-----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, J4j4KeYCEp9VDTYPCLC9UbH377MSI9A0rZfZgmphyB/+WOk0zkv+V09SViQi2HjW rvcihonAnQqD8SktULlcoQ== 0000946644-02-000006.txt : 20020814 0000946644-02-000006.hdr.sgml : 20020814 20020814123246 ACCESSION NUMBER: 0000946644-02-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEMISPHERX BIOPHARMA INC CENTRAL INDEX KEY: 0000946644 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 520845822 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13441 FILM NUMBER: 02733232 BUSINESS ADDRESS: STREET 1: 1617 JFK BLVD #660 STREET 2: ONE PENN CENTER CITY: PHILADELPHIA STATE: PA ZIP: 19104 BUSINESS PHONE: 2159880080 MAIL ADDRESS: STREET 1: 1617 JFK BLVD STREET 2: ONE PENN CENTER CITY: PHILADELPHIA STATE: PA ZIP: 19103 10-Q 1 r10q-0630_02.txt FORM 10Q HEMISPHERX BIOPHARMA, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended June 30, 2002 Commission File Number: 0-27072 HEMISPHERx BIOPHARMA, INC. - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 52-0845822 - ------------------------------ ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1617 JFK Boulevard, Suite 660, Philadelphia, PA 19103 - ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) (215) 988-0080 - ------------------------------------------------------------------------------ (Registrant's telephone number, including area code) Not Applicable - ------------------------------------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. /X/ Yes / / No 32,616,408 shares of common stock issued and outstanding as of August 9, 2002. 2 PART I - FINANCIAL INFORMATION ITEM 1: Financial Statements HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
December 31, June 30, 2001 2002 ----------- ----------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $3,107 $3,298 Short Term investments 5,310 2,542 Accounts receivable 8 10 Prepaid expenses and other current assets 381 224 ----------- ---------- Total current assets 8,806 6,074 Property and equipment, net 246 199 Patent and trademark rights, net 1,025 1,026 Investments in unconsolidated affiliates 1,878 1,160 Other assets 80 53 ----------- ---------- Total assets $12,035 $ 8,512 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 979 $ 625 Accrued expenses 293 193 ----------- ---------- Total current liabilities 1,272 818 ----------- ---------- Commitments and contingencies: Minority interest in subsidiary (Note 5) - 946 Stockholders' equity: Common stock 33 33 Additional paid-in capital 106,832 106,970 Accumulated other comprehensive income 17 17 Treasury stock - at cost (4,470) (4,501) Accumulated deficit (91,649) (95,771) ----------- ---------- Total stockholders' equity 10,763 6,748 ----------- ---------- Total liabilities and stockholders' equity $12,035 $ 8,512 =========== ==========
See accompanying notes to condensed consolidated financial statements. 3 HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data)
For the Three months ended June 30, -------------------------- (Unaudited) 2001 2002 ---------- ---------- Revenues: Cost recovery - clinical treatment programs $ 101 $ 134 ---------- ---------- Costs and expenses: Research and development 1,468 1,246 General and administrative 1,036 851 ---------- ---------- Total cost and expenses 2,504 2,097 Interest and other income 86 25 Loss on investment due to impairment - (678) Equity in loss of unconsolidated affiliate (26) (18) ---------- ---------- Net loss $(2,343) $(2,634) ========== ========== Basic and diluted loss per share $ (.08) $ (.08) ========== ========== Basic and diluted weighted average common shares outstanding 30,109,219 32,086,966 =========== ==========
See accompanying notes to condensed consolidated financial statements. 4 HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data)
For the Six months ended June 30, -------------------------- (Unaudited) 2001 2002 ---------- ---------- Revenues: Cost recovery - clinical treatment programs $ 228 $ 184 License fee income - 563 ---------- ---------- 228 747 Costs and expenses: Research and development 3,176 2,538 General and administrative 2,004 1,680 ---------- ---------- Total cost and expenses 5,180 4,218 Interest and other income 180 67 Loss on investment due to impairment - (678) Equity in loss of unconsolidated Affiliate (51) (40) ---------- ---------- Net loss $(4,823) $(4,122) ========== ========== Basic and diluted loss per share $ (.16) $ (.13) ========== ========== Basic and diluted weighted average common shares outstanding 30,035,522 32,079,327 =========== ==========
See accompanying notes to condensed consolidated financial statements. 5 HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
For the Six months ended June 30, -------------------------- (Unaudited) 2001 2002 -------- --------- Cash flows from operating activities: Net loss $(4,823) $(4,122) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation of property and equipment 71 47 Amortization of patents rights 191 53 Write-off of patent rights 29 - Stock option and warrant compensation and service expense 595 - Equity in loss of unconsolidated affiliates 51 40 Loss in investment due to impairment - 678 Changes in assets and liabilities: Accounts receivable 49 66 Prepaid expenses and other current assets 71 114 Accounts payable (422) (281) Accrued expenses 49 (100) Other assets (21) 2 - -------- ---------- Net cash (used in) operating activities (4,160) (3,503) -------- ---------- Cash flows from investing activities: Additions to patent rights (67) (54) Maturity of short term investments 4,657 5,310 Purchase of short term investments (2,401) (2,542) Investments in unconsolidated affiliates (22) _ --------- ---------- Net cash provided by investing activities 2,167 2,714 --------- ---------- Cash flows from financing activities: Proceeds from issuance of common stock 73 6 Proceeds from exercise of warrants 1,147 59 Proceeds from issuance of preferred stock of subsidiary - 946 Purchase of treasury stock (363) (31) -------- --------- Net cash provided by financing activities 857 980 --------- --------- Net increase (decrease) in cash and cash equivalents (1,136) 191 Cash and cash equivalents at beginning of period 3,721 3,107 --------- --------- Cash and cash equivalents at end of period $2,585 $3,298 ========= ========= Supplemental disclosures of cash flow information: Issuances of common stock for accounts payable - $ 100 ========= =========
See accompanying notes to condensed consolidated financial statements. 6 HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of Hemispherx BioPharma, Inc., a Delaware corporation and its wholly owned subsidiaries. All significant intercompany accounts and transac- tions have been eliminated. In the opinion of management, all adjustments necessary for a fair presentation of such consolidated financial statements have been includ- ed. Such adjustments consist of normal recurring items. Interim results are not necessarily indicative of results for a full year. The interim consolidated financial statements and notes thereto are presented as permitted by the Securities and Exchange Commission, and do not contain certain information which will be included in our annual consolidated financial statements and notes thereto. These consolidated financial statements should be read in conjunction with our year 2001 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2001, as filed with the SEC on April 9, 2002. NOTE 2: STOCK COMPENSATION This charge consists of the fair market value of warrants issued to outside parties for services rendered on behalf of the Company. Stock/Warrant compensation expense has no effect on shareholder equity as it is offset by an increase in additional paid in capital. The Company recorded $595,000 in non-cash stock compensation expense in the first six months of 2001. These charges were the result of actions taken by the Board of Directors in 1) extending the expiration date of certain non public warrants which produced stock compensation expense of $262,000 and 2) the granting of warrants to certain financial advisors which produced stock compensation expense of $333,000. 7 Note 3: INVESTMENTS Investments in unconsolidated affiliates: In 1998, the Company invested $1,074,000 for a 3.3% equity interest in R.E.D. Laboratories ("R.E.D."). R.E.D. is a privately held biotechnology company for the development of diagnostic markers for Chronic Fatigue Syndrome and other chronic immune diseases. We have a research collaboration agreement with R.E.D. to assist in this development. R.E.D. is headquartered in Belgium. The investment was recorded at cost. In June, 2002 we recorded a non-cash charge of $678,000 to operations with respect to our investment in R.E.D. This charge was the result of our determination that R.E.D.'s business had not yet evolved to the point that our carrying value of this investment could be supported. Our net investment as of June 30, 2002 was $396,000. On May 11, 1999, the Company acquired a 15% interest in California Institute of Molecular Medicine ("CIMM") for $375,000. On May 16, 2000, the Company acquired an additional 15% interest in CIMM. The Company currently has a total interest of 30% in CIMM for a total of $750,000. CIMM is developing therapy for treating Hepatitis C virus. The investment has been recorded by the equity method. During the fourth quarter of 2001, the Company recorded a non-cash charge of $485,000 to operations with respect to the Company investment in CIMM. This charge is a result of the Company determination that CIMM'S operation had not yet evolved to the point where the Company's full carrying value of this investment could be supported pursuant to the guidelines of APB opinion No. 18. The $485,000 represents the unamortized balance of goodwill included as part of the Company investment. The Company's net investment in CIMM was $64,469 at June 30, 2002. Other investments include an initial equity investment of $290,625 in Chronix Biomedical ("Chronix"). Chronix focuses upon the development of diagnostics for chronic diseases. This initial investment was made in May 31, 2000 by the issuance of 50,000 shares of Hemispherx Biopharma, Inc. common stock from the treasury. On October 12, 2000, the Company issued an additional 50,000 shares of Hemispherx Biopharma, Inc. common stock and on March 7, 2001 the Company issued 12,000 more shares of Hemispherx Biopharma, Inc. common stock from the treasury to Chronix for an aggregate equity investment of $700,000. Note 4: LICENSING FEE INCOME On March 20, 2002 our European Subsidiary Hemispherx Biopharma Europe, S.A. ("Hemispherx, S.A.") entered into a Sales and Distribution agreement with Laboratorios del Dr. Esteve S.A. ("Esteve"). Pursuant to the terms of the Agreement, Esteve was granted the exclusive right to 8 market Ampligen in Spain, Portugal and Andorra for the treatment of Myalgic Encephalitis/Chronic Fatigue Syndrome ("ME/CFS"). In addition to other terms and other projected payments, Esteve paid an initial and non refundable fee of 625,000 Euros (approximately $545,000) to Hemispherx S.A. on April 24, 2002 as the first part of a series of milestone based payments. In addition, Esteve acquired 1,000,000 Euros of Hemispherx S.A.'s preferred equity certificates on May 23, 2002. (Refer to Note 5 of this report for the terms and conditions of these securities.) Note 5: MINORITY SHAREHOLDER INTEREST Laboratorios del Dr. Esteve S.A. purchased 1,000,000 Euros of Hemispherx Biopharma Europe S.A.'s convertible preferred equity certificates on May 23, 2002. Currently these securities will pay a 7% dividend and will be converted into 1.14% of the outstanding common stock of Hemispherx Biopharma Europe S.A. upon completion of an initial public offering ("IPO") on a European stock exchange on or before September 30, 2003 whichever comes earlier. The terms and conditions of these securities are being changed so that these preferred equity certificates will be converted into the common stock of Hemispherx Biopharma, Inc. in the event that a European IPO is not completed by September 30, 2003. In this event the conversion rate is 300 shares of Hemispherx Biopharma,Inc.'s common shares for each 1000 Euro convertible preferred certificate. ITEM 2: Management's Discussion and Analysis of Financial Condition and Results of Operations. SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS Certain statements in this Report on Form 10-Q ("Form 10-Q"), constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 (collectively, the "Reform Act"). Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, including but not limited to, the risk factors discussed below, which may cause the actual results, performance or achievements of Hemispherx Biopharma, Inc. and its subsidiaries (collectively, the "Company", "we or "us") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements and other factors referenced in this Form 10- Q. The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions which may be 9 made to any forward-looking statement to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Overview We are a biopharmaceutical firm that focuses on the development of Ribonucleic Acid (RNA) drug technology intended to enhance the immune system of the body by boosting the natural anti-viral defense system. Our specially configured RNA technologies represent a potential new class of pharmaceutical products for use in treating viral diseases and disorders of the immune system. Our experimental drug, Ampligen, is currently being developed for the treatment of Myalgic Encephalomyelitis/Chronic Fatique Syndrome ("ME/CFS") and HIV disease. We have four clinical trials underway in the United States consisting of 1) a Phase III clinical trial to measure the safety and efficacy of Ampligen in treating patients with ME/CFS and 2) a treatment protocol with recovery of the cost of the Ampligen for severely debilitated CFS patients and 3) a Phase IIb clinical trial to evaluate the safety and efficacy of Ampligen in treating drug resistant HIV patients for control of HIV and for immune system enhancement by adding Ampligen to the current cocktail of anti- HIV drugs called "HAART", and 4) a Phase IIb clinical trial designed to evaluate the use of Ampligen in treating patients already controlling their HIV on HAART as a way to improve HIV control off of HAART during a so called Strategic Treatment Intervention or (STI). This approach is designed to try to prevent serious drug toxicities that are seen with highly active antiretroviral therapy ("HAART"). We have three domestic subsidiaries: BioPro Corp., BioAegean Corp. and Core BioTech Corp., all of which are incorporated in Delaware. Our foreign subsidiaries include Hemispherx BioPharma Europe, N.V./S.A. which was established in Belgium in 1998 and Hemispherx Biopharma Europe, S.A. which was established in Luxembourg during 2002. Our principal executive offices are located at One Penn Center, 1617 JFK Boulevard, Philadelphia, Pennsylvania 19103, and our telephone number is (215) 988-0080. Risk Factors The following cautionary statements identify important factors that could cause our actual results to differ materially from those projected in the forward-looking statements made in this Annual Report. Among the key factors that have a direct bearing on our results of operations are: 10 No assurance of successful product development of Ampligen. The development of Ampligen and our other products is subject to a number of significant risks. Ampligen may be found to be ineffective or to have adverse side effects, fail to receive necessary regulatory clearances, be difficult to manufacture on a commercial scale, be uneconomical to market or be precluded from commercialization by proprietary rights of third parties. Our products are in various stages of clinical and pre-clinical development and, require further clinical studies and appropriate regulatory approval processes before any such products can be marketed. We do not know when, or if ever, Ampligen or our other products will be generally available for commercial sale for any indication. Generally, only a small percentage of potential therapeutic products are eventually approved by the FDA for commercial sale. Our drug and related technologies are investigational and subject to regulatory approval All of our drugs and associated technologies are investigational and must receive prior regulatory approval by appropriate regulatory authorities for general use and are currently legally available only through clinical trials with specified disorders. Our principal development efforts are currently focused on Ampligen, which has not been approved for commercial use. Ampligen and other proposed products are subject to extensive regulation by numerous governmental authorities in the U.S. and other countries, including, but not limited to, the Food and Drug Administration in the U.S., the Health Protection Branch of Canada, and the European Medicines Evaluation Agency in Europe. Obtaining regulatory approvals is a rigorous and lengthy process and requires the expenditure of substantial resources. In order to obtain final regulatory approval of a new drug, we must demonstrate to the satisfaction of the regulatory agency that the product is safe and effective for its intended uses and that we are capable of manufacturing the product to the applicable regulatory standards. We require regulatory approval in order to market Ampligen or any other proposed product and receive product revenues or royalties. We cannot assure you that the drug will ultimately be demonstrated to be safe or efficacious. In addition, while Ampligen is authorized for use in clinical trials in the United States and other countries, we cannot assure you that additional clinical trial approvals will be authorized in the United States or in other countries in a timely fashion or at all, or that we 11 will complete these clinical trials. If Ampligen or one of our other proposed products does not receive regulatory approval in the U.S. or elsewhere, our operations will be materially adversely effected. We may continue to incur substantial losses and our future profitability is uncertain We began operations in 1966 and last reported net profit from 1985 through 1987. Since 1987, we have incurred substantial operating losses, as we pursued our Clinical trial effort and expanded our efforts in Europe. As of June 30, 2002 our accumulated deficit was approximately $95,771,000. We have not yet generated significant revenues from our products and may incur substantial and increased losses in the future. We cannot assure that we will ever achieve significant revenues from product sales or become profitable. We require, and will continue to require, the commitment of substantial resources to develop our products. We cannot assure that our product development efforts will be successfully completed or that required regulatory approvals will be obtained or that any products will be manufactured and marketed successfully, or profitably. Additional financing requirements. The development of our products will require the commitment of substantial resources to conduct the time-consuming research, preclinical development, and clinical trials that are necessary to bring pharmaceutical products to market. Based on our current operating plan, we anticipate receipt of limited revenues and proceeds from the sale of Ampligen under the Cost Recovery Treatment Clinical Programs and holders of non-public warrants exercising warrants from time to time. We believe these proceeds and the cash on hand will be sufficient to meet our capital requirements for the near future. The Company may need to raise substantial additional funds through additional equity or debt financing or from other sources in order to complete the necessary clinical trials and the regulatory approval processes and begin commercializing its products. There can be no assurances that our non- public Warrants will be exercised or that we will raise any proceeds from possible equity financing, which may have a material effect on our ability to develop our products. No regulatory agency has approved the full commercial sale of any of the our products. We cannot assure you that Ampligen or any of our other products being 12 developed will ultimately be demonstrated to be safe or efficacious. While Ampligen is authorized for use in clinical trials in the United States and other countries, we cannot assure you that additional clinical trial approvals will be authorized in the United States, or in other countries in a timely fashion or at all or that we will complete these clinical trials. If Ampligen or one of our other products does not receive regulatory approval in the United States or elsewhere, our operations will be significantly affected. We may not be profitable unless we can protect our patents and/or receive approval for additional pending patents. We need to acquire enforceable patents covering the use of Ampligen and other products for a particular disease in order to obtain exclusive rights for the commercial sale of Ampligen for such disease. Our success depends, in large part, on our ability to obtain patent protection for our products and to obtain and preserve our trade secrets and expertise. We have been issued certain patents including those on the use of Ampligen and Ampligen in combination with certain other drugs for the treatment of HIV. We have also been issued patents on the use of Ampligen in combination with certain other drugs for the treatment of chronic hepatitis B virus, chronic hepatitis C virus, and a patent which affords protection on the use of Ampligen in patients with chronic fatigue syndrome. We have not been issued any patents in the United States for the use of Ampligen as a sole treatment for any of the cancers which we have sought to target. We cannot assure you that any of these applications will be approved or that our competitors will not seek and obtain patents regarding the use of Ampligen in combination with various other agents, for a particular target indication prior to us. If we cannot protect our patents covering the use of Ampligen for a particular disease, or obtain additional pending patents, we may not be able to successfully market Ampligen. The patent position of biotechnology and pharmaceutical firms is highly uncertain and involves complex legal and factual questions. To date, no consistent policy has emerged regarding the breadth of protection afforded by pharmaceutical and biotechnology patents. There can be no assurance that patent applications relating to our products or technology will result in patents being issued or that, if issued, such patents will afford meaningful protection against competitors with similar technology. It is generally anticipated that there may be significant litigation in the industry regarding patent and intellectual property rights. Such litigation could require substantial resources from us. No assurance can be made that our patents will provide competitive advantages for our products or will not be successfully challenged by competitors. No assurance can be given that patents do not 13 exist or could not be filed which would have a materially adverse effect on our ability to market our products or to obtain or maintain any competitive position that we may achieve with respect to our products. Our patents also may not prevent others from developing competitive products using a different technology. There can be no assurance that we will have the financial resources necessary to enforce patent rights we may hold. If we cannot enforce the patent rights we currently hold we may be required to obtain licenses from others to develop, manufacture or market our products. There can be no assurance that we would be able to obtain any such licenses on commercially reasonable terms, if at all. We currently license certain proprietary information from third parties, some of which may have been developed with government grants under circumstances where the government maintained certain rights with respect to the proprietary information developed. No assurances can be given that such third parties will adequately enforce any rights they may have or that the rights, if any, retained by the government will not adversely affect the value of our license. Certain of our know-how and technology is not fully patentable, particularly the procedures for the manufacture of our Ampligen drug product which are carried out according to standard operating procedure manuals. We may not be profitable unless we can produce Ampligen in commercial quantities at costs acceptable to us. We have never produced Ampligen or any other products in large commercial quantities. Ampligen is currently produced only for use in clinical trials. We must manufacture our products in compliance with regulatory requirements in commercial quantities and at acceptable costs in order for us to be profitable. We intend to utilize third-party manufacturers and/or facilities if and when the need arises or, if we are unable to do so, to build or acquire commercial-scale manufacturing facilities. We are dependent upon certain third party supplies for key components of the proposed products and for substantially all of the production process. If we cannot manufacture commercial quantities of Ampligen or enter into third party agreements for its manufacture at costs acceptable to us, our operations will be significantly affected. If our distributors do not market our product successfully, we may not generate significant revenues or become profitable. We have limited marketing and sales capability. Accordingly we may need to enter into marketing agreements and third party distribution agreements for our products in order to generate significant revenues 14 and become profitable. To the extent that we enter into co-marketing or other licensing arrangements, any revenues received by us will be dependent on the efforts of third parties, and there is no assurance that these efforts will be successful. Our agreement with Gentiva Health Services offers the potential to provide significant marketing and distribution capacity in the United States while licensing and marketing agreements with certain foreign firms should provide an adequate sales force in South America, Africa, United Kingdom, Australia and New Zealand, Canada, Austria, Spain and Portugal. Our partners may not be able to deliver treatment and services to chronic disease patients including infusion services, home nursing and other medical services through a national network of more than 500 locations. We cannot assure that our domestic or our foreign marketing partners will be able to successfully distribute our products, or that we will be able to establish future marketing or third party distribution agreements on terms acceptable to us, or that the cost of establishing these arrangements will not exceed any product revenues. The failure to continue these arrangements or to achieve other such arrangements on satisfactory terms could have a materially adverse effect on us. Ampligen safety profile and scientific literature. We believe that Ampligen has been generally well tolerated with a low incidence of clinical toxicity, particularly given the severely debilitating or life threatening diseases that have been treated. A mild flushing reaction has been observed in approximately 15% of patients treated in our various studies. This reaction is occasionally accompanied by erythema, a tightness of the chest, tachycardia, anxiety, shortness of breath, subjective reports of "feeling hot," sweating and nausea. The reaction is usually infusion-rate related and can generally be controlled by slowing the infusion rate. Other adverse side effects include liver enzyme level elevations, diarrhea, itching, urticaria (swelling of the skin), bronchospasm, transient hypotension, photophobia, rash, bradycardia, transient visual disturbances, arrhythmias, decreases in platelets and white blood cell counts, anemia, dizziness, confusion, elevation of kidney function tests, occasional temporary hair loss and various flu-like symptoms, including fever, chills, fatigue, muscular aches, joint pains, headaches, nausea and vomiting. These flu-like side effect typically subside within several months. One or more of the potential side effects might deter usage of Ampligen in certain clinical situations and therefore, could adversely effect potential revenues and physician/patient acceptability of our product. In general, we believe 15 that the relative safety profile to date has been well tolerated given the severe Chronic diseases being targeted. There is no assurance that successful manufacture of a drug on a limited scale basis for investigational use will lead to a successful transition to commercial, large-scale production. Small changes in methods of manufacturing may affect the chemical structure of Ampligen and other such RNA drugs, as well as their safety and efficacy. Changes in methods of manufacture, including commercial scale-up may affect the chemical structure of Ampligen and, can, among other things, require new clinical studies and affect orphan drug status, particularly, market exclusivity rights, if any, under the Orphan Drug Act. The transition from limited production of pre-clinical and clinical research quantities to production of commercial quantities of our products will involve distinct management and technical challenges and will require additional management and technical personnel and capital to the extent such manufacturing is not handled by third parties. There can be no assurance that our efforts will be successful or that any given product will be determined to be safe and effective, capable of being manufactured economically in commercial quantities or successfully marketed. Rapid technological change. The pharmaceutical and biotechnology industries are subject to rapid and substantial technological change. Technological competition from pharmaceutical and biotechnology companies, universities, governmental entities and others diversifying into the field is intense and is expected to increase. Most of these entities have significantly greater research and development capabilities than we do, as well as substantial marketing, financial and managerial resources, and represent significant competition for us. There can be no assurance that developments by others will not render our products or technologies obsolete or noncompetitive or that we will be able to keep pace with technological developments. Substantial competition. Competitors have developed or are in the process of developing technologies that are, or in the future may be, the basis for competitive products. Some of these products may have an entirely different approach or means of accomplishing similar therapeutic effects to products being developed by us. These competing products may be more effective and less costly than our products. In addition, conventional drug therapy, surgery and other more familiar treatments will offer competition to our products. Furthermore, many of our competitors have significantly greater 16 experience than us in pre-clinical testing and human clinical trials of pharmaceutical products and in obtaining FDA, EMEA HPB and other regulatory approvals of products. Accordingly, our competitors may succeed in obtaining FDA EMEA and HPB product approvals more rapidly than us. If any of our products receive regulatory approvals and we commence commercial sales of our products, we will also be competing with respect to manufacturing efficiency and marketing capabilities, areas in which we have no experience. Our competitors may possess or obtain patent protection or other intellectual property rights that prevent, limit or otherwise adversely affect our ability to develop or exploit our products. Limited manufacturing experience and capacity. Ampligen is currently produced only in limited quantities for use in our clinical trials and we are dependent upon certain third party suppliers for key components of our products. The failure to continue these arrangements on satisfactory terms could have a material adverse affect on us. Also, to be successful, our products must be manufactured in commercial quantities in compliance with regulatory requirements and at acceptable costs. Our current facilities are not adequate for the production of our proposed products for large-scale commercialization. We intend to utilize third-party facilities if and when the need arises or, if we are unable to do so, to build or acquire commercial-scale manufacturing facilities. We will need to comply with regulatory requirements for such facilities, including those of the FDA EMEA and HPB pertaining to Good Manufacturing Practices ("GMP") regulations. There can be no assurance that such facilities can be used, built, or acquired on commercially acceptable terms, that such facilities, if used, built, or acquired, will be adequate for our long-term needs. We may be subject to product liability claims from the use of Ampligen or other of our products which could negatively affect our future operations. We face an inherent business risk of exposure to product liability claims in the event that the use of Ampligen or other of our products results in adverse effects. This liability might result from claims made directly by patients, hospitals, clinics or other consumers, or by pharmaceutical companies or others manufacturing these products on our behalf. Our future operations may be negatively effected from the litigation costs, settlement expenses and lost product sales inherent to these claims. While we will continue to attempt to take appropriate precautions, we cannot assure that we will avoid significant product liability exposure. Although we currently maintain worldwide product liability insurance 17 coverage, there can be no assurance that this insurance will provide adequate coverage against product liability claims. While no product liability claims are pending or threatened against us to date, a successful product liability claim against us in excess of our insurance coverage could have a negative effect on our business and financial condition. Members of our Scientific Advisory Board may have conflicting interests and may disclose data and technical know how to our competitors. All of our Scientific Advisory Board members are employed by other entities, which may include our competitors. Although we require each of our Scientific Advisory Board members to sign a non-disclosure and non-competition agreement with respect to the data and information that he or she receives from us, we cannot assure you that members will abide by them. If a member were to reveal this information to outside sources, accidentally or otherwise, our operations could be negatively effected. Since our business depends in large part on our ability to keep our technical expertise confidential, any revelation of this information to a competitor or other source could have an adverse effect on our operations. There is no guarantee that our trade secrets will not be disclosed or known by our competitors. To protect our rights, we require certain employees and consultants to enter into confidentiality agreements with us. There can be no assurance that these agreements will not be breached, that we would have adequate and enforceable remedies for any breach, or that any trade secrets of ours will not otherwise become known or be independently developed by competitors. The loss of Dr. Carter's services could hurt our chances for success. Our success is dependent on the continued efforts of Dr. William A. Carter because of his position as a pioneer in the field of Nucleic Acid drugs, his being co-inventor of Ampligen and his knowledge of the Company's overall activities, including patents, clinical trials, corporate relationships and relationships with various governmental regulatory agencies. The loss of Dr. Carter's services could have a material adverse effect on our operations. While we have an employment agreement with Dr. William A. Carter, and have secured key man life insurance in the amount of $2 million on the life of Dr. Carter, the loss of Dr. Carter or other key personnel, such as Dr. David Strayer or Dr. Carol Smith, or the failure to recruit additional personnel as needed 18 could have a materially adverse effect on our ability to achieve our objectives. Uncertainty of health care reimbursement and potential legislation. Our ability to successfully commercialize our products will depend, in part, on the extent to which reimbursement for the cost of such products and related treatment will be available from government health administration authorities, private health coverage insurers and other organizations. Significant uncertainty exists as to the reimbursement status of newly approved health care products, and from time to time legislation is proposed, which, if adopted, could further restrict the prices charged by and/or amounts reimbursable to manufacturers of pharmaceutical products. We cannot predict what, if any, legislation will ultimately be adopted or the impact of such legislation on us. There can be no assurance that third party insurance companies will allow us to charge and receive payments for products sufficient to realize an appropriate return on our investment in product development. Hazardous materials. Our business involves the controlled use of hazardous materials, carcinogenic chemicals and various radioactive compounds. Although we believe that our safety procedures for handling and disposing of such materials comply in all material respects with the standards prescribed by applicable regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident or the failure to comply with applicable regulations, we could be held liable for any damages that result, and any such liability could be significant. The company does not maintain insurance coverage against such liabilities. Because the risk factors referred to above could cause actual results or outcomes to differ materially from those expressed in any forward- looking statements made by us, you should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business of the extent to which any factors, or combination of factors, may cause actual results to differ materially 19 from those contained in any forward-looking statements. Our research and clinical efforts may continue for the next several years and we may continue to incur losses due to clinical costs incurred in the development of Ampligen for commercial application. Possible losses may fluctuate from quarter to quarter as a result of differences in the timing of significant expenses incurred and receipt of licensing fees and/or cost recovery treatment revenues in Europe, Canada and in the United States. Critical Accounting Policies Financial Reporting Release No. 60., which was released by the Securities and Exchange Commission, requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. The significant accounting policies that we believe are most critical to aid in fully understanding our reported financial results are the following: 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 for the reporting period. Actual results could differ from those estimates. Impairment of Long-Lived Assets Statement of Financial Accounting Standards ("SFAS") No. 121. "Accounting for Long-Lived Assets and Long Lived Assets to be disposed of," requires that long-lived assets and certain identifiable intangibles, including goodwill, be held and used by an entity, be reviewed for impairment whenever events or changes in circumstances indicated that the carrying amount of the assets may not be recoverable. We assess the recoverability of fixed assets and intangibles based on undiscounted estimated future operating cash flows. If we determine that the carrying values have been impaired, the measurement and recognition of the impairment will be based on estimated future operating cash flows. During the fourth quarter of 2001, we recognized an impairment of $485,000 in connection with goodwill related to equity investments of ours. In June, 2002 we recognized an impairment of $678,000 with respect to another 20 investment whose operations had not evolved to the point where the company's full carrying value could be supported. As of June 30, 2002, management believes that the carrying value of the remaining long-lived assets and identifiable intangibles have not been impaired. Patents and Trademarks Patents and trademarks are stated at cost (primarily legal fees) and are amortized using the straight line method over the life of the assets. The Company reviews its patents and trademark rights periodically to determine whether they have continuing value. Such review includes an analysis of the patent and trademark's ultimate revenue and profitability potential on an undiscounted cash basis to support the realizability of its respective capitalized cost. In addition, management's review addresses whether each patent continues to fit into Company's strategic business plans. Research and Developments Costs Research and development costs are direct costs related to both future and present products and are charged to operations as incurred. The Company recognized research and development costs of $3,176,000 and $2,538,000 in the six month period ending June 30, 2001 and 2002 respectively. New Accounting Pronouncements In April 2002, the FASB issued SFAS No. 145, "Recission of FASB statements No. 4,44 and 64, Amendment of FASB statement No. 13, and Technical Corrections" ("SFAS 145"). FASB No. 4 required that gains and losses from extinguishment of debt that were included in the determination of net income be aggregated and, if material, be classified as an extraordinary item, net of related income tax. Effective January 1, 2003, pursuant to SFAS 145, the treatment of debt is to be included in "Other Income" in the Financial Statements. Currently the Company believes that the adoption of SEAS 145 will not have an impact on it's financial position and results of operations. 21 RESULTS OF OPERATIONS Three months ended June 30, 2002 versus Three months ended June 30, 2001 - ------------------------------------------------------------------------- Our recorded losses of $2,634,000 in the three months ended June 30, 2002 were $291,000 higher than the same period in 2001. Our losses in 2002 include a $678,000 write down of our investment in R.E.D. Labs ("R.E.D.") due to the conclusion that R.E.D.'s operations had not evolved to the point where the company's full carrying value could be supported. Our investment in R.E.D. is now carried at $396,000. The losses of $2,343,000 recorded in the three months ended June 30, 2001 includes non-cash stock compensation expense of $333,000. Excluding these two substantial non-cash transactions, our losses were $1,956,000 in 2002 versus $2,010,000 in 2001. Revenues from our ME/CFS cost recovery clinical program were up $33,000 from the same period a year ago primarily reflecting an increase in our clinical efforts in Austria to initiate ME/CFS cost recovery clinical programs. Over the past year the focus of our U.S. clinical resources has been directed toward concluding the Phase III ME/CFS clinical trial and initiating and conducting the Phase IIb HIV clinical trials now in progress. Research and Development ("R&D") costs were down $222,000, in part, due to lower expenses related to the Phase III ME/CFS clinical trial. This clinical trial is a double blind, randomized, placebo controlled study of treating ME/CFS with Ampligen. The Amp 719 and Amp720 Phase IIb HIV clinical trials are progressing and the expenses related to these studies increase as more HIV patients are enrolled in these studies. Our overall objective is to recruit 120-130 patients to participate in each of these studies. These studies are "open label" and therefore we have concurrent data as to the health status and progress of each patient enrolled in these trials. Excluding the $333,000 stock compensation charge in 2001, General and Administrative ("G&A") expenses were up $146,000 in the months three ended June 30, 2002 compared to the same period in 2001. This increase reflects slightly higher costs for a varity of expenses, ie; Insurance premiums, office rents, public relations, office supplies, stock market registration fees and travel. Insurance premiums for liability, property and product liability coverage have increased substantially. Our headquarters rent expense has increased due to the escalator provision for operating expenses in the lease. Increased travel expenses primarily relate to the travel required to negotiate and finalize various marketing, distribution and equity placement agreements. We had no stock compensation expense in the three month ended June 30, 2002. In this same period in 2001, we recorded a non-cash charge of 22 $333,000 reflecting the grant of warrants to purchase common stock to certain individuals that serve as financial advisors to the Company. Interest income was $25,000 for the three months ended June 30, 2002 versus interest income of $87,000 during the same period in 2001. This decrease in interest income reflects the significant drop in rates earned on money market securities as well as less funds available to invest in 2002. Six months ended June 30, 2002 versus six months ended June 30, 2001 - --------------------------------------------------------------------- Our losses for the six months ended June 30, 2002 were approximately $4,122,000 compared to losses of $4,823,000 in the same period of 2001. These losses include non cash expenses. This reduction in losses of approximately $701,000 is basically due to license fee income received in 2002 and lower research and development ("R&D") and general and administrative ("G&A") expenses in 2002. Revenues were up $519,000 in the six months ended June 30, 2002 compared to the same period in 2001. This increase in 2002 revenues is due to licensing fee income paid by Laboratorios del Dr. Esteve, S.A. ("Esteve") pursuant to the marketing and distribution agreement executed in March, 2002. This agreement, which provides for additional milestone agreements, gives Esteve the exclusive right, upon regulatory approval, to market and distribute Ampligen in Spain, Portugal and Andorra for the treatment of ME/CFS. R&D expenses in the six months ended June 30, 2002 was approximately $2,538,000 or some $638,000 lower than R&D expenses recorded in the six months ended June 30, 2001. These expenses consist of direct costs incurred for research, drug production clinical trials and related expenses. Drug production costs were down by some $272,000 in 2002 versus 2001 primarily due to the purchases of Ampligen inventories in the six months ended June 30, 2001. This build up of inventories in 2001 was in anticipation of increased Ampligen needs in our ME/CFS and HIV clinical trials. All costs relating to the production of Ampligen are expensed as incurred, therefore we do not carry a value for inventories on our books, even through we actually have a significant investment in inventory on hand. Costs related to the Phase III ME/CFS clinical trial were down some $360,000 in the six months ended June 30, 2002 versus the same period in 2001 as we had fewer patients enrolled. Cost related to the Phase IIb HIV clinical trials were up some $291,000 in 2002 versus 2001. 23 These trials were initiated last fall and investigator/patient recruitment has been underway since that time. Our objective is to recruit and enroll 120-130 HIV patients in each of these trials. G&A expenses were $1,680,000 in the six months ended June 30, 2002 versus expenses of $2,004,000 for the same period in 2001. Without non-cash stock compensation expense, our G&A expenses were $1,680,000 in 2002 versus $1,409,000 in 2001. The increase of $271,000 in 2002 expenses include increased costs for 1) insurance premiums, 2) legal fees related to the January 2002 Asensio trial, 3) public relations, 4) shareholder communications, 5)escalation of office rents and 6) American Stock Exchange fees. We had no stock compensation expense in the six months ended June 30, 2002. Stock compensation expense for the same period in 2001 totaled $595,000 and consisted of extending the term of certain non-public warrants to buy common stock and the granting of non-public warrants to buy common stock to investment bankers serving as financial advisors to us. Interest income for the six months ended June 30, 2002 was down some $113,000 compared to the same period in 2001. This decrease in interest income is primarily due to lower money market rates and less funds to invest in 2002 versus 2001. In June, 2002 we reviewed our $1,074,000 investment in R.E.D. and concluded that R.E.D.'s operations had not evolved to the point where the company's full carrying value could be supported. We determined that our 3.3% interest in R.E.D. was impaired. Accordingly we wrote off $678,000 of our R.E.D. investment. LIQUIDITY AND CAPITAL RESOURCES Our cash, cash equivalents and short term investments were $5,840,000 as of June 30, 2002 compared to $8,417,000 at December 31, 2001 reflecting a net decrease of cash in the amount of $2,577,000 in the first six months of 2002. Operating activities utilized $3,503,000 reflecting cash outlays in support of the Phase III ME/CFS clinical trial as well as the Phase IIb HIV trials now underway. In addition we have significantly invested in expanding our capacity to manufacture liquid Ampligen doses through outside suppliers as well as expended funds to increase our 24 supplies of Ampligen. These expenditures were made to assure an adequate and stable supply of Ampligen to support the ongoing clinical trials as well as provide the capacity to manufacture Ampligen in commercial quantities. Some portion of these costs are expected to be recovered under the expanded access, cost-recovery, programs authorized by the FDA and regulatory bodies in other countries. The costs of the Phase IIb HIV trials should increase as more patients are recruited. However the costs of these HIV trials should be lower overall due to certain inherent efficiencies of running the two clinical trials in parallel. During March 2002, Hemispherx Biopharma Europe, S.A. (Hemispherx S.A.) was authorized to issue up to 22,000,000 Euros of seven percent (7%) convertible preferred equity securities. Such securities can be converted into a specified number of shares of common stock of Hemispherx Biopharma Europe S.A. These securities are to be privately placed as the market allows. Pursuant to the terms of the Sales and Distribution agreement executed in March 2002, laboratorios del Dr. Esteve S.A.("Esteve") paid Hemispherx Europe, S.A. an initial and non refundable fee of 625,000 Euros (approximately $545,000) on April 24, 2002. Among other requirements, Esteve is to pay a fee of 1,000,000 Euros after FDA approval of Ampligen for the treatment of ME/CFS in the U.S. and a fee of 1,000,000 Euros after issuance of final marketing authorization by Spain for the use of Ampligen for the treatment of ME/CFS. Additionally, Esteve purchased 1,000,000 Euros of Hemispherx Biopharma, S.A.'s Preferred Equity Certificates in May, 2002. (Refer to Note 5 of this report for the terms and conditions of these securities.) In the event that additional funding is needed to support our operations, we believe that such funding will be available by one or more of the following: 1) a private or public placement of equity in either Hemispherx Biopharma, Inc. or our European subsidiary, Hemispherx Europe S.A. 2) funds derived from the granting of licensing agreements or 3) proceeds from warrantholders exercising warrants, and 4) the possibility of revenues from partial or full marketing approval in countries outside Europe and north America. Any additional equity funding may result in significant dilution and could involve the issuance of securities with rights, which are senior to those of existing stockholders. We may also need additional funding earlier than anticipated, and our cash requirements, in general, may vary materially from those now planned, for reasons including, but not limited to, changes in our research and 25 development programs, clinical trials, competitive and technological advances, the regulatory process, and higher than anticipated expenses and lower than anticipated revenues from certain of our clinical trials for which cost recovery from participants has been approved. ITEM 3: Quantitative and Qualitative Disclosures About Market Risk Excluding obligations to pay us for various licensing related fees, we had approximately $5,840,000 in cash, cash equivalents and short term investments at June 30, 2002. To the extent that our cash and cash equivalents exceed our near term funding needs, we invest the excess cash in three to six month high quality interest bearing financial instruments. The Company employs established conservative policies and procedures to manage any risks with respect to investment exposure. Part II - OTHER INFORMATION ITEM 1: Legal Proceedings In 1998, we filed a multi-count complaint against Manuel P. Asensio, Asensio & Company, Inc.("Asensio"). The action included claims of defamation, disparagement, tortious interference with existing and prospective business relations and conspiracy, arising out of the Asensio's false and defamatory statements. The complaint further alleged that Asensio defamed and disparaged us in furtherance of a manipulative, deceptive and unlawful short-selling scheme between August, 1998, and the present. In 1999, Asensio filed an answer and counterclaim alleging that in response to Asensio's strong sell recommendation and other press releases, we made defamatory statements about Asensio. We denied the material allegations of the counterclaim. In July 2000, following dismissal in federal court for lack of subject matter jurisdiction, we transferred the action to the Pennsylvania State Court. In March 2001, the defendants responded to the complaints as amended and a trial commenced on January 30, 2002 resulting in a withdrawal with prejudice of the counterclaim against us. A jury verdict disallowed the claims against the defendants for defamation and disparagement. However, on July 2, 2002 the Court entered an order granting us a new trial against Asensio for defamation and disparagement. On July 10, 2002 Asensio filed a Notice of Appeal to the Superior Court of Pennsylvania from order of July 2, 2002. In June 2002 a former ME/CFS clinical trial patient and her husband filed a claim in the Superior Court of New Jersey, Middlesex County, against us, one of our clinical trial investigators and others alleging that she was harmed in the ME/CFS clinical trial as a result of negligence and breach of warranties. We believe the claim is without merit and we are 26 defending the claim against us through our product liability insurance carrier. In July 2002 we filed suit against Federal Insurance Company ("Federal") seeking (1) a judicial order declaring our rights and the obligations of Federal under the insurance policy Federal sold to us (2) monetary damage for breach of contract resulting from Federal's refusal to fully defend us in connection with the Asensio litigation (3) monetary damages to compensate us for Federal's breach of its fiduciary duty faith and dealing and (4) monetary damages, interest, costs, and attorneys fees to compensate us for Federal's violation of the Pennsylvania Bad Faith Statute. ITEM 2: Changes in Securities and Use of Proceeds During the quarter ended June 30, 2002, we issued an aggregate of 14708 shares of common stock to two parties, for an aggregate of $46,000 in proceeds. All of these shares were issued pursuant to the exemption from registration provided by section 4(2) of the Securities Act of 1933. No commission were paid with regard to these sales. ITEM 3: Defaults in Senior Securities None ITEM 4: Submission of Matters to a Vote of Security Holders None ITEM 5: Other Information In keeping with good corporate governance the Board of Directors is establishing a nominating committee composed solely of outside independent directors. On occasion, and to a limited extent, the Company utilized the individual expertise of one or more of its outside independent directors, and to that extent and for that purpose, the outside independent directors may be deemed affiliated outside independent directors while continuing to meet the stringent qualifications of independent directors as set forth in Section 121A of the American Stock Exchange regulations. ITEM 6: Exhibits and Reports on Form 8K (a)Exhibits 99.1 Statement under oath of principal executive officer 99.2 Statement under oath of principal financial officer (b) Reports on Form 8-K None 27 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 thereunto duly authorized. HEMISPHERx BIOPHARMA, INC. /S/ William A. Carter --------------------------- Date: August 14, 2002 William A. Carter, M.D. Chief Executive Officer & President /S/ Robert E. Peterson -------------------------- Date: August 14, 2002 Robert E. Peterson Chief Financial Officer 28 Exhibit 99.1 Hemispherx Biopharma, Inc. - ------------------------------------------------------------------------------- Statement Under Oath of Principal Executive Officer and Principal Financial Officer Regarding Facts and Circumstances Relating to Exchange Act Filings I, William A. Carter, Chief Executive Officer, state and attest that: (1) To the best of my knowledge, based upon a review of the covered reports of Hemispherx Biopharma, Inc., and, except as corrected or supplemented in a subsequent covered report: * No covered report contained an untrue statement of a material fact as of the end of the period covered by such report (or in the case of a report on Form 8-K or definitive proxy materials, as of the date on which it was filed); and * No covered report omitted to state a material fact necessary to make the statements in the covered report, in light of the circumstances under which they were made, not misleading as of the end of the period covered by such report (or in the case of a report on Form 8-K or definitive proxy materials, as of the date on which it was filed). (2) I have reviewed the contents of this statement with the Company's audit committee. (3) In this statement under oath, each of the following, if filed on or before the date of this statement, is a "covered report": * Year 2001 Annual Report on Form 10-K for Hemispherx Biopharma, Inc. on April 9, 2002; * All reports on Form 10-Q, all reports on Form 8-K and all definitive proxy materials of Hemispherx Biopharma, Inc. filed with the Commission subsequent to the filing of the Form 10-K identified above; and * Any amendments to any of the foregoing. 8/12/02 Date: _____________________ Subscribed and sworn to /S/ William A. Carter before me this ____12 th___day By: ______________________ of ___August_____2002 William A. Carter Chief Executive Officer Hemispherx Biopharma, Inc. /s/ __Sharon Conway_____ Notary Public My Commission Expires: Jan. 31, 2005 1349: Notarial Seal 29 Exhibit 99.2 Hemispherx Biopharma, Inc. - -------------------------------------------------------------------------------- Statement Under Oath of Principal Executive Officer and Principal Financial Officer Regarding Facts and Circumstances Relating to Exchange Act Filings I, Robert E. Peterson, Chief Financial Officer, state and attest that: (1) To the best of my knowledge, based upon a review of the covered reports of Hemispherx Biopharma, Inc., and, except as corrected or supplemented in a subsequent covered report: * No covered report contained an untrue statement of a material fact as of the end of the period covered by such report (or in the case of a report on Form 8-K or definitive proxy materials, as of the date on which it was filed); and * No covered report omitted to state a material fact necessary to make the statements in the covered report, in light of the circumstances under which they were made, not misleading as of the end of the period covered by such report (or in the case of a report on Form 8-K or definitive proxy materials, as of the date on which it was filed). (2) I have reviewed the contents of this statement with the Company's audit committee. (3) In this statement under oath, each of the following, if filed on or before the date of this statement, is a "covered report": * Year 2001 Annual Report on Form 10-K for Hemispherx Biopharma, Inc. on April 9, 2002; * All reports on Form 10-Q, all reports on Form 8-K and all definitive proxy materials of Hemispherx Biopharma, Inc. filed with the Commission subsequent to the filing of the Form 10-K identified above; and * Any amendments to any of the foregoing. 8/12/02 Date: _____________________ Subscribed and sworn to /S/ Robert E. Peterson before me this ___12 th___day By: ______________________ of __August___2002 Robert E. Peterson Chief Financial Officer Hemispherx Biopharma, Inc. /s/ _Sharon Conway___ Notary Public My Commission Expires: Jan. 31, 2005 Notarial Seal -----END PRIVACY-ENHANCED MESSAGE-----