U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from____________ to
______________
COMMISSION FILE NO. 33-20897-D
HELIX BIOMEDIX, INC.
COLORADO 84-1080717
2151 E. LAKESHORE DR., BATON ROUGE, LA 70808
(504) 387-1112
Securities registered pursuant to Section 12(b) of the
Act: NONE
Securities registered pursuant to Section 12(g) of the
Act: NONE
Check whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period
that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for
the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-B is not contained
in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part
III of this Form 10-KSB or any amendment to this Form 10-
KSB. [ ]
Registrant's revenues for the fiscal year ending December
31, 1996: $10,838
As of December 31, 1996, there were 1,270,620 shares of
common no par value stock of Helix BioMedix, Inc. issued
and outstanding, and the aggregate market value of the
common stock held by non-affiliates was approximately:
$1,064,423
DOCUMENTS INCORPORATED BY REFERENCE: YES. SEE INDEX ON
PAGES 20 AND 21
1
<PAGE>
EXHIBITS: Indexed at Pages 21 and 22
PAGES: This Form 10-KSB consists of 23 pages, plus pages
F-1 through F-13.
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Helix BioMedix, Inc., formerly Cartel Acquisitions, Inc.
("the Company"), was formed under the laws of the state
of Colorado on February 2, 1988 to create a corporate
vehicle to seek and acquire a business opportunity. On
March 20, 1989, the Company acquired 100% of the
outstanding shares of Helix BioMedix, Inc., a Louisiana
corporation, ("BioMedix of Louisiana") in exchange for
shares of the Company's common stock representing a
control interest in the Company. The Company acquired
all of the stock of BioMedix of Louisiana from Helix
International Corporation ("Helix"), a Louisiana
corporation founded in 1985. BioMedix of Lousiana was
incorporated on November 7, 1988 as a wholly owned
subsidiary of Helix to develop therapeutic
biopharmaceuticals for animal and human health care.
On June 19, 1989, having acquired BioMedix of Louisiana,
the Company amended its charter to change its name to
Helix BioMedix, Inc. All references herein to the Company
refer to Helix BioMedix, Inc., the Colorado corporation,
and its wholly owned subsidiary, Helix BioMedix, Inc. of
Louisiana.
(b) Description of Business During the Development Stage
Acquisition of Rights to the Lytic Peptide Technology
Since March 1989 the Company has been involved in the
business of conducting research both internally and
through a contract arrangement with Louisiana State
University ("LSU"). Prior to its incorporation of
BioMedix of Louisiana, Helix had started its research on
lytic peptides (small bioactive proteins) in 1986, and in
August 1987 entered into a collaborative "Antimicrobial
Project" Agreement with LSU which had done pioneering
exploratory research in this area. Under the terms of
the Agreement Helix provided funding for specific
research support at LSU, Helix assumed responsibility for
obtaining a patent position to protect the results of the
research, and LSU and Helix agree to share equally in any
future royalty income, and Helix retained the rights to
commercialize the technology developed in the
Antimicrobial Project.
Helix transferred to BioMedix of Louisiana in 1988 all of
its rights and obligations in the Antimicrobial Project
relating to the use of lytic peptides in animal and human
health care. Therefore, in March 1989 the Company
acquired all of such rights for the purpose of further
developing the technology and ultimately bringing
commercial products to market.
Research and Management Agreement with Helix
International Corporation
Concurrent with its acquisition of BioMedix of Louisiana,
the Company entered into an agreement with Helix which
provided that the scientific employees of Helix continue
to conduct lytic peptide research in its laboratories,
that Helix continue to support the LSU research under the
Antimicrobial Agreement, that Helix continue to obtain
the related patent coverage---all to be undertaken on a
contract basis for the account of the Company. Under the
terms of the Agreement, Helix provided research
scientists and technicians, laboratory and office
facilities and all administrative services to the Company
on a cost plus 15% basis. This arrangement continued
through February 1990.
Research and Management Agreement With University
Research & Marketing, Inc.
In March 1990 the Company lacked adequate financial
resources to continue its contract research activities,
and Helix was also no longer able to provide financial
support to the Company. At that time Helix closed its
2
<PAGE>
laboratory operations, and the Company's in-house
research and development activities were curtailed
pending availability of additional financing.
Concurrently, the Company underwent a de-facto change in
control wherein Helix agreed to sell to University
Research & Marketing, Inc. ("URM") the majority of its
controlling stock interest in the Company. In connection
with this action the Company entered into an agreement
with URM, whereby URM would provide administrative
services and continue to support the research at LSU in
behalf of the Company for a flat fee of $20,000 per month
plus patent and other out of pocket costs. It was agreed
that the Company would defer cash payment for such
services until it was able to obtain additional corporate
financing.
URM continued to perform such services on behalf of the
Company from March 1990 until August 1991. Although
research activities were maintained at a substantially
lower level than in 1989, the patent prosecution was
continued, and favorable corroboration of the early
research was obtained by scientists in outside
universities (other than LSU) who evaluated several of
the Company's proprietary lytic peptide compounds.
Discontinuation of Reporting to the SEC and Cessation of
Trading of the Company's Stock
From February 1990 until 1994 the Company was operated on
an absolutely minimum budget for administrative costs
because of the lack of operating capital. Therefore, the
Company was unable to continue the substantial expense
and effort of filing quarterly 10-Q and annual 10-K (with
audited financial statements) Reports with the SEC.
Prior to 1994 the last report filed with the SEC was the
Company's Report on Form 10-Q for the quarterly period
ending September 30, 1989. That Report is incorporated
herein by reference as Exhibit 13-a. Until 1994 the
Company had not been current nor in compliance with the
reporting requirements for public companies pursuant to
Section 13 or 15(d) of the Securities Exchange Act of
1934 Company during the period of non-reporting to the
SEC. In late 1988 and throughout 1989 the Company's
common stock was actively traded in the over-the-counter
market as a "penny stock" listed in the pink sheets.
Several brokerage firms acted as market makers in the
stock. After State and Federal securities regulatory
agencies drastically curtailed operations of penny stock
brokers in 1989 and 1990, and after the Company ceased to
make financial statements publicly available, trading of
the Company's stock substantially discontinued until
1994. This is discussed further in Item 5 of Part II of
this Report.
Management Control of the Company Returned to Helix
International Corporation
URM was unable to fulfill its commitment to purchase from
Helix the controlling interest in the Company's common
stock. In July 1992, de-facto control of the Company was
returned to Helix by the shareholders of the Company, at
which time Helix, URM, and Mr. Keith P. Lanneau
(returning as President and CEO of the Company) and
several other substantial shareholders committed to a
plan of action for revitalizing and restructuring the
Company.
Plan for Restructuring the Company
By mid 1992 it was the belief of the major shareholders
of the Company that the Company's proprietary lytic
peptide technology and the associated patent estate and
the gradually emerging market potential for
biopharmaceuticals had developed to a point which
encouraged and demanded renewed corporate vigor.
Management recognized that the Company should undertake a
major strategic and financial restructuring to strengthen
itself and to move aggressively toward commercialization
of its technology base. A restructuring plan was adopted
with the following objectives which have been attained or
are currently in the process of implementation as
follows:
3
<PAGE>
(a) Several key shareholders to provide interim funding
to maintain the Company's activities during the
restructuring.
Key shareholders have done this on a month-to-month basis
since August 1991 to the present time. The Company
believes it can rely upon a continuation of this funding
until permanent private and/or public financing is
obtained.
(b) Management to be strengthened by new outside
Directors.
In March 1993 the Company entered into an agreement with
the Louisiana Partnership for Technology and Innovation
("LAPTI") to obtain assistance in implementation of the
Company's restructuring plan and in the development of a
program for selective licensing of the Company's
technology. In consideration of these services to be
rendered, the Company issued 8,000 shares of its common
stock to LAPTI in May 1993. An officer and staff member
of the Partnership, Mr. Michael K. Marcantel, joined the
Company's Board of Directors and since 1993 has served as
Vice President, Secretary-Treasurer. He spends
approximately 20% of his time assisting the Company's
President in the restructuring initiatives discussed
herein.
In December 1993 Dr. Donald R. Owen joined the Company as
a Director and Vice President and Chief Scientist,
bringing high level expertise to the Company in its
fields of technical endeavor.
In October 1994 Mr. Thomas L. Frazer joined the Company
as a Director with the specific mission of assisting
management with its restructuring plan. Access to Mr.
Frazer's extensive business experience and financial
expertise constitute an important step in further
strengthening company management. In mid 1995 the board
of directors designated Mr. Frazer as Chief Financial
Officer for the Company.
(c.)The Agreements with LSU to be renegotiated and
novated to the benefit of the parties involved.
In March 1993 the Company, Helix, URM, and Helix
Phytonetix, Inc. (a related company) entered into a
novated Agreement of Settlement with LSU which releases
all the parties from any defaults arising from their
former respective agreements. Ownership of the lytic
peptide technology, formerly jointly owned by LSU and
Helix (with the Company as assignee of the Helix
interest) is now definitively clarified. Under the new
Agreement five U.S. patent applications (and their
foreign counterparts), which have been prosecuted by
Helix, URM, and the Company, are now the property of LSU.
Pursuant to the new Agreement, the Company was granted by
LSU a world-wide exclusive license to the technology of
the lytic peptide patent estate with respect to all
potential uses except in the area of plant technology.
Additionally, the Company was granted a conditional
right, without further funding from the Company, to
obtain a license to certain future lytic peptide
technology which LSU may develop.
4
<PAGE>
(d) Stepped up development and prosecution of the patent
estate.
In March 1994 the Company discharged the patent law firm
which had previously handled prosecution of patent
matters relating to the lytic peptide technology. (See
Item 3 herein) The Company retained another large patent
law firm, which it believes is fully qualified to develop
the patent estate. The Company is actively working with
this law firm, as well as with several patent law firms
in foreign countries to achieve the final issuance of
several U.S. and foreign patents during 1997. As soon as
further financing is available, the Company is prepared
to file additional patent applications on its peptides
and drug delivery formulations, based on new proprietary
bioactive compounds, which are outside the scope of the
past and present agreements with LSU.
(e) Strengthen in-house scientific expertise and obtain
enhanced capability to produce the Company's proprietary
peptides and to develop formulated drug delivery vehicles
for same.
In late 1993 the Company entered into negotiations with
Therapeutic Peptides, Inc. ("TPI"), a firm located in New
Orleans, LA. In the Registrant's December 31, 1994 10-
KSB Report (Exhibit 13-f) it was disclosed that the
Company and TPI were considering a plan to merge TPI into
Helix BioMedix, contingent upon the latter's success in
completing its first step private financing initiative to
raise $500,000 as bridge funding. The Company is
currently deliberating with four separate corporate and
institutional groups considering substantial private
investment in the Company. However, during the latter
part of 1995, the Boards of Directors of Helix BioMedix
and TPI concluded that the present interests of both
companies are better served by a contractural strategic
alliance between the parties than by a merger of the
corporations. On November 10, 1995 the Company and TPI
reached agreement on such an alliance and executed a
"Cooperative Endeavor Agreement" which closely links the
parties in a joint initiative to further enhance the
Company's patent estate and to commercialize the
Cytoporin technology.
Dr. Donald R. Owen, Chief Scientist and a director of the
Company, serves as President and Scientific Director of
TPI. Since 1993 TPI has utilized its scientific staff
and well equipped laboratory facilities to synthesize and
further evaluate the Company's lytic peptides. During
1995 and 1996 scientists at TPI developed new "third
generation" derivatives of the Company's Cytoporin
peptides which will further enhance the Company's patent
estate. Several of the new peptides, as well as earlier
patented Cytoporins, all show excellent promise as lead
compounds for pre-clinical and clinical development of
new drugs.
(f) Remove the Company's common stock from its previous
"penny stock" status.
As set forth in Item 4 (Part I) of this Report, on
December 29, 1993 at an Annual Meeting of its
Shareholders the Company effected a 500:1 reverse
split of its outstanding shares of Common Stock. With
only 1,270,620 shares now outstanding, the stock (as set
5
<PAGE>
forth in Item 5-Part II herein) has resumed limited
trading in the low "dollars", rather than "penny", range.
This will facilitate the Company's future efforts to
attract market makers and retail brokers to support
trading of the Company's securities.
(g) Place the Company's financial reporting on a current
basis and resume compliance with the SEC public company
reporting requirements.
During the third quarter of 1994 the Company filed those
Form 10-KSB and 10-QSB reports necessary to bring it
current and in compliance with SEC reporting
requirements.
Audited financial statements were prepared for the fiscal
years ending December 31, 1989, 1990, 1991, 1992, and
1993. These statements were incorporated in a Form 10-
KSB report for the period ending December 31, That report
was filed September 30, 1994 concurrently with the filing
of Form 10-QSB reports for the first and second quarters
of1994. The Company also filed with the SEC its 1994
third quarter 10-and December 31, 1994 10-KSB reports on
a timely basis. All quarterly 10-QSB and 10-KSB reports
for 1995 and 1996 have been filed on a timely basis. The
aforesaid reports are incorporated herein by reference as
Exhibits 13-a through 13-m. With the present filing of
this Form 10-KSB report for the fiscal year ended
December 31, 1995, the Company has been in full
compliance with SEC public company reporting requirements
with timely filing of required reports for the last
thirty (30) months.
(h) Prepare a well documented five year Business Plan
for the Company.
As a major component of its restructuring initiative,
during the last two years the Company developed a five
year Business Plan which is periodically updated to
reflect advances in the state of the Company's technology
platform. The strategic elements of this Plan, which the
Company believes are prudently consistent with the
Company's probable ability to attract capital resources,
will in the near future be reported in summary form to
the Shareholders and to the public investing community.
(i) Resume a program of financial and information
reporting to the Shareholders.
As soon as practicable after filing of this 1996 10-KSB
report the Company plans to resume formal communications
with its Shareholders by means of regular meetings,
newsletters and/or quarterly and annual reports to the
Shareholders.
(j) Obtain adequate outside private capital funding to
place the Company in sound financial condition to execute
its Business Plan.
A primary, and necessary, objective of the Company's
restructuring efforts has been to reach a point where
adequate private capital funding can be attracted to
supplement the earlier, limited public financing and to
move the Company out of its development stage by
commercializing the technology base. The Company
6
<PAGE>
believes such financing will enable it to enter into
strategic alliances and licensing agreements to produce
both capital and revenues and to introduce its first
products to the marketplace within the next two years.
Given the availability of current financial reporting,
recent advances in development of its technology, and the
aforesaid Business Plan, during 1996 the Company made
presentations to potential private capital sources,
including both venture capital groups and
biotech/pharmaceutical companies interested in the
Company's technology. Definitive discussions are now
underway with several such groups. During 1997
implementation of the financing initiatives is first
priority for the Company's management.
(k) Develop a network of retail brokers to re-establish
an active trading market in the Company's securities.
Pursuant to completion of the restructuring initiatives
(i) and (j) described above, Company management will
undertake to interest a group of small-to-medium size
brokerage firms in becoming retail market makers in the
Company's common stock. This will require (1) current
SEC reports, (2) a summary of the Company's current
Business Plan, (3) re-establishment of news flow to
shareholders, and (4) evidence of good financial
viability through successful completion of the Company's
on-going initiative to attract private capital.
During the latter half of 1997 the Company believes it
will develop an active market for its securities. This
will provide liquidity for the present public
shareholders as well as lay the groundwork for future
public financing by the Company.
Investment in Research and Development
The Company's direct investment in research and
development of its "Cytoporin" (i.e., lytic peptide)
technology has aggregated $1,915,872 since Registrant's
inception (November 7, 1988) to December 31, 1996. Of
this sum an amount of $329,053 has been capitalized as
the legal costs incurred in patent prosecution, $200,000
capitalized as a cost paid by promissory note to Helix
International Corporation to acquire the Antimicrobial
Technology at Registrant's inception, and $25,000 paid in
common stock issued (10,000 shares) as partial
consideration for Antimicrobial Technology developed for
the Company by TPI prior to confection of the Cooperative
Endeavor Agreement in November 1995. The balance of
$1,361,819 has been expensed as R & D costs as they were
incurred by the Company. The Company's total investment
in R & D and other operating and interest expenses to
develop its Cytoporin technology has aggregated
$3,110,122 since Registrant's inception through December
31, 1996.
To the best of Registrant's knowledge, prior to November
7, 1988 Helix International had invested approximately
$839,400 in research and development (excluding patent
costs) on the lytic peptide technology. In addition to
the approximately $3,949,522 invested by Registrant and
Helix International Corporation to develop the technology
base, LSU, several other universities, TPI, and several
other companies have expended substantial sums of their
own in exploring potential applications of the Company's
Cytoporin technology.
7
<PAGE>
Potential for Commercialization of the Company's
Technology
The Company's technology is based on the discovery that
its proprietary bioactive Cytoporin compounds (lytic
peptides) have the ability to destroy a broad spectrum of
bacteria, protozoa, fungi, and viruses which cause
pathogenic disease conditions in animals and humans.
Some of the Cytoporins have demonstrated activity as
growth factors to promote wound healing and to cause
proliferation of white blood cells which are subject to
destruction by autoimmune diseases such as AIDS. Certain
Cytoporins, in in-vitro tests, have shown potential
applications as chemotherapeutic agents in cancer
therapy.
With the on-going critical concern in scientific and
medical circles about the exploding emergence of
antibiotic resistant bacteria, the use of Cytoporins as
adjuvants or enhancers to boost the effect of existing
antibiotics against resistant bacterial strains opens an
important new realm of possible pharmaceutical
applications for the Company's Cytoporin compounds.
The cost and time of bringing new drugs to market
essentially mandates that the Company seek strategic
alliances and licensing arrangements with larger, well
financed companies to bring the Cytoporins through
arduous and expensive clinical trials before they find
commercial applications as prescription drugs.
While the Company is pursuing the long term introduction
of high potential prescription drugs through a program of
strategic partnering, it will concentrate in-house
efforts on the near term introduction of proprietary
products in the area of topical antiseptics and
industrial disinfectants.
Impact of Regulatory Factors
The enormous cost and time of bringing prescription drugs
through the FDA regulatory gauntlet of clinical trials
and approvals is a factor that virtually assures the
Company must seek well financed strategic partners for
such initiatives in the pharmaceutical or biotechnology
industries. For this reason the Company is developing,
for near term market introduction, certain non-drug
products subject to less stringent regulatory hurdles
posed by the FDA and/or environmental protection
agencies.
Company's Proprietary Position and Competition
The Company believes it is establishing a strong patent
position (both U.S. and foreign) with respect to the
compositions of matter and use of its Cytoporin peptides.
There is increasing interest in the biopharmaceutical
industry in the potential for lytic peptides as
therapeutic drug agents. To the best of the Company's
knowledge there are at least four other U.S. companies
actively working in the field. They have greater
financial resources available to them. However,
Registrant believes its early dates on patents and patent
applications are a major competitive asset, as is the
proprietary technical and product know-how which it has
gained over a period of eight years. The Company's five
year Business Plan embraces a concept of long term
strategic partnering and introduction of near term
proprietary products to niche markets. Company
management believes the Plan takes full cognizance of the
emerging presence of well financed competitors in the
general field of endeavor.
ITEM 2. PROPERTIES
The Company maintains its offices in office space
provided by the Company's President. The President is
paid $200 per month for rent of this space and is
reimbursed for out-of-pocket expenses for telephone use,
postage, and other general office expenses. These rent
payments for rent and other Company offices expenses are
8
<PAGE>
not made in cash, but are accrued as an account or note
payable to the President (or an affiliated company) until
the Company is in a position to pay these expenses on a
cash basis. The Company offices are located at 2151 East
Lakeshore Dr., Baton Rouge, Louisiana 70818. The
telephone number is (504) 387-1112, and the Fax Number is
(504) 338-9727.
Synthesis and testing of the Company's proprietary
Cytoporin compounds (lytic peptides) are conducted at the
laboratories (approx. 3000 sq. ft. ) of Therapeutic
Peptides, Inc.(TPI) in Harahan, LA. Dr. Donald R. Owen
is President of TPI and is a Vice President and Director
of Helix BioMedix, Inc. The Company utilizes the TPI
laboratories under the terms of the Cooperative Endeavor
Agreement between the Company and TPI. The Company
reimburses TPI in cash for such contract research
conducted for the account of the Company.
ITEM 3. LEGAL PROCEEDINGS
On July 27, 1994 the Company, as a Co-Plaintiff, filed a
suit against Pravel, Hewitt, Kimball & Krieger, P.C., ET
AL, as defendants, in the Civil District Court, Parish of
Orleans, State of Louisiana. Other Co-Plaintiffs with
the Company were Helix BioMedix, Inc. (LA), Helix
International Corporation (a Louisiana corportion), Helix
Phytonetix, Inc. (a Louisiana corporation), and
University Research & Marketing, Inc. (a Louisiana
corporation). This litigation was settled in 1996.
The Defendants in the above proceeding were a patent law
firm (or members of same) which previously represented
and performed professional services for the Plaintiffs.
Plaintiffs alleged that Defendants committed legal
malpractice through their failure to file or timely file
certain patent applications in certain foreign countries,
that said patent applications were with respect to
technology licensed to Plaintiffs by Louisiana State
University, and that Plaintiffs were damaged by present
and future diminution of the value of the patent estates
of Plaintiffs.
The Plaintiffs sought relief through money judgment for
damages. In May 1996 the suit was settled out of court.
The Company received a portion of the net settlement
proceeds paid to the joint Plaintiffs. (See Note 6 to
the Financial Statements herein).
Registrant has no liability in connection with the above
suit which has been settled, and Registrant is not aware
of any threatened legal proceeding to which the
Registrant is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
No matters were submitted to a vote of security holders
during 1996. The most recent Annual Meeting of the
Shareholders of Registrant was held on December 29, 1993.
There was no proxy solicitation for the meeting. Exhibit
No. 22 incorporated by reference in this Report is a copy
of the Notice of the Meeting timely forwarded to the
Shareholders. A quorum was present and voting and there
was a unanimous vote in favor of each matter voted upon
as follows:
Directors elected or re-elected to constitute the Board
of Directors.
Amendments to the Articles of Incorporation to (i) Effect
a 500:1 Reverse Stock Split, and (ii) Reduce the Number
of Authorized Shares, all as set forth in Exhibit No. 22
incorporated by reference in this Report.
9
<PAGE>
Exhibit No. 22 also includes a copy of a Notice to
Shareholders dated March 11, 1994 requesting them to
contact Registrant's Stock Transfer Agent to exchange
their stock certificates pursuant to the shareholder
approved 500:1 reverse stock split.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Principal Market or Markets
The Registrant's Shares of common stock are traded on the
over-the-counter market. Registrant ceased to be
compliant with SEC reporting requirements in 1990, and
there were only limited and sporadic trades of
Registrant's securities, as "penny stock" from 1990 to
1994. After the 500:1 reverse stock split described in
Item 4. of Part I of this Report, Registrant's stock
(formerly symbol HXBI on the pink sheets) was reported in
April, 1994 under the new stock symbol, "HXBM", on the
electronic bulletin board of NASDAQ Market Operations.
Since Registrant continued to be non-compliant with SEC
reporting requirements until September 30, 1994, only
limited trading of Registrant's stock had taken place in
1994. Based on information received from one of two
Market Makers for Registrant's stock, during 1995 and
1996 there has been a continuation of very limited and
sporadic trading of Registrant's stock, with total
transactions aggregating less than 10,000 shares during
1996. In the ninety day period prior to date of this
Report the bid/ask quote has remained at $1.00 per share
bid and $2.50 per share asked. The foregoing prices are
believed to be representative inter-dealer quotations,
without retail markup, markdown or comnmissions, and may
not represent actual transactions.
Registrant believes that a non active market for its
securities will continue to exist until such time as (1)
Registrant promulgates to the public news of the
Company's restructuring program and recent advances in
development of its technology and (2) until the Company,
now fully current in it SEC reporting, obtains a network
of retail brokers to re-establish an active trading
market for the stock, all as discussed in Item 1 of Part
I of this Report. Management believes this will occur
during the latter half of 1997.
(b) Approximate Number of Holders of Common Stock
The number of holders of record of Registrant's no par
value common stock at December 31, 1996 was approximately
600. Registrant estimates and believes there are 200 to
500 additional shareholders holding stock in "street
name" in brokerage accounts.
(c) Dividends
Holders of common stock are entitled to receive such
dividends as may be declared by the Registrant's Board of
Directors. No dividends have been paid with respect to
the common stock since Registrant's inception, and no
dividends are anticipated to be paid in the foreseeable
future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
(a) Plan of Operation
The Company's general plan of operation is outlined in
Item 1 of Part I of this Report. The Company has
maintained operations since 1990 primarily with limited
capital provided by loans from key Shareholders. A major
strategic and financial corporate restructuring
initiative has been undertaken since 1993. The details
of this program are set forth in Item 1 of Part I herein.
The Company believes it is now prepared to implement a
10
<PAGE>
Business Plan providing for both near term and long term
product introductions. At the present time the Company
is actively seeking additional capital through private
sector financing. Such financing will be used to bring
the Company to continuing economic viability from
commercially profitable operations. This plan
contemplates revenues from licensing and strategic
alliances for long term development of prescription
pharmaceutical products as well as introduction within
the near term of products subject to less regulatory
restraints. It is expected by management that
achievement of projected progress milestones will
establish the Company as a financially viable
biotechnology firm with substantial public investor
support.
(b) Management's Discussion and Analysis
During the two fiscal years ending December 31, 1993 and
December 31, 1994, while the Company was instituting the
restructuring program discussed in this report, the cost
of operations was held to a minimum. Continuing through
1995, in the absence of revenues operating losses were
held to approximately $47,000 per quarter, of which
approximately $14,000 per quarter represents interest
accrual rolled into the principal of loans from
shareholders. Administrative costs were controlled at a
low level by the fact that only the Company's President
was a full time employee. During this period the company
substantially enhanced its patent prosecution with an
investment of nearly $11,000 per quarter. In house
research and development has been placed in a holding
pattern, with no funds of the Company expended in this
area. However, evaluation and product development with
the Company's Cytoporin compounds has continued on an
accelerated basis at Therapeutic Peptides, Inc.
During 1996 operations continued to be funded by
additional loans from shareholders in the amount of
approximately $236,000. More significantly, at December
31,1996 the Company's balance sheet was substantially
improved by the conversion of approximately $111,000 in
debt into common stock. This is indicative of the
continuing confidence of management and key shareholders
in the prospects for the Company's future.
Over the past year operating losses increased to an
average of approximately $82,500 per quarter, of which
approximately $16,500 per quarter represents interest
accrual on loans from major shareholders. Conversion
into stock of approximately $111,000 in debt at December
31, 1996, along with further substantial conversion of
debt to key shareholders expected in 1997, should greatly
reduce future interest burden. The main source of
increase in operating expense in 1996 over the prior year
came from stepped up R & D expense.
In 1996 full implementation of the alliance between the
Company and TPI through the Cooperative Endeavor
Agreement confected in November 1995 strengthened the
Company's capability to expand its patent estate and
bring the Cytoporin technology to commercial fruition.
With Research and Development expenditures of $133,500 in
1996 the Company greatly accelerated the development of
its technology platform. During the year the development
and testing of more active and selective peptides
produced data which has been particularly valuable in the
Company's dialogue with potential strategic alliances in
the pharmaceutical and biotechnology fields.
In the second quarter of 1997 the Company expects to
complete its present near term initiative to raise
capital through private financing. In its first phase of
financing, the Company is seeking to raise $500,000 as
bridge capital to fund operations for a period of twelve
to sixteen months at the level projected in the Business
Plan. Management believes it is now critically important
to increase spending in order to (i) step up further
development of the patent estate, (ii) fund the vital
product development work at TPI, (iii) aggressively
proceed with seeking strategic alliances, (iv) maintain
public reporting of company finances and operations, and
to (v) conclude successfully an effort to bring further
equity capital funding to the Company through a major
private placement. Management believes after the bridge
capital funding that an additional $2.0 million added to
11
<PAGE>
the Company's equity capital base will permit the Company
to emerge profitably from its development stage during
the next two to three years. Success in its efforts to
consummate the planned private capital financing steps is
now essential to the Company's completion of the
restructuring program which it has undertaken.
During the last quarter of 1995 operations were
highlighted by two important technical developments.
These were reported in two News Releases which were both
nationally and internationally promulgated through the
media and Business Wire services. Copies of these
releases were included as exhibits in Registrant's 1995
10-KSB Report, which is incorporated by reference herein
as Exhibit 13-j. In 1996 these News Releases have
resulted in inquiries from over 20 international
pharmaceutical and biotechnology companies. The
inquiries about the Cytoporin technology have already
developed for the Company on-going dialogue with several
potential candidates for strategic alliances.
In the third and forth quarters of 1996 the Company
entered into confidential Material Transfer Agreements
with two such pharmaceutical companies for collaborative
test programs on selected Cytoporin lead compounds. As
disclosed in the News Releases, Management believes the
Company's Cytoporin compounds may play a vital role in
addressing the current health care crisis related to
rapid and continuing emergence of antibiotic resistant
bacteria and other pathogens. Also, the announced
issuance of two important European patents, under
exclusive world-wide license to the Company, will
materially strengthen the Company's competitive position
and enhance the Company's posture in its initiatives to
acquire financing and to establish alliances in the
biopharmaceutical industry.
The Company's common stock, which is traded OTC under the
symbol "HXBM" on the NASDAQ bulletin board, continues to
trade only sporadically and in small transactions.
Management believes this will continue to be the case
until the Company completes its first step of bridge
financing and thereby permit expanded operations under a
sound and viable Business Plan. As a step precedent to
resumption of active public trading of the common stock,
in late 1995 the Company made application for and
obtained published coverage of the Company in Standard
and Poor's Corporation Records. This coverage continues
on a current basis.
Pending completion of ongoing financing initiatives,
current operations of the Company continue to be financed
by loans from and/or investments by several key
shareholders.
ITEM 7. FINANCIAL STATEMENTS
Please see Pages F-1 through F-13.
The following Financial Statements are filed as part of
this report:
Page
Report of Independent Certified Public Accountants F-1
Balance sheet as of December 31, 1996 F-2
Statement of Operations for the periods ending
December 31, 1995 and December 31, 1996 and
for the period from inception (November 7, 1988)
to December 31, 1996 F-3
Statement of Stockholders' Equity (Deficit)
for the period from inception (November 7,
1988) to December 31, 1996 F-4 to F-6
12
<PAGE>
Statements of Cash Flows for the period
from inception (November 7, 1988) to
December 31, 1996 F-7 to F-8
Notes to Financial Statements F-9 to F-13
All schedules have been omitted, as the required
information is inapplicable or the information is
presented in the financial statements or the notes
thereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements between the Registrant
and its independent accountants on any matter of
accounting principles or practices or financial statement
disclosure since the Registrant's inception.
13
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE ACT
(a) The Directors and Officers of the Registrant are as
follows:
Name: Keith P. Lanneau
Age: 71
Position: President, CEO, and Director
Tenure as Officer or Director: March 15, 1989
to March 10, 1990 as President, CEO, and Director;
November 13, 1991 to July 10, 1992 as a Director; and
July 10, 1992 to present as President, CEO, and Director.
Name: Thomas L. Frazer
Age: 51
Position: Director
Tenure as Officer or Director: October 27, 1994 to
present as a Director
Name: Robert J. Love, M.D.
Age: 48
Position: Vice President and Director
Tenure as Officer or Director: March 15, 1989 to March
10, 1990 as a Director; September 14, 1991 to July 10,
1992 as a Director; July 10, 1992 to December 31, 1993 as
a Director; and December 31, 1993 to present as Vice
President and a Director.
Name: Michael K. Marcantel
Age: 48
Position: Vice President, Secretary-Treasurer, and
Director
Tenure as Officer or Director: May 5, 1993 to present.
Name: Donald R. Owen, Ph.D.
Age: 52
Position: Vice President , Chief Scientist, and Director
Tenure as Officer or Director: December 29, 1993 to
present.
A brief description of the business experience of each of
the above Directors and Officers of Registrant is set
forth below:
Mr. Lanneau was founder of Helix Biomedix, Inc. (of
Lousiana) in 1988, which company was acquired by
Registrant on March 20, 1989. Registrant, formerly named
Cartel Acquisitions, Inc. (a Colorado corporation) then
changed its name to Helix BioMedix, Inc. (of Colorado).
Mr. Lanneau has served full time as Chief Executive
Officer of Registrant during the periods of tenure shown
above. He holds a B.S. degree in Physics from the
Massachusetts Institute of Technology and an M.B.A.
degree from Harvard. He is the author of numerous
patents and publications and was a scientist and research
director with Exxon Research and Engineering for eleven
years from 1949 to 1960. For some of his notable
scientific work with Exxon he was awarded the Senior
Moulton Medal of the British Institution of Chemical
Engineers in 1959.
14
<PAGE>
Prior to his association with Registrant Mr. Lanneau,
after 1960 had extensive experience as a scientist-
businessman, having been the founder, Chief Executive
Officer, Director, and/or Principal Scientist of several
high technology companies. He was a founding director of
Louisiana's Gulf South Research Institute, a non-profit
multi-disciplinary contract research organization. He
was a member of its Board of Directors and Executive
Committee from 1965 to 1985 and served a two year term as
Chairman of the Board. Mr. Lanneau was a founding member
of the Louisiana Partnership for Technology and
Innovation in 1988. Throughout his business and
professional career, he has actively served on the boards
of various local and statewide civic organizations within
Louisiana.
In addition to his present duties as President/CEO and
Director of the Company Mr. Lanneau is an active
scientific collaborator with Dr. Donald R. Owen, and he
assumes primary responsibility for technical interfacing
with patent attorneys and those outside companies with
whom the Registrant seeks collaborations and strategic
alliances.
Mr. Frazer, a practicing CPA, is a prominent business
executive in Baton Rouge, LA. He was a founding director
of a commercial bank and has served on the board of
directors of a number of business corporations. He was
chairman of the board of a $50,000,000 computer software
company. He is a professional consultant and expert in
company acquisitions, restructuring programs, and
financial reorganizations. As such, Mr. Frazer's recent
addition to the Company's board of directors constitutes
an important milestone in the Company's initiative to
strengthen its management organization.
Dr. Love is a Canadian citizen and resident of Vancouver,
British Colombia. He holds a B.S. degree in biology and
received his Doctorate in Medicine from the University of
Alberta. From 1986 to 1988 he served as President and
Director of Esstra Industries Corporation, a Canadian
public company with interests in several high technology
ventures. During his association with Helix BioMedix,
Inc. he has been active in developing interest in the
company's technology at medical research clinics in
Canada. In his medical practice in Vancouver he
specializes in environmental medicine and immunology. He
is a member of the American Academy of Environmental
Medicine.
Mr. Marcantel is a Vice President of the Louisiana
Partnership for Technology and Innovation ("LAPTI") and
has held that position since 1988. Prior to joining
LAPTI he held various management positions from 1977 to
1988 with Gulf South Research Institute where he was
responsible for contract administration and intellectual
property (patents) management. He holds a B.S. degree in
Business Administration from Louisiana State University.
LAPTI, a private, non-profit successor to Gulf South
Research Institute supported by both State and private
funding, assists in the formation and/or development of
new technology based industries within the State of
Louisiana. LAPTI makes small seed capital investments in
and/or contributes expertise in strategic and financial
planning and management assistance to its "portfolio"
companies. As an officer and senior staff member of
LAPTI, Mr. Marcantel presently serves on the Board of
Directors of several high technology companies based in
Louisiana. In behalf of LAPTI, which holds a minority
equity interest (approx. 1%) in Registrant, he spends
approximately 20% of his time on his activities as an
Officer and Director of Helix BioMedix, Inc. Mr.
Marcantel is a member of the Technology Transfer Society,
Licensing Executives Society, and the National Contract
Management Association.
15
<PAGE>
Dr. Owen holds a B.S. degree in Pre-Medicine and M.S.
degree in Chemistry. He obtained his Ph.D. in Chemistry
from the University of Houston. He has served on the
faculties and staff of the University of Southern
Mississippi, the University of Utah, and Tulane
University. Dr. Owen has numerous publications and
extensive academic and industry research experience in
several fields including polymer chemistry, biomaterials
science, biomedical engineering, cosmetic and
pharmaceutical formularies, and computer-aided rational
design of bioactive peptides and proteins.
After serving six years as a Senior Scientist with Gulf
South Research Institute, in 1987 Dr. Owen founded
Biosouth Research Laboratories, Inc. ("BRL") in New
Orleans as a private, contract research laboratory
specializing in development of pharmaceutical and
cosmetic formularies. He is also founder and President
of Biosyn, Inc., a manufacturer of specialty products for
the cosmetic and pharmaceutical industries. He is
President of Vital Assist, Inc., another high technology
company doing pioneering research on development of
medical device organ perfusion systems for use in organ
transplant centers and in the transport and preservation
of donated human organs. Both of these latter two
companies are "spin-outs" from technologies developed by
Dr. Owen in his research company, BRL. In 1992 a third
"spin-out" (Therapeutic Peptides, Inc. ("TPI") was formed
by BRL and Dr. Owen to focus on research in peptide
chemistry and to collaborate with Helix BioMedix, Inc. in
the synthesis and testing of the proprietary Cytoporin
(lytic peptide) compounds of BioMedix.
At the present time Registrant and TPI are working
jointly to commercialize the Cytoporins under the terms
of the Cooperative Endeavor Agreement adopted by them in
November 1995. Dr. Owen is President and Scientific
Director of TPI. In December 1993 he joined Helix
BioMedix, Inc. as a Director and Vice President and Chief
Scientist. Dr. Owen is presently an Adjunct Professor of
Materials Science and Bioengineering at the University of
New Orleans. He is a member of the American Chemical
Society, Society of Biomaterials, and the International
Society of Artificial Organs. In 1993 he received
recognition from the Louisiana Partnership for Technology
and Innovation as the State's top "Innovator of the
Year".
All Directors of the Registrant will hold office until
the next annual meeting of the shareholders and hold
office until their successors have been elected and
qualified.
The Officers of the Registrant are elected by the Board
of Directors at the first meeting after each annual
meeting of the Registrant's shareholders and hold office
until their death or until they shall resign or have been
removed from office.
The date of the next annual meeting of the Registrant
will be determined by the Registrant's Board of Directors
in accordance with Colorado law.
(b) Compliance With Section 16(a) of The Exchange Act
No persons or entities holding Registrant's securities or
serving as Officers or Directors of Registrant are
subject to the reporting requirements of Section 16(a) of
The Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION
Since 1991 the only officer who has received compensation
for his services is the President and CEO, Keith P.
Lanneau. From December 1, 1991 to December 31, 1994 he
16
<PAGE>
was compensated by an accrual of $5,000 per month. In
lieu of cash payment for services, which has not been
feasible for the Company, Mr. Lanneau accepted
convertible promissory notes of the Company, payble on
demand, with 8% interest compounded quarterly. Said
notes, in the aggregate amount of $192,943, were
converted on April 1, 1995 into 80,000 shares of common
stock of the Company at a price of $2.42 per share.
Commencing January 1, 1995 to the present Helix
International Corporation and Arrowhead Technology
Associates, Inc., both affiliates of Registrant, have
provided full time management consulting services to the
Company for a fee of $5000 per month through June 30,
1995 and for $6000 per month thereafter. These fees
include Mr. Lanneau's services as President and CEO of
the Company.
Since inception of the Company no persons have received
any monetary compensation for their services as Members
of the Board of Directors. On November 28, 1995, in
consideration of their past services as Directors of the
Company the following persons were granted stock options
to purchase common stock at a price of $1.00 per share,
the number of shares being shown beside each name:
Director Number of Shares
Thomas L. Frazer 5,000
Dr. Robert J. Love 5,000
Michael K. Marcantel 10,000
Dr. Donald R. Owen 10,000
Keith P. Lanneau 15,000
The above cited options are all exercisable upon issuance
and expire at various dates through 1998.
SUMMARY ANNUAL COMPENSATION TABLE
Name and Year Salary Bonus Other Compensation
Position
__________ ____ ______ _____ ________________
Keith P.
Lanneau 1991 $ 5,000 None None
Director 12/91
to 6/92,
President
and CEO and 1992 $60,000 None None
Director from
7/92 to
Present 1993 $60,000 None None
1994 $60,000 None None
1995 - None Options
1996 - None None
17
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
(a) Present Ownership
The following table sets forth, as of the date of this
Report, the stock ownership of each person known by the
Registrant to be the beneficial and/or record owner of
five percent or more of the Registrant's Common Stock,
each Officer and Director individually and all Officers
and Directors of the Registrant as a group:
NAME AND ADDRESS NUMBER OF SHARES PERCENT
- ---------------- ---------------- -------
Helix International
Corporation 540,000 (1) 42.4%
2151 East Lakeshore Drive
Baton Rouge, LA 70808
Joy G. Lanneau 91,000 (2) 7.1%
2151 East Lakeshore Drive
Baton Rouge, LA 70808
Keith P. Lanneau 631,000 (3) 49.6%
2151 East Lakeshore Drive
Baton Rouge, LA 70808
Thomas L. Frazer 131,776 (4) 10.3%
7520 Perkins Rd. Suite 280
Baton Rouge, LA 70808
Robert J. Love -0- (5) 0.0%
3483 W. 18th Ave.
Vancouver, B.C.
Canada V6S 1A8
Michael K. Marcantel -0- (6) 0.0%
8748 Quarters Lake Road
Baton Rouge, LA 70809
Donald R. Owen 10,000 (7) 0.7%
5701 Crawford St., Suite 1
Harahan, LA 70123
------- ------
All Officers and
Directors 772,776 60.8%
As a Group (5 persons)
------- ------
University Research & 72,075 5.6%
Marketing, Inc.
LSU Business & Tech Center
South Stadium Drive
Baton Rouge, LA 70803 ========= ======
TOTAL SHARES OUTSTANDING 1,270,620 100.0%
========= ======
18
<PAGE>
(b) Ownership Assuming Conversion of All Promissory
Notes and Exercise of Options
NAME AND ADDRESS NUMBER OF SHARES PERCENT
- ---------------- ---------------- -------
Helix International
Corporation 820,907 (1) 45.9%
Joy G. Lanneau 279,993 (2) 15.6%
Keith P. Lanneau 1,115,900 (3) 62.4%
Thomas L. Frazer 136,776 (4) 7.6%
Robert J. Love 5,000 (5) 0.2%
Michael K. Marcantel 10,000 (6) 0.5%
Donald R. Owen 20,000 (7) 1.1%
--------- -----
All Officers and Directors 1,287,676 72.1%
As a Group (5 persons)
========= ======
TOTAL SHARES OUTSTANDING 1,785,520 100.0%
========= ======
(c) Notes to Tables (a) and (b) Above
(1) The controlling shareholder, Helix International
Corporation, held, as of December 31, 1996, a promissory
note of Registrant convertible into 280,907 shares of
Registrant's common stock.
(2) Mrs. Lanneau is beneficial owner of 91,000 shares of
stock and of notes convertible into 188,993 shares of
stock, either held personally or beneficially as sole
shareholder of Arrowhead Technology Associates, Inc..
(3) Mr. Lanneau is beneficial owner as Chief Executive
Officer of Helix International Corporation, and as spouse
of Mrs. Lanneau, of 631,000 shares of stock. As a
Director he also holds an option to purchase 15,000
shares. He is beneficial owner of the stock conversion
rights held by Helix International and by Mrs. Lanneau.
(4) Mr. Frazer is the holder of record of 131,776 shares
of stock and an option, as a Director, to purchase an
additional 5,000 shares.
(5) Dr. Love holds, as a Director, an option to acquire
5,000 shares of stock.
(6) Mr. Marcantel holds, as a Director, an option to
purchase from the Company 10,000 shares of stock.
(7) As controlling shareholder of TPI, Dr. Owen is the
beneficial owner of 10,000 shares of the Company's stock.
He also owns, as a Director, an option to purchase an
additional 10,000 shares.
19
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) With Helix International Corporation
From March 1989 to March 1990, the Company contracted
with Helix International Corporation ("Helix"), a
principal shareholder, to conduct research on lytic
peptides and the Company's proprietary Cytoporin
compounds on a contract basis for the account of the
Company. The Company incurred a total of $655,321 in
such research costs paid or payable to Helix during this
period. These costs included payments by Helix to
Louisiana State University ("LSU") for contract research
support and to patent attorneys for development of a
patent position on the Company's proprietary technology.
At December 31, 1996, the Company's promissory note for
$690,944 was outstanding to Helix to recognize the
balance due to Helix on unpaid research costs, accrued
interest, consulting fees, and patent pass through costs.
In addition, $50,000 in debt payable to Helix had been
converted in September 1993 into common stock equity of
the Company on the basis of $2.50 per share.
Commencing January 1, 1995 the Company began to accrue
for Helix International a management consulting fee of
$5000 per month, which fee was increased to $6000 per
month effective July 1, 1995. This fee arrangement
includes the services of Mr. Lanneau as President and CEO
of the Company, and Mr. Lanneau has not otherwise been
compensated by the Company since 1994 for his services as
an officer. This consulting fee arrangement with Helix
International was terminated June 30, 1996 and was
transferred to Arrowhead Technology Associates, Inc.
(b) With Arrowhead Technology Associates, Inc.
Arrowhead Technology Associates, Inc. is a business
consulting company affiliated with Mr. Lanneau. On July
1, 1996 the Company began to accrue for Arrowhead a
consulting fee of $6000 per month, which fee continues to
the present and includes the services of Mr. Lanneau as
President and CEO of the Company. Mr. Lanneau receives
no other compensation for his services as an officer of
Registrant. Office rent and general office expenses of
the Company are paid by Arrowhead and the Company either
reimburses Arrowhead or accrues these expenses to the
Company's promissory note payable to Arrowhead. This is
more fully discussed in Item 12. (d) below.
(c) With University Research & Marketing, Inc.
In March 1990, when Helix became unable to continue
funding of the Company's research and other business
activities, the Company entered into an agreement with
another shareholder, University Research & Marketing,
Inc. (URM), as part of a restructuring of debt, to
continue the Company's research and development for a
flat fee of $20,000 per month plus patent and other out
of pocket costs. Under this agreement, which terminated
the Company's earlier agreement with Helix, URM provided
administrative services and sponsored research on behalf
of the Company totalling $360,000 for the period from
March 1990 until August 1991. The $360,000 in debt
incurred under this agreement was converted into common
stock equity of the Company by the shareholder in
September, 1993. The conversion was on the basis of
$2.50 per share of stock. At March 31, 1995, the Company
remained obligated to URM for out of pocket costs, patent
costs, and interest in the form of a promissory note in
the amount of $104,331. On April 1, 1995 this note was
also converted into common stock at $2.50 per share.
As part of the LSU Settlement Agreement (described in
Note 1 to the Financial Statements, page F-10), the
Company entered into a sublicense agreement with URM, a
shareholder, for the development and marketing of a
portion of the Company's proprietary technology,
specifically the use of the technology in food
preservation and purification of drinking water.
20
<PAGE>
(d) With Keith P. Lanneau
The Company maintains it corporate offices in the offices
of its President, Keith P. Lanneau. From Inception to
December 31, 1996, the Company has incurred $128,255 in
rental and general office expense reimbursements which
have been paid or are payable to Arrowhead Technology
Associates, Inc., another company affiliated with Mr.
Lanneau. In September, 1993 $50,000 of the debt incurred
with the affiliated company was converted into common
stock equity of the Company. The conversion was on the
basis of $2.50 per share of stock. At December 31, 1996,
the balance of the unpaid debt to the affiliated company,
Arrowhead Technology Associates, Inc., was evidenced by
the Company's promissory note in the amount of $87,871.
This balance includes unpaid accruals for rent, general
office expenses, the consulting fee described in Item 12.
(b) above, and accrued interest.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description and Location
- ----------- ------------------------
3-a Articles of Incorporation and ByLaws
Incorporated by reference to Exhibit No.
3 to the Registrant's Registration
Statement (No.33-20897-D) dated July
1, 1988.
3-b Amendments to Articles of Incorporation
Incorporated by reference to Form 10-KSB
for 1993 filed by Registrant with the SEC
(File No. 33-20897-D) on September 30,
1994.
3-c Amendments to By Laws
Incorporated by reference to Form 10-KSB
for 1993 filed by Registrant with
the SEC (File No. 33-20897-D) on
September 30, 1994.
13-a Registrant's Form 10-Q For the Quarter
Ended September 30, 1989
Incorporated by reference to Form 10-Q
filed by Registrant with the SEC
(File No. 33-20897-D) on November l5,
1989.
13-b Registrant's Form 10-KSB for the Five
Years Ended December 31, 1993
Incorporated by reference to Form 10-KSB
for 1993 filed by Registrant with
the SEC (File No. 33-20897-D) on
September 30, 1994.
13-c Registrant's Form 10-QSB For the Quarter
Ended March 31, 1994 Incorporated by
reference to Form 10-QSB (First Quarter,
1994) filed by Registrant with the SEC
(File No. 33-20897-D) on September 30,
1994.
13-d Registrant's Form 10-QSB For the Quarter
Ended June 30, 1994 Incorporated by
reference to Form 10-QSB (Second Quarter,
1994) filed by Registrant with the SEC
(File No. 33-20897-D) on September 30,
1994.
13-e Registrant's Form 10-QSB For the Quarter
Ended September 30, 1994 Incorporated by
reference to Form 10-QSB (Third Quarter,
1994) filed by Registrant with the SEC
(File No. 33-20897-D) on November 12,
1994.
21
<PAGE>
13-f Registrant's Form 10-KSB for the Year
Ended December 31, 1994 Incorporated by
reference to Form 10-KSB for 1994 filed
by Registrant with the SEC (File No. 33-
20897-D) on April 12, 1995.
13-g Registrant's Form 10-QSB for the Quarter
Ended March 31, 1995 Incorporated by
reference to Form 10-QSB (First Quarter,
1995) filed by Registrant with the SEC
(File No. 33-20897-D) on May 12, 1995.
13-h Registrant's Form 10-QSB for the Quarter
Ended June 30, 1995 Incorporated by
reference to Form 10-QSB (Second Quarter,
1995) filed by Registrant with the SEC
(File No. 33-20897-D) on August 12, 1995.
13-I Registrant's Form 10-QSB for the Quarter
Ended September 30, 1995 Incorporated by
reference to Form 10-QSB (Third Quarter,
1995) filed by Registrant with the SEC
(File No. 33-20897-D) on November 13,
1995.
13-j Registrant's Form 10-KSB for the Year
Ended December 31, 1995 Incorporated by
Reference to Form 10-KSB for 1995 filed
by Registrant with the SEC (File No. 33-
20897-D) on April 12, 1996.
13-k Registrant's Form 10-QSB for the Quarter
Ended March 31, 1996 Incorporated by
reference to Form 10-QSB (First Quarter,
1996) filed by Registrant with the SEC
(File No. 33-20897-D) on May 16, 1996.
13-l Registrant's Form 10-QSB for the Quarter
Ended June 30, 1996 Incorporated by
reference to Form 10-QSB (Second Quarter,
1996) filed by Registrant with the SEC
(File No. 33-20897-D) on August 12, 1996.
13-m Registrant's Form 10-QSB for the Quarter
Ended September 30, 1996 Incorporated by
reference to Form 10-QSB (Third Quarter,
1996)filed by Registrant with the SEC
(File No. 33-20897-D) on November 8,
1996.
22 Notice of 1993 Annual Shareholders'
Meeting and Request to Exchange Stock
Certificates Pursuant to 500:1 Reverse
Stock Split Incorporated by reference to
Form 10-KSB for 1993 filed by Registrant
with the SEC (File No. 33-20897-D) on
September 30, 1994.
(b) Reports on Form 8-K
No reports on Form 8k were filed during any quarter of
the fiscal year ending December 31, 1996.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has
duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Registrant: HELIX BIOMEDIX, INC.
By:/s/ Keith P. Lanneau
____________________________ Date: April 9, 1997
Keith P. Lanneau, President
Pursuant to the requirements of the Securities Exchange
Act of 1934, this Report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
By:/s/ Keith P. Lanneau
______________________________ Date: April 9, 1997
Keith P. Lanneau, President, Principal
Financial Officer, and Director
By:/s/ Michael K. Marcantel
______________________________ Date: April 9, 1997
Michael K. Marcantel, Vice President,
Secretary-Treasurer, and Director
By:/s/ Donald R. Owen
______________________________ Date: April 9, 1997
Donald R. Owen, Vice President, Chief
Scientist, and Director
<PAGE>
HELIX BIOMEDIX, INC.
Financial Statements
December 31, 1995
<PAGE>
CONTENTS
Page
REPORT OF CERTIFIED PUBLIC ACCOUNTANT F-1
BALANCE SHEET F-2
STATEMENTS OF OPERATIONS F-3
STATEMENT OF STOCKHOLDERS' DEFICIT F-4 to F-6
STATEMENTS OF CASH FLOWS F-7 to F-8
NOTES TO FINANCIAL STATEMENTS F-9 to F-13
<PAGE>
REPORT OF CERTIFIED PUBLIC ACCOUNTANT
The Board of Directors
Helix Biomedix, Inc.
Baton Rouge, Louisiana
We have audited the accompanying balance sheet of Helix
Biomedix, Inc. as of December 31, 1996, and the related
statements of operations, cash flows, and changes in
stockholders' deficit for each of the two years then
ended and for the period from inception (November 7,
1988) to December 31, 1996. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance that the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of Helix Biomedix, Inc. as of December
31, 1996, and the results of its operations, cash flows,
and changes in its stockholders' deficit for each of the
two years ended December 31, 1996, and for the period
from inception (November 7, 1988) to December 31, 1996 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared
assuming the Company will continue as a going concern.
The company, which is in the development stage, has
incurred substantial losses since its inception, and has
minimal current assets with which to repay obligations as
they come due. Management plans to raise money in equity
markets to finance further patent prosecution and ongoing
research and development activities. However, there is
no assurance that management will be successful in
obtaining additional financing. These conditions give
rise to substantial doubt about the Company's ability to
continue as a going concern. These financial statements
do not include any adjustments which may be necessary if
the Company is unable to continue in existence.
Aurora, Colorado
April 2, 1997
COMISKEY & COMPANY
PROFESSIONAL CORPORATION
F-1
<PAGE>
HELIX BIOMEDIX INC.
BALANCE SHEET
DECEMBER 31, 1996
CURRENT ASSETS
Cash $ 1,369
Note Receivable - TPI 25,000
---------
Total current assets 26,369
OTHER ASSETS
Antimicrobial technology (net) 143,748
Patents pending and approved (net) 318,785
Due from affiliated company 1,839
---------
Total other assets 464,372
---------
Total assets $ 490,741
=========
CURRENT LIABILITIES
Accounts payable - trade $ 6,794
Notes payable 40,000
Notes payable on demand - related parties 193,522
Accrued interest payable 8,497
---------
Total current liabilities 248,813
LONG TERM LIABILITIES
Notes payable to shareholders 690,944
---------
690,944
Total liabilities 939,757
STOCKHOLDERS' DEFICIT
Common stock, no par value, 2,000,000
shares authorized, 1,270,620
shares issued and outstanding 2,001,580
Preferred stock, no par value, 400,000
shares authorized, no shares issued or
outstanding -
Additional paid in capital 137,400
Deficit accumulated during the
development stage (2,587,996)
---------
Total stockholders' deficit (449,016)
---------
Total liabilities and stockholders'
deficit $ 490,741
=========
The accompanying notes are an integral part of the
financial statements
F-2
<PAGE>
HELIX BIOMEDIX INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988)
TO DECEMBER 31, 1996
<TABLE>
<S> <C> <C> <C>
INCEPTION
TO DEC. 31, DECEMBER 31,
1996 1996 1995
----------- ------- --------
REVENUE $ 10,838 $ 7,838 $ -
OPERATING EXPENSES
Research & Development 1,361,819 133,500 -
Amortization 92,172 17,492 13,828
Accounting & Legal 104,096 4,284 22,552
Advertising 13,488 - 736
Compensation costs 137,400 - 137,400
Consulting fees 449,708 85,437 66,000
Office expense 128,255 26,414 26,263
Other general & administrative costs 10,447 685 1,182
----------- --------- --------
TOTAL OPERATING EXPENSES 2,297,385 267,812 267,961
----------- --------- --------
NET LOSS FROM OPERATIONS (2,286,547) (259,974) (267,961)
OTHER (INCOME) EXPENSE
Gain on settlement of lawsuit (48,574) (48,574) -
Interest expense 350,023 70,152 55,547
----------- --------- --------
301,449 21,578 55,547
----------- --------- --------
NET LOSS (2,587,996) (281,552) (323,508)
=========== ========= =======
NET LOSS PER SHARE $ (2.90) $ (0.24) $ (0.32)
=========== ========= =======
WEIGHTED AVERAGE SHARES OUTSTANDING 893,508 1,159,644 1,000,698
=========== ========= ========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
F-3
<PAGE>
HELIX BIOMEDIX INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO
DECEMBER 31, 1996
<TABLE>
<S> <C> <C> <C> <C> <C>
ADDITIONAL
COMMON STOCK PAID IN ACCUMULATED STOCKHOLDERS'
# SHARES AMOUNT CAPITAL DEFICIT DEFICIT
--------- --------- ---------- ----------- -------------
Initial capitalization 1,000,000 $ 66,486 $ 66,486
November 7, 1988
Restated for recapitalization
of the private company (370,000) -
Net loss for the period
ended Dec 31, 1988 (217,271) (217,271)
--------- ------- ---------- ----------- -------------
Balance,
December 31, 1988 630,000 66,486 (217,271) (150,785)
Reverse acquisition of
Helix BioMedix, Inc. by
Cartel Acquisitions, Inc.
March 20, 1989 151,262 855,292 855,292
Net loss for the year
ended Dec 31, 1989 (705,641) (705,641)
--------- ------- ---------- ----------- -------------
Balance,
December 31, 1989 781,262 921,778 (922,912) (1,134)
Net loss for the year
ended Dec 31, 1990 (267,541) (267,541)
--------- ------- ---------- ----------- -------------
Balance
December 31, 1990 781,262 921,778 (1,190,453) (268,675)
Net loss for the year
ended Dec 31, 1991 (206,878) (206,878)
--------- ------- ---------- ----------- -------------
Balance
December 31, 1991 781,262 921,778 (1,397,331) (475,553)
Issuance of stock for
services rendered,
Dec. 1992, $2.50/share 5,600 14,000 14,000
Net loss for the year
ended Dec 31, 1992 (191,053) (191,053)
--------- ------- ---------- ----------- -------------
Balance
December 31, 1992 786,862 935,778 (1,588,384) (652,606)
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
HELIX BIOMEDIX INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 1995
continued
ADDITIONAL
COMMON STOCK PAID IN ACCUMULATED STOCKHOLDERS'
# SHARES AMOUNT CAPITAL DEFICIT DEFICIT
--------- --------- ---------- ----------- -------------
Issuance of stock for
services rendered,
May, 1993 $5.00/share 8,000 40,000 40,000
Issuance of stock in
partial settlement of
account payable,
May, 1993, $5.00/share 4,000 20,000 20,000
Issuance of stock for
debt conversion, September
1993, $2.50 per share 184,000 460,000 460,000
Issuance of stock for
current and prior services
rendered, December 1993,
$2.50 per share 9,490 23,724 23,724
Fractional shares issued
in connection with 1 for
500 reverse stock split 29 -
Net loss for the year
ended Dec 31, 1993 (222,049) (222,049)
--------- --------- ---------- ----------- -------------
Balance
December 31, 1993 992,381 1,479,502 (1,810,433) (330,931)
Issuance of stock
for cash, March and
December 1994,
$2.50 per share 16,000 40,000 40,000
Net loss for the year
ended Dec 31, 1994 (172,503) (172,503)
--------- --------- ---------- ----------- -------------
Balance,
December 31, 1994 1,008,381 1,519,502 (1,982,936) (463,434)
Issuance of stock
for debt conversion,
April 1995, $2.50/share 41,732 104,331 104,331
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
HELIX BIOMEDIX INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 1995
continued
ADDITIONAL
COMMON STOCK PAID IN ACCUMULATED STOCKHOLDERS'
# SHARES AMOUNT CAPITAL DEFICIT DEFICIT
--------- --------- ---------- ----------- -------------
Issuance of stock for
debt conversion,
April 1995, $2.41/share 80,000 192,943 192,943
Issuance of stock for
cash, April 19, 1995,
$2.50 per share 4,800 12,000 12,000
Issuance of stock for
debt conversion,
September 1995,
$2.50 per share 14,731 36,828 36,828
Issuance of stock
consideration in
cooperative endeavor
agreement Nov. 10, 1995 10,000 25,000 25,000
Issuance of stock options 137,400 137,400
Net loss for the year
ended Dec 31, 1995 (323,508) (323,508)
--------- --------- ---------- ----------- -------------
Balance
December 31, 1995 1,159,644 1,890,604 137,400 (2,306,444) (278,440)
Issuance of stock
for conversion of debt
and accounts payable
for consulting fees,
December 1996.
$1.00 per share 110,976 110,976 110,976
Net loss for the year
ended Dec 31, 1996 (281,552) (281,552)
--------- --------- ---------- ----------- -------------
Balance
December 31, 1996 1,270,620 2,001,580 137,400 (2,587,996) (449,016)
========= ========= ========== =========== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
HELIX BIOMEDIX, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 1996
<TABLE>
<S> <C> <C> <C>
INCEPTION
TO DEC. 31, DECEMBER 31,
1996 1996 1995
----------- ---------- ----------
CASH FLOWS FROM OPERATIONS
Net Loss $ (2,587,996) $ (281,552) $ (323,508)
Adjustments to reconcile net loss
with net cash flows from operations
Stock for services 135,161 37,437 -
Accrued interest receivable (1,839) (1,839) -
Amortization 92,353 17,492 13,828
Compensation Cost 137,400 - 137,400
Consultation Fees 151,437 85,437 66,000
Research & Development 24,000 24,000 -
Increase(decrease) in accounts
payable 6,794 (31,581) (18,451)
Increase (decrease) in accounts
payable - related party 1,034,880 - 70,569
Increase (decrease) in accrued
interest payable 8,497 3,582 (856)
----------- ---------- ----------
NET CASH USED IN OPERATIONS (999,313) (147,024) (55,018)
CASH FLOWS FROM INVESTING ACTIVITIES
Patents (191,695) (13,689) -
----------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (191,695) (13,689) -
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received in Cartel
reverse acquisition 634,497 - -
Due from Affiliate - 30,124 -
Notes Receivable (25,000) - (25,000)
Notes payable 47,394 (4,131) 35,742
Related party notes payable (net) 409,947 59,323 20,500
Issuance of stock for cash 52,000 - 12,000
Issuance of stock for debt 73,539 73,539 -
----------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,192,377 158,855 43,242
----------- ---------- ----------
NET INCREASE (DECREASE) IN CASH 1,369 (1,858) (11,776)
CASH, BEGINNING, OF PERIOD - 3,227 15,003
----------- ---------- ----------
CASH, END OF PERIOD $ 1,369 $ 1,369 $ 3,227
=========== ========== ==========
The accompanying notes are an integral part of the financial statements
F-7
<PAGE>
HELIX BIOMEDIX, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 199
continued
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
AND OTHER CASH INFORMATION
INCEPTION
TO DEC. 31, DECEMBER 31,
1996 1996 1995
----------- ---------- ---------
Stock issued to acquire patents $ 66,486 $ - $ -
Debt issued to acquire technology 200,000 - -
Bridge loans outstanding at acquisition 200,000 - -
Patent costs included in accts payable 74,120 1,784 25,874
Accounts payable converted to notes 687,264 37,437 -
Accrued interest rolled into note 271,169 69,501 56,410
Notes converted to equity 867,023 72,921 334,102
Cash paid for interest and taxes 651 651 -
</TABLE>
The accompanying notes are an integral part of the financial statements
F-8
<PAGE>
Helix BioMedix, Inc.
Notes to Financial Statements
For the period from inception (November 7, 1998) to December 31, 1996
1.Summary of Significant Accounting Policies
Description of entity
Helix BioMedix, Inc., formerly Cartel Acquisitions, Inc. ("the Company") was
formed laws of the state of Colorado on February 2, 1988 to create a corporate
vehicle acquire a business opportunity. On March 20, 1989, the Company
acquired 100% of outstanding shares of Helix BioMedix, Inc., a Louisiana
corporation, ("BioMedix Louisiana") in exchange for 630,000 shares of the
Company's common stock. The C acquired its shares from Helix International
Corporation. BioMedix of Louisiana incorporated on November 7, 1988 as a
separate corporate entity from Helix Inter Inc., to develop therapeutic
biopharmaceuticals for animal and human health care accompanying financial
statements present the financial position and results of BioMedix of Louisiana
since inception.
Unless otherwise noted, all references herein to ("the Company") refer to Helix
Inc., the Colorado corporation, and its wholly owned subsidiary, Helix BioMedix,
Louisiana.
Development stage activities
The Company has been involved in the business of conducting research both intern
in conjunction with a research and development arrangement with a Louisiana
State University (LSU), in the field of biotechnology. The Company applies
genetic engineering techniques to the development of potential commercial
products primarily in the human therapeutics and agribusiness.
In conjunction with the incorporation of BioMedix of Louisiana, Helix
transferred an Assignment of Interest in Technology, all of Helix's right, title
and interest technology and potential patent rights relating to the use of lytic
peptides in human health care. Furthermore, Helix granted to BioMedix of
Louisiana all of Helix's rights and obligations associated with the Helix/LSU
Antimicrobial Project relating to peptides in animal and human health care. In
exchange for the transfer of technology, BioMedix of Louisiana issued 100% of
its stock to Helix and signed a $200,000 promissory note to Helix.
Concurrently with the aforementioned events, the Company entered into an
agreement Helix International with provided that the scientific employees of
Helix continue lytic peptide research on a contract basis for the account of the
Company. Under of the Agreement, Helix provided research associates,
laboratory and office facilities and all administrative services to the Company
on a cost plus 15% basis until an aggregate of $500,000 in expenditures had been
reached. This arrangement continued through February 1990.
In March 1990, the Company' in-house research and development activities were
curtailed pending additional financing. Concurrently, the Company underwent a
de-facto change in control wherein Helix International sold the majority of its
controlling stock interest in the Company to University Research Marketing, Inc.
("URM"). Concurrently with this action, the Company entered into an agreement
with URM to provide administrative services and to continue its research and
development for a flat fee of $20,000 per month plus patent and other out of
pocket costs. URM performed such services and funded research at LSU on behalf
of the Company from March 1990 until August 1991.
F-9
<PAGE>
Helix BioMedix, Inc.
Notes to Financial Statements
For the period from inception (November 7, 1998) to December 31, 1996
continued
In July 1992, de-facto control of the Company was returned to Helix
International, and the Company, with the assistance of both URM and Helix
International, began a series of negotiations with LSU which culminated in the
February 1993 Agreement of Settlement Compromise and Release. This settlement
agreement essentially released LSU, the Company, Helix International, URM, and
Helix Phytonetix, a related company, from defaults under their original
respective agreements. The settlement renewed the Company's exclusive license
in five lytic peptide patents currently under development. Excluding research
and development costs expensed to operations as incurred, the Company's
investment in these patents was $318,785, net of amortization, at December 31,
1996 as part of the settlement, the Company executed a sublicense agreement with
URM for the development and marketing of a portion of the patented technology.
In 1993, the Company entered into an agreement with the Louisiana Partnership
for Technology and Innovation to obtain assistance in the implementation of a
financial and managerial restructuring plan for the Company, and in the
development and implementation of licensing programs for the technology. In
consideration for these services, the Company issued 8,000 shares of its common
stock to the Partnership in May 1993.
In late 1993, the Company entered into negotiations with Therapeutic Peptides,
Inc. (TPI), the objective of which is to bring about a merger of TPI into Helix
BioMedix, Inc., contingent upon the successful completion of the Company's
financing plan. Since 1993 and through the present, TPI has continued to
conduct lytic peptide research on behalf of the Company.
In November 1995, the Company, in lieu of a proposed merger with TPI, entered
into a cooperative endeavor agreement with Therapeutic Peptides, Inc. Upon
consummation of the agreement, Therapeutic Peptides, Inc. received 10,000
shares of stock in Helix BioMedix, Inc., and shall henceforth share in the
royalties received by Helix BioMedix, Inc. with respect to the derivative
peptides. The Company continues to fund research on its peptides at the
laboratories of TPI.
During 1996, the Company settled a pending lawsuit, more fully described in
Note 6.
Due to the fact that the Company's research and development activities have
begun but there has been no significant revenue therefrom, the Company is in
the development stage as defined in Statement of Financial Accounting Standards
#7.
The following are the Company's significant accounting policies:
Basis of Presentation
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company, which is in the development
stage, has incurred substantial losses since its inception, and has no current
assets with which to repay obligations as the come due. Management plans to
raise money in equity markets to finance further patent prosecution and ongoing
research and development activities. However, there is no assurance that
management will be successful in obtaining additional financing. These
conditions give rise to substantial doubt about the Company's ability to
continue as a going concern. These financial statements do not include any
adjustments which may be necessary if the Company is unable to continue.
F-10
<PAGE>
Helix BioMedix, Inc.
Notes to Financial Statements
For the period from inception (November 7, 1998) to December 31, 1996
continued
Intangibles
Patent costs, consisting primarily of legal and filing fees, are capitalized.
Amortization is taken on the straight line method over the life of each patent
commencing upon the issuance of the patent(s), not to exceed 17 or 20 years,
depending on the date the patent was issued, or the date the application was
filed. Antimicrobial technology which was purchased in conjunction with the
patents, has been capitalized at the basis of the debt issued for it. This
technology is being amortized ratably over twenty years. Organization costs
were amortized ratably over 60 months.
Research and Development
Research and development costs are expensed as incurred.
Statement of cash flows
For purposes of the statement of cash flows, the company considers all highly
liquid debt instruments purchased with an original maturity of three months or
less to be cash equivalents.
Loss per share
Loss per share has been computed using the weighted average number of shares
outstanding during the period. Filly diluted earnings per share have not been
presented as their effect is estimated to be antidilutive.
Income taxes
For all periods presented, the Company has computed its income tax benefit under
FASB 109 - Accounting for Income Taxes. Because of the company's creation of a
valuation allowance for the tax benefit of net operating loss carryforwards and
R & D credit carryforwards, there is no material difference in the financial
statements between income tax calculated under FASB 109 and income tax
calculated under APB 11.
Reverse stock split
On December 29, 1993 the company underwent a 1 for 500 reverse stock split.
All share and per share amounts have been retroactively restated to reflect
the split.
2.Notes Payable
The Company is obligated under the following notes at December 31, 1996
8% convertible demand note
payable to shareholder, principal
and interest originally payable in
March 1990, extended until August
1991, now due September 1998. $ 690,944
8% convertible demand note,
interest due quarterly. 4,529
8% convertible promissory note,
principal and interest due June 1996. 4,000
12% promissory note, principal and
interest due November 1989 2,000
F-11
<PAGE>
Helix BioMedix, Inc.
Notes to Financial Statements
For the period from inception (November 7, 1998) to December 31, 1996
continued
Two 8% convertible demand
notes payable to shareholder, due
on demand. 188,993
Three 12% promissory notes due
December 1997, each note
convertible into 400 shares of
common stock at the option of the
holder. 9,000
10.25% promissory note, principal
and interest due May 1996 25,000
-------
Total notes outstanding 924,466
Less amount classified as current 233,522
-------
$ 690,944
=======
The shareholder note for $690,944 is secured by a first security
interest in technology and intellectual property rights of the
Company. Interest is payable quarterly in cash or common shares of
the Company at the rate of $2.50 per share, or may be converted to
principal. Form of payment of quarterly interest is at the
discretion of the note holder. The note plus arrcued interest is
convertible in whole or in part at any time prior to maturity into
shares of the Company's common stock. Stock conversion Stock
conversion will be made at $2.50 per share.
The shareholder notes for $188,993 are secured by a first security
interest in technology and intellectual property rights of the
Company. Interest is payable quarterly in cash or common shares of
the Company at the rate of $1.00 per share, or may be converted to
principal. Form of payment of quarterly interest is at the
discretion of the note holder. The note plus accrued interest is
convertible in whole or in part at any time prior to maturity into
shares of the Company's common stock at $1.00 per share.
The 8% note for $4,000 is convertible into shares of the Company's
common stock at $2.50 per share.
Debt maturities over the next five years are as follows: due in
1997, $233,522; due in 1998, $690,944; and, due thereafter $0.
3.Stockholders' Equity
The Company has 1,270,620 outstanding common shares and no
outstanding preferred shares. The Company is authorized to issue
2,000,000 common and 400,000 preferred shares. The Company's
president, Keith P. Lanneau, holds a total of 631,000 shares
beneficially as shareholder in Helix International, which holds
540,000 of the Company's shares, and as beneficial owner of Arrowhead
Technology Associates, which holds 11,000 of the Company's shares and
an additional 80,000 shares from the conversion of debt owed.
On December 29, 1993, the Company underwent a 1 for 500 reverse stock
split. All share and per share amounts in these financial statements
have been retroactively restated to reflect this reverse split.
F-12
<PAGE>
Helix BioMedix, Inc.
Notes to Financial Statements
For the period from inception (November 7, 1998) to December 31, 1996
continued
At December 31, 1996, the Company had outstanding stock options to
purchase 45,600 shares of the Company's common stock, 600 of which
state an exercise price of $0.50 per share and the remaining 45,000
at a price of $1.00 per share. The options became exercisable upon
issuance and expire at various dates through 1998. During 1996,
45,800 stock options were canceled upon the conversion of debt to
equity.
4.Income Taxes
At December 31, 1996 the Company has approximately $2,588,000 in net
operating loss carryforwards and approximately $91,404 in Research
and Development tax credit carryforwards available to offset future
taxable income and related income tax. The operating loss
carryforwards expire between 2003 and 2011. The tax benefit of these
carryforwards has been offset by a full allowance for realization.
5.Related Party Transactions
From March 1989 to March 1990, the Company contracted with Helix
International, Inc., a principal shareholder, to conduct lytic
peptide research on a contract basis for the account of the Company.
The Company incurred a total of $655,321 in research costs paid or
payable to Helix International during this period. At December 31,
1996. a promissory note for $690,944 was outstanding, consisting of
unpaid research costs, accrued interest, consulting fees, and patent
pass through costs. In addition, $50,000 in debt payable t Helix
International had been converted to equity in 1992.
The Company maintains its corporate offices in the offices of its
president. From inception to December 31, 1996, the Company has
incurred $128,255 in rental and general office expense reimbursements
which have been paid or are payable to an affiliated company.
The President of the Company is also a principal shareholder of Helix
Phytonetix, Inc. ("Phytonetix"). Phytonetix is a party to the LSU
settlement agreement described in Note 1. Due to the out of court
settlement more fully described in Note 6, Phytonetix paid the
$30,124 to the Company, which was outstanding at December 31, 1995.
As part of the LSU settlement described in Note 1, the Company
entered into a sublicense agreement with URM, a shareholder, for the
development and marketing of a portion of the patented technology,
specifically the use of the technology in food preservation and
purification of drinking water.
For the year ended December 31, 1996, $36,000 of consulting fees have
accrued to each of Helix International, Inc., and Arrowhead
Technology Associates, Inc.
The note receivable from Therapeutic Peptides, Inc.(TPI), a
shareholder of the Company, was due June 30, 1996. the Company plans
to write off this receivable against invoices received from TPI for
work to be performed in future periods on behalf of the Company in
the area of research & development. For the year ended December 31,
1996 the Company paid $99,500 to TPI for these services.
6.Litigation settlement
In 1996, the Company agreed to an out of court settlement resulting
from a suit filed by the Company and three other parties, including
Helix International, Inc., University Research and Marketing, Inc.
and Helix Phytonetix, against former patent attorneys for the failure
to renew patents held by the plaintiffs. The settlement resulted in
a gain for the Company of $48,574.
F-13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND STATEMENTS OF LOSS AND ACCUMULATED DEFICIT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10KSB FOR THE YEAR
ENDED DECEMBER 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1369
<SECURITIES> 0
<RECEIVABLES> 25000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26369
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 490741
<CURRENT-LIABILITIES> 248813
<BONDS> 0
0
0
<COMMON> 2001580
<OTHER-SE> (2450596)
<TOTAL-LIABILITY-AND-EQUITY> 490741
<SALES> 0
<TOTAL-REVENUES> 7839
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 267812
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 70152
<INCOME-PRETAX> (281552)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> (0.24)
<EPS-DILUTED> (0.24)
</TABLE>
