and third party service providers. The Company expects to complete its review of the compliance efforts by these parties in March, 1999. There can be no assurance, however, that the computer systems and applications of other companies on which the Company's operations rely, will be timely converted, or that any such failure to convert by another company will not have a material adverse effect on the Company. Moreover, the following could have a material adverse effect on the Company's business or financial condition: (i) failure of suppliers and third-party service providers equipment to operate or to operate accurately, (ii) failure of clinical trial site medical equipment to perform properly, (iii) failure of necessary materials or supplies to be available to the Company 9 10 when needed, or (iv) failure of other equipment, software, or systems as a result of Year 2000 problems. At the completion of its review of its material suppliers and third-party service providers, the Company intends to assess worst case scenarios and to develop one or more contingency plans that may be necessary, such as securing alternative vendors. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS None ITEM 5. OTHER INFORMATION Pursuant to the Company's bylaws, stockholders who wish to bring matters or propose nominees for director at the Company's 1999 annual meeting of stockholders must provide specified information to the Company between February 18, 1999 and March 19, 1999 (unless such matters are included in the Company's proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended). ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibits: 27 Financial Data Schedule (filed electronically only) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HOLLIS-EDEN PHARMACEUTICALS, INC. Dated: November 4, 1998 By: /s/ Robert W. Weber -------------------------------- Robert W. Weber Vice President-Controller (Principal Financial and Accounting Officer) INDEX TO EXHIBITS 27 FINANCIAL DATA SCHEDULE (FILED ELECTRONICALLY ONLY) 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FORM 10-Q FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1997 JAN-01-1998 SEP-30-1998 24,838,497 0 0 0 0 25,122,707 113,509 22,074 25,418,054 215,729 0 0 40 83,696 25,118,589 25,418,054 0 0 0 4,139,016 0 0 (1,726) (3,518,542) 0 (3,518,542) 0 0 0 (3,518,542) (0.46) (0.46)
-----END PRIVACY-ENHANCED MESSAGE-----