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 September 30, 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 September 30, 2000 was 4,902,950 shares.
DOCUMENTS INCORPORATED BY REFERENCE: YES. SEE INDEX ON PAGE 5.
EXHIBITS: Indexed at Page 5.
PAGES: This Form 10-QSB consists of 6 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 September 30, 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
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 milestones will establish the Company as a financially
viable biotechnology firm with substantial public investor support.
COMPETITION AND THE COMPANY'S PROPRIETARY POSITION
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
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has gained over a period of 13 years. The Company further believes
that the activity of a few competitors, 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 $466,000 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
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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 which may 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 through 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 adequate operating
capital and a strengthened management organization. Accordingly,
during 2000 operating losses sharply increased to an average of
approximately $296,000 per quarter from an average quarterly level of
$162,000 in 1999. 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
third quarter and year to date net losses for the period ending
September 30, 2000 increased to a level of $326,479 and $887,816
respectively. These figures and the quarterly averages cited in the
foregoing paragraph, do not include (i) $85,181 non cash compensation
expense recorded in the third quarter in connection with the extension
of vested options (see footnote 2 on page F-4 herein), nor do they
include (ii) the cost of non-cash compensation, including $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, the Company had good near term financial liquidity to start
the year 2000. The first 3 quarters of 2000 the financial statements,
presented herein, reflect that average monthly cash outflow (net) has
increased to a level of $78,200. Management projects that currently
available cash on hand is adequate to fund planned operations for the
next three to six months. As a result of the declining liquidity
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.
4
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is currently not involved in any litigation.
ITEM 2. CHANGES IN SECURITIES
On September 30, 2000, in consideration of services rendered during
the third quarter and pursuant to the terms of two employment agreements,
the Company granted an option to purchase 29,100 common shares of the
company at an option price of $0.70 per share through January 15, 2003.
The options continue to vest at the level of 29,100 shares per quarter
until March 31, 2001.. The total amount of services was valued at $55,108.
On September 30, 2000, the Company issued 1,250 common shares to each
of the members of its board of directors in consideration of services
rendered, for a total of 8,750 shares issued. In addition, options were
granted to the board members to purchase a total of 8,750 shares of common
stock at $0.70 per share through December 31, 2002. The total amount of
services was valued at $42,000. No underwriters were employed in the
offering of these securities. These shares were issued in transactions
exempt from registration pursuant to Section 4(2) of the Securities Act
of 1933, as amended.
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
5
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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: November 14, 2000
BY:/s/ Thomas L. Frazer
--------------------
Thomas L. Frazer, Director, Vice President and Chief Financial Officer
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HELIX BIOMEDIX, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
September 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
September 30, 2000
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 751,534
Prepaid expenses 6,538
----------
Total current assets 758,072
PROPERTY AND EQUIPMENT
Machinery and equipment 1,591
Furniture and fixtures 393
----------
1,984
Less: Accumulated depreciation 463
----------
1,521
OTHER ASSETS
Antimicrobial technology (net) 101,553
Patents pending and approved (net) 406,294
----------
507,847
----------
TOTAL ASSETS $ 1,267,440
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 5,590
Accounts payable - related party 1,948
Notes payable 9,000
Notes payable - related parties 163,154
Accrued interest payable 7,560
----------
Total current liabilities 187,252
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, 4,902,950 shares issued and outstanding 5,595,611
Treasury stock (312)
Additional paid-in-capital, net of
Deferred compensation component 342,192
Deficit accumulated during the
development stage (5,183,611)
----------
753,880
----------
Total liabilities and stockholders' equity $1,267,440
==========
The accompanying notes are an integral part of the financial statements.
F-1
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Helix BioMedix, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For the period from inception (November 7, 1988) to September 30, 2000
<TABLE>
<S> <C> <C> <C> <C> <C>
Inception to For the three months For the nine months
September 30, ended September 30, ended September 30,
2000 2000 1999 2000 1999
------------ --------- --------- ---------- --------
REVENUE $ 19,500 $ - $ - $ - $ -
OPERATING EXPENSES
Accounting &
legal 659,900 103,258 48,657 293,176 53,231
Advertising 13,566 - - - -
Amortization 183,885 9,899 6,236 29,697 18,708
Compensation
costs 137,400 - - - -
Consulting fees 1,150,042 2,594 6,000 585,094 21,100
Office expense 195,208 1,697 2,658 4,701 11,515
Other general &
administrative 486,694 198,035 1,847 387,555 2,716
Research &
development 1,940,749 96,177 12,000 255,274 36,000
------------ --------- -------- ---------- --------
TOTAL OPERATING
EXPENSES 4,767,444 411,660 77,398 1,555,497 143,270
------------ --------- -------- ---------- --------
NET LOSS FROM
OPERATIONS (4,747,944) (411,660) (77,398) (1,555,497) (143,270)
OTHER (INCOME) EXPENSE
Gain on settlement
of lawsuit (48,574) - - - -
Interest income (63,005) (12,337) (438) (40,743) (876)
Interest
expense 547,246 10,059 13,483 39,825 23,796
------------ -------- ------- ---------- --------
435,667 (2,278) 13,045 (918) 22,920
------------ -------- ------- ---------- --------
NET LOSS $(5,183,611) $(409,382) $ (90,443) $(1,554,579) $(166,190)
============ ========= ========== =========== =========
NET LOSS
PER SHARE $ (3.82) $ (0.08) $ (0.05) $ (0.32) $ (0.10)
============ ========= ========== =========== =========
WEIGHTED AVERAGE NUMBER
OF SHARES
OUTSTANDING 1,355,216 4,853,490 1,692,421 4,853,490 1,627,098
============ ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
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Helix BioMedix, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the period from inception (November 7, 1988) to September 30, 2000
Inception to For the nine months
September 30, ended September 30,
2000 2000 1999
------------ ----------- ----------
NET CASH FLOWS FROM OPERATIONS $ (3,126,737) $ (651,788) $ (23,713)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (1,984) - -
Patents (328,722) (25,498) (29,522)
------------ ----------- ----------
NET CASH FLOWS FROM
INVESTING ACTIVITIES (330,706) (25,498) (29,522)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of stock for debt 832,819 - -
Issuance of stock for cash 2,019,380 - 1,470,450
Cash received in reverse acquisition 634,497 - -
Notes payable 16,394 (27,000) -
Related party notes payable (net) 705,887 - 50,000
------------ ----------- ----------
NET CASH FLOWS FROM FINANCING
ACTIVITIES 4,208,977 (27,000) 1,520,450
------------ ----------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 751,534 (704,286) 1,467,215
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - 1,455,820 763
------------ ----------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 751,534 $ 751,534 $1,467,978
============ =========== ==========
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 - 45,796
Notes converted to equity 1,639,548 - -
Cash paid for interest 61,497 51,635 -
Cash paid for income taxes - - -
The accompanying notes are an integral part of the financial statements.
F-3
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Helix BioMedix, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 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. Non-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 September 30, 2000 is as follows:
Measurement Compensation
Instrument Quantity Date Expense
-------------- ------------ ----------- ------------
Common shares 8,750 09/30/00 24,063
Common shares 40,000 12/14/99 50,000
Other non-cash - - 85,181
Options @ $0.70 20,000 12/14/99 11,000
Options @ $0.70 9,100 06/30/00 16,380
Options @ $0.70 8,750 09/30/00 17,937
------------
204,561
============
Conpensation recorded in connection with extension of vested options has
been charged to expense currently.
Compensation cost related to the options is recognized in an amount 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
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