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 June 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 June 30, 2000 was 4,852,200 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-5.
<PAGE>
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 June 30, 2000-----------------------------F-1
Statements of Operations--------------------------------------F-2
Statements of Cash Flows--------------------------------------F-3
Notes to Financial Statements------------------------------F-4 - F-5
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 13 years. The Company further believes
that the activity of a few competitors,
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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 $452,000 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 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
3
<PAGE>
of 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 and semi-annual net losses for the period ending June 30,
2000 increased to a level of $289,641 and $555,622 respectively. These
figures do 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 resented herein
for the quarterly period ended June 30, 2000, the Company now has good
near term financial liquidity. For the first 2 quarters of 2000 the
financial statements reflect an average monthly cash outflow (net) of
$81,000. Management projects that currently available cash on hand is
adequate to fund planned operations for the next six to nine 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.
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 did not make
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 June 16,2000 the parties agreed
to an out of court settlement whereby Helix paid $45,000 in cash to
IBG. This payment eliminated Helix's liability for the obligation of
the principal amount and accrued interest carried on its books. This
settlement payment resulted in an additional interest expense of
approximately $6,300 charged in the second quarter.
The Company is currently not involved in any other litigation.
4
<PAGE>
ITEM 2. CHANGES IN SECURITIES
On June 30, 2000, in consideration of services rendered and
pursuant to an amendment to an employment agreement, the Company
granted an option to purchase 27,300 common shares of the company at an
option price of $0.70 per share through December 31, 2002. The options
vest equally over three quarters ended June 30, 2000, September 30,
2000 and December 30, 2000. The total amount of services was valued at
$49,140.
On June 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 $37,625.
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
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 14, 2000
BY:/S/ THOMAS L. FRAZER
--------------------
Thomas L. Frazer, Director, Vice President and Chief Financial Officer
5
<PAGE>
HELIX BIOMEDIX, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
June 30, 2000
<PAGE>
CONTENTS
Page
BALANCE SHEET F-1
STATEMENTS OF OPERATIONS F-2
STATEMENTS OF CASH FLOWS F-3
NOTES TO FINANCIAL STATEMENTS F-4 - F-5
<PAGE>
Helix BioMedix, Inc.
(A Development Stage Company)
BALANCE SHEET
June 30, 2000
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 967,753
Prepaid expenses 6,375
----------
Total current assets 974,128
PROPERTY AND EQUIPMENT
Machinery and equipment 1,591
Furniture and fixtures 393
----------
1,984
Less: Accumulated depreciation 369
----------
1,615
OTHER ASSETS
Antimicrobial technology (net) 104,366
Patents pending and approved (net) 399,470
----------
503,836
----------
TOTAL ASSETS $ 1,479,579
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 14,442
Accounts payable - related party 1,948
Payroll taxes payable 1,331
Notes payable 9,000
Notes payable - related parties 163,154
Accrued interest payable 7,290
----------
Total current liabilities 197,165
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, 4,852,200 shares issued and outstanding 5,596,873
Additional paid-in-capital, net of
Deferred compensation component 133,462
Deficit accumulated during the
development stage (4,774,229)
----------
956,106
----------
Total liabilities and stockholders' equity $1,479,579
==========
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 June 30, 2000
<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,
2000 2000 1999 2000 1999
------------ --------- --------- ---------- --------
REVENUE $ 19,500 $ - $ - $ - $ -
OPERATING EXPENSES
Accounting, legal
& management 556,642 107,413 4,546 189,918 4,573
Advertising 13,566 - - - -
Amortization 173,986 12,844 6,236 19,798 12,472
Compensation
costs 137,400 - - - -
Consulting
fees 1,147,448 - 6,000 582,500 15,100
Office expense 193,511 (3,042) 2,821 3,004 8,857
Other general &
administrative 288,659 124,705 435 189,520 870
Research &
development 1,844,572 50,597 12,000 159,097 24,000
------------ -------- -------- ---------- --------
TOTAL OPERATING
EXPENSES 4,355,784 292,517 32,038 1,143,837 65,872
------------ -------- -------- ---------- --------
NET LOSS FROM
OPERATIONS (4,336,284) (292,517) (32,038) (1,143,837) (65,872)
OTHER (INCOME) EXPENSE
Gain on settlement
of lawsuit (48,574) - - - -
Interest income (50,668) (14,477) (438) (28,406) (876)
Interest
expense 537,187 18,676 10,313 29,766 20,091
------------ -------- ------- --------- -------
437,945 4,199 9,875 1,360 19,215
------------ -------- ------- --------- -------
NET LOSS $(4,774,229) $ (296,176) $ (41,913) $(1,145,197) $ (85,087)
=========== ========= ========== ========== =========
NET LOSS
PER SHARE $ (3.73) $ (0.06) $ (0.03) $ (0.25) $ (0.05)
============ ========= ========== ========== =========
WEIGHTED AVERAGE NUMBER
OF SHARES
OUTSTANDING 1,279,474 4,843,450 1,622,400 4,584,450 1,617,880
============ ========== ========== ========== ==========
</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 June 30, 2000
Inception to For the six months
June 30, ended June 30,
2000 2000 1999
------------ ----------- ----------
NET CASH FLOWS FROM OPERATIONS $ (2,924,428) $ (449,479) $ 19,545
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (1,984) - -
Patents (314,812) (11,588) (20,111)
------------ ----------- ----------
NET CASH FLOWS FROM
INVESTING ACTIVITIES (316,796) (11,588) (20,111)
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 16,394 (27,000) -
Related party notes payable (net) 705,887 - -
------------ ----------- ----------
NET CASH FLOWS FROM FINANCING
ACTIVITIES 4,208,977 - -
------------ ----------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 967,753 (488,067) (566)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - 1,455,820 763
------------ ----------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 967,753 $ 967,753 $ 197
============ =========== ==========
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 - 17,989
Notes converted to equity 1,639,548 - -
Cash paid for interest 61,497 41,485 -
Cash paid for income taxes - - -
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
June 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 g
enerally 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 June 30, 2000 is as
follows:
Measurement Compensation
Instrument Quantity Date Expense
Common shares 8,750 06/30/00 21,875
Options @ $0.70 20,000 12/14/99 11,000
Options @ $0.70 27,300 06/30/00 21,221**
Options @ $0.70 8,750 06/30/00 15,750
$ 69,846
** Net of amounts previously recognized under an agreement which was
superceded.
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. (APB 25)
For purposes of loss per share, all shares above have been treated
as outstanding as of the date they are earned.
F-4
<PAGE>
Helix BioMedix, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
3. Settlement of Litigation
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 did not make 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 June 16, 2000 the parties agreed to an out of court settlement whereby
Helix paid $45,000 in cash to IBG. The settlement resulted in an additional
charge to operations of $6,300 in the current quarter.
F-5
