U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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
210 BARONNE ST., SUITE 1004, NEW ORLEANS, LA
(504) 525-2090
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 [ ]
The number of shares outstanding of Registrant's common stock,
no par value at March 31, 2000 was 4,843,450 shares.
DOCUMENTS INCORPORATED BY REFERENCE: YES. SEE INDEX ON PAGE 5.
EXHIBITS: Indexed at Page 5.
PAGES: This Form 10-QSB consists of 5 pages, plus pages F-1 through F-4.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL INFORMATION
Please see Pages F-1 through F-4.
The following financial statements are filed as part of this
Report:
Page
Balance Sheet as at March 31, 2000----------------------------F-1
Statements of Operations--------------------------------------F-2
Statements of Cash Flows--------------------------------------F-3
Notes to Financial Statements---------------------------------F-4
These financial statements should be read in conjunction with
the audited financial statements at December 31, 1999. 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 Items 1 and 2 of Part I
and Item 6 of Part II of Registrant's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1999. (Exhibit No. 99-a)
(A) PLAN OF OPERATION
The Company's general plan of operation is outlined in detail
in Item 1(i) through Item 1(l) of Part I of Exhibit 99-a. The
Company has maintained operations since 1990 until October 1999
primarily with limited capital provided by loans from key
Shareholders. A major financial and managerial corporate
restructuring initiative was successfully undertaken in 1999. The
Company believes it is now well prepared to implement its short term
Strategic Plan of action. 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 fewer 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.
Competition and the Company's Proprietary Position
COMPETITION
The Company believes it is establishing a strong patent
position with respect to proprietary compositions of matter and use
of its Cytoporins or other lytic peptides. There is increasing
interest in the biopharmaceutical industry in the potential for such
peptides as therapeutic drug agents. To the best of the Company's
knowledge there are five or six other U.S. or Canadian biotechnology
companies actively working in the field. Although they have had
greater financial resources available to them, the Company believes
the early priority dates on its 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 twelve years.
The Company further believes that the activity of a few competitors,
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<PAGE>
who have all entered the lytic peptide technology field after the
Company, is helping to accelerate the advance of this basic
technology to the commercial stage.
The Company's basic business plan embraces a concept of (i)
long term strategic partnering for developing pharmaceutical
products and (ii) introduction of near term proprietary non-drug
products (e.g. topical antiseptics and industrial disinfectants and
biocides) to niche markets where regulatory constraints are less of
an obstacle. Company management believes its business plans take
full cognizance of the emerging presence of several well financed
competitors in the general field of endeavor.
THE COMPANY'S PATENT ESTATE
THE HELIX/LSU PATENT ESTATE
Since its inception to the date hereof the Company has
invested over $440,000 in legal costs and fees, alone, to prosecute
the various patent applications based on the early Cytoporin
research conducted for the Company at Louisiana State University
(LSU). A brief summary of the current status of this patent
portfolio is as follows:
1.) All of the pending applications and issued patents have
early priority dates (i.e. 1987-89) with little prior
art cited. Many broad composition and use claims have
been allowed. The Company has been assigned all rights
to the Helix/LSU patent applications and patents, as
discussed in Exhibit 99-a.
2.) Twenty two (22) foreign patents have issued, and an
important divisional application is pending in five
foreign countries.
3.) Two (2) U.S. patents have issued, and a third U.S.
patent is pending. Two additional divisional U.S.
patent applications, with early priority dates, are also
pending.
The Company believes (i) that the broad claims on the
Helix/LSU patents issued and pending with early priority dates will
present potential infringement problems to other biotechnology or
pharmaceutical companies working in the lytic peptide field, and
(ii) that claims allowed to the Company on proprietary
compositions-of-matter protect the Company's right to commercialize
its product technology without risk of infringing patents of others.
THE HELIX/TPI PATENT ESTATE
As discussed above in Exhibit 99-a to this Report, pursuant to
execution of the new 1999 Research Alliance Agreement between the
Company and Therapeutic Peptides, Inc. (TPI), the Company holds full
title to all patent rights on the composition and use of Cytoporin
compounds and the applications thereof, as developed at TPI since
1993. The Company is now in the process of filing U. S. patent
applications covering this technology, and foreign counterpart
applications will be filed hereafter. Additional patent
applications will be filed by the Company and assigned to the
Company covering results of future contract work at TPI to be
sponsored by the Company. As stated in Exhibit 99-a the Company
believes the new generation of Cytoporins derived from TPI's past
research are among the most promising of the Company's proprietary
lead compounds for both pharmaceutical (drug) and non-drug
applications.
(b) Management's Discussion and Analysis
In 1999 the Company (i) attained many objectives of its short
term Strategic Plan for financial and managerial restructuring, (ii)
successfully completed a major recapitalization though its Private
Offering of securities, (iii) executed a number of important
agreements with related parties on September 30, 1999 pursuant to
terms of the Private Placement Memorandum, and (iv) generally
stepped up the tempo of Company operations with the availability of
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adequate operating capital and a strengthened management
organization. Accordingly, during 1999 operating losses sharply
increased to an average of approximately $162,300 per quarter. The
major items of increase over prior years resulted from (i)
substantial cost increases in legal, accounting, and other
professional services associated with the restructuring initiatives,
(ii) higher R & D costs to acquire the title to patent rights from
TPI, and (iii) higher administrative expenses associated with the
addition of key personnel to the staff.
With the expanded operations of the Company in year 2000, the
quarterly net loss for the period ending March 31, 2000 increased to
a level of $265,980. This figure does not include the cost of
non-cash compensation valued at $582,500 for 200,000 shares of
common stock issued by the Company to its consultants, Katz-Miller
Ventures, L.L.C. These bonus shares, provided for in the consulting
agreement between the Company and Katz-Miller, were awarded during
the first quarter of 2000 for the achievement of certain milestones
relating to increased market price of the Company's common stock.
(This is discussed in Exhibit 99-a)
As seen from the Audit Report for the fiscal year ended
December 31, 1999 and from the unaudited financial statements
presented herein for the quarterly period ended March 31, 2000, the
Company now has good near term financial liquidity. For the first
quarter of 2000 the financial statements reflect an average monthly
cash outflow (net) of $75,000. Management projects that currently
available cash on hand is adequate to fund planned operations for
the next eight to twelve months. During this period the Company
will seek to supplement cash availability from (i) licensing
activities, (ii) outside research support, and/or (iii) additional
capital raised from private or public financing. Success in any of
these areas is significantly dependent upon achievement of some of
the goals of the Company's short term Strategic Plan for business
operations.
(C) YEAR 2000 ISSUE
The Company has conducted an assessment of the impact of the
Year 2000 issue on its operations. No problems have been
encountered since December 31, 1999. 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 yet encounter.
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 was sustained on appeal and the Company continues the
litigation to recover damages from Interbio on the reconventional
demand still pending in the suit. However, the parties are
considering a negotiated settlement.
4
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Included in the accompanying financial statements is $25,000,
representing principal amount of the IBG note, plus accrued interest
of $10,659. In the event the parties do not settle out of court,
management estimates the Company will be liable for an additional
$12,184 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
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
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, 1999
Incorporated by reference to Form 10-KSB for
1999 filed by Registrant with the SEC ( File
No. 33-20897-D) on April 14, 2000.
(B) REPORTS ON FORM 8-K--NONE
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: MAY 18, 2000
BY:/S/ THOMAS L. FRAZER
--------------------
Thomas L. Frazer, Director, Vice President and Chief Financial Officer
5
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HELIX BIOMEDIX, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
March 30, 2000
CONTENTS
Page
BALANCE SHEET F-1
STATEMENTS OF OPERATIONS F-2
STATEMENTS OF CASH FLOWS F-3
NOTES TO FINANCIAL STATEMENTS F-4
<PAGE>
Helix BioMedix, Inc.
(A Development Stage Company)
BALANCE SHEET
March 30, 2000
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,231,507
Prepaid expenses 10,750
----------
Total current assets 1,242,257
PROPERTY AND EQUIPMENT
Machinery and equipment 1,591
Furniture and fixtures 393
----------
1,984
Less: Accumulated depreciation 275
----------
1,709
OTHER ASSETS
Antimicrobial technology (net) 107,179
Patents pending and approved (net) 399,832
----------
507,011
----------
TOTAL ASSETS $ 1,750,977
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 1,919
Accounts payable - related party 3,673
Payroll taxes payable 1,646
Notes payable 36,000
Notes payable - related parties 163,154
Accrued interest payable 30,460
----------
Total current liabilities 236,852
LONG-TERM LIABILITIES 326,308
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, 4,843,450 shares issued and outstanding 5,574,998
Additional paid-in-capital, net of
Deferred compensation component 90,332
Deficit accumulated during the
development stage (4,477,513)
----------
1,187,817
----------
Total liabilities and stockholders' equity $1,750,977
==========
The accompanying notes are an integral part of the financial statements.
F-1
<PAGE>
Helix BioMedix, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For the period from inception (November 7, 1988) to March 31, 2000
<TABLE>
<S> <C> <C> <C>
Inception to For the three months
September 30, ended September 30,
2000 2000 1999
------------ --------- ---------
REVENUE $ 19,500 $ - $ -
OPERATING EXPENSES
Accounting, legal
and professional 449,229 82,505 27
Advertising 13,566 - -
Amortization 161,142 6,954 6,236
Compensation costs 137,400 - -
Consulting fees 1,147,448 582,500 9,100
Office expense 196,553 6,046 6,036
Other general &
administrative 163,954 64,814 435
Research &
development 1,793,975 108,500 12,000
------------ -------- --------
TOTAL OPERATING
EXPENSES 4,063,267 851,319 33,834
------------ -------- --------
NET LOSS FROM
OPERATIONS (4,043,767) (851,319) (33,834)
OTHER (INCOME) EXPENSE
Gain on settlement
of lawsuit (48,574) - -
Interest income (36,191) (13,929) (438)
Interest expense 518,511 11,090 9,778
------------ -------- -------
433,746 (2,839) 9,340
------------ -------- -------
NET LOSS $ (4,477,513) $ (848,480) $ (43,174)
============ ========== =========
NET LOSS
PER SHARE $ (3.73) $ (0.18) $ (0.03)
============ ========= ==========
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 1,201,530 4,658,808 1,619,300
============ ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
Helix BioMedix, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the period from inception (November 7, 1988) to March 31, 2000
Inception to For the six months end
June 30, September 30,
2000 2000 1999
------------ ----------- ----------
NET CASH FLOWS FROM OPERATIONS $ (2,697,343) $ (222,394) $ 18,018
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (1,984) - -
Patents (305,143) (1,919) (16,482)
------------ ----------- ----------
NET CASH FLOWS FROM
INVESTING ACTIVITIES (307,127) (1,919) (16,482)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of stock for debt 832,819 - -
Issuance of stock for cash 2,019,380 - -
Cash received in reverse acquisition 634,497 - -
Notes payable 43,394 - -
Related party notes payable (net) 705,887 - -
------------ ----------- ----------
NET CASH FLOWS FROM FINANCING
ACTIVITIES 4,235,977 - -
------------ ----------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,231,507 (224,313) 1,536
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - 1,455,820 763
------------ ----------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,231,507 $ 1,231,507 $ 2,299
============ =========== ==========
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 - -
Accounts payable converted to notes 704,559 - -
Accrued interest rolled into notes 403,463 - 8,727
Notes converted to equity 1,639,548 - -
Cash paid for interest 19,652 - -
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
Helix BioMedix, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
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, 1999.
2. Cash Compensation
-----------------
In accordance with various consulting and employment agreements the Company
issued or is obligated to issue the following equity instruments for which
compensation cost has been recorded. A summary of non-cash compensation
recognized during the quarter ended March 31, 2000 is as follows:
Measurement Compensation
Instrument Quantity Date Expense
-------------- ------------ ----------- ------------
Common shares 7,445 12/14/99 9,306
Common shares 80,000 03/09/00 290,000
Common shares 60,000 03/17/00 165,000
Common shares 60,000 03/28/00 127,500
Common shares 7,747 03/31/00 18,399
Other non-cash - 12/14/99 21,000
Options @ $0.70 20,000 12/14/99 11,000
Options @ $0.70 7,747 03/31/00 12,976
------------
655,181
============
Compensation cost on the options is recognized equal to the difference in
the market value of the stock on the measurement date and the exercise price.
For purposes of loss per share, all shares above have been treated as
outstanding as of the date they are earned.
F-4
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH 10QSB FOR THE QUARTER ENDED MARCH 31, 2000.
</LEGEND>
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<PERIOD-END> MAR-31-2000
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