-----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, T9wRa53zkSxhq4WdRHUtzOVy9+x+p0ECVuoaRPGCfwS1j+TVr2csYpVlpfooTmc7 00OEgAWG9wMU8hCX/J8n6w== 0000946644-97-000009.txt : 19971114 0000946644-97-000009.hdr.sgml : 19971114 ACCESSION NUMBER: 0000946644-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEMISPHERX BIOPHARMA INC CENTRAL INDEX KEY: 0000946644 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 520845822 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13441 FILM NUMBER: 97712969 BUSINESS ADDRESS: STREET 1: 1617 JFK BLVD STREET 2: ONE PENN CENTER CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2159880080 MAIL ADDRESS: STREET 1: 1617 JFK BLVD STREET 2: ONE PENN CENTER CITY: PHILADELPHIA STATE: PA ZIP: 19103 10-Q 1 FORM 10Q HEMISPHERX BIOPHARMA, INC. (PAGE) 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 September 30, 1997 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 16,693,659 shares of common stock issued and outstanding as of September 30, 1997. (PAGE) 2 PART I - FINANCIAL INFORMATION ITEM 1: Financial Statements HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) December 31, September 30, 1996 1997 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 5,279,429 $ 1,780,469 Prepaid expenses and other current assets 105,341 69,613 ----------- ---------- Total current assets 5,384,770 1,850,082 Property and equipment, net 83,475 68,526 Patent and trademark rights, net 1,502,816 1,578,386 Security deposits 28,323 18,323 ----------- ---------- Total assets $ 6,999,384 $ 3,515,317 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 598,078 $ 889,379 Accrued expenses 548,312 524,775 ----------- ---------- Total current liabilities 1,146,390 1,414,154 Commitments and contingencies Stockholders' equity: Preferred stock 50 44 Common stock 16,160 16,693 Additional paid-in capital 54,080,171 55,394,595 Accumulated deficit (48,243,387) (53,310,169) ----------- ---------- Total stockholders' equity 5,852,994 2,101,163 ----------- ---------- Total liabilities and stockholders' equity $ 6,999,384 $ 3,515,317 =========== ==========
See accompanying notes to condensed consolidated financial statements. (PAGE) 3 HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) For the Three months ended September 30 -------------------------- 1996 1997 ---------- ---------- Revenues: Cost recovery - clinical trials $ 10,082 $ 93,457 ---------- ---------- Total revenues 10,082 93,457 ---------- ---------- Costs and expenses: Research and development 343,523 917,123 General and administrative 1,279,414 678,721 ---------- ---------- Total cost and expenses 1,622,937 1,595,844 Interest income 92,047 31,758 ---------- ---------- Net loss $(1,520,808) $(1,470,629) ========== ========== Weighted average shares outstanding 15,589,835 16,554,333 Net loss per share $ (0.10) $ (0.09) ========== ==========
See accompanying notes to condensed consolidated financial statements. (PAGE) 4 HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) For the Nine months ended September 30, -------------------------- 1996 1997 ---------- ---------- Revenues: Cost recovery - clinical trials $ 28,451 $ 155,282 ---------- ---------- Total revenues 28,451 155,282 ---------- ---------- Costs and expenses: Research and development 1,038,028 2,244,056 General and administrative 2,514,980 1,705,124 Preferred stock conversion expense - 1,227,864 ---------- ---------- Total cost and expenses 3,553,008 5,177,044 Interest income 257,612 142,476 ---------- ---------- Net loss $(3,266,945) $(4,879,286) ========== ========== Weighted average shares outstanding 15,584,405 16,395,817 Net loss per share $ (0.21) $ (0.30) ========== ==========
See accompanying notes to condensed consolidated financial statements. (PAGE) 5 HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) For the Nine months ended September 30, ------------------------- 1996 1997 ----------- ---------- Cash flows from operating activities: Net loss $(3,266,945) $(4,879,286) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation of property and equipment 42,719 20,610 Amortization of patents rights 62,592 91,491 Write-off of patent rights - 59,985 Preferred stock conversion expense - 1,227,864 Stock option compensation expense 617,911 24,108 Changes in assets and liabilities: Prepaid expenses and other current assets (123,422) 35,728 Accounts payable (448,842) 346,301 Accrued expenses (1,831,242) (39,259) Security deposits 28,241 10,000 --------- --------- Net cash used in operating activities (4,918,988) (3,102,458) --------- --------- Cash flows from investing activities: Purchase of property and equipment ( 86,480) (5,661) Additions to patent rights (211,691) (227,046) --------- --------- Net cash used in investing activities (298,171) (232,707) --------- --------- Cash flows from financing activities: Proceeds from issuance of preferred stock 5,395,885 4,834,923 Preferred stock redeemed - (5000,000) Payments on stockholder notes (4,920,000) - Common stock issued 94,792 1,282 Dividends paid on preferred stock (8,654) - --------- --------- Net cash used in financing activities 562,023 (163,795) --------- --------- Net decrease in cash and cash equivalents (4,655,136) (3,498,960) Cash and cash equivalents at beginning of period 11,291,167 5,279,429 --------- --------- Cash and cash equivalents at end of period $6,636,031 $1,780,469 ========= =========
See accompanying notes to condensed consolidated financial statements. (PAGE) 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. (the "Company"), a Delaware corporation and all its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The Company's interim consolidated financial statements are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of such consolidated financial statements have been included. 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 (SEC), and do not contain certain information which will be included in the Company's annual consolidated financial statements and notes thereto. These consolidated financial statements should be read in conjunction with the Company's 1996 consolidated financial statements included in the Company's Form 10K statement filed with the SEC on March 26, 1997. NOTE 2: SERIES D CONVERTIBLE PREFERRED STOCK On July 3, 1996 the Company issued and sold 6,000 shares of Series D Convertible Preferred Stock ("the Preferred Stock") at $1,000 per share for an aggregate total of $6,000,000. The proceeds, net of issuance costs, realized by the Company were $5,395,885. In addition to the issuance of the Preferred Stock, the Company issued to the buyer Warrants ("the Warrants") to purchase 100,000 shares of Common Stock at the strike price of $4 per share. The Preferred Stock earned dividends at the rate of $50 per annum per share. The dividends were cumulative and payable quarterly commencing October 1, 1996 as declared by the Board of Directors of the Corporation. (PAGE) 7 On September 16, 1996 the Company's registration statement registering the common stock underlying the Preferred Stock and the Warrants was declared effective by the SEC. In October,1996, the Preferred Shareholder converted 1,381 shares of Series D Convertible Preferred Stock into 576,527 shares of common stock. On March 7, 1997, the Company retired all the outstanding Series D Convertible Preferred Stock.(See note 3). NOTE 3: SERIES E CONVERTIBLE PREFERRED STOCK On March 7, 1997, the Company used the services of an investment banking firm to privately place $5 million of Series E Convertible Preferred Stock. The proceeds from placement were used to retire the $5 million balance of Series D Convertible Stock issued on July 3, 1996. In conjunction with this transaction, the Company issued 200,000 shares of common stock with a guaranteed value of $6.00 per share within the subsequent ten months of issuance. Consequently, the Company incurred a $1.2 million charge which had no effect on the total stockholders' equity as it was offset by an increase in additional paid-in capital. NOTE 4: STOCK COMPENSATION: The Company recorded stock/warrant compensation expense of $24,108 during the quarter ended September 30, 1997 on the basis of granting 50,000 warrants to purchase Common stock to non-employees of the Company. NOTE 5: NEW ACCOUNTING PRONOUNCEMENTS: In February, 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 128, "Earnings Per Share." This statement establishes standards for computing and presenting earnings per share (EPS) and applies to entities with publicly held common stock or potential common stock. This Statement simplifies the standards for computing earnings per share previously found in APB Opinion NO. 15, "Earnings Per Share," and makes them comparable to international EPS standards. It replaces the presentation of primary EPS with a presentation of basic EPS. It also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator (PAGE) 8 and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. This Statement is effective for financial statements issued for periods ending after December 15, 1997, including interim periods; earlier application in not permitted. This Statement requires restatement of all prior-period EPS data presented. The adoption of this Statement will not have any impact on the Company's EPS disclosure, as the Company's stock options and warrants are anti-dilutive and will be excluded from the denominator of earnings per share; thus, earnings per common share is equal to basic earnings per share as computed under SFAS No. 128. ITEM 2: Managements Discussion and Analysis of Financial Condition and Results of Operations. GENERAL The Company was incorporated in Maryland in 1966 under the name HEM Research, Inc. and originally served as a supplier of research support products. The Company's business was redirected in the early 1980's to the development of nucleic acid pharmaceutical technology and the commercialization of RNA drugs. The Company was reincorporated in Delaware and changed its name to HEM Pharmaceuticals Corp. in 1991 and to Hemispherx BioPharma, Inc. in June 1995. The Company has three subsidiaries--BioPro Corp., BioAegean Corp. and Core BioTech Corp., all of which were incorporated in Delaware in 1994. The Company has reported net profit only from 1985 through 1987. Since 1987, the Company has incurred substantial operating losses. Prior to completing an Initial Public Offering (IPO) in November 1995, the Company financed operations primarily through the private placement of equity and debt securities, equipment lease financing, interest income and revenues from licensing and royalty agreements. The Company's drug technology utilizes specifically-configured ribonucleic acid("RNA"). One of the Company's double stranded RNA drug products, trademarked Ampligen, a parental drug product, is in advanced human clinical development for various therapeutic indications. Based on the results of pre-clinical studies and clinical trials, the Company believes that Ampligen may have broad-spectrum anti-viral and anti-cancer activities. The Company's policy is to file or license patent applications on a worldwide basis to protect technology, inventories and improvements that are considered important to the development of its business. More than 400 patent applications have been filed worldwide of which more than 300 have been issued. (PAGE) 9 The development of the Company's products has required and will continue to require the commitment of substantial resources to conduct the time-consuming research, preclinical development, and clinical trials necessary to bring pharmaceutical products to market and establish commercial production and marketing capabilities. Accordingly, the Company may need to raise additional funds through additional equity or debt financing, collaborative arrangements with corporate partners, off balance sheet financing or from other sources in order to complete the necessary clinical trials and the regulatory approval processes and begin commercializing its products. During fiscal 1994 and 1995, the Company focused on negotiating and executing the SAB/BIOCLONES Agreement, exploring potential partnerships to pursue additional clinical trials with special emphasis on the CFS and HBV disease indication, restructuring certain of its outstanding debt, conducting the 1994 Common Stock Financing and the Bridge Financing and completing its IPO. In 1996, the Company reviewed and restructured the Ampligen manufacturing process. Secondary sources were established to procure raw materials, lyophilization services and drug release testing. In the areas of research and clinical efforts, the Company established with the FDA a comprehensive roadmap of research and clinical studies. These studies include animal toxicity and clinical studies in HIV and CFS. One HIV clinical study was approved by the FDA and started in early 1997. The comprehensive animal toxicity studies began in 1996 and are expected to be completed by year end 1997 on time to support various other regulatory initiatives of the Company in North America and Europe. The Company expects to continue its research and clinical efforts for the next several years with significant benefit occurring as a result of certain revenues from cost various recovery programs, notably in Canada, Belgium, and the U.S. However, the Company may continue to incur losses over the next several years due to clinical costs incurred in the continued development of Ampligen for commercial application. Possibly 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 revenues sales in Belgium, Canada and the United States. The Company is also pursuing similar programs in other countries, especially within the European Union. Recent Developments In October, 1997 the Company raised an aggregate of $10,005,000 in gross proceeds through two private offerings pursuant to Regulation D of (PAGE) 10 the Securities Act of 1933, as amended ("Act"), and Rule 506 promulgated thereunder. All investors represented that they were accredited pursuant to Rule 501 of the Act. The Company intends to use the proceeds from the offering for general working capital and operating funds and to advance its various clinical initiatives, including build-up of inventory and streamlining various aspects of the over all manufacturing process. The offerings were as follows: Pursuant to a Term Sheet dated September 2, 1997, the Company offered 2,840,000 shares of Common Stock at $2.50 per share, through Hermitage Capital, Inc., the Company's placement agent ("Placement Agent") on a "best-efforts" basis. The Placement Agent received as compensation 6% of the gross proceeds and 200,000 warrants exercisable at $4.00 per share and expiring on December 31, 2000. The Company raised gross proceeds of $7,100,000 pursuant to this offering. Pursuant to a Term Sheet dated September 22, 1997, the Company offered 2,000,000 shares of Common Stock at $3.00 per share, and one warrant for every ten shares purchased. Each warrant is exercisable at $4.00 per share and expires on december 31, 2000 ("Warrant"). The Company offered its securities through finders and broker/dealers, and paid commissions of 6% of gross proceeds, and one Warrant for every ten shares of Common Stock sold. the warrants are exercisable at $4.00 per share and expire on December 31, 2000. Pursuant to the offering, the Company sold 968,333 shares of Common Stock and raised gross proceeds of $2,905,000. As of September 30, 1997 the Company had 8 patents enrolled in the HIV clinical study. Also, the Company had 26 CFS patients enrolled in the cost recovery clinical treatment programs being conducted in Belgium, Canada, and the U.S. During the quarter ended September 30, 1997, the production facility located in the Republic of South Africa and owned jointly by the Company (24.9%) and by our affiliate Bioclones (PTY) Limited (75.1%) continued production of the raw materials, Poly I and C12U, needed to formulate Ampligen (the final product). During the current quarter the Company received two significantly sized shipments of Poly I and C12U which met all product specifications and will be processed to increase the Ampligen inventory. The Company is presently exploring distribution relationships for the European and U.S. markets, and signed a letter of intent regarding a novel (PAGE) 11 treatment regimen for hepatitis B infection with a France-based multinational pharmaceutical company termed Beaufour Ipsen. The Company retained in November, 1997, regulatory consultants to assist in preparing a marketing application for the European Union. There are about 300 million carriers of hepatitis B (HBV) virus worldwide. About one half of those who are chronic carriers will die of cirrhosis or liver cancer. Although the disease is most prevalent in Asia and third world countries, there are an estimated 1.25 million carriers in the U.S. The only approved treatment for HBV is interferon-a (mostly Intron-A from Schering Plough). Less than 40% of patients treated with interferon-a respond and the side effects are severe. Furthermore, Asian patients are less responsive to this treatment than Western patients. In June, 1997, the Company received notification of acceptance of four new patents in New Zealand covering various medical indications for its double- stranded RNAs, including Ampligen. On May 1, 1997, the Company received permission from the U.S. Food and Drug Administration (FDA) to recover costs from Chronic Fatigue Syndrome (CFS) patients in the Company's AMP-511 open-label treatment protocol. In June, 1997, five (5) clinical sites across the United States had been approved to participate in this protocol. The cost of Ampligen to the patient is $2,100 for the first eight weeks of treatment and $2,400 for each additional eight- week period thereafter. This treatment protocol has begun to enroll CFS patients at these centers in the U.S. The Company has been in discussion with the FDA on the design of a controlled CFS clinical trial (AMP-516). CFS, which is also known as chronic fatigue and immune dysfunctional syndrome (CFIDS) or myalgic encephalomyelitis (ME), is a complex illness characterized by disabling fatigue, flu-like symptoms, joint and muscle pain, cognitive problems, and sleep disorders. Its cause is unknown. However. herpes virus type 6 (HHV-6) has been associated with the disease process. The Center for Disease Control (CDC) has assigned CFS to its priority one list of "new and reemerging infectious diseases" in the United States. Estimates of annual incidences given by the company are 0.5 to 2.0 million people in the United States and about 100,000 in Canada. An incidence of 0.2% of the U.S. population or 520,000 persons was cited in a recent article in the American Psychologist. There are no other specific treatments for CFS. In March, 1997, the Company sold 5,000 shares of Series E Convertible (PAGE) 12 Preferred Stock at $1,000 per share in a private offering pursuant to Regulation D of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder. The proceeds of this placement were used to retire the convertible preferred stock (Series D), which was placed under Regulation D filing with the SEC during 1996. As a result of this transaction in 1997, the Company incurred a $1.2 million charge which had no effect on total stockholders' equity as it was offset by an increase in additional paid-in capital. As of September 30, 1997, three holders of 650 shares of series E preferred stock have elected to convert their shares into 325,000 shares of common stock. In January 1997, the Company began a Phase II clinical trial in Texas treating HIV infected patients with Ampligen. The trial, approved by the FDA, is studying the effect of Ampligen on viral load, or burden, in HIV patients with CD4 levels over 400 cells/mm who are not being treated with any other HIV medications. The principal investigator in the trial, Dr. Patricia Salvato, specializes in the treatment of individuals with HIV infection. Dr. Salvato is a Clinical Associate Professor at the University of Texas Health Science Center, and has participated in prior clinical trials of Ampligen for various chronic viral diseases including HIV and CFS. Five earlier HIV clinical studies have been carried out with Ampligen. Three were open label studies that showed stabilization of CD4 cell count, and return of delayed hypersensitivity. The fourth study was a Phase II double- blind, multi center study carried out in combination with zivovudine (AZT). The fifth was a crossover study where placebo patients from the fourth study were given Ampligen. The latter two studies showed decreased progression to AIDS, as well as CD4 cell count stabilization and return of delayed hypersensitivity. The Company believes that the data may justify a potential indication for combination treatment of adult HIV patients with CD4 counts of less than or equal to 300 cells/mm3 who show clinical or immulogic deterioration. In December, 1996 the Company and Temple University settled their legal disputes regarding the license agreement between the parties covering the Oragen drugs. The parties signed the documents required to consummate their settlement, which includes a worldwide license for the commercial sale of all Oragen products based on patents and related technology held by Temple. This agreement was originally executed in 1988. In 1994, Temple terminated the agreement, which caused the company to file legal action to re-instate the 1988 agreement. (PAGE) 13 On October 15, 1996, results of a Belgium clinical study were presented at the annual scientific meeting of the American Association for Chronic Fatigue Syndrome (AACFS) evidencing that Ampligen produced significant physical and cognitive improvements among patients suffering from Chronic Fatigue Syndrome. The study was presented by Kenny De Meirleir, M.D., Ph.D. from the University of Brussels, and by David S. Strayer, M.D., Professor of Medicine at Allegheny University, PA, and Medical Director for the Company. RESULTS OF OPERATIONS - --------------------- Nine months ended September 30, 1997 versus nine months ended September 30, - --------------------------------------------------------------------------- 1996 - ---- The Company reported a net loss of $4,879,286 for the nine months ended September 30, 1997 versus a net loss of $3,266,945 for the same period in 1996. Several factors contributed to the increased loss of $1,612,341 in 1997, primarily a non-operating preferred stock conversion expense (described below) of $1,227,864. Revenues were up $126,831 for the nine months of 1997 due to the increased enrollment of patients in the cost recovery clinical trials being conducted in Belgium, Canada and the United States. Research and development costs increased $1,206,028 in the nine months ended September 30, 1997 due primarily to increased efforts in conducting the pre-clinical toxicity studies, cost associated with the Canadian, Belgium and U.S. clinical cost recovery programs and the HIV clinical trials being conducted in the U.S. These costs were part of an overall plan to enhance the clinical data bases to support an eventual full marketing application. General and administrative expenses in the first nine months of 1997 decreased by $809,856. General and administrative expenses in the first nine months of 1996 included a one time gain in the amount of $318,757 resulting from the forgiveness of certain lease obligations in connection with the restructuring of the Company's principal office lease. Excluding this one time gain general and administrative expenses in the first nine months of 1997 decreased by $1,128,613. This decrease is primarily due to lower legal and consulting fees, and various other administrative expenses. Preferred stock conversion expense of $1,227,864 primarily resulted from the issuance of Series E Convertible Preferred Stock in March, 1997. (See notes 2 and 3 to unaudited condensed consolidated financial statements). (PAGE) 14 Interest income decreased $115,136 in the nine months ended September 30, 1997 compared to the same period in 1996 is due to lower cash and cash equivalents available for short term investments. Three months ended September 30, 1997 versus three months ended September - ------------------------------------------------------------------------- 30, 1997 - -------- The Company reported a net loss of $1,470,629 for the three months ended September 30, 1997 versus a net loss of $1,520,808 for the same period in 1996. Several factors contributed to the decreased loss of $50,179. Revenues were up for the three months ended September 30, 1997 due to increased cost recovery proceeds from the clinical trials in Belgium, Canada and the United States. Research and development costs increased $573,600 in the three months ended September 30, 1997 due primarily to increased efforts in conducting the toxicity studies, cost associated with the Canadian, Belgium and U.S. clinical cost recovery programs and the HIV clinical trials. General and administrative expenses decreased by $600,693 in the three months ended September 30, 1997. This decrease is primarily due to lower legal and consulting fees, and reduction in various other administrative expenses. Interest income decreased in the three months ended September 30, 1997 compared to 1996 due to lower cash and cash equivalents available for short term investments. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash and cash equivalents at September 30, 1997 was $1,780,469 compared to $5,279,429 at December 31, 1996, reflecting a net cash use of $3,498,960 to support operations. In October, 1997 the Company received net proceeds of $9.4 million from two separate private placements of equity. Because of the Company's long-term capital requirements, it may seek to access the public equity market whenever conditions are favorable, even if it does not have an immediate need for additional capital at that time. Any additional funding may result in significant dilution and could involve the issuance of securities with rights which are senior to those of existing stockholders. (PAGE) 15 The Company may also need additional funding earlier than anticipated, and the Company's cash requirements in general may vary materially from those now planned, for reasons including, but not limited to, changes in the Company's research and development programs, clinical trials, competitive and technological advances, the regulatory process, and higher than anticipated expenses and lower than anticipated revenues from certain of the Company's clinical trials for which cost recovery from participants has been approved. In October, 1997 the Company's common stock and Class A warrants commenced trading on the American Stock Exchange. These public securities were delisted from NASDAQ at that time. The securities had traded on NASDAQ since the IPO in November, 1995. In October, 1997 the Company completed two (2) private offerings of 4,840,000 shares of Common stock for and aggregate of $10,005,000 in gross proceeds. Both transactions were handled by placement agents, who earned 6% commissions. On March 7, 1997, the Company used the services of an investment banking firm to privately place $5 million of Series E Convertible Preferred Stock. The proceeds from placement were used to retire the $5 million balance of Series D Convertible Stock issued on July 3, 1996. (see notes 2 and 3 to unaudited condensed consolidated financial statements). On July 3, 1996 the Company issued and sold 6,000 of Series D Convertible Preferred Stock.The net proceeds realized by the Company were $5,395,885. On March 7, 1997, the company retired Series D Convertible Preferred Stock. (see notes 2 and 3 to unaudited condensed consolidated financial statements). (PAGE) 16 PART II - OTHER INFORMATION ITEM 1: Legal Proceedings None ITEM 2: Changes in Securities In July 1996, the Company separated it's public stock unit (consisting of one share of Common Stock and one Class A Redeemable Warrant to purchase Common Stock). The Common shares (HEMX), and Warrants (HEMXW) were separately traded on NASDAQ. In conjunction, the public units were delisted in July, 1996. On July 3, 1996, the Company completed a $6 million private placement with a single institutional investor in the form of a newly issued Series D Preferred Stock which is convertible into Common Stock. The proceeds from this private placement were used to expand drug inventory. On March 7, 1997, the Company used the services of an investment banking firm to privately place $5 million of Series E Convertible Preferred Stock. The proceeds from placement were used to retire the $5 million balance of Series D Convertible Stock issued on July 3, 1996. In October, 1997, the Company's shares of common stock and Class A warrants were listed with the American Stock Exchange and will trade under the symbols HEB and HEBW respectively. Accordingly, the shares were delisted from the Nasdaq SmallCap Market. ITEM 3: Defaults in Senior Securities None ITEM 4: Submission of Matters to a Vote of Security Holders None ITEM 5:Other Information At the Company's annual meeting in October, 1997 the shareholders voted by proxy to retain William A. Carter, Cedric Philipp, Peter Rodino III and Richard Piani as the directors of the Company, and to retained KPMG Peat Marwick as the Company's auditors. ITEM 6: Exhibits and Reports on Form 8K Reports on Form 8K - None (PAGE) 17 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: November 12, 1997 William A. Carter, M.D. Chief Executive Officer & President /s/ Robert Peterson -------------------------- Date: November 12, 1997 Robert E. Peterson Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1997 SEP-30-1997 1,780,469 0 0 0 0 1,850,082 692,051 (623,525) 3,515,317 1,414,154 0 0 44 16,693 2,084,426 3,515,317 0 297,758 0 5,177,044 0 0 0 0 0 (4,879,286) 0 0 0 (4,879,286) (.30) (.30)
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