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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934,
For the Quarterly Period Ended March 31, 1999
Commission File Number: 0-27072
HEMISPHERx BIOPHARMA, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-0845822
- ------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1617 JFK Boulevard, Suite 660, Philadelphia, PA 19103
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(Address of principal executive offices) (Zip Code)
(215) 988-0080
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed since last
report)
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.
/X/ Yes / / No
26,194,040 shares of common stock issued and outstanding as of March 31, 1999.
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PART I - FINANCIAL INFORMATION
ITEM 1: Financial Statements
HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
December 31, March 31,
1998 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $12,025,073 $10,549,567
Short Term Investments 1,591,378 500,000
Accounts Receivable 56,500 55,100
Prepaid expenses and other current assets 56,214 71,983
----------- ----------
Total current assets 13,729,165 11,176,650
Property and equipment, net 181,724 279,857
Patent and trademark rights, net 1,356,139 1,366,106
Investment in unconsolidated affiliates 1,038,000 1,038,000
Other assets 22,184 24,704
----------- ----------
Total assets $16,327,212 $13,885,317
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 802,538 $ 1,423,125
Accrued expenses 339,374 265,376
----------- ----------
Total current liabilities 1,141,912 1,688,501
Commitments and contingencies
Stockholders' equity:
Common stock 26,162 26,314
Additional paid-in capital 78,059,650 78,765,245
Treasury stock - (674,186)
Deferred compensation (1,184,830) (1,304,498)
Accumulated other comprehensive gain 324 -
Accumulated deficit (61,716,006) (64,616,059)
----------- ----------
Total stockholder's equity 15,185,300 12,196,816
----------- ----------
Total liabilities and stockholders' equity $16,327,212 $13,885,317
=========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited)
For the Three months ended
March 31
--------------------------
<S> <C> <C>
1998 1999
---------- ----------
Revenues:
Cost recovery - clinical treatment programs $ 85,911 $ 131,728
---------- ----------
Total revenues 85,911 131,728
---------- ----------
Costs and expenses:
Research and development 919,608 1,535,498
General and administrative 567,851 1,265,114
Stock compensation expense 216,808 378,079
---------- ----------
Total cost and expenses 1,704,267 3,178,691
Interest income 137,767 146,910
---------- ----------
Net loss $(1,480,589) $(2,900,053)
========== ==========
Basic loss per share $ (0.07) $ (0.11)
========== ==========
Weighted average shares outstanding 21,055,705 26,273,707
========== ==========
Diluted loss per share $ (0.07) $ (0.11)
========== ==========
Weighted average common and dilutive
equivalent shares outstanding 21,055,705 26,273,707
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY(DEFICIT) AND COMPREHENSIVE LOSS
For the three months ended March 31, 1999
<TABLE>
<CAPTION> Total
Common stock Common Stock Additional Deferred Accumulated other Accumulated Treasury stockholders'
shares Par value paid-in capital Compensation comprehensive loss deficit stock equity/(deficit)
------------ ------------ --------------- ------------ ------------------ ------------ -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance 12/31/98 26,162,040 $26,162 $78,059,650 $(1,184,830) $ 324 $(61,716,006) $ - $15,185,300
Common stock
issued 152,000 152 207,848 208,000
Purchase of
120,000 shares
of Treasury stock (674,186) (674,186)
Stock compensation 497,747 (119,668) 378,079
Total comprehensive loss (324) (2,900,053) (2,900,377)
------------ ------------ --------------- ------------ ------------------ ------------ --------- --------------
Balance 3/31/99 26,314,040 $26,314 $78,765,245 $(1,304,498) $ - $(64,616,059) $(674,186) $12,196,816
============ ============ =============== ============ ================== ============ ========= ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
For the three months ended
--------------------------
March 31
1998 1999
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,480,589) $(2,900,053)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation of property and equipment 8,241 20,440
Amortization of patents rights 72,864 51,835
Write-off of patent rights 44,604 7,962
Preferred stock compensation expense - -
Stock option compensation expense 216,808 378,079
Changes in assets and liabilities:
Accounts receivable 1,400
Prepaid expenses and other current assets 54 (15,769)
Accounts payable 107,606 620,587
Accrued expenses (13,222) (73,998)
Other assets - (2,520)
--------- ---------
Net cash used in operating activities (1,017,190) (1,912,037)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment (32,675) (118,573)
Additions to patent rights (55,377) (69,764)
Marketable securities matured - 1,591,054
Purchase of marketable securities - (500,000)
--------- ---------
Net cash used in investing activities (88,052) 902,717
--------- ---------
Cash flows from financing activities:
Exercise of warrants 21,507 208,000
Stock issuance cost (181,485) -
Purchase of treasury stock - (674,186)
--------- ---------
Net cash provided by (used in) financing activities (159,978) (466,186)
--------- ---------
Net decrease in cash and cash equivalents (1,265,220) (1,475,506)
Cash and cash equivalents at beginning of period 8,965,714 12,025,073
--------- ---------
Cash and cash equivalents at end of period $7,700,494 $10,549,567
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
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HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Hemispherx BioPharma, Inc. (the "Company"), a Delaware corporation and all its
wholly owned subsidiaries. All significant intercompany accounts and transac-
tions have been eliminated. The Company's interim consolidated financial
statements are unaudited.
In the opinion of management, all adjustments necessary for a fair presentation
of such consolidated financial statements have been included. Such adjustments
consist of normal recurring items. Interim results are not necessarily
indicative of results for a full year.
The interim consolidated financial statements and notes thereto are presented as
permitted by the Securities and Exchange Commission (SEC), and do not contain
certain information which will be included in the Company's annual consolidated
financial statements and notes thereto.
These consolidated financial statements should be read in conjunction with the
Company's 1998 consolidated financial statements included in the Company's Form
10K statement filed with the SEC on March 30, 1999.
NOTE 2: SERIES E CONVERTIBLE PREFERRED STOCK
In March, 1997, the Company used the services of an investment banking firm to
privately place $5 million of Series E Convertible Preferred Stock. The proceeds
from this placement were used to retire the balance of Series D Convertible
Stock issued in July of 1996. As an inducement to effect the early redemption of
the Series D Preferred Stock, the Company gave the Preferred Stockholder 200,000
shares of common stock with a guaranteed sales price of $6 per share. Any
shortfall in the selling price from $6 per share could be settled through cash
payments or additional shares at the election of the Company. As a result of
this inducement in 1997, the Company incurred a $1.2 million stock conversion
cost, which had no effect on the net equity of the company as it was offset by
an increase in additional paid-in capital. This agreement was settled upon a
cash payment of $109,712 in December, 1997, a cash payment of $79,587 in
January, 1998 and the issuance of 100,000 additional shares of common stock in
January, 1998.
The holders of Series E Convertible Preferred Stock shall receive cumulative
dividends when and if declared by the board of directors at the rate of $60 per
share. Holders of Series E Convertible Preferred Stock upon surrender of the
certificates shall have the right to convert the Series E preferred into fully
paid and non-assessable share of Common Stock.
On April 18, 1997, the Company's registration statement registering the common
stock underlying the preferred stock and warrants was declared effective by the
SEC.As of December 31, 1998, all holders of Series E convertible preferred stock
had converted their holding into 2,500,000 shares of common stock.
NOTE 3: STOCK COMPENSATION:
The Company recorded stock/warrant compensation expense of $378,079 during the
quarter ended March 31, 1999 for warrants granted to purchase Common stock to
non-employees of the Company.
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In 1998, the Company granted 1,163,000 stock warrants to Directors and certain
employees in recognition of services performed and services to be performed.
These options are exercisable at the fair value price on the date of grant
ranging from $3-$6 per share. The Company applies APB Opinion No. 25 in
accounting for stock-based compensation of its employees and, accordingly, no
compensation expense has been recognized for stock purchase rights issued to
employees in the financial statements.
NOTE 4: COMPREHENSIVE INCOME:
In January, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income ("Statement 130"), Statement
130 establishes new rules for the reporting and display of comprehensive income
and its components; however, the adoption of this Statement had no impact on the
Company's net loss or stockholders' equity. Comprehensive income is defined as
the change in equity of a business enterprise during a period from transactions
and other events and circumstances from non-owner sources. It includes all
changes in equity during a period except those resulting from investments by
owners and distributions to owners. The term "other comprehensive income"
refers to revenues, expenses, gains and losses that under generally accepted
accounting principles are included in comprehensive income but excluded from net
income.
The components of comprehensive (loss):
For the three months ending
------------------------------------
March 31, 1998 March 31, 1999
-------------- --------------
Net loss $(1,488,589) $(2,900,053)
Unrealized loss on short
term investments - (324)
------------ -------------
Total comprehensive loss $(1,488,589) $(2,900,377)
============ =============
The components of accumulated other comprehensive income are as follows:
December 31, 1998 March 31, 1999
----------------- --------------
Unrealized gain in
marketable securities $ 324 -
----------------- --------------
Accumulated other
comprehensive income $ 324 -
================= ==============
ITEM 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations.
GENERAL
Since 1980, the Company has devoted resources of some $150,000,000 to the
research and development of it's Nucleic Acid Technologies. Nucleic Acid
compounds represent a new class of pharmaceutical products designed to act at
the molecular and genetic level for the definitive treatment of certain
devastating
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human diseases. The Company's platform technology utilizes specifically
configured ribonucleic acids ("RNA") which are broadly protected by a patent
estate consisting of more than 300 patents. One of the Company's double-
stranded RNA drug products, trademarked "Ampligen",is in advanced human clinical
development for various therapeutic indications. Based on the results of pre-
clinical and clinical trials, the Company believes that Ampligen may have broad
spectrum anti-viral and anti-cancer potential. Over 400 patients have
participated in clinical trials authorized by the Food and Drug Administration
("FDA") at some twenty clinical sites across the United States, representing the
administration of more than 40,000 doses.
In October, 1998, the Company initiated a Phase III trial for the treatment of
230 patients afflicted with Myalgic Encephalomyelitis/Chronic Fatigue Syndrome
("ME/CFS") at various medical centers in the United States. In parallel, the
Company is conducting cost recovery treatment programs for ME/CFS patients in
the United States, Canada, Belgium and Austria.The treatment program in the U.S.
was recently expanded by FDA authorization. In December, 1998, the Company
completed and filed a full marketing application for approval to treat ME/CFS
patients in the European Union.
The Company is actively engaged in various market development strategies in the
United States and European Union, as well as other countries including Canada,
Australia and South Africa. Disease categories under active development include
ME/CFS, hepatitis and HIV. The Company maintains offices and clinical operations
in both the United States and European Union, as well as ownership interests in
a related European based diagnostic company and in a South African manufacturing
entity which produces its raw drug materials.
The Company is not yet profitable and may continue to have operating losses for
the next several years, dependent on the rate of progressive regulatory
approvals in various global markets. The Company's current revenues are derived
from the sale of Ampligen on a pre-approved cost recovery basis to certain
patients afflicted with ME/CFS. Such cost recovery programs have been approved
by the various regulatory bodies in the United States, Canada, Belgium and
Austria. The Company's other major source of income comes from interest earned
on the short term investment of surplus funds.
Product Development
As of April 30, 1999,the Company had initiated either the confirmatory Phase III
ME/CFS clinical program or the related cost recovery treatment program at more
than 10 investigative sites. Negotiations are in process with additional
investigative sites. As of April 30, 1999, over 175 patients have been enrolled
in these clinical trials. In total, the Company expects to operate in 15 to 20
medical centers located throughout the United States and enroll 330 patients in
this confirmatory Phase III and related clinical treatment programs. Of these
patients,230 patients will be enrolled in the confirmatory, randomized Phase III
study. The remaining 100 patients, ME/CFS patients who are not eligible for the
confirmatory Phase III trial in the United States,will be treated under the cost
recovery treatment program authorized by the Food and Drug Administration (FDA).
Similar cost recovery treatment programs have been initiated in Canada, Belgium
and Austria. Approximately one hundred patients have been treated, and/or are
under evaluation, in these countries. The Company responded to contractual
solicitations from the U.S. government to devise a new treatment strategy for
addressing "Gulf War Syndrome" which appears similar to CFS/ME in non-military
personnel in many respects.
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Manufacturing
The Company outsources the manufacturing of Ampligen to certain contractor
facilities in the United States and South Africa. Nucleic Acid polymers
constitute the raw materials used in the production of Ampligen. The Company
acquires its raw materials from Ribotech, Ltd., a subsidiary of Bioclones
Proprietary, Ltd., and Pharmacia Biotech, a former division of Pharmacia Upjohn
which holds a minority equity interest in the Company. Bioclones Proprietary,
Ltd. is a strategic partner with the Company and the Company owns 24.9% of
Ribotech, Ltd. Two manufacturers in the United States are used to process the
raw materials and produce clinical grade Ampligen.
Until recently, the Company has distributed Ampligen in the form of a freeze-
dried powder to be formulated by pharmacists at the site of use. The Company has
perfected a production process to produce ready to use liquid Ampligen in dosage
form which will mainly be used upon commercial approval of Ampligen. The Company
is in discussions with several major multinational pharmaceutical manufacturing
firms in search of additional production capacity and resultant lower costs for
producing these commercial quantities.
Europe
In December, 1998, the Company filed an application with the European Medical
Evaluation Agency ("EMEA") in the European Union for commercial approval of
Ampligen for use in treating ME/CFS patients. In February, 1999, the Company
received notice that the application cleared the first stage of the review by
being designated complete by the EMEA. This designation indicates that the
extensive clinical data submitted in support of the application would be
sufficient for the review process to proceed. Approval by the EMEA would provide
the Company access to the European Union market of some 500,000 ME/CFS patients.
The Company recently acquired 3% ownership in a Belgium company, R.E.D.
Laboratories, which developed a diagnostic test designed to detect ME/CFS in
patients. The R.E.D. diagnostic test is in the process of being evaluated in
clinical setting and should be ready to file for regulatory approval as a
diagnostic tool in the near future. The significance of this development is that
the test may facilitate the identification of a subset of ME/CFS sufferers who
may be treated with Ampligen. It is believed that introduction of such a test
may facilitate the regulatory approval process for the use of Ampligen in
treating ME/CFS, as well as identify suitable candidates for therapy earlier in
the disease process.
The Company recently presented a comprehensive clinical overview of its ME/CFS
treatment program at "Fatigue 2000", an international research conference held
in London. The Company and its collaborators have developed a report on the
potential pharmacoeconomics of using Ampligen to treat ME/CFS patients. This
data will be submitted to various regulatory and drug reimbursement authorities
in certain countries making up the European Union.
In addition, progress was made towards the development of inventory control and
to expand quality assurance facilities in the European Union. The Company is
seeking to identify and/or implement certain quality control processes,packaging
and storage capacity as well as identifying new distribution channels in Europe.
Spin-off of Subsidiary
The Company continues to evaluate plans to spin-off it's wholly-owned
subsidiary, Core Biotech Corporation, to its shareholders. As a separate entity,
Core Biotech would research, develop and commercialize therapeutic drug products
and diagnostic techniques related to Hepatitis B. It is contemplated that the
distribution would be tax free to shareholders. The purpose of the proposed
spin-off would be to provide a vehicle to focus and obtain resources necessary
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to pursue the use of Ampligen and related patented products in treating patients
afflicted with Hepatitis B or Hepatitis C. The Company believes this spin-off
would enhance shareholder value. This spin-off and timetable for such is subject
to further review and approval of the Board of Directors. The Company is also
actively considering acquisitions of new hepatitis treatment technology in order
to expand its portfolio of products in this disease category.
Recent Developments
Year 2000 Project
The Company's plan to become Year 2000 compliant is nearing completion. All non-
compliant hardware has been replaced and is in operation. New administrative and
clinical operating software systems have been installed and are now operating.
Administrative and clinical data in the old operating systems are being
transferred to the new systems. One manufacturing software operating system
still requires custom programming which is actively underway. The Company
expects this system to be tested and in place within the next two months.
Requests for statements of Y2K compliance have been mailed to 285 suppliers of
which 40 are considered to be critical. To date, 128 have responded including
38 critical businesses. A third request for a statement of compliance will be
sent to the non-responders/non-compliant businesses on or about June 1, 1999.
The overall cost of becoming Y2K compliant is expected to be $225,000 which will
also include upgrades in various computer capability for issuing regulatory
reports to various agencies as well as assisting in accelerated preparation of
scientific and medical articles.
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RESULTS OF OPERATIONS
Three months ended March 31, 1999 versus Three months ended March 31, 1998
- ----------------------------------------------------------------------------
The Company reported a net loss of $2,900,053 for the three months ended March
31, 1999 versus a net loss of $1,480,589 for the same period in 1998. Several
factors contributed to the $1,419,464 increase in the loss in 1999, including
major incremental costs of securing larger drug inventory as well as higher non-
operating expenses due to stock option expenses.
Research and development costs increased $615,890 primarily due to a major
acquisition of raw materials to be used in manufacturing Ampligen. Raw material
purchases increased $539,708 over purchases in the first three months of 1998.
This purchase reflects the Company's plan to increase on-hand inventories in
anticipation of meeting product needs for increased clinical trial efforts and
possible commercial needs. Certain preclinical research expenses were down from
the prior year by $94,735 primarily due to major costs incurred in the first
quarter of 1998 for animal toxicology studies. Clinical trial expenses increased
$186,679 primarily due to activity on the AMP 516 ME/CFS clinical program which
was initiated in October, 1998.
General and administrative expenses increased $697,263 over the same period in
1998 due to a variety of initiatives requiring additional legal services and
consultative skills, as well as increased non-operating costs. Expenses incurred
for legal and audit, the spin-off evaluation of Core Biotech to shareholders as
a tax-exempt dividend, shareholder communications and European matters increased
materially in the first quarter. Litigation work by outside attorneys on the
Asensio company lawsuit, the ELL & Co. lawsuit, the VMW lawsuit and other legal
matters increased approximately $296,000. Work performed by attorneys and tax
authorities in evaluating and drafting documents in the matter of the spin-off
was $122,500. There was no such effort in the first quarter of 1998.
Shareholder communications expenses were up $122,000 due to increased
communications with the public shareholders. In addition, consulting expenses
increased $88,900 in the first quarter due to efforts performed in support of
the European operation.
Stock compensation expense was $378,079 in the first quarter of 1999 versus
$216,808 recorded in the first quarter of 1998. Stock compensation expense
reflects the value of warrants to purchase common stock that were granted to
non-employees of the Company.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at March 31, 1999 was $10,549,567 compared to
$12,025,073 at December 31, 1998, reflecting a net cash decrease of $1,475,506
in the first three months of 1999. In addition to the cash and cash equivalents
of $10,549,567 at March 31, 1999, the Company had $500,000 in short term
investments. These funds with an aggregate total of $11,049,568 reflect the
residual of the $9.4 million net proceeds of two private placements of equity in
October 1997, the exercise of warrants in 1998 by shareholders in the amount of
$8.8 million and a private placement totaling $2.25 million in the third quarter
of 1998 less operating expenses.
In the first quarter of 1999, the Company instituted a stock buy back program
pursuant to approval of the Board of Directors and acquired 120,000 shares of
the Company's common stock on the open market at a cost of $674,186. The Board
of Directors authorized the buy back of up to 200,000 shares.
Revenues from the ME/CFS clinical treatment cost recovery programs underway in
the United States,Canada and Belgium produced $131,728 in revenues for the first
three months of 1999, substantially higher than in previous quarters. Interest
income on the short term investment of surplus funds produced $146,910, also an
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increase over the prior year. Funds from shareholders exercising warrants and
options to purchase common stock totaled $208,000 in the first three months of
1999.
The Company expects warrant holders to continue exercising the Class A
redeemable warrants and private warrants from time to time depending on the
trading price of the Company common stock. As of March 31, 1999, the Company
has 5,648,810 Class A redeemable warrants outstanding. These warrants can be
exercised at $4.00 per share. In addition, there are 462,000 Class A redeemable
warrants outstanding at an exercise price of $6.60 per share. Non-public
warrants outstanding total 8,854,000 with a weighted average exercise price of
$3.46.
Because of the Company's long-term capital requirements, it may seek to access
the public equity market whenever conditions are favorable, even if it does not
have an immediate need for additional capital at that time. Any additional
funding may result in significant dilution and could involve the issuance of
securities with rights which are senior to those of existing stockholders. The
Company may also need additional funding earlier than anticipated, and the
Company's cash requirements in general may vary materially from those now
planned, for reasons including, but not limited to, changes in the Company's
research and development programs, clinical trials,competitive and technological
advances, the regulatory process, and higher than anticipated expenses and lower
than anticipated revenues from certain of the Company's clinical trials for
which cost recovery from participants has been approved.
Part II OTHER INFORMATION
ITEM 1: Legal Proceedings
On September 14, 1998, VMW, Inc. filed a complaint against the Company in the
United States District Court, Southern Division of New York. The complaint
alleges that the Company failed to fulfill its financial obligations to VMW,Inc.
with respect to a certain letter agreement pertaining to marketing services
rendered. VMW, Inc. claims damages of less than $100,000. The Company
counterclaimed alleging breach of contract by VMW and have demanded damages of
approximately $25,000. Settlement negotiations started in May, 1999 and we
believe that any settlement arranged will not have a material effect on the
results of operations or financial position of the Company.
Ell & Co., and the Northern Trust Company, as Trustee of the AT&T Master Pension
Trust filed a complaint against the Company in the Court of Chancery of the
State of Delaware in and for New Castle County on September 23, 1998. This
complaint alleges that the Company breached its contractual obligations as set
forth in the Certificate of Powers, Designations, Preferences and Rights of the
Series E Convertible Stock. The Plaintiff seeks to enforce its rights to
convert 1,500 shares of Series E Preferred Stock into 750,000 shares of freely
traded common stock and to recover damages for its inability to convert the
preferred stock when it requested to do so. The Company does not believe that
the complaint will have a material effect on the results of operations or
financial position of the Company. Although the Company maintains that the
1,500 shares of Series E Preferred Stock had been properly redeemed and,
therefore, the plaintiff was not contractually able to effect a proper
conversion into common shares, the Company agreed in December, 1998 to convert
the plaintiffs preferred stock to common stock. Currently the claim is still
in litigation.
The Company filed a complaint against Manual P. Asensio, Asensio & Company, Inc.
and others in the United States District Court for the Eastern District of
Pennsylvania on September 30, 1998. The Company alleges the unlawful
manipulation and short selling by defendants of the Company's common stock on
the American Stock Exchange on or about September 15, 1998 through the present.
The
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<PAGE> 13
Company alleges, among other things, that the defendants distributed materially
false information concerning Hemispherx to the public, thereby damaging the
Company and its shareholder equity. Certain defendants have entered motions to
dismiss all or part of the case. On March 18, 1999, the court dismissed the
charges relating to RICO violations and negligence count on purely
jurisdictional grounds. The fraud, misrepresentation and defamation charges
remain in effect and discovery on these matters is proceeding.
ITEM 2: Changes in Securities
In February, 1998,the Company filed a Registration Statement with the Securities
and Exchange Commission (SEC) to register the common stock placed in the
September 1997 private placements. The statement included common stock
underlying certain stock purchase warrants with registration rights.
In July, 1998,the Company's Common Stock and Class A Warrants were listed on the
Berlin Stock Exchange. The shares and warrants will trade under the symbols HXB
and HXBA respectively. The listing on the Berlin Stock Exchange has been
facilitated by Berliner Freiverkehr, a major German investment banking and
brokerage firm, with assistance from Value Management & Research, GmbH, a
European based Research and Investment Firm.
In April, 1999, the company filed a Registration Statement with the Securities
and Exchange Commission (SEC) to register the common stock privately placed in
July, 19998. In addition, certain warrants and underlying common stock was
included in the Registration.
In February, March, and April,1999 the Company acquired 120,000 shares of Common
Stock on the open market at an average cost of $5.62 per share. This acquisition
is part of the 200,000 share buy back program authorized by the Board of
Directors.
ITEM 3: Defaults in Senior Securities
None
ITEM 4: Submission of Matters to a Vote of Security Holders
None
ITEM 5: Other Information
The Company's Annual Meeting is scheduled to be held in Philadelphia,
Pennsylvania at the Embassy Suites in Center City on Wednesday, July 14, 1999 at
10:00 am. Only shareholders of record at the close of business on May 17, 1999
are entitled to receive notice of, and vote at the annual meeting.
ITEM 6: Exhibits and Reports on Form 8K
Reports on Form 8K - None
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<PAGE> 14
SIGNATURES
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.
HEMISPHERx BIOPHARMA, INC.
/S/ William A. Carter
---------------------------
Date: May 14, 1999 William A. Carter, M.D.
Chief Executive Officer & President
/S/ Robert E. Peterson
--------------------------
Date: May 14, 1999 Robert E. Peterson
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 10,549,567
<SECURITIES> 500,000
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0
0
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<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
