FORM 10-Q SB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 33-20897-D
HELIX BIOMEDIX, INC.
______________________________________________________
(Exact name of registrant as specified in its charter)
Colorado 84-1080717
_______________________________ __________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2151 E. Lakeshore Drive, Baton Rouge, LA 70808
___________________________________________________________________________
(Address of principal executive offices) (Zip Code)
(225)-387-1112
______________________________________________________________________________
(Registrant's telephone number, including area code)
Not Applicable
______________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
___ ___
Indicate the number of shares outstanding of each of the issuer's classes
of stock, as of the latest practicable date.
Shares
Outstanding
Class of Securities at June 30, 1999
___________________ ___________________
Common Stock, no par value 1,622,400
DOCUMENTS INCORPORATED BY REFERENCE: YES, SEE INDEX ON PAGE 7.
-------------------------
EXHIBITS: Indexed at page 7.
-------------------
PAGES: This form 10-QSB consists of 8 pages and Exhibit No. 99-c (1 page),
plus pages F-1 through F-5.
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL INFORMATION
Please see Pages F-1 through F-5.
The following financial statements are filed as part of this Report:
Page
Accountants' Report-------------------------F-1
Balance Sheet as at June 30, 1999-----------F-2
Statements of Operations--------------------F-3
Statements of Cash Flows--------------------F-4
Notes to Financial Statements---------------F-5
These financial statements should be read in conjunction with the
audited financial statements at December 31, 1998. Those statements
are incorporated herein by reference as part of Exhibit No. 99-a.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This item incorporates by reference Item 1-Part I and Item 6-Part II of
Registrant's Annual Report on Form 10-KSB for the fiscal year ended December
31, 1998. (Exhibit No. 99-a). This item also incorporates by reference
Item 2-Part I of Registrant's Quarterly Report on Form 10-QSB for the
period ended March 31, 1999. (Exhibit No. 99-b).
(a) Plan of Operation
The Company's general plan of operation is outlined in Item 1 of Part I
of Exhibit No. 99-a. 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, Exhibit No. 99-a. The Company believes it is now prepared
to implement a 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.
2
<PAGE>
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
five or six other U.S. and Canadian companies actively working in the
field, several of which companies 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 ten
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.
Collaborative Research with Therapeutic Peptides, Inc.
As set forth in Item 1 of Part I of Exhibit No. 99-a, (i) during the
perriod 1987 to 1992 the Company conducted the original germinal research
on its Cytoporin technology through scientific work which it supported
at Louisiana State University. ("LSU"); and thereafter (ii) the Company
expanded the realm of its scientific expertise and continued development
of the technology through a joint venture with Therapeutic Peptides, Inc.
("TPI"), a New Orleans, LA based high-tech research entity. In November
1995 the Company and TPI formalized their alliance through execution of
a "Cooperative Endeavor Agreement". This agreement closely linked the
parties in a continuing initiative to expand upon the early work done at
LSU, to further enhance the patent Company's patent estate and to
commercialize the Cytoporin technology.
Dr. Donald R. Owen, Chief Scientist and a Vice President of the
Company, serves as CEO and Scientific director of TPI. Since 1993 TPI
has utilized its technical staff and well equipped laboratory facilities
to synthesize and further evaluate the Company's proprietary lytic peptides.
From 1995 through 1998 scientists at TPI developed new and improved
"third and fourth generation" derivatives of the Company's earlier
proprietary peptides. Several of the new peptides show promise as
lead compounds for pre-clinical and clinical development of new drugs.
Patent applications and patents resulting from the joint undertaking by
TPI and the Company will be fully assigned to the Company, thereby
substantially enhancing the Company's patent properties derived from the
earlier research sponsored at LSU.
Critical Developments in the Company's Relationship with Louisiana
State University ("LSU")
From the outset of its Agreement of Settlement with LSU in 1993, the
Company found its position as a patent licensee of the University to be
one without proper cooperative support. In 1996 and early 1997 the
Company formally notified LSU officials of its concerns about the
deteriorating relationship. During the first quarter of 1997 continuing
disputes between the Registrant and LSU resulted in each party's placing
the other in default of the agreements between the two.
During the second quarter of 1997 LSU formally terminated the Company's
license of certain LSU patents relating to the Cytoporin technology. This
termination of license and resolution of the alleged defaults of the
parties were all subject to arbitration. The arbitration procedures
were invoked, and the Company notified LSU of Registrant's intent to seek
further relief in an appropriate court of law. The actions of LSU in
summarily terminating the license were unwarranted in the opinion of
management and corporate counsel. Furthermore, throughout 1997 and
1998 Registrant's ongoing initiatives to raise capital and to confect
strategic alliances were effectively in a state of hiatus until the
conflict with LSU was settled or otherwise resolved. Management and
corporate counsel for the Company emphasized to LSU that the University
was exposing itself to serious liability for damages which would continue
to increase by the month.
In late 1997 the Company and LSU made substantial progress in good
faith negotiations to settle all disputes. Continued progress in
negotiations by year end prompted the parties to place the arbitration
proceedings in abeyance and to withhold contemplated legal actions pending
the outcome of the negotiations.
3
<PAGE>
In March 1998 the Company and LSU reached final agreement on a "Novation
of Prior Agreements". Arbitration proceedures were terminated by the
parties. In consideration of the Company's dismissing and waiving its causes
of action against LSU, LSU assigned to the Company all right, title and
interest to all of the U.S. and foreign patents and patent applications
previously under license to the Company. The patent estate now fully
assigned to the Company has resulted in sole ownership by the Company of
sixteen (16) U. S. and foreign patents already issued, twelve (12) U. S.
and foreign patent applications pending, and numerous divisional
applications subject to filing with the early priority dates (1987 to 1989)
of the issued patents and applications pending.
(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 was 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 loans from shareholders
in the amount of approximately $236,000. At December 31,1996 the Company's
balance sheet was substantially improved by the conversion of approximately
$111,000 in debt into common stock.
In 1996 operating losses increased to an average of approximately
$82,500 per quarter, of which approximately $16,500 per quarter represented
interest accrual on loans from major shareholders. The main source of
increase in operating expense in 1996 over the prior year came from stepped
up R & D expense.
Because of the hiatus created in 1997 by the revocation of the
Company's license by LSU, operating expenses and R & D expenditures
were substantially curtailed. Operating losses averaged approximately
$57,100 per quarter, of which amount $19,900 was for accrual of interest.
Operations were funded by loans from key shareholders. On December 31, 1997
the Company's balance sheet was substantially improved by debt reduction
through the conversion of $772,075 in promissory notes payable to
key shareholders into common stock of the Company. This was indicative of
the continuing confidence of management and key shareholders in the
prospects for the Company's future.
In 1998, pending final resolution of the dispute with LSU (as set forth
in Part I herein), and pending consumation of a private financing
initiative, the Company continued curtailment of its operating expenditures.
During the year operating losses averaged approximately $40,800 per
quarter, of which only $8,300 was for accrual of interest. The relatively
large reduction of interest costs from 1996 and 1997 resulted from
the substantial reduction of debt at the end of 1997. During 1998 and
the first two quarters of 1999 operations continued to be funded by
stock purchases and loans from key shareholders.
In 1999 the Company expects to complete its renewed initiative to
raise capital through private financing following the recent settlement
of disputes with LSU. In its first phase of financing, the Company is
seeking to raise $1,000,000 to $2,000,000 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
4
<PAGE>
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. Management believes after the bridge capital
funding that additional equity capital can be added, on a favorable
basis, to the Company's capital base. This should facilitate the
Company's emerging 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. Pending completion
of ongoing financial and restructuring initiatives, current operations of
the Company continue to be financed by loans from and/or investments by several
key shareholders.
The Company's common stock, which is traded under the symbol "HXBM"
on the OTC 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.
(c) Year 2000 Issue
The Company's management has conducted an assessment of the impact of
the Year 2000 issue on its operations. Management believes that Year 2000
issues are not currently material to the Company's business, operations
or financial condition, and the Company does not currently anticipate that
it will incur any material expenses to remediate any Year 2000 issues it
may encounter. However, Year 2000 issues may become material to the
Company following its completion of a business combination transaction. In
that event, the Company may be required to adopt a plan and a budget
for addressing such issues.
(d) Other Developments
During the first quarter of 1999 the Company retained the services of
outside financial and management consultants to (i) update various
components of the Company's Business Plan (ii) evaluate and develop
alternative plans for financial restructuring, (iii) assist the Company
with recruitment of management and scientific personnel, and to (iv)
implement programs for enhancing corporate public profile (e.g., development
of a Company Website) to facilitate investor relations and strategic
contacts with the scientific and pharmaceutical industry communities.
During the second quarter of 1999, with the assistance of its consultants
the Company (i) updated its Business Plan, (ii) confected a definitive
plan for financial restructuring, (iii) reached agreement in principle
for employment of three new management and scientific personnel, (v) at a
duly called meeting of the shareholders, elected a new board of directors
and amended the Articles of Incorporation of the Company to increased
authorized capital stock, and (vi) completed a Private Placement Memorandum
and other documentation required for a private offering of equity
securities to raise capital in the financing initiative which the Company
has been planning since 1998.
The effective date of the Private Placement Memorandum was July 19,
1999 with a final expiration date of not later than October 31, 1999.
This private offering contemplates the sale of common stock and warrants
for an aggregate maximum amount of $1,680,000. The Company intends to
use the proceeds of the offering primarily to further enhance its patent
position, to restructure its research alliance agreement with its
principal research partner (Therapeutic Peptides, Inc.), to rearrange
certain promissory debt obligations of the Company, and for general
working capital to implement the Company's updated Business Plan.
5
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On November 3, 1995 the Company entered into a Loan Agreement with
International Biochemicals Group, Inc. ("IBG") whereby IBG advanced
$25,000 to the Company and made a commitment for further lending. On
November 3, 1995 the Company issued to IBG a promissory note for $25,000
due and payable May 3, 1996. The Company has not made payment on the
note and advised IBG of its breach of various provisions of the lending
agreement. From time to time the due date of the note was extended, and
the Company agreed to pay the note in full promptly following resolution of
its disputes with LSU, in consideration of which the Company had offered
to withdraw its allegations of IBG's default on the Loan Agreement.
The protracted nature of the disputes between LSU and the Company and
the termination of the Company's license by LSU prompted IBG to take
legal action to collect on the above referenced note.
On September 16, 1997 IBG filed a petition in the Nineteenth Judicial
District Court of Louisiana seeking judgment on the note. Corporate
Counsel for the Company timely responded to the petition and filed a
reconventional demand in support of Registrant's allegation of IBG's breach
of the Loan Agreement. On August 19, 1998 the Court granted the judgment
to Interbio for payment of principal and interest due on the note along
with legal costs. The judgment is on appeal and the Company continues
the litigation to recover damages from Interbio on the reconventional
demand still pending in the suit. Included in the accompanying
financial statements is $25,000, representing principal amount of the
IBG note, plus interest of $7,454. In the event the Company's appeal
is unsuccessful, management estimates the Company will be liable for an
additional $15,080 in interest and legal fees pursuant to the aforementioned
judgment. In its reconventional demand the Company is seeking to recover
damages in excess of $1,000,000 from Interbio for its alleged breaches of
contract.
ITEM 2. CHANGES IN SECURITIES
On May 28, 1999 at a duly called meeting of the shareholders of the
Company, the shareholders adopted an Amendment to the Articles of
Incorporation to increase the authorized capital stock of the Company.
A copy of the Articles of Amendment filed with the Colorado Secretary of
State on July 15, 1999 is incorporated herein as Exhibit 99-c.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Shareholders' Meeting on May 28, 1999 two matters were
submitted to a vote.
The shareholders (i) amended the Articles of Incorporation, as set
forth in Item 2 above, and (ii) elected a new slate of seven directors
for the forthcoming year, as set forth in Item 5 below.
6
<PAGE>
ITEM 5. OTHER INFORMATION
Expansion of the Number of Directors on the Board of Directors
At a duly called meeting of the Company's Board of Directors on May 12,
1999, a quorum was present, and the directors, by unanimously adopted
resolutions, increased the number of directors from five (5) to seven (7).
The two vacancies on the board, thereby created, were filled by a resolution
appointing two new members to the board. The new members so appointed
were Mr. Ralph Katz and Dr. Jeffrey A. Miller. The actions of the board
were in full compliance with provisions of the Company's By Laws and
the Colorado Corporation Act.
The two new directors have been active during 1999 in the Company's
business affairs as members of the outside consulting group assisting
the Company in its restructuring initiatives reported herein. At the
Annual Meeting of Shareholders on May 28, 1999 the shareholders elected
a new slate of seven (7) directors to serve until the next annual meeting
thereafter of the shareholders. These seven directors included the
following persons:
R. Stephen Beatty
Thomas L. Frazer
Ralph Katz
Keith P. Lanneau
Michael K. Marcantel
Dr. Jeffrey A. Miller
Lester J. Waldman
Although Dr. Robert J. Love and Dr. Donald R. Owen, former directors,
did not stand for re-election to the Board, they remain active in the
Company in other capacities. During the third quarter of 1999 the new
Board of Directors will meet to elect the corporate officers of the
Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description and Location
- ----------- ---------------------------------
99-a Registrant's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1998
Incorporated by reference to Form 10-KSB for 1997 filed
by Registrant with the SEC ( File No. 33-20897-D) on
April 15, 1999.
99-b Registrant's Form 10-QSB for the Quarter Ended March 31, 1999
Incorporated by reference to Form 10-QSB
((First Quarter,1999) filed by Registrant with the SEC
(File No. 33-20897-D) on May 18, 1999.
99-c Registrant's Articles of Amendment to the Articles of
Incorporation (07-15-99)
Incorporated herein as part of Form 10-QSB for the
Quarter ended June 30, 1999.
(b) Reports on Form 8-K--None
7
<PAGE>
SIGNATURE
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.
HELIX BIOMEDIX, INC. DATE: August 19, 1999
BY:/s/ Keith P. Lanneau
Keith P. Lanneau, President, Principal Financial and Accounting Officer.
8
<PAGE>
HELIX BIOMEDIX, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
<PAGE>
CONTENTS
Page
ACCOUNTANTS' REPORT F-1
BALANCE SHEET F-2
STATEMENTS OF LOSS AND ACCUMULATED DEFICIT F-3
STATEMENTS OF CASH FLOWS F-4
NOTES TO FINANCIAL STATEMENTS F-5
<PAGE>
The Board of Directors
Helix BioMedix, Inc.
The accompanying balance sheet of Helix BioMedix, Inc. (a
development stage company) as of June 30, 1999 and the
related statements of loss and accumulated deficit and
cash flows for the period then ended were not audited by
us, and accordingly, we do not express an opinion on them.
Denver, Colorado
August 19, 1999
COMISKEY & COMPANY
PROFESSIONAL CORPORATION
F-1
<PAGE>
Helix BioMedix, Inc.
(A Development Stage Company)
BALANCE SHEET
June 30, 1999
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 197
Note receivable - TPI 25,000
----------
Total current assets 25,197
OTHER ASSETS
Accrued interest receivable 6,218
Deferred private offering costs 9,661
Antimicrobial technology (net) 115,618
Patents pending and approved (net) 362,517
----------
494,014
----------
TOTAL ASSETS $ 519,211
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 36,958
Accounts payable - related party 53,709
Notes payable 40,000
Notes payable on demand - related parties 462,218
Accrued interest payable 19,007
----------
Total current liabilities 611,892
LONG-TERM LIABILITIES 28,154
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 2,000,000 shares
authorized, no shares issued or outstanding -
Common stock, no par value, 10,000,000 shares
authorized, 1,622,400 shares issued and outstanding 2,806,600
Additional paid-in-capital 137,400
Deficit accumulated during the
development stage (3,064,835)
----------
(120,835)
----------
Total liabilities and stockholders' equity $ 519,211
==========
The accompanying notes are an integral part of the financial statement
F-2
<PAGE>
Helix BioMedix, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For the period from inception (November 7, 1988) to June 30, 1999
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Inception to For the three months For the six months
June 30, ended June 30, ended June 30, 1999
1999 1999 1998 1999 1998
------------ --------- --------- ---------- --------
REVENUE $ 19,500 $ - $ - $ - $ -
OPERATING EXPENSES
Accounting &
legal 126,494 4,546 3,768 4,573 3,768
Advertising 13,488 - - - -
Amortization 141,716 6,236 4,895 12,472 9,790
Compensation
costs 137,400 - - - -
Consulting fees 537,948 6,000 7,395 15,100 18,295
Office expense 180,773 2,821 6,166 8,857 10,569
Other general &
administrative 13,969 435 799 870 1,074
Research &
development 1,504,319 12,000 12,000 24,000 24,000
------------ -------- -------- ---------- --------
TOTAL OPERATING
EXPENSES 2,656,107 32,038 35,023 65,872 67,496
------------ -------- -------- ---------- --------
NET LOSS FROM
OPERATIONS (2,636,607) (32,038) (35,023) (65,872) (67,496)
OTHER (INCOME) EXPENSE
Gain on settlement
of lawsuit (48,574) - - - -
Interest income (6,218) (438) (438) (876) (876)
Interest
expense 483,020 10,313 7,413 20,091 15,388
------------ -------- ------- --------- -------
428,228 9,875 6,975 19,215 14,512
------------ -------- ------- --------- -------
NET LOSS $(3,064,835) $ (41,913) $ (41,998) $ (85,087) $ (82,008)
============ ========= ========== ========== =========
NET LOSS
PER SHARE $ (2.98) $ (0.03) $ (0.03) $ (0.05) $ (0.06)
============ ========= ========== ========== =========
WEIGHTED AVERAGE NUMBER
OF SHARES
OUTSTANDING 1,030,101 1,622,400 1,612,305 1,617,880 1,436,385
============ ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
Helix BioMedix, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the period from inception (November 7, 1988) to June 30, 1999
(Unaudited)
Inception to For the six months end
June 30, June 30,
1999 1999 1998
------------ ----------- ----------
NET CASH PROVIDED (USED)
BY OPERATIONS $ (1,947,480) $ 19,545 $ (52,142)
CASH FLOWS FROM INVESTING ACTIVITIES
Patents (256,841) (20,111) (16,538)
------------ ----------- ----------
NET CASH USED IN
INVESTING ACTIVITIES (256,841) (20,111) (16,538)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of stock for debt 832,819 - 4,900
Issuance of stock for cash 62,000 - 10,000
Note receivable (25,000) - -
Cash received in reverse acquisition 634,497 - -
Notes payable 74,455 - 1,010
Related party notes payable (net) 625,747 - 52,004
------------ ----------- ----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 2,204,518 - 67,914
------------ ----------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 197 (566) (764)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - 763 1,101
------------ ----------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 197 $ 197 $ 337
=========== ========= ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
AND OTHER CASH INFORMATION
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 accounts payable 99,859 - 13,030
Accounts payable converted to notes 700,559 - -
Accrued interest rolled into notes 393,656 17,989 14,337
Notes converted to equity 1,639,548 - -
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
Helix BioMedix, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
1. Management's Representation of Interim Financial Information
The accompanying financial statements have been prepared by Helix
BioMedix, Inc. without audit pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted as allowed by such rules and regulations, and management believes
that the disclosures are adequate to make the information presented not
misleading. These financial statements include all of the adjustments
which, in the opinion of management, are necessary to a fair presentation
of financial position and results of operations. All such adjustments are
of a normal and recurring nature. These financial statements should be
read in conjunction with the audited financial statements
at December 31, 1998.
2. Legal Proceedings
On November 3, 1995, the Company entered into a Loan Agreement with
International Biochemicals Group, Inc. ("IBG") whereby IBG advanced $25,000
to the Company and made a commitment for further lending. On November 3,
1995, the Company issued to IBG a promissory note for $25,000 due and
payable May 3, 1996. The Company has not made payment on the note and
advised IBG of its breach of various provisions of the lending agreement.
From time to time the due date of the note was extended, and the Company
agreed to pay the note in full promptly following resolution of its disputes
with LSU, in consideration of which the Company had offered to withdraw
its allegations of IBG's default on the Loan Agreement. The protracted
nature of the disputes between LSU and the Company and the termination of
the Company's license by LSU prompted IBG to take legal action to collect
on the above referenced note.
On September 16, 1997, IBG filed a petition in the Nineteenth Judicial
District Court of Louisiana seeking judgment on the note. Corporate
Counsel for the Company timely responded to the petition and filed a
reconventional demand in support of Registrant's allegation of IBG's breach
of the Loan Agreement. On August 19, 1998 the Court granted the judgement
to Interbio for payment of principal and interest due on the note along
with legal costs. The judgement is on appeal and the Company continues
the litigation to recover damages from Interbio on the reconventional
demand still pending in the suit. Contingent liability of the Registrant
on the judgement is approximately $15,080 in excess of the face amount of
the note and interest which the Registrant has accrued to date in its
financial statements. In its reconventional demand the Company is seeking
to recover damages in excess of $1,000,000 from Interbio for its alleged
breaches of contract.
3. Subsequent Event
As of July 19, 1999, a Private Placement Memorandum is in effect, with a
final expiration date not later then October 31, 1999. This private
offering contemplates the sale of common stock and warrants for an
aggregate maximum amount of $1,680,000. The Company intends to use the
proceeds of the offering primarily to further enhance its patent position,
to restructure its research alliance agreement with its principal research
partner (Therapeutic Peptides, Inc.), to rearrange certain promissory
debt obligations of the Company, and for general working capital to
implement the Company's updated Business Plan.
F-5
<PAGE>
Exhibit No. 99-c to SEC Form 10-QSB
For Quarterly Period Ending June 30, 1999
EXHIBIT 99-c
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
of
HELIX BIOMEDIX, INC.
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned corporation, by and through its undersigned President and
Secretary, certifies the following:
FIRST: The name of the corporation is Helix Biomedix, Inc., a Colorado
corporation (the "Corporation").
SECOND: On May 28, 1999, at a duly called Annual Meeting of the
Shareholders of the Corporation, the shareholders adopted
the following amendment to the Corporation's Articles of
Incorporation (As previously amended):
The first paragraph of Article IV of the Corporation's Articles of
Incorporation is amended to change (a) the number of authorized shares
of Common Stock from "Two million (2,000,000)" to "Ten million (10,000,000)
and (b) the number of authorized shares of Preferred Stock from "Four hundred
thousand (400,000)" to "Two million (2,000,000)", with such amendment
effective after filing with the Colorado Secretary of State.
THIRD: The foregoing amendment was adopted by the shareholders at a
meeting duly noticed in accordance with the provisions of Section
7-110-103 of the Colorado Corporation Code, at all times a quorum
was present for the meeting, and the number of votes cast for
the amendment by each voting group entitled to vote separately
on the amendment was sufficient for approval by that voting group.
There were no shares of Preferred Stock issued and outstanding,
therefore only the holders of the no par value common stock were
entitled to vote on the amendment.
FOURTH: The foregoing amendment does not provide for any exchange,
reclassification, or cancellation of issued shares, and no
shares of Preferred Stock are issued and outstanding.
IN WITNESS WHEREOF, the Corporation's President and Secretary, for
and on behalf of the Corporation, have executed these Articles of
Amendment to the Articles of Incorporation this 14th day of July, 1999.
HELIX BIOMEDIX, INC.
/s/ Keith P. Lanneau
BY:________________________________
Keith P. Lanneau, President
/s/ Michael K. Marcantel
BY:________________________________
Michael K. Marcantel, Secretary
1
<PAGE>
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<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 10QSB FOR THE QUARTER ENDED JUNE 30, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
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<SECURITIES> 0
<RECEIVABLES> 25000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25197
<PP&E> 0
<DEPRECIATION> 0
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<CURRENT-LIABILITIES> 611892
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 519211
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<INCOME-PRETAX> (41913)
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