UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------------
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report - March 12, 2003 (March 11, 2003)
(Date of earliest event reported)
Hemispherx Biopharma, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-27072 52-0845822
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification
Number)
1617 JFK Boulevard 19103
(Address of principal executive offices) (Zip Code)
Area Code (215) 988-0080
(Registrant's telephone number
Item 7. Financial Statements and Exhibits.
Seth forth below are the required Financial Statements and Pro Forma Financial
Information related to the Registrant's acquisition of certain assets of
Interferon Sciences, Inc. on March 11, 2003.
(a) Financial Statements.
The financial statements of Interferon Sciences, Inc. ("ISI") as of December 31,
2002 and 2001, and for the three years ended December 31, 2002 are included as
EXHIBIT 99.1 to this Form 8-K/A and are incorporated herein by reference.
(b) Unaudited Pro forma Financial Information.
Consolidated Statements of Operations for the year ended December 31, 2002 and
for the three months ended March 31, 2003.
Consolidated Balance Sheet as of March 31, 2003.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On March 11, 2003, we executed two agreements with Interferon Sciences, Inc.
("ISI") to purchase certain of its assets.
In the first agreement with ISI, the Company acquired ISI's inventory of ALFERON
N Injection(R), and a limited license for the production, manufacture use,
marketing and sale of this product. For these assets, the Company:
i) Issued 487,028 shares of its common stock, and
ii) Agreed to pay ISI 6% of the net sales of the Product.
The Company also is required to pay ISI a service fee and pay certain of ISI's
obligation related to the product.
In the second agreement with ISI, ISI has agreed to sell to the Company all of
ISI's rights to the product and other assets related to the product including,
but not limited to, real estate and machinery. For these assets, the Company
will: i) Issue an additional 487,028 shares of its common stock; and ii)
Continue to pay ISI 6% of the net sales of the product
In addition, the Company was required to satisfy three obligations of ISI. The
Company satisfied two of these obligations, pursuant to forbearance agreements
with The American National Red Cross and GP Strategies Corporation, two of ISI's
creditors, by issuing an aggregate of 581,761 shares of common stock to these
creditors. The third obligation is approximately $521,000 and was secured by a
lien on the property.
The second agreement with ISI is contingent on the Company receiving appropriate
governmental approval for the real estate transaction and ISI stockholders
approving the transactions contemplated by the second agreement.
We will account for these transactions as a Business Combination under Statement
of Financial Accounting Standards ("SFAS") No. 141 Accounting for Business
Combinations.
On March 12, 2003, we issued an aggregate of $5,426,000 in principal amount of
6% Senior Convertible Debentures due January 31, 2005 and an aggregate of
743,288 Warrants to two investors in a private placement for aggregate
anticipated gross proceeds of $4,650,000. Pursuant to the terms of the
Debentures, $1,550,000 of the proceeds from the sale of the Debentures were held
back and were to be released to us if, and only if we acquire, within a set time
frame, ISI's facility, which is currently contingent upon receiving the
appropriate governmental and ISI stockholder approval. The Debenture Holders
waived this requirement and, on June 12, 2003, we received the $1,550,000. The
Debentures mature on January 31, 2005 and bear interest at 6% per annum, payable
quarterly in cash or, subject to satisfaction of certain conditions, common
stock. Any shares of common stock issued to the investors as payment of interest
shall be valued at 95% of the average closing price of the common stock during
the five consecutive business days ending on the third business day immediately
preceding the applicable interest payment date. Pursuant to the terms and
conditions of the Senior Convertible Debentures, we have pledged all of our
assets other than intellectual property, as collateral and are subject to comply
with certain financial and negative covenants, which include but are not limited
to the repayment of principal balances upon achieving certain revenue milestone.
The Debentures are convertible at the option of the investors at any time
through January 31, 2005 into shares of our common stock. The conversion price
under the Debentures is fixed at $1.46 per share, subject to adjustment for
anti-dilution protection for issuance of common stock or securities convertible
or exchangeable into common stock at a price less than the conversion price then
in effect.
The investors also received Warrants to acquire at any time through March 12,
2008 an aggregate of 743,288 shares of common stock at a price of $1.68 per
share. On March 12, 2004, the exercise price of the Warrants will reset to the
lesser of the exercise price then in effect or a price equal to the average of
the daily price of the common stock between March 13, 2003 and March 11, 2004
(but in no event less than $1.176 per share). The exercise price (and the reset
price) under the Warrants also is subject to similar adjustments for
anti-dilution protection. All of these warrants were exercised on June 25, 2003.
On June 25, 2003 the investors received additional warrants to acquire an
aggregate of 1,000,000 shares of common stock. The warrants are exercisable at
$2.40 per share within five years from the date of issuance. On June 25, 2004,
the exercise price of the Warrants will reset to the lesser of the exercise
price then in effect or a price equal to the average of the daily price of the
common stock between June 26, 2003 and June 23, 2004 (but in no event less than
$1.68 per share). The exercise price (and the reset price) under the Warrants
also is subject to similar adjustments for anti-dilution protection.
The following unaudited Pro Forma consolidated statement of operations for the
year ended December 31, 2002 and the three months ended March 31, 2003 have been
prepared giving effect to the acquisition of certain assets of ISI and the
related funding of the transaction, by the Company's senior convertible
debentures, as if they occurred on January 1, 2002.
The following unaudited Pro Forma consolidated balance sheet has been prepared
as if the second portion of the acquisition of certain assets of ISI and the
related funding of the transaction, by the Company's senior convertible
debentures, had occurred on March 31, 2003.
The unaudited pro-forma adjustments give effect to the second agreement with ISI
irrespective of the fact that the second acquisition remains unconsummated and
is contingent on the Company receiving the appropriate governmental approval for
the real estate to be acquired and ISI stockholders approving the transaction.
The unaudited Pro Forma consolidated financial statements should be read in
conjuction with the notes hereto and the following: o The Company's historical
consolidated financial statements and notes thereto for the year ended December
31, 2002 included
in the Company's Annual Report on Form 10-K/A
o The Company's historical consolidated financial statements and notes
thereto for the three months ended March 31, 2003 included in the Company's
Report on Form 10-Q.
o The historical financial statements and notes thereto of ISI included as
Exhibit 99.1 to this Current Report of Form 8-K/A.
The following unaudited Pro Forma consolidated financial statements are
preliminary and subject to change based on finalization of the other applicable
post-closing adjustments including the finalization of the fair values assigned
to acquired assets and assumed obligations. Results are not intended to indicate
what operations would have been if transactions would have been consummated on
these dates or a reflection of future operations.
Hemispherx Biopharma, Inc. and
Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations
Year ended December 31, 2002 (4) PRO FORMA
(in thousands, except per share data) (3) PRO FORMA AS FURTHER
PRO FORMA PRO FORMA FURTHER ADJUSTED
(1) (2) ADJUSTMENTS AS ADJUSTED ADJUSTMENTS FOR
HEMISPHERX INTERFERON FOR FIRST FOR FIRST FOR SECOND SECOND
BIOPHARMA, INC. SCIENCES, INC. ASSET ASSET ASSET ASSET
AND SUBSIDIARIES AND SUBSIDIARY ACQUISITION ACQUISITION ACQUISITION ACQUISITION
---------------- -------------- ----------- ----------- ----------- -----------
2002 2002
---- ----
Revenues:
Sales of product $ - $ 1,926 $ $ 1,926 $ $ 1,926
Clinical treatment programs 341 341 341
License fee income 563 563 563
----------------- ----------------- ------------ -------------- -------------- ----------------
904 1,926 - 2,830 - 2,830
----------------- ----------------- ------------ -------------- -------------- ----------------
Costs and expenses:
Costs of goods sold/idle
Production costs - 1,482 (37)(a) 1,445 60(e) 1,505
Research and development 4,946 1,514 (39)(a) 6,421 7(e) 6,428
General and administrative 2,015 1,818 (34)(a) 3,915 6(e) 3,921
116 (c)
------------------ ----------------- ------------- -------------- -------------- ----------------
Total cost and expenses 6,961 4,814 6 11,781 73 11,854
------------------ ----------------- ------------- -------------- -------------- ----------------
Interest and other income 103 7 (7)(a) 103 103
Interest and related expenses (386) 386 (a) (1,551) (1,609)(d) (3,160)
(1,551)(b)
Investments in
unconsolidated affiliates (1,470) (1,470) (1,470)
Gain on sale of state net
operating loss carryovers 528 (528)(a) - -
------------------ ----------------- ------------- -------------- -------------- ----------------
Net loss $ (7,424) $ (2,739) $ (1,706) $ (11,869) $ (1,682) $ (13,551)
------------------ ----------------- ------------- -------------- -------------- ----------------
Basic and diluted loss per
share $ (0.23) $ (0.36) $ (0.40)
------------------ -------------- ----------------
Basic and diluted weighted
Average common shares
outstanding
32,086 487 32,573 1,069 33,642
------------------ -------------- -------------- -------------- ----------------
See accompanying notes to consolidated statement of operations
NOTES TO UNAUDITED PROFORMA
CONSOLIDATED STATEMENT OF OPERATIONS
The following notes describe the column headings in the unaudited pro forma
consolidated statement of operations and the pro forma adjustments that have
been made to this statement:
(1) Reflects the audited consolidated historical statement of operations of
Hemispherx Biopharma, Inc. and subsidiaries for the year ended December 31,
2002.
(2) Reflects the audited consolidated historical statement of operations
for ISI for the year ended December 31, 2002.
(3) Reflects pro forma adjustments relating to the first acquisition of
certain assets of ISI and the related funding as follows:
(a) Adjustments to reflect the recording of costs related to sales of product
by ISI where values were reduced to zero in years prior to 2002, the
elimination of ISI's net interest expense, the elimination of ISI's
depreciation, and the elimination of a gain on the sale of a tax loss by
ISI as follows:
Inventory $(287)
Interest expense-net 379
Depreciation 397
Sale of state net operating loss
carryover (528)
-----
Total $( 39)
----
(b) Increase in interest expense resulting from the issuance of $3.1 million of
6% senior convertible debentures. Interest expense is inclusive of deferred
interest charges resulting from the Company recording debt discounts of
$2.1 million in recognition of fair values of detachable warrants,
contingent conversion features, original issued discount and settlement
costs recorded in connection with the debenture offering.
(c) Increase in general and administrative costs of resulting from the
recognition of 6% royalty charges on the net sales of the acquired ALFERON
N injection product.
(4) Reflects pro forma adjustments relating to the second acquisition of
certain asset of ISI and the related funding as follows:
(d) Increase in interest expense resulting from the issuance of an additional
$1.6 million 6% senior convertible debentures and additional detachable
warrants to purchase 1,000,000 shares of common stock at $2.40 per share .
Interest expense is inclusive of deferred interest charges resulting from
the Company recording of additional debt discounts of approximately $ 2.8
million in recognition of fair values of additional detachable warrants,
contingent conversion features, original issued discount and additional
settlement costs recorded in connection with the debenture offering.
(e) Adjustments reflect depreciation expense relating to the acquired building
as result of the second acquisition of certain assets of ISI.
Hemispherx Biopharma, Inc. and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations
Three Months ended March 31, 2003 (4) PRO FORMA
(in thousands, except per share data) (3) PRO FORMA AS FURTHER
PRO FORMA PRO FORMA FURTHER ADJUSTED
(1) (2) ADJUSTMENTS AS ADJUSTED ADJUSTMENTS FOR
HEMISPHERX INTERFERON FOR FIRST FOR FIRST FOR SECOND SECOND
BIOPHARMA, INC. SCIENCES, INC. ASSET ASSET ASSET ASSET
AND SUBSIDIARIES AND SUBSIDIARY ACQUISITION ACQUISITION ACQUISITION ACQUISITION
---------------- -------------- ----------- ----------- ----------- -----------
2003 2003
---- ----
Revenues:
Sales of product $19 $ 242 $ $ 261 $ $ 261
Clinical treatment programs 47 47 47
----------------- -------------- ----------- ----------- ----------- ------------
66 242 308 308
----------------- -------------- ----------- ----------- ----------- ------------
Costs and expenses:
Costs of goods sold/idle
Production costs 118 267 47 (a) 432 15 (e) 447
Research and development 873 190 (7) (a) 1,056 2 (e) 1,058
General and administrative 667 266 (7) (a) 941 2 (e) 943
15 (c)
----------------- -------------- ------------ ----------- ----------- ------------
Total cost and expenses 1,658 723 48 2,429 19 2,448
----------------- -------------- ------------ ----------- ----------- ------------
Interest and other income 50 50 50
Interest and related expenses (75) (33) 33 (a) (386) (399) (d) (785)
(311) (b)
Service fee income 115 (115) (a)
Other income 6 (6) (a)
Bulk sale of Alferon 1,164 (1,164) (a)
inventory
------------------ ------------- ------------ ----------- ----------- ------------
Net loss $ (1,617) $ 771 $ (1,611) $ (2,457) $ (418) $ (2,875)
------------------ ------------- ------------ ----------- ----------- ------------
Basic and diluted loss per $ (.05) $ (.07) $ (.09)
share
------------------ ----------- ------------
Basic and diluted weighted
Average common shares
outstanding
32,394 487 32,881 1,069 33,950
------------------ ------------ ----------- ----------- ------------
See accompanying notes to consolidated statement of operations
NOTES TO UNAUDITED PROFORMA
CONSOLIDATED STATEMENT OF OPERATIONS
The following notes describe the column headings in the unaudited pro forma
consolidated statement of operations and the pro forma adjustments that have
been made to this statement:
(1) Reflects the unaudited consolidated historical statement of operations
of Hemispherx Biopharma, Inc.and subsidiaries for the three months ended March
31, 2003.
(2) Reflects the unaudited consolidated historical statement of operations
for ISI for the period ended March 11, 2003.
(3) Reflects pro forma adjustments relating to the first acquisition of
certain assets of ISI and the related funding as follows:
(a) Adjustments to reflect the recording of costs related to sales of product
by ISI where values were reduced to zero in years prior to 2002, the
elimination of ISI's net interest expense, the elimination of ISI's
depreciation , and the elimination of a gain and service fee income in
connection with the sale of the Alferon business as follows:
Inventory $(109)
Interest expense 33
Depreciation 76
Service fee income (115)
Other income (6)
Bulk sale of Alferon inventory (1,164)
--------
Total $(1,285)
--------
(b) Increase in interest expense resulting from the issuance of $3.1 million of
6% senior convertible debentures. Interest expense is inclusive of deferred
interest charges resulting from the Company recording debt discounts of
$2.1 million in recognition of fair values of detachable warrants,
contingent conversion features and original issued discount and settlement
costs recorded in connection with the debenture offering.
(c) Increase in general and administrative costs resulting from the recognition
of 6% royalty charges on the net sales of the acquired ALFERON N injection
product.
(4) Reflects pro forma adjustments relating to the second acquisition of
certain asset of ISI and the related funding as follows:
(d) Increase in interest expense resulting from the issuance of an additional
$1.6 million 6% senior convertible debentures and additional warrants to
purchase 1,000,000 shares of common stock at $2.40 per share. Interest
expense is inclusive of deferred interest charges resulting from the
Company recording of additional debt discounts of approximately $2.8
million in recognition of fair values of additional detachable warrants,
contingent conversion features, original issued discount and additional
settlement costs recorded in connection with the debenture offering.
(e) Adjustments reflect depreciation expense relating to the acquired building
as result of the second acquisition of certain assets of ISI.
Hemispherx Biopharma, Inc. and Subsidiaries PRO FORMA
Unaudited Pro Forma Consolidated Balance Sheet (2) AS
March 31, 2003 (1) PRO FORMA ADJUSTED
(in thousands) HEMISPHERX ADJUSTMENTS FOR
BIOPHARMA, FOR SECOND SECOND
INC. AND ASSET ASSET
SUBSIDIARIES ACQUISITION ACQUISITION
------------- ------------ -----------
ASSETS
Current Assets:
Cash and cash equivalents $ 3,409 $ 1,471 $4,880
Other receivables 1,519 1,519
Inventories net of reserves 1,829 1,829
Prepaid and other current assets 142 142
-------------- ------------ ----------
Total current assets 6,899 1,471 8,370
-------------- ------------ ----------
Property, plant and equipment,net 133 2,189 2,322
Patent and trademark rights, net 978 978
Investments in unconsolidated
affiliates 408 408
Deferred financing costs 260 79 339
Other assets 51 51
-------------- ------------ ----------
Total assets $8,729 $3,739 $12,468
============== ============ ==========
LIABILITIES
Current liabilities:
Accounts payable $1,588 $ 522 $2,110
Accrued expenses 668 668
Current portion of long term
debt 570 (570) -
-------------- ------------ ----------
Total current liabilities 2,826 (48) 2,778
-------------- ------------ ----------
Long term debt-net of current
portion 638 (638) -
Redeemable common stock 675 675 1,350
Stockholders' equity :
Common stock 33 1 34
Additional paid-in capital 108,964 3,749 112,713
Accumulated deficit (100,691) (100,691)
Treasury stock (3,716) (3,716)
-------------- ----------- ----------
Total stockholders' equity 4,590 3,750 8,340
-------------- ----------- ---------
Total liabilities and
stockholders' equity $ 8,729 $ 3,739 $12,468
============== =========== ==========
See accompanying notes to consolidated balance sheet
NOTES TO UNAUDITED PROFORMA
CONSOLIDATED BALANCE SHEET
The following notes describe the column headings in the unaudited pro-forma
consolidated balance sheet and the pro forma adjustments that have been made to
this balance sheet:
(1) Reflects the unaudited consolidated historic balance sheet of
Hemispherx Biopharma Inc. and subsidiaries as of March 31, 2003.
(2) Reflects pro forma adjustments for the second acquisition of certain
assets of ISI of approximately $2.2 million, the assumption of certain
obligations, and the related financing, inclusive of the proceeds received
totaling approximately $1.5 million, from the issuance of an additional $1.6
million of 6% Senior Convertible Debentures, additional warrants to acquire an
aggregate of 1,000,000 shares of common stock, the recording of additional debt
discounts of approximately $2.8 million in recognition of fair values of
additional detachable warrants, contingent conversion features, original issued
discount and settlement costs recorded in connection with the debenture
offering, resulting in a net adjustment of approximately $1.2 million, which
effectively reduced the carrying value of the debt to zero and increased
additional paid in capital by approximately $3.8 million. Portions of the common
shares, totaling approximately $.7 million issued to ISI were redeemable in
nature and are reflected as such.
As a result of the agreements, the following table summarizes the estimated
fair values of the assets and liabilities assumed at the acquisition date.
(AMOUNTS IN THOUSANDS)
Second Acquisition
-------------------
Building $2,189
Fair Value of liabilities Assumed (522)
-------
Fair Value of Common Shares
Issued $1,667
=======
(a) Exhibits
Exhibit No. Exhibit
99.1 The financials statements of Interferon Sciences, Inc. as of December
31, 2002 and 2001 and for the three years ended December 31, 2002.
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 hereunto duly authorized.
Hemispherx Biopharma, Inc.
By:
/s/ William A. Carter
----------------------------------
August 13 , 2003 William A. Carter, M.D., President