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Year Ended December 31, -------------------------------------------------------- 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Income Statement Data: (In millions, except per common share data, number of catalog titles and number of countries) Net sales................................. $1,686.1 $1,754.5 $1,435.7 $1,145.4 $911.9 Gross profit.............................. $ 209.9 $314.5 $288.6 $265.5 $249.6 Selling, general and administrative expenses................ $270.9 $254.7 $224.2 $206.3 $180.1 Income (loss) from operations............. $(61.0) $59.8 $64.3 $59.3 $69.5 Income taxes.............................. $(24.5) $24.5 $25.8 $23.3 $27.7 Net income (loss)......................... $(40.8) $36.0 $41.3 $38.8 $43.7 Net income (loss) per common share: Basic................................. $(1.19) $1.01 $1.11 $1.02 $1.16 Diluted............................... $(1.19) $1.01 $1.11 $1.02 $1.15 Weighted average common shares outstanding: Basic................................. 34.3 35.8 37.3 38.0 37.6 Diluted............................... 34.3 35.8 37.3 38.2 38.1 Selected Operating Data: Active customers (1)...................... 1.5 1.8 1.8 1.8 1.7 Orders entered............................ 3.9 4.4 3.8 3.5 3.4 Number of catalogs distributed............ 157 171 179 162 160 Number of catalog titles.................... 37 37 44 41 40 Number of countries receiving catalogs...... 14 14 14 13 12 Balance Sheet Data (at December 31): Working capital .......................... $106.7 $186.9 $194.6 $187.8 $194.4 Total assets................................ $538.0 $551.8 $454.4 $399.7 $331.4 Short-term debt........................... $48.6 $9.0 $.5 Long-term debt, excluding current portion......................... $1.7 $2.5 $2.0 $2.0 Stockholders' equity...................... $255.7 $310.2 $286.6 $272.2 $228.6 (1) An "active customer" is defined as a customer who has purchased from the Company within the preceding 12 months. |
Other factors that could contribute to or cause such differences include, but are not limited to, unanticipated developments in any one or more of the following areas: (i) the Company's ability to manage rapid growth as a result of internal expansion and strategic acquisitions, (ii) the effect on the Company of volatility in the price of paper and periodic increases in postage rates, (iii) the operation and anticipated upgrading of the Company's management information systems, (iv) the general risks attendant to the conduct of business in foreign countries, including currency fluctuations associated with sales not denominated in United States dollars, (v) significant changes in the computer products retail industry, especially relating to the distribution and sale of such products, (vi) competition in the PC, notebook computer, computer related products, industrial products and office products markets from superstores, direct response (mail order) distributors, mass merchants, value added resellers, the Internet and other retailers, (vii) the potential for expanded imposition of state sales taxes, use taxes, or other taxes on direct marketing and e-commerce companies, (viii) the continuation of key vendor relationships including the ability to continue to receive vendor supported advertising, (ix) timely availability of existing and new products, (x) risks involved with e-commerce, including possible loss of business and customer dissatisfaction if outages or other computer-related problems should preclude customer access to the Company's web sites, (xi) risks associated with delivery of merchandise to customers by utilizing common delivery services such as UPS, including possible strikes, (xii) risks due to shifts in market demand and/or price erosion of owned inventory, (xiii) ability to consummate and maintain satisfactory loan agreements with the Company's lenders, (xiv) borrowing costs, (xv) changes in taxes due to changes in the mix of U.S. and non-U.S. revenue, (xvi) pending or threatened litigation and investigations and (xvii) the availability of key personnel, as well as other risk factors which may be detailed from time to time in the Company's Securities and Exchange Commission filings. |
Description 3.1 Certificate of Incorporation of Registrant1 3.2 By-laws of Registrant1 3.3 Certificate of Amendment of Certificate of Incorporation changing the Company's name to Systemax Inc.7 4.1 Stockholders Agreement2 10.1 Form of 1995 Long-Term Stock Incentive Plan3* 10.2 Exchange Agreement dated as of May 8, 1995 between certain stockholders of the Predecessor Companies and the Company1 10.3 Lease Agreement dated October 14, 1992 between the Company and 2RB Associates Co. (Port Washington facility)1 10.4 Lease Agreement dated September 20, 1988 between the Company and Addwin Realty Associates (Port Washington facility)1 10.4A Amendment to Lease Agreement dated September 29, 1998 between the Company and Addwin Realty Associates (Port Washington facility) 8 10.5 Lease Agreement dated as of July 17, 1997 between the Company and South Bay Industrials Company (Compton facility)4 10.6 Build-to-Suit Lease Agreement dated April, 1995 among the Company, American National Bank and Trust Company of Chicago and Walsh, Higgins&Company (Naperville facility)1 10.7 Lease Agreement dated September 17, 1998 between Tiger Direct, Inc. and Keystone Miami Property Holding Corp. (Miami facility)5 10.9 Royalty Agreement dated June 30, 1986 between the Company and Richard Leeds, Bruce Leeds and Robert Leeds, and Addendum thereto1 10.10 Form of 1995 Stock Plan for Non-Employee Directors3* 10.11 Consulting Agreement dated as of January 1, 1996 between the Company and Gilbert Rothenberg3* 10.12 Asset Purchase Agreement dated September 12, 1997 among Infotel, Inc., Mark L. Runkle, Midwest Micro Corp. and the Company6 10.13 Employment Agreement dated as of December 12, 1997 between the Company and Steven M. Goldschein4* 10.14 Revolving Credit Agreement among the Company, certain subsidiaries of the Company, The Chase Manhattan Bank, as Agent, and The Bank of New York, as Documentation Agent, dated November 30, 200010 10.15 Security Agreement, dated as of October 16, 2000, among the Company, certain subsidiaries of the Company and the Chase Manhattan Bank for itself and as agent for The Bank of New York 11 10.16 First Amendment, dated as of January 22, 2001 to Revolving Credit Agreement among the Company, certain subsidiaries of the Company, The Chase Manhattan Bank, as Agent, and The Bank of New York, as Documentation Agent, dated November 30, 200013 10.17 Second Amendment, dated as of March 16, 2001 to Revolving Credit Agreement among the Company, certain subsidiaries of the Company, The Chase Manhattan Bank, as Agent, and The Bank of New York, as Documentation Agent, dated November 30, 2000 19.1 Specimen stock certificate of Registrant14 19.2 Form of 1999 Long-Term Stock Incentive Plan9* Subsidiaries of the Registrant Consent of experts and counsel: Consent of Independent Public Accountants Audit Committee Charter 12 * Management contract or compensatory plan or arrangement (b) Reports on Form 8-K. A report on Form 8-K was filed by the Company on November 9, 2000 concerning the Company's announcement of its financial results for the quarter ended September 30, 2000 and its restatement of financial results for the quarters ended March 31, 2000 and June 30, 2000. |
Signature Title Date /s/ RICHARD LEEDS Richard Leeds Chairman and Chief Executive Officer (Principal Executive Officer) March 27, 2001 /s/ BRUCE LEEDS Bruce Leeds Vice Chairman and President of International Operations March 27, 2001 /s/ ROBERT LEEDS Robert Leeds Vice Chairman and President of Domestic Operations March 27, 2001 /s/ ROBERT DOOLEY Robert Dooley Director and Senior Vice President-- Worldwide Computer Sales and Marketing March 27, 2001 /s/ STEVEN GOLDSCHEIN Steven Goldschein Senior Vice President and Chief Financial Officer (Principal Financial Officer) March 27, 2001 /s/ MICHAEL J. SPEILLER Michael J. Speiller Vice President and Controller (Principal Accounting Officer) March 27, 2001 /s/ ROBERT D. ROSENTHAL Robert D. Rosenthal Director March 27, 2001 /s/ STACY DICK Stacy Dick Director March 27, 2001 ******** INDEPENDENT AUDITORS' REPORT The Shareholders and Board of Directors of SYSTEMAX INC.: We have audited the accompanying consolidated balance sheets of Systemax Inc. and its subsidiaries, (the "Company"), as of December 31, 2000 and 1999 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2000. |
/S/ DELOITTE & TOUCHE LLP New York, New York February 13, 2001 SYSTEMAX INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND 1999 (IN THOUSANDS, except for share data) 2000 1999 ---- ---- ASSETS ------ CURRENT ASSETS: Cash and cash equivalents $ 14,496 $ 17,470 Accounts receivable, net 183,493 200,082 Inventories 127,271 173,966 Prepaid expenses and other current assets 29,509 28,890 Income taxes receivable 25,486 Deferred income tax benefit 8,781 6,369 --------- ---------- Total current assets 389,036 426,777 PROPERTY, PLANT AND EQUIPMENT, net 74,749 46,839 GOODWILL, net 70,672 73,684 DEFERRED INCOME TAX BENEFIT 3,224 4,190 OTHER ASSETS 337 322 --------- ---------- TOTAL $ 538,018 $ 551,812 ========= ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Notes payable to banks $ 48,559 $ 9,000 Current portion of long-term debt 634 Accounts payable 170,548 165,525 Accrued expenses and other current liabilities 63,240 64,727 --------- ---------- Total current liabilities 282,347 239,886 --------- ---------- LONG-TERM DEBT 1,740 ---------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Preferred stock, par value $.01 per share, authorized 25 million shares, issued none Common stock, par value $.01 per share, authorized 150 million shares, issued 38,231,990; outstanding 34,104,290 (2000) and 35,237,790 (1999) 382 382 Additional paid-in capital 176,743 176,743 Accumulated other comprehensive loss (6,662) (2,748) Retained earnings 133,697 174,468 --------- ---------- 304,160 348,845 --------- ---------- Less: common stock in treasury at cost - 4,127,700 (2000) and 2,994,200 (1999) shares 48,489 38,659 --------- ---------- Total shareholders' equity 255,671 310,186 --------- ---------- TOTAL $ 538,018 $ 551,812 ========= ========== See notes to consolidated financial statements. |
SYSTEMAX INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNTS) 2000 1999 1998 ---- ---- ---- NET SALES $ 1,686,103 $1,754,472 $1,435,654 COST OF SALES 1,476,248 1,439,947 1,147,098 --------- --------- ---------- GROSS PROFIT 209,855 314,525 288,556 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 270,863 254,690 224,208 --------- --------- ----------- INCOME (LOSS) FROM OPERATIONS (61,008) 59,835 64,348 INTEREST AND OTHER INCOME (106) (1,153) (3,225) INTEREST EXPENSE 4,352 465 497 --------- --------- ----------- INCOME (LOSS) BEFORE INCOME TAXES (65,254) 60,523 67,076 PROVISION (BENEFIT) FOR INCOME TAXES (24,483) 24,511 25,824 --------- --------- ----------- NET INCOME (LOSS) $ (40,771) $ 36,012 $ 41,252 =========== ========= ========== NET INCOME (LOSS) PER COMMON SHARE: BASIC $ (1.19) $ 1.01 $ 1.11 =========== ========= ========= DILUTED $ (1.19) $ 1.01 $ 1.11 =========== ========= ========= See notes to consolidated financial statements. |
SYSTEMAX INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS) Accumulated Common Stock Other Number Additional Comprehensive Treasury Comprehensive of Paid-in Retained Income (Loss), Stock Income Shares Amount Capital Earnings Net of Tax at Cost (Loss) --------- -------- --------- -------- ------------ --------- --------- Balances, January 1, 1998 38,232 $ 382 $ 176,743 $ 97,204 $ (1,174) Change in cumulative translation adjustment 1,083 $ 1,083 Purchase of treasury shares (2,104) $ (28,604) Net income 41,252 41,252 ------- -------- --------- -------- ---------- --------- --------- Total comprehensive income $ 42,335 --------- Balances, December 31, 1998 36,128 382 176,743 138,456 (91) (28,604) Change in cumulative translation adjustment (2,657) $ (2,657) Purchase of treasury shares (890) (10,055) Net income 36,012 36,012 ------- -------- --------- -------- ---------- --------- --------- Total comprehensive income $ 33,355 --------- Balances, December 31, 1999 35,238 382 176,743 174,468 (2,748) (38,659) Change in cumulative translation adjustment (3,914) $ (3,914) Purchase of treasury shares (1,134) (9,830) Net loss (40,771) (40,771) ------- -------- --------- -------- ---------- --------- --------- Total comprehensive loss $ (44,685) --------- Balances, December 31, 2000 34,104 $ 382 $176,743 $ 133,697 $ (6,662) $(48,489) ======= ======= ======== ======== ========= ======== See notes to consolidated financial statements. |
SYSTEMAX INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS) 2000 1999 1998 ---- ---- ---- CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net income (loss) $(40,771) $ 36,012 $ 41,252 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization, net 13,608 11,170 7,482 Charges associated with the impairment of certain long lived assets 1,921 Provision for deferred income taxes 230 1,160 (2,728) Provision for returns and doubtful accounts 12,721 8,832 5,264 Changes in certain assets and liabilities: Accounts receivable (3,263) (46,578) (23,688) Inventories 43,124 (39,506) (23,942) Prepaid expenses and other current assets (1,245) (7,186) 330 Income tax receivable (25,486) Accounts payable and accrued expenses 9,554 54,714 33,801 -------- --------- ----------- Net cash provided by operating activities 8,472 20,539 37,771 -------- --------- ----------- CASH FLOWS USED IN INVESTING ACTIVITIES: Net change in short-term investments 5,050 3,967 Investments in property, plant and equipment (40,738) (21,981) (11,051) Acquisitions, net of cash acquired (10,176) Deferred payments on acquisitions (249) ( 9,000) (5,942) -------- --------- ----------- Net cash used in investing activities (40,987) (36,107) (13,026) -------- --------- ----------- CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Proceeds from long-term borrowings 3,326 Proceeds from short-term borrowings from banks 39,559 9,000 Repayments of long-term borrowings (2,245) (2,767) (168) Purchase of treasury shares (9,830) (10,055) (28,604) -------- --------- ----------- Net cash provided by (used in) financing activities 27,484 (3,822) (25,446) -------- --------- ----------- EFFECTS OF EXCHANGE RATES ON CASH 2,057 (5,169) (702) -------- --------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS (2,974) (24,559) (1,403) -------- --------- ----------- CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 17,470 42,029 43,432 -------- --------- ----------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 14,496 $ 17,470 $ 42,029 ======== ========= =========== SUPPLEMENTAL DISCLOSURES: Interest paid $ 4,176 $ 537 $ 309 ======== ========= =========== Income taxes paid $ 5,027 $ 21,684 $ 28,577 ======== ========= =========== See notes to consolidated financial statements. |
The following table reflects the plan activity for the years ended December 31, 2000, 1999 and 1998: Year-end Options For Shares Option Prices ---------- ------------- Outstanding, January 1, 1998 1,304,948 $17.50 to $39.06 Granted 469,450 $12.38 to $17.50 Cancelled (131,550) $17.50 to $18.41 -------- ---------------- Outstanding, December 31, 1998 1,642,848 $12.38 to $39.06 Granted 848,700 $ 7.31 to $ 7.88 Cancelled (65,164) $12.38 to $18.41 ------- ---------------- Outstanding, December 31, 1999 2,426,384 $ 7.31 to $39.06 Granted 4,000 $ 7.19 Cancelled (303,752) $ 7.31 to $18.41 -------- ---------------- Outstanding, December 31, 2000 2,126,632 $ 7.19 to $39.06 ========= The following table summarizes information for the three years ended December 31, 2000 concerning currently outstanding and exercisable options: 2000 1999 1998 -------------------------- --------------------------- ------------------------ Weighted-Average Weighted Average Weighted Average Fixed Options Shares Exercise Price Shares Exercise Price Shares Exercise Price ------------------------------------------------------------------------------ Outstanding at beginning of year 2,426,384 $14.34 1,642,848 $18.04 1,304,948 $19.28 Granted ......................... 4,000 $ 7.19 848,700 $ 7.32 469,450 $14.49 Cancelled ....................... (303,752) $11.72 (65,164) $17.14 (131,550) $17.64 ---------- ---------- -------- Outstanding at end of year ......2,126,632 $14.70 2,426,384 $14.34 1,642,848 $18.04 ========= ========= ========= Options exercisable at year end 1,133,547 595,050 335,550 Weighted average fair value per option granted during the year $5.60 $3.02 $5.77 As of December 31, 2000: Range of Weighted-Average Weighted-Average Weighted-Average Exercise Number Remaining Exercise Number Exercise Price Outstanding Contractual Life Price Exercisable Price ----------------------- ----------- ---------------- ---------------- ----------- --------------- $ 7.19 to $ 15.00 901,850 8.58 $ 8.49 167,526 $ 7.47 $ 15.01 to $ 20.00 977,782 5.38 $ 17.39 719,021 $ 17.41 $ 20.01 to $ 30.00 243,000 4.71 $ 26.57 243,000 $ 26.57 $ 30.01 to $ 39.06 4,000 5.33 $ 39.06 4,000 $ 39.06 --------- --------- $ 7.19 to $ 39.06 2,126,632 6.66 $ 14.70 1,133,547 $ 17.98 ========= ========= 7. |
A reconciliation of the difference between the income tax expense (benefit) and the computed income tax expense based on the Federal statutory corporate rate is as follows (in thousands): Year Ended December 31 2000 1999 1998 ---------------------- ------- ------- --------- Income tax at Federal statutory rate $(22,839) $ 21,183 $ 23,477 State and local income taxes, net of federal tax benefit (766) 2,461 2,511 Foreign operating losses with no benefit provided 932 Foreign income taxed at different rates (481) Other items, net (397) (65) (164) -------- -------- --------- $(24,483) $ 24,511 $ 25,824 ======== ======== ========= The deferred tax assets (liabilities) are comprised of the following (in thousands): 2000 1999 ------- -------- Current: Deductible assets....................................................$(5,030) $ (5,380) Non-deductible accruals and reserves..................................12,416 10,129 Non-deductible assets................................................. 1,430 1,692 Other................................................................. (35) (72) ------ -------- Current........................................................... 8,781 6,369 ------ -------- Non-current: Foreign net operating loss carryforwards.............................. 4,280 5,642 Accelerated depreciation..............................................(1,035) (968) Basis differences from acquisitions................................... (667) 792 Valuation allowances..................................................(2,923) (3,126) ------ -------- Non-current....................................................... (345) 2,340 ------ -------- Total.........................................................$8,436 $ 8,709 ====== ======== The foreign net operating loss carryforwards generally expire at dates through 2007 except for carryforwards in the United Kingdom and Germany, which have no expiration. |
QUARTERLY FINANCIAL DATA (UNAUDITED) Quarterly financial data is as follows (in thousands, except for per share amounts): First Second Third Fourth 2000 Quarter Quarter Quarter Quarter ---- ------- ------- ------- ------- Net sales.........................$ 448,870 $ 405,972 $ 409,795 $ 421,466 Gross profit......................$ 68,169 $ 44,348 $ 47,777 $ 49,561 Net loss .......................$ (2,552) $ (14,531) $ (14,236) $ (9,452) Net loss per common share: Basic and diluted........ ($ .07) ($ .43) ($ .42) ($ .28) First Second Third Fourth 1999 Quarter Quarter Quarter Quarter ---- ------- ------- ------- ------- Net sales.........................$ 421,651 $ 413,800 $ 440,659 $ 478,362 Gross profit......................$ 79,312 $ 76,222 $ 77,697 $ 81,294 Net income........................$ 10,763 $ 5,230 $ 9,314 $ 10,705 Net income per common share: Basic and diluted........$ .30 $ .15 $ .26 $ .30 * * * * * * * EXHIBIT INDEX 10.17 Second Amendment, dated as of March 16, 2001 to Revolving Credit Agreement among the Company, certain subsidiaries of the Company, The Chase Manhattan Bank, as Agent, and The Bank of New York, as Documentation Agent, dated November 30, 2000 Subsidiaries of the Registrant Consent of Independent Public Accountants |
Other factors that could contribute to or cause such differences include, but are not limited to, unanticipated developments in any one or more of the following areas: (i) the Company's ability to manage rapid growth as a result of internal expansion and strategic acquisitions, (ii) the effect on the Company of volatility in the price of paper and periodic increases in postage rates, (iii) the operation of the Company's management information systems, (iv) the general risks attendant to the conduct of business in foreign countries, including currency fluctuations associated with sales not denominated in United States dollars, (v) significant changes in the computer products retail industry, especially relating to the distribution and sale of such products, (vi) competition in the PC, notebook computer, computer related products, industrial products and office products markets from superstores, direct response (mail order) distributors, mass merchants, value added resellers, the Internet and other retailers, (vii) the potential for expanded imposition of state sales taxes, use taxes, or other taxes on direct marketing and e-commerce companies, (viii) the continuation of key vendor relationships including the ability to continue to receive vendor supported advertising, (ix) timely availability of existing and new products, (x) risks involved with e- commerce, including possible loss of business and customer dissatisfaction if outages or other computer- related problems should preclude customer access to the Company's web sites, (xi) risks associated with delivery of merchandise to customers by utilizing common delivery services such as UPS, including possible strikes, (xii) risks due to shifts in market demand and/or price erosion of owned inventory, (xiii) borrowing costs, (xiv) changes in taxes due to changes in the mix of U.S. and non-U.S. revenue, (xv) pending or threatened litigation and investigations and (xvi) the availability of key personnel, as well as other risk factors which may be detailed from time to time in the Company's Securities and Exchange Commission filings. |
DESCRIPTION ------ ------------------------------------------------ 3.1 Certificate of Incorporation of Registrant (1) 3.2 By-laws of Registrant (1) 3.3 Certificate of Amendment of Certificate of Incorporation changing the Company's name to Systemax Inc. (7) 4.1 Stockholders Agreement (2) 10.1 Form of 1995 Long-Term Stock Incentive Plan (3)* 10.2 Exchange Agreement dated as of May 8, 1995 between certain stockholders of the Predecessor Companies and the Company (1) 10.3 Lease Agreement dated October 14, 1992 between the Company and 2RB Associates Co. (Port Washington facility) (1) 10.4 Lease Agreement dated September 20, 1988 between the Company and Addwin Realty Associates (Port Washington facility) (1) 10.4A Amendment to Lease Agreement dated September 29, 1998 between the Company and Addwin Realty Associates (Port Washington facility) (8) 10.5 Lease Agreement dated May 25, 1989 between the Company and Addwin Realty Associates (Suwanee facility) (1) 10.6 Lease Agreement dated as of July 17, 1997 between the Company and South Bay Industrials Company (Compton facility) (4) 10.7 Build-to-Suit Lease Agreement dated April, 1995 among the Company, American National Bank and Trust Company of Chicago and Walsh, Higgins & Company (Naperville facility) (1) 10.8 Lease Agreement dated September 17, 1998 between Tiger Direct, Inc. and Keystone Miami Property Holding Corp. (Miami facility) (5) 10.9 Rent Guaranty dated as of October 14, 1992 by the Company to the Bank of New York (1) 10.10 Royalty Agreement dated June 30, 1986 between the Company and Richard Leeds, Bruce Leeds and Robert Leeds, and Addendum thereto (1) 10.11 Consulting Agreement dated as of December 22, 1992 between the Company and Paul Leeds (1)* 10.12 Form of 1995 Stock Plan for Non-Employee Directors (3)* 10.13 Consulting Agreement dated as of January 1, 1996 between the Company and Gilbert Rothenberg (3)* 10.14 Asset Purchase Agreement dated September 12, 1997 among Infotel, Inc., Mark L. Runkle, Midwest Micro Corp. and the Company (6) 10.15 Employment Agreement dated as of December 12, 1997 between the Company and Steven M. Goldschein (4)* 19.1 Specimen stock certificate of Registrant 19.2 Form of 1999 Long-Term Stock Incentive Plan (9)* 21 Subsidiaries of the Registrant 23 Consent of experts and counsel: Consent of Independent Public Accountants 27 Financial Data Schedule (EDGAR version only) - -------- 1 Incorporated herein by reference to the Company's registration statement on Form S-1 (Registration No. |
SIGNATURE TITLE DATE /s/ RICHARD LEEDS Chairman and Chief Executive Officer March 27, 2000 - ---------------------- (Principal Executive Officer) Richard Leeds /s/ BRUCE LEEDS Vice Chairman and President of March 27, 2000 - ---------------------- International Operations Bruce Leeds /s/ ROBERT LEEDS Vice Chairman and President of March 27, 2000 - ---------------------- Domestic Operations Robert Leeds /s/ ROBERT DOOLEY Director and Senior Vice President-- March 27, 2000 - ---------------------- Worldwide Computer Sales and Marketing Robert Dooley /s/ STEVEN GOLDSCHEIN Senior Vice President and Chief March 27, 2000 - ---------------------- Financial Officer (Principal Financial Steven Goldschein Officer) /s/ MICHAEL SPEILLER Vice President and Controller March 27, 2000 - ---------------------- (Principal Accounting Officer) Michael Speiller /s/ ROBERT D. ROSENTHAL Director March 27, 2000 - ------------------------ Robert D. Rosenthal /s/ STACY DICK Director March 27, 2000 - ---------------------- Stacy Dick ******** INDEPENDENT AUDITORS' REPORT The Shareholders and Board of Directors of SYSTEMAX INC.: We have audited the accompanying consolidated balance sheets of Systemax Inc. and its subsidiaries, (the "Company"), as of December 31, 1999 and 1998 and the related consolidated statements of net income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1999. |
The following table reflects the plan activity for the years ended December 31, 1999, 1998 and 1997: YEAR-END OPTIONS FOR SHARES OPTION PRICES --------- ---------------- Outstanding, January 1, 1997 1,206,500 $17.50 to $49.13 Granted 604,146 $17.50 to $18.41 Cancelled (505,698) $24.38 TO $49.13 -------- ---------------- Outstanding, December 31, 1997 1,304,948 $17.50 to $39.06 Granted 469,450 $12.38 to $17.50 Cancelled (131,550) $17.50 TO $18.41 -------- ---------------- Outstanding, December 31, 1998 1,642,848 $12.38 to $39.06 Granted 848,700 $ 7.31 to $ 7.88 Cancelled (65,164) $12.38 TO $18.41 --------- ---------------- Outstanding, December 31, 1999 2,426,384 $ 7.31 to $39.06 ========= The following table summarizes information for the three years ended December 31, 1999 concerning currently outstanding and exercisable options: An aggregate of 420,348 options granted during 1997, with exercise prices ranging from $24.38 to $49.13, were re-priced on April 28, 1997 with an exercise price of $17.50, which represented the market price of the common stock at such date. |
DESCRIPTION - ------ -------------------------------------------------------------------- 3.1 Certificate of Incorporation of Registrant(1) 3.2 By-laws of Registrant(1) 3.3 Certificate of Amendment of Certificate of Incorporation changing the Company's name to Systemax Inc.(7) 4.1 Stockholders Agreement(2) 10.1 Form of 1995 Long-Term Stock Incentive Plan(3)* 10.2 Exchange Agreement dated as of May 8, 1995 between certain stockholders of the Predecessor Companies and the Company(1) 10.3 Lease Agreement dated October 14, 1992 between the Company and 2RB Associates Co. (Port Washington facility)(1) 10.4 Lease Agreement dated September 20, 1988 between the Company and Addwin Realty Associates (Port Washington facility)(1) 10.4A Amendment to Lease Agreement dated September 29, 1998 between the Company and Addwin Realty Associates (Port Washington facility)(8) 10.5 Lease Agreement dated May 25, 1989 between the Company and Addwin Realty Associates (Suwanee facility)(1) 10.6 Lease Agreement dated as of July 17, 1997 between the Company and South Bay Industrials Company (Compton facility)(4) 10.7 Build-to-Suit Lease Agreement dated April, 1995 among the Company, American National Bank and Trust Company of Chicago and Walsh, Higgins & Company (Naperville facility)(1) 10.8 Lease Agreement dated September 17, 1998 between Tiger Direct, Inc. and Keystone Miami Property Holding Corp. (Miami facility)(5) 10.9 Rent Guaranty dated as of October 14, 1992 by the Company to the Bank of New York(1) 10.10 Royalty Agreement dated June 30, 1986 between the Company and Richard Leeds, Bruce Leeds and Robert Leeds, and Addendum thereto(1) 10.11 Consulting Agreement dated as of December 22, 1992 between the Company and Paul Leeds(1)* 10.12 Form of 1995 Stock Plan for Non-Employee Directors(3)* 10.13 Consulting Agreement dated as of January 1, 1996 between the Company and Gilbert Rothenberg(3)* 10.14 Asset Purchase Agreement dated September 12, 1997 among Infotel, Inc., Mark L. Runkle, Midwest Micro Corp. and the Company(6) 10.15 Employment Agreement dated as of December 12, 1997 between the Company and Steven M. Goldschein(4)* 19.1 Specimen stock certificate of Registrant 19.2 Form of 1999 Long-Term Stock Incentive Plan(9)* 21 Subsidiaries of the Registrant 23 Consent of experts and counsel: Consent of Independent Public Accountants 27 Financial Data Schedule (EDGAR version only) - --------- 1 Incorporated herein by reference to the Company's registration statement on Form S-1 (Registration No. |
Other factors that could contribute to or cause such differences include, but are not limited to, unanticipated developments in any one or more of the following areas: (i) the Company's ability to manage rapid growth as a result of internal expansion and strategic acquisitions, (ii) the effect on the Company of volatility in the price of paper and periodic increases in postage rates, (iii) the operation of the Company's management information systems including the costs and effects associated with the year 2000 date change problem, (iv) the general risks attendant to the conduct of business in foreign countries, including currency fluctuations associated with sales not denominated in United States dollars, (v) significant changes in the computer products retail industry, especially relating to the distribution and sale of such products, (vi) competition in the PC, notebook computer, computer related products, industrial products and office products markets from superstores, direct response (mail order) distributors, mass merchants, value added resellers, the Internet and other retailers, (vii) the potential for expanded imposition of state sales taxes, use taxes, or other taxes on direct marketing companies, (viii) the continuation of key vendor relationships including the ability to continue to receive vendor supported advertising, (ix) timely availability of existing and new products, (x) risks due to shifts in market demand and/or price erosion of owned inventory, (xi) borrowing costs, (xii) changes in taxes due to changes in the mix of U.S. and non-U.S. revenue, (xiii) pending or threatened litigation and investigations and (xiv) the availability of key personnel, as well as other risk factors which may be detailed from time to time in the Company's Securities and Exchange Commission filings. |
DESCRIPTION - -------- -------------------------------------------------------------- 3.1 Certificate of Incorporation of Registrant(1) 3.2 By-laws of Registrant(1) 4.1 Stockholders Agreement(2) 4.2 Specimen Stock Certificate of Registrant(1) 10.1 Form of 1995 Long-Term Stock Incentive Plan(3)* 10.2 Exchange Agreement dated as of May 8, 1995 between certain stockholders of the Predecessor Companies and the Company1 10.3 Lease Agreement dated October 14, 1992 between the Company and 2RB Associates Co. (Port Washington facility)(1) 10.4 Lease Agreement dated September 20, 1988 between the Company and Addwin Realty Associates (Port Washington facility)(1) 10.4A Amendment to Lease Agreement dated September 29, 1998 between the Company and Addwin Realty Associates (Port Washington facility) 10.5 Lease Agreement dated May 25, 1989 between the Company and Addwin Realty Associates (Suwanee facility)(1) 10.6 Lease Agreement dated as of July 17, 1997 between the Company and South Bay Industrials Company (Compton facility)(4) 10.7 Build-to-Suit Lease Agreement dated April, 1995 among the Company, American National Bank and Trust Company of Chicago and Walsh, Higgins & Company (Naperville facility)(1) 10.8 Lease Agreement dated September 17, 1998 between Tiger Direct, Inc. and Keystone Miami Property Holding Corp. (Miami facility)(5) 10.9 Rent Guaranty dated as of October 14, 1992 by the Company to the Bank of New York(1) 10.10 Royalty Agreement dated June 30, 1986 between the Company and Richard Leeds, Bruce Leeds and Robert Leeds, and Addendum thereto(1) 10.11 Consulting Agreement dated as of December 22, 1992 between the Company and Paul Leeds1(1)* 10.12 Form of 1995 Stock Plan for Non-Employee Directors(3)* 10.13 Consulting Agreement dated as of January 1, 1996 between the Company and Gilbert Rothenberg(3)* 10.14 Asset Purchase Agreement dated September 12, 1997 among Infotel, Inc., Mark L. Runkle, Midwest Micro Corp. and the Company(6) 10.15 Employment Agreement dated as of December 12, 1997 between the Company and Steven M. Goldschein(4)* 21.1 Subsidiaries of the Registrant 23 Consent of experts and counsel: Consent of Independent Public Accountants 27 Financial Data Schedule (EDGAR version only) - ------------------ 1 Incorporated herein by reference to the Company's registration statement on Form S-1 (Registration No. |
SIGNATURE TITLE DATE -------- ----- ----- /s/ RICHARD LEEDS Chairman and Chief Executive March 26, 1999 - ------------------------ Officer Richard Leeds (Principal Executive Officer) /s/ BRUCE LEEDS Vice Chairman and President of March 26, 1999 - ------------------------ International Operations Bruce Leeds /s/ ROBERT LEEDS Vice Chairman and President of March 26, 1999 - ------------------------ Domestic Operations Robert Leeds /s/ ROBERT DOOLEY Director and Senior Vice March 26, 1999 - ------------------------ President-- Worldwide Computer Robert Dooley Sales and Marketing /s/ STEVEN GOLDSCHEIN Senior Vice President and Chief March 26, 1999 - ------------------------ Financial Officer Steven Goldschein (Principal Financial Officer) /s/ MICHAEL SPEILLER Vice President and Controller March 26, 1999 - ------------------------ (Principal Accounting Officer) Michael Speiller /s/ ROBERT D. ROSENTHAL Director March 26, 1999 - ------------------------ Robert D. Rosenthal /s/ STACY DICK Director March 26, 1999 - -------------------------- Stacy Dick ******** INDEPENDENT AUDITORS' REPORT The Shareholders and Board of Directors of GLOBAL DIRECTMAIL CORP: We have audited the accompanying consolidated balance sheets of Global DirectMail Corp and its subsidiaries, (the "Company"), as of December 31, 1998 and 1997 and the related consolidated statements of net income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1998. |
LONG-TERM DEBT Long-term debt consists of the following (in thousands): 1998 1997 ------- ------ Mortgage loan (a)........................... $2,016 $ 1,972 Secured loan (b) ........................... 3,158 Other....................................... 12 ------ ------- Total long-term debt................... 5,174 1,984 Less: current maturities............... 2,681 12 ------ ------- $ 2,493 $ 1,972 ======= ====== At December 31, 1998, the aggregate maturities of long-term debt are as follows (in thousands): AMOUNT ------ 1999..................................................$ 2,681 2000................................................... 665 2001................................................... 665 2002................................................... 665 2003................................................... 498 ------- $ 5,174 ======= (a) subsidiary of the Company entered into a mortgage agreement in the amount of 1.2 million Pounds Sterling due in its entirety in June 1999, with interest payable semi-annually at a rate of 9.6 percent per annum. |
Other factors that could contribute to or cause such differences include, but are not limited to, unanticipated developments in any one or more of the following areas: (i) the Company's ability to manage rapid growth as a result of internal expansion and strategic acquisitions, (ii) the effect on the Company of volatility in the price of paper and periodic increases in postage rates, (iii) the operation of the Company's management information systems including the costs and effects associated with the year 2000 date change problem, (iv) the general risks attendant to the conduct of business in foreign countries, including currency fluctuations associated with sales not denominated in United States dollars, (v) significant changes in the computer products retail industry, especially relating to the distribution and sale of such products, (vi) competition in the PC, notebook computer, computer related products, office products and industrial products markets from superstores, direct response (mail order) distributors, mass merchants, value added resellers, the Internet and other retailers, (vii) the potential for expanded imposition of state sales taxes, use taxes, or other taxes on direct marketing companies, (viii) the continuation of key vendor relationships including the ability to continue to receive vendor supported advertising, (ix) timely availability of existing and new products, (x) risks due to shifts in market demand and/or price erosion of owned inventory, (xi) borrowing costs, (xii) changes in taxes due to changes in the mix of U.S. and non-U.S. revenue, (xiii)pending or threatened litigation and investigations and (xiv) the availability of key personnel, as well as other risk factors which may be detailed from time to time in the Company's Securities and Exchange Commission filings. |
DESCRIPTION - ------ -------------------------------------------------------------------- 3.1 Certificate of Incorporation of Registrant* 3.2 By-laws of Registrant* 4.1 Stockholders Agreement** 4.2 Specimen Stock Certificate of Registrant* 10.1 Form of 1995 Long-Term Stock Incentive Plan***+ 10.2 Exchange Agreement dated as of May 8, 1995 between certain stockholders of the Predecessor Companies and the Company* 10.3 Lease Agreement dated October 14, 1992 between the Company and 2RB Associates Co. (Port Washington facility)* 10.4 Lease Agreement dated September 20, 1988 between the Company and Addwin Realty Associates (Port Washington facility)* 10.5 Lease Agreement dated May 25, 1989 between the Company and Addwin Realty Associates (Suwanee facility)* 10.6 Lease Agreement dated as of July 17, 1997 between the Company and South Bay Industrials Company (New Compton facility) 10.7 Build-to-Suit Lease Agreement dated April, 1995 among the Company, American National Bank and Trust Company of Chicago and Walsh, Higgins & Company (Naperville facility)* 10.8 Rent Guaranty dated as of October 14, 1992 by the Company to the Bank of New York* 10.9 Royalty Agreement dated June 30, 1986 between the Company and Richard Leeds, Bruce Leeds and Robert Leeds, and Addendum thereto* 10.10 Consulting Agreement dated as of December 22, 1992 between the Company and Paul Leeds*+ 10.11 Form of 1995 Stock Plan for Non-Employee Directors***+ 10.12 Consulting Agreement dated as of January 1, 1996 between the Company and Gilbert Rothenberg***+ 10.13 Asset Purchase Agreement dated September 12, 1997 among Infotel, Inc., Mark L. Runkle, Midwest Micro Corp. and the Company **** 10.14 Employment Agreement dated as of December 12, 1997 between the Company and Steven M. Goldschein+ 21.1 Subsidiaries of the Registrant 23 Consent of experts and counsel: Consent of Independent Public Accountants 27 Financial Data Schedule (EDGAR version only) - -------- * Incorporated herein by reference to the Company's registration statement on Form S-1 (Registration No. |
Domestic Operations Robert Leeds /s/ ROBERT DOOLEY Director and Senior Vice President-- March 27, 1998 ...................... Worldwide Computer Sales and Robert Dooley Marketing /s/ STEVEN GOLDSCHEIN Senior Vice President and Chief March 27, 1998 ...................... Financial Officer Steven Goldschein (Principal Financial Officer) /s/ HOWARD KOHOS Corporate Controller March 27, 1998 ...................... (Principal Accounting Officer) Howard Kohos /s/ ROBERT D. ROSENTHAL Director March 27, 1998 ...................... Robert D. Rosenthal /s/ STACY DICK Director March 27, 1998 ...................... Stacy Dick ******** INDEPENDENT AUDITORS' REPORT The Shareholders and Board of Directors of THE GLOBAL DIRECTMAIL CORP: We have audited the accompanying consolidated balance sheets of Global DirectMail Corp and its subsidiaries, (the "Company"), as of December 31, 1997 and 1996 and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1997. |
As the pandemic continues, we could very well experience disruptions that could severely impact our business and clinical trials, including: ● delays or difficulties in enrolling patients in our clinical trials; ● delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff; ● diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials; ● interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others; ● limitations in employee resources that would otherwise be focused on the conduct of our clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; ● delays in issuing reports, results and publishing papers; ● delays in receiving approval from local regulatory authorities to initiate our planned clinical trials; ● delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials; ● interruption in global shipping that may affect the transport of clinical trial materials, such as investigational drug product used in our clinical trials; ● changes in local regulations as part of a response to the COVID-19 coronavirus outbreak which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether; ● delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; and ● refusal of the FDA to accept data from clinical trials in affected geographies outside the United States. |
Even after completing clinical trials and other studies, a product candidate could fail to receive regulatory approval for many reasons, including the following: ● not be able to demonstrate to the satisfaction of the FDA that our product candidate is safe and effective for any indication; ● the FDA may disagree with the design or implementation of our clinical trials or other studies; ● the results of the clinical trials or other studies may not demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; ● the FDA may disagree with our interpretation of data from clinical trials or other studies; ● the data collected from clinical trials and other studies of a product candidate may not be sufficient to support the submission of a NDA; ● the approval policies or regulations of the FDA may significantly change in a manner rendering our clinical and other study data insufficient for approval; and ● the FDA may not approve the proposed manufacturing processes and facilities for a product candidate. |
In addition to the foregoing and, general economic, political and market conditions, the price and trading volume of our stock could fluctuate widely in response to many factors, including: ● announcements of the results of clinical trials by us or our competitors; ● announcements of availability or projections of our products for commercial sale; ● announcements of legal actions against us and/or settlements or verdicts adverse to us; ● adverse reactions to products; ● governmental approvals, delays in expected governmental approvals or withdrawals of any prior governmental approvals or public or regulatory agency comments regarding the safety or effectiveness of our products, or the adequacy of the procedures, facilities or controls employed in the manufacture of our products; ● changes in U.S. or foreign regulatory policy during the period of product development; ● developments in patent or other proprietary rights, including any third-party challenges of our intellectual property rights; ● announcements of technological innovations by us or our competitors; ● announcements of new products or new contracts by us or our competitors; ● actual or anticipated variations in our operating results due to the level of development expenses and other factors; ● changes in financial estimates by securities analysts and whether our earnings meet or exceed the estimates; ● conditions and trends in the pharmaceutical and other industries; ● new accounting standards; ● overall investment market fluctuation; ● restatement of prior financial results; ● notice of NYSE American non-compliance with requirements; and ● occurrence of any of the risks described in these risk factors and the risk factors incorporated by reference herein. |
This increase in loss for the year ended December 31, 2020 was primarily due to the following: ● an increase in the loss of the quarterly revaluation of certain redeemable warrants of $1,633,000 which resulted in a non cash loss of $123,000 in the year-ended December 31, 2020 compared to a non-cash gain of $1,510,000 in the year ended December 31, 2019; ● an increase in research and development expenses of $1,069,000 or 23%; ● an increase in general and administrative expenses of $1,615,000 or 23%; ● an increase in other assets impairment losses of $135,000; ● an increase in interest expense and finance costs of $245,000; ● a decrease in the gain resulting from a settlement with as insurance claim of $1,217,000 in 2019 which did not occur in 2020; and ● a decrease of $90,000 in the gain for the fair value adjustment for the convertible note which was paid in full in 2019; offset by: ● a decrease in the extinguishment of debt of $487,000 which resulted in a gain of $142,000 for the year ended December 31, 2020 compared to a loss of $345,000 in the year-ended December 31, 2019: ● a decrease in production costs of $87,000 or 10%; ● an increase in interest/other income of $130,000; and ● an increase in revenue from cost recovery of $23,000. |
The principal functions of the Audit Committee are to (i) assist the Board in fulfilling its oversight responsibility relating to the annual independent audit of our consolidated financial statements and management’s assessment of internal control over financial reporting, the engagement of the independent registered public accounting firm and the evaluation of the independent registered public accounting firm’s qualifications, independence and performance; (ii) prepare the reports or statements as may be required by NYSE American or the securities laws; (iii) assist the Board in fulfilling its oversight responsibility relating to the integrity of our financial statements and financial reporting process and our system of internal accounting and financial controls; (iv) discuss the financial statements and reports with management, including any significant adjustments, management judgments and estimates, new accounting policies and disagreements with management; and (v) review disclosures by our independent registered public accounting firm concerning relationships with us and the performance of our independent accountants. |
The Board may provide for options to become immediately exercisable upon a “change in control”, which is defined in the Plans to occur upon any of the following events: (a) the acquisition by any person or group, as beneficial owner, of 20% or more of the outstanding shares or the voting power of the outstanding securities of the Company; (b) either a majority of the Directors of the Company at the annual stockholders meeting has been nominated other than by or at the direction of the incumbent Directors of the Board, or the incumbent Directors cease to constitute a majority of the Company’s Board; (c) the Company’s stockholders approve a merger or other business combination pursuant to which the outstanding common stock of the Company no longer represents more than 50% of the combined entity after the transaction; (d) the Company’s stockholders approve a plan of complete liquidation or an agreement for the sale or disposition of all or substantially all of the Company’s assets; or (e) any other event or circumstance determined by the Company’s Board to affect control of the Company and designated by resolution of the Board as a change in control. |
Even after completing clinical trials and other studies, a product candidate could fail to receive regulatory approval for many reasons, including the following: ● not be able to demonstrate to the satisfaction of the FDA that our product candidate is safe and effective for any indication; ● the FDA may disagree with the design or implementation of our clinical trials or other studies; ● the results of the clinical trials or other studies may not demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; ● the FDA may disagree with our interpretation of data from clinical trials or other studies; ● the data collected from clinical trials and other studies of a product candidate may not be sufficient to support the submission of a NDA; ● the approval policies or regulations of the FDA may significantly change in a manner rendering our clinical and other study data insufficient for approval; and ● the FDA may not approve the proposed manufacturing processes and facilities for a product candidate. |
As COVID-19 continues to spread, we could very well experience disruptions that could severely impact our business and clinical trials, including: ● delays or difficulties in enrolling patients in our clinical trials; ● delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff; ● diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials; ● interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others; ● limitations in employee resources that would otherwise be focused on the conduct of our clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; ● delays in issuing reports, results and publishing papers; ● delays in receiving approval from local regulatory authorities to initiate our planned clinical trials; ● delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials; ● interruption in global shipping that may affect the transport of clinical trial materials, such as investigational drug product used in our clinical trials; ● changes in local regulations as part of a response to the COVID-19 coronavirus outbreak which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether; ● delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; and ● refusal of the FDA to accept data from clinical trials in affected geographies outside the United States. |
In addition to the foregoing and, general economic, political and market conditions, the price and trading volume of our stock could fluctuate widely in response to many factors, including: ● announcements of the results of clinical trials by us or our competitors; ● announcements of availability or projections of our products for commercial sale; ● announcements of legal actions against us and/or settlements or verdicts adverse to us; ● adverse reactions to products; ● governmental approvals, delays in expected governmental approvals or withdrawals of any prior governmental approvals or public or regulatory agency comments regarding the safety or effectiveness of our products, or the adequacy of the procedures, facilities or controls employed in the manufacture of our products; ● changes in U.S. or foreign regulatory policy during the period of product development; ● developments in patent or other proprietary rights, including any third party challenges of our intellectual property rights; ● announcements of technological innovations by us or our competitors; ● announcements of new products or new contracts by us or our competitors; ● actual or anticipated variations in our operating results due to the level of development expenses and other factors; ● changes in financial estimates by securities analysts and whether our earnings meet or exceed the estimates; ● conditions and trends in the pharmaceutical and other industries; ● new accounting standards; ● overall investment market fluctuation; ● restatement of prior financial results; ● notice of NYSE American non-compliance with requirements; and ● occurrence of any of the risks described in these risk factors and the risk factors incorporated by reference herein. |
The principal functions of the Audit Committee are to (i) assist the Board in fulfilling its oversight responsibility relating to the annual independent audit of our consolidated financial statements and management’s assessment of internal control over financial reporting, the engagement of the independent registered public accounting firm and the evaluation of the independent registered public accounting firm’s qualifications, independence and performance; (ii) prepare the reports or statements as may be required by NYSE American or the securities laws; (iii) assist the Board in fulfilling its oversight responsibility relating to the integrity of our financial statements and financial reporting process and our system of internal accounting and financial controls; (iv) discuss the financial statements and reports with management, including any significant adjustments, management judgments and estimates, new accounting policies and disagreements with management; and (v) review disclosures by our independent registered public accounting firm concerning relationships with us and the performance of our independent accountants. |
The Board may provide for options to become immediately exercisable upon a “change in control”, which is defined in the Plans to occur upon any of the following events: (a) the acquisition by any person or group, as beneficial owner, of 20% or more of the outstanding shares or the voting power of the outstanding securities of the Company; (b) either a majority of the Directors of the Company at the annual stockholders meeting has been nominated other than by or at the direction of the incumbent Directors of the Board, or the incumbent Directors cease to constitute a majority of the Company’s Board; (c) the Company’s stockholders approve a merger or other business combination pursuant to which the outstanding common stock of the Company no longer represents more than 50% of the combined entity after the transaction; (d) the Company’s stockholders approve a plan of complete liquidation or an agreement for the sale or disposition of all or substantially all of the Company’s assets; or (e) any other event or circumstance determined by the Company’s Board to affect control of the Company and designated by resolution of the Board as a change in control. |
Even after completing clinical trials and other studies, a product candidate could fail to receive regulatory approval for many reasons, including the following: ● not be able to demonstrate to the satisfaction of the FDA that our product candidate is safe and effective for any indication; ● the FDA may disagree with the design or implementation of our clinical trials or other studies; ● the results of the clinical trials or other studies may not demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; ● the FDA may disagree with our interpretation of data from clinical trials or other studies; ● the data collected from clinical trials and other studies of a product candidate may not be sufficient to support the submission of a NDA; ● the approval policies or regulations of the FDA may significantly change in a manner rendering our clinical and other study data insufficient for approval; and ● the FDA may not approve the proposed manufacturing processes and facilities for a product candidate. |
In addition to general economic, political and market conditions, the price and trading volume of our stock could fluctuate widely in response to many factors, including: ● announcements of the results of clinical trials by us or our competitors; ● announcements of availability or projections of our products for commercial sale; ● announcements of legal actions against us and/or settlements or verdicts adverse to us; ● adverse reactions to products; ● governmental approvals, delays in expected governmental approvals or withdrawals of any prior governmental approvals or public or regulatory agency comments regarding the safety or effectiveness of our products, or the adequacy of the procedures, facilities or controls employed in the manufacture of our products; ● changes in U.S. or foreign regulatory policy during the period of product development; ● developments in patent or other proprietary rights, including any third party challenges of our intellectual property rights; ● announcements of technological innovations by us or our competitors; ● announcements of new products or new contracts by us or our competitors; ● actual or anticipated variations in our operating results due to the level of development expenses and other factors; ● changes in financial estimates by securities analysts and whether our earnings meet or exceed the estimates; ● conditions and trends in the pharmaceutical and other industries; ● new accounting standards; ● overall investment market fluctuation; ● restatement of prior financial results; ● notice of NYSE American non-compliance with requirements; and ● occurrence of any of the risks described in these “Risk Factors”. |
This increase in loss for the year ended December 31, 2018 was primarily due to the following: 1) a decrease in revenues of $70,000 or 16%; 2) an increase in interest and finance costs of $363,000; 3) the quarterly revaluation of certain redeemable warrants resulted in a non-cash gain of $1,165,000 in the year ended December 31, 2018 compared to a gain of $2,417,000 in the year ended December 31, 2017, a decrease of $1,252,000; 4) the fair value adjustment for the convertible note resulted in a loss of $582,000 in the year ended December 31, 2018, which did not occur in 2017; 5) an increase in research and development expense of $680,000 or 17%; offset by 6) a decrease in production costs of $299,000; 7) a decrease in general and administrative expenses of $371,000 8) a gain resulting from a settlement of litigation with a vendor of $474,000; 9) a gain from the sale of the underutilized building in New Brunswick of $223,000; and 10) a decrease in legal fees due to a favorable settlement of legal fees of $342,000. |
The principal functions of the Audit Committee are to (i) assist the Board in fulfilling its oversight responsibility relating to the annual independent audit of our consolidated financial statements and internal control over financial reporting, the engagement of the independent registered public accounting firm and the evaluation of the independent registered public accounting firm’s qualifications, independence and performance; (ii) prepare the reports or statements as may be required by NYSE American or the securities laws; (iii) assist the Board in fulfilling its oversight responsibility relating to the integrity of our financial statements and financial reporting process and our system of internal accounting and financial controls; (iv) discuss the financial statements and reports with management, including any significant adjustments, management judgments and estimates, new accounting policies and disagreements with management; and (v) review disclosures by our independent registered public accounting firm concerning relationships with us and the performance of our independent accountants. |
The Board may provide for options to become immediately exercisable upon a “change in control”, which is defined in the Plans to occur upon any of the following events: (a) the acquisition by any person or group, as beneficial owner, of 20% or more of the outstanding shares or the voting power of the outstanding securities of the Company; (b) either a majority of the Directors of the Company at the annual stockholders meeting has been nominated other than by or at the direction of the incumbent Directors of the Board, or the incumbent Directors cease to constitute a majority of the Company’s Board; (c) the Company’s stockholders approve a merger or other business combination pursuant to which the outstanding common stock of the Company no longer represents more than 50% of the combined entity after the transaction; (d) the Company’s stockholders approve a plan of complete liquidation or an agreement for the sale or disposition of all or substantially all of the Company’s assets; or (e) any other event or circumstance determined by the Company’s Board to affect control of the Company and designated by resolution of the Board as a change in control. |
Even after completing clinical trials and other studies, a product candidate could fail to receive regulatory approval for many reasons, including the following: ● not be able to demonstrate to the satisfaction of the FDA that our product candidate is safe and effective for any indication; ● the FDA may disagree with the design or implementation of our clinical trials or other studies; ● the results of the clinical trials or other studies may not demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; ● the FDA may disagree with our interpretation of data from clinical trials or other studies; ● the data collected from clinical trials and other studies of a product candidate may not be sufficient to support the submission of a NDA; ● the approval policies or regulations of the FDA may significantly change in a manner rendering our clinical and other study data insufficient for approval; and ● the FDA may not approve the proposed manufacturing processes and facilities for a product candidate. |
In addition to general economic, political and market conditions, the price and trading volume of our stock could fluctuate widely in response to many factors, including: ● announcements of the results of clinical trials by us or our competitors; ● announcements of availability or projections of our products for commercial sale; ● announcements of legal actions against us and/or settlements or verdicts adverse to us; ● adverse reactions to products; ● governmental approvals, delays in expected governmental approvals or withdrawals of any prior governmental approvals or public or regulatory agency comments regarding the safety or effectiveness of our products, or the adequacy of the procedures, facilities or controls employed in the manufacture of our products; ● changes in U.S. or foreign regulatory policy during the period of product development; ● developments in patent or other proprietary rights, including any third party challenges of our intellectual property rights; ● announcements of technological innovations by us or our competitors; ● announcements of new products or new contracts by us or our competitors; ● actual or anticipated variations in our operating results due to the level of development expenses and other factors; ● changes in financial estimates by securities analysts and whether our earnings meet or exceed the estimates; ● conditions and trends in the pharmaceutical and other industries; ● new accounting standards; ● overall investment market fluctuation; ● restatement of prior financial results; ● notice of NYSE American non-compliance with requirements; and ● occurrence of any of the risks described in these “Risk Factors”. |
The principal functions of the Audit Committee are to (i) assist the Board in fulfilling its oversight responsibility relating to the annual independent audit of our consolidated financial statements and internal control over financial reporting, the engagement of the independent registered public accounting firm and the evaluation of the independent registered public accounting firm’s qualifications, independence and performance; (ii) prepare the reports or statements as may be required by NYSE American or the securities laws; (iii) assist the Board in fulfilling its oversight responsibility relating to the integrity of our financial statements and financial reporting process and our system of internal accounting and financial controls; (iv) discuss the financial statements and reports with management, including any significant adjustments, management judgments and estimates, new accounting policies and disagreements with management; and (v) review disclosures by our independent registered public accounting firm concerning relationships with us and the performance of our independent accountants. |
/s/ Thomas K. Equels Chief Executive Officer & President, March 29, 2018 Thomas K. Equels Director /s/ William Mitchell Chairman of the Board March 29, 2018 William Mitchell, M.D., Ph.D. and Director /s/ Stewart L. Appelrouth Director March 29, 2018 Stewart L. Appelrouth /s/ Adam Pascale Chief Financial Officer March 29, 2018 Adam Pascale HEMISPHERx BIOPHARMA, INC AND SUBSIDIARIES Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Hemispherx Biopharma, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Hemispherx Biopharma, Inc. and its subsidiaries (the Company) as of December 31, 2017 and 2016, the related consolidated statements of comprehensive loss, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes to the consolidated financial statements (collectively, the financial statements). |
The Board may provide for options to become immediately exercisable upon a “change in control”, which is defined in the Plans to occur upon any of the following events: (a) the acquisition by any person or group, as beneficial owner, of 20% or more of the outstanding shares or the voting power of the outstanding securities of the Company; (b) either a majority of the Directors of the Company at the annual stockholders meeting has been nominated other than by or at the direction of the incumbent Directors of the Board, or the incumbent Directors cease to constitute a majority of the Company’s Board; (c) the Company’s stockholders approve a merger or other business combination pursuant to which the outstanding common stock of the Company no longer represents more than 50% of the combined entity after the transaction; (d) the Company’s stockholders approve a plan of complete liquidation or an agreement for the sale or disposition of all or substantially all of the Company’s assets; or (e) any other event or circumstance determined by the Company’s Board to affect control of the Company and designated by resolution of the Board as a change in control. |
Even after completing clinical trials and other studies, a product candidate could fail to receive regulatory approval for many reasons, including the following: ● not be able to demonstrate to the satisfaction of the FDA that our product candidate is safe and effective for any indication; ● the FDA may disagree with the design or implementation of our clinical trials or other studies; ● the results of the clinical trials or other studies may not demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; ● the FDA may disagree with our interpretation of data from clinical trials or other studies; ● the data collected from clinical trials and other studies of a product candidate may not be sufficient to support the submission of a NDA; ● the approval policies or regulations of the FDA may significantly change in a manner rendering our clinical and other study data insufficient for approval; and ● the FDA may not approve the proposed manufacturing processes and facilities for a product candidate. |
In addition to general economic, political and market conditions, the price and trading volume of our stock could fluctuate widely in response to many factors, including: ● announcements of the results of clinical trials by us or our competitors; ● announcements of availability or projections of our products for commercial sale; ● announcements of legal actions against us and/or settlements or verdicts adverse to us; ● adverse reactions to products; ● governmental approvals, delays in expected governmental approvals or withdrawals of any prior governmental approvals or public or regulatory agency comments regarding the safety or effectiveness of our products, or the adequacy of the procedures, facilities or controls employed in the manufacture of our products; ● changes in U.S. or foreign regulatory policy during the period of product development; ● developments in patent or other proprietary rights, including any third party challenges of our intellectual property rights; ● announcements of technological innovations by us or our competitors; ● announcements of new products or new contracts by us or our competitors; ● actual or anticipated variations in our operating results due to the level of development expenses and other factors; ● changes in financial estimates by securities analysts and whether our earnings meet or exceed the estimates; ● conditions and trends in the pharmaceutical and other industries; ● new accounting standards; ● overall investment market fluctuation; ● restatement of prior financial results; ● notice of NYSE MKT non-compliance with requirements; and ● occurrence of any of the risks described in these “Risk Factors”. |
The principal functions of the Audit Committee are to (i) assist the Board in fulfilling its oversight responsibility relating to the annual independent audit of our consolidated financial statements and internal control over financial reporting, the engagement of the independent registered public accounting firm and the evaluation of the independent registered public accounting firm’s qualifications, independence and performance; (ii) prepare the reports or statements as may be required by NYSE MKT or the securities laws; (iii) assist the Board in fulfilling its oversight responsibility relating to the integrity of our financial statements and financial reporting process and our system of internal accounting and financial controls; (iv) discuss the financial statements and reports with management, including any significant adjustments, management judgments and estimates, new accounting policies and disagreements with management; and (v) review disclosures by our independent registered public accounting firm concerning relationships with us and the performance of our independent accountants. |
The following Options were issued to NEO in their role as employees during 2016: ● On June 8, 2016, we granted options to Thomas K. Equels, Chief Executive Officer, consistent with his employment agreement 25,000 ten year options to purchase common stock at $1.68 per share which vest in entirety in one year; and ● On June 21, 2016, we granted 12,500 ten year options to purchase common stock at $1.56 per share which vest in entirety in one year options to Dr. Strayer, Chief Scientific Officer and Chief Medical Officer; and ● On June 21, 2016, we granted 12,500 ten year options to purchase common stock at $1.56 per share which vest in entirety in one year options to Adam Pascale, Chief Financial Officer; The following Options were issued to NEO in their role as employees during 2015: ● On June 6, 2015, we granted options to Thomas K. Equels, Chief Executive Officer consistent with his employment agreement 25,000 ten year options to purchase common stock at $3.00 per share which vest in entirety in one year; The following Options were issued to NEO in their role as employees during 2014: ● On June 6, 2014, we granted options to Thomas K. Equels, Chief Executive Officer consistent with his employment agreement 25,000 ten year options to purchase common stock at $4.32 per share which vest in entirety in one year; and The Equity Incentive Plan of 2009 authorizes the grant of non-qualified and incentive stock options, stock appreciation rights, restricted stock and other stock awards. |
The Board may provide for options to become immediately exercisable upon a “change in control”, which is defined in the Plans to occur upon any of the following events: (a) the acquisition by any person or group, as beneficial owner, of 20% or more of the outstanding shares or the voting power of the outstanding securities of the Company; (b) either a majority of the Directors of the Company at the annual stockholders meeting has been nominated other than by or at the direction of the incumbent Directors of the Board, or the incumbent Directors cease to constitute a majority of the Company’s Board; (c) the Company’s stockholders approve a merger or other business combination pursuant to which the outstanding common stock of the Company no longer represents more than 50% of the combined entity after the transaction; (d) the Company’s stockholders approve a plan of complete liquidation or an agreement for the sale or disposition of all or substantially all of the Company’s assets; or (e) any other event or circumstance determined by the Company’s Board to affect control of the Company and designated by resolution of the Board as a change in control. |
Even after completing clinical trials and other studies, a product candidate could fail to receive regulatory approval for many reasons, including the following: •not be able to demonstrate to the satisfaction of the FDA that our product candidate is safe and effective for any indication; •the FDA may disagree with the design or implementation of our clinical trials or other studies; •the results of the clinical trials or other studies may not demonstrate that a product candidate's clinical and other benefits outweigh its safety risks; •the FDA may disagree with our interpretation of data from clinical trials or other studies; •the data collected from clinical trials and other studies of a product candidate may not be sufficient to support the submission of a NDA; •the approval policies or regulations of the FDA may significantly change in a manner rendering our clinical and other study data insufficient for approval; and •the FDA may not approve the proposed manufacturing processes and facilities for a product candidate. |
In addition to general economic, political and market conditions, the price and trading volume of our stock could fluctuate widely in response to many factors, including: •announcements of the results of clinical trials by us or our competitors; •announcements of availability or projections of our products for commercial sale; •announcements of legal actions against us and/or settlements or verdicts adverse to us; •adverse reactions to products; •governmental approvals, delays in expected governmental approvals or withdrawals of any prior governmental approvals or public or regulatory agency comments regarding the safety or effectiveness of our products, or the adequacy of the procedures, facilities or controls employed in the manufacture of our products; •changes in U.S. or foreign regulatory policy during the period of product development; •developments in patent or other proprietary rights, including any third party challenges of our intellectual property rights; •announcements of technological innovations by us or our competitors; •announcements of new products or new contracts by us or our competitors; •actual or anticipated variations in our operating results due to the level of development expenses and other factors; •changes in financial estimates by securities analysts and whether our earnings meet or exceed the estimates; •conditions and trends in the pharmaceutical and other industries; •new accounting standards; •overall investment market fluctuation; •restatement of prior financial results; •notice of NYSE MKT non-compliance with requirements; and •occurrence of any of the risks described in these "Risk Factors". |
The principal functions of the Audit Committee are to (i) assist the Board in fulfilling its oversight responsibility relating to the annual independent audit of our consolidated financial statements and internal control over financial reporting, the engagement of the independent registered public accounting firm and the evaluation of the independent registered public accounting firm’s qualifications, independence and performance; (ii) prepare the reports or statements as may be required by NYSE MKT or the securities laws; (iii) assist the Board in fulfilling its oversight responsibility relating to the integrity of our financial statements and financial reporting process and our system of internal accounting and financial controls; (iv) discuss the financial statements and reports with management, including any significant adjustments, management judgments and estimates, new accounting policies and disagreements with management; and (v) review disclosures by our independent registered public accounting firm concerning relationships with us and the performance of our independent accountants. |
In its review of each member of the Executive Team, the Committee utilized a weighted-average rating process regarding the goals and responsibilities specific to each individual as well as their contribution in meeting Company’s overall goals; •Reviewed peer group financial data of comparable publicly-traded companies for 2011 and 2010 with emphasis on a comparison of executive compensation as a factor to various Balance Sheet ratios to determine reasonableness to the respective companies; •Considered the change in the market value of the Company’s stock during the year in relation to Management’s efforts and ability to impact the results; •Mandated that the standard terms of future employee options issued by the Company require that such options not vest sooner than one year from the date of issuance and that, to the extent that any such options have not vested on the date of an Executive’s termination, the options will expire; •Issued new options to employees at the rate of 110% of the Company’s NYSE MKT stock market trading value at the time of award; and •Adopted a policy to facilitate compliance with Dodd-Frank’s Claw-Back Compensation Recoupment provisions. |
The Compensation Committee, in light of established individual and Company-wide goals and objectives, evaluated the performance of each NEO, key executive and overall staff in order to determine each respective annual incentive opportunity including an analysis by the Compensation Committee that provides the following information: 1.The Company-wide goals and objectives along with individual performance goals for each NEO used to determine annual bonuses for the fiscal year; 2.How each goal individually or in totality was weighted, if applicable, to the extent that any of the performance goals were quantitatively and/or quantitatively measurable; 3.The threshold, target, and maximum levels of achievement of each performance goal, if applicable; 4.The intended relationship between the level of achievement of Company-wide performance goals and the amount of bonus to be awarded; 5.The intended relationship between the level of achievement of each NEO’s individual performance goals and the amount of bonus to be awarded; 6.The evaluation by the Committee of the level of achievement by each NEO of the Company-wide and individual performance goals applicable to him/her individually; 7.If applicable, whether the Committee reviewed any report(s) from compensation consultant(s) and/or web based organizations and data bases; 8.The adequate disclosure of the percentage of base salary awarded in the form of an incentive bonus to each NEO as a result of their or the Company’s performance; and 9.If applicable, how the Company’s compensation policies and practices relate to the Company’s risk management. |
These indications include cancer vaccines, vaccines for infectious indications including bioterror/biowarfare, burns or other inducers of traumatic immunodeficiency; C.Regulatory approval and sales of Alferon for the treatment of any non-CFS indication in any country jurisdiction; D.Any merger, acquisition, or partnership that quantitatively improves the value of the company; E.Any governmental grant and/or contact, singly or in the aggregate for R & D or commercial product; F.Continued productive interaction with the FDA concerning issues necessary for approval of Ampligen for CFS; G.Continued progress towards non-USA approval of Ampligen® for Chronic Fatigue Syndrome; H.An overall strategic plan for Ampligen® and Alferon® to be submitted to the Board; I.Strategic plans for the marketing and partners for Ampligen® to be submitted to the Board; J.Continued development of enhancement of vaccines requiring Ampligen®; K.Success in the protection of Company Intellectual Property; L.Continued development of Alferon® LDO; M.Progress in the return to commercialization of Alferon N Injection®; N.Continued development of Ampligen® and Alferon N Injection® for treatment of influenza; O.Maintaining the overall financial strength of the Company and operations consistent with the budget; P.Implementation of research & development partnerships; Q.Implementation of Ampligen® clinical trials in cancer with commercial partner(s); R.Implementation of Ampligen® clinical trials in cancer with academic partner(s); S.Increase in clinical trials of Alferon N Injection® and additional indications; and, T.Acquisition of complimentary pharmaceutical technologies and/or drugs/vaccines. |
The following Options were issued to NEO in their role as employees during 2015: •On June 6, 2015, we granted options to William A. Carter, Chairman, Chief Executive Officer and Chief Scientific Officer, consistent with his employment agreement, to purchase 500,000 ten year options to purchase common stock at $0.25 per share which vest in entirety in one year; and •On June 6, 2015, we granted options to Thomas K. Equels, Executive Vice Chairman, Secretary and General Counsel, consistent with his employment agreement 300,000 ten year options to purchase common stock at $0.25 per share which vest in entirety in one year; The following Options were issued to NEO in their role as employees during 2014: •On June 6, 2014, we granted options to William A. Carter, Chairman, Chief Executive Officer and Chief Scientific Officer, consistent with his employment agreement, to purchase 500,000 ten year options to purchase common stock at $0.36 per share which vest in entirety in one year; •On June 6, 2014, we granted options to Thomas K. Equels, Executive Vice Chairman, Secretary and General Counsel, consistent with his employment agreement 300,000 ten year options to purchase common stock at $0.36 per share which vest in entirety in one year; and •On June 6, 2014, we granted options to Wayne Springate, SVP Operations, consistent with his employment agreement 50,000 ten year options to purchase common stock at $0.36 per share which vest in entirety in one year; The following Options were issued to NEO in their role as employees during 2013: •On June 6, 2013, we granted options to William A. Carter, Chairman, Chief Executive Officer and Chief Scientific Officer, consistent with his employment agreement, to purchase 500,000 ten year options to purchase common stock at $0.31 per share which vest in entirety in one year; and •On June 6, 2013, we granted options to Thomas K. Equels, Executive Vice Chairman, Secretary and General Counsel, consistent with his employment agreement 300,000 ten year options to purchase common stock at $0.31 per share which vest in entirety in one year; The Equity Incentive Plan of 2009 authorizes the grant of non-qualified and incentive stock options, stock appreciation rights, restricted stock and other stock awards. |
The Company’s plans to allocate the net proceeds from the offering towards research and development, operations and general and administrative purposes related to the commercialization of Ampligen® and Alferon® related products, including, but not limited to, the following: (1) Costs to maintain the Alferon N Injection® manufacturing facility and to prepare for the FDA pre-approval inspections of the Ampligen® facility, (2) Manufacture of commercial product, (3) Potential new preclinical and/or clinical studies in order to gain commercial approval for Ampligen® and broader approvals for Alferon® and Alferon LDO®, (4) Working capital to build and maintain sufficient inventory by procuring raw materials, supplies and other items for the New Brunswick manufacturing facility, as well as to remunerate outside contractors for necessary services, such as, final filling and finishing operations in order to meet any anticipated demand from normal operations as well as through the possible pursuit of other disease areas and/or geographic regions that may present themselves, (5) Pursuit of potential partnering opportunities for Ampligen®, (6) Potential establishment of sales and marketing capabilities, as well as consideration towards the expansion of our manufacturing capacity, and (7) working capital for general and administrative expenses. |
The Board may provide for options to become immediately exercisable upon a "change in control”, which is defined in the Plans to occur upon any of the following events: (a) the acquisition by any person or group, as beneficial owner, of 20% or more of the outstanding shares or the voting power of the outstanding securities of the Company; (b) either a majority of the Directors of the Company at the annual stockholders meeting has been nominated other than by or at the direction of the incumbent Directors of the Board, or the incumbent Directors cease to constitute a majority of the Company’s Board; (c) the Company’s stockholders approve a merger or other business combination pursuant to which the outstanding common stock of the Company no longer represents more than 50% of the combined entity after the transaction; (d) the Company’s stockholders approve a plan of complete liquidation or an agreement for the sale or disposition of all or substantially all of the Company’s assets; or (e) any other event or circumstance determined by the Company’s Board to affect control of the Company and designated by resolution of the Board as a change in control. |
In 2014, equity was granted as a form of compensation to these Officers: •Chief Executive Officer was granted 500,000 ten year options to purchase common stock at $0.36 per share which vest in entirety in one year and 320,000 ten year options to purchase common stock at $2.60 which vest in entirety in one year; and •General Counsel was granted 300,000 ten year options to purchase common stock at $0.36 per share which vest in entirety in one year, and; In 2013, equity was granted as a form of compensation to these Officers: •Chief Executive Officer was granted 500,000 ten year options to purchase common stock at $0.31 per share which vest in entirety in one year; and •Chief Executive Officer was granted 150,000 ten year options to purchase common stock at $0.25 per share which vest in entirety in one year; and •General Counsel was granted 300,000 ten year options to purchase common stock at $0.31 per share which vest in entirety in one year, and; •General Counsel was granted 150,000 ten year options to purchase common stock at $0.25 per share which vest in entirety in one year. |
Even after completing clinical trials and other studies, a product candidate could fail to receive regulatory approval for many reasons, including the following: • not be able to demonstrate to the satisfaction of the FDA that our product candidate is safe and effective for any indication; • the FDA may disagree with the design or implementation of our clinical trials or other studies; • the results of the clinical trials or other studies may not demonstrate that a product candidate's clinical and other benefits outweigh its safety risks; • the FDA may disagree with our interpretation of data from clinical trials or other studies; • the data collected from clinical trials and other studies of a product candidate may not be sufficient to support the submission of a NDA; • the approval policies or regulations of the FDA may significantly change in a manner rendering our clinical and other study data insufficient for approval; and • the FDA may not approve the proposed manufacturing processes and facilities for a product candidate. |
In addition to general economic, political and market conditions, the price and trading volume of our stock could fluctuate widely in response to many factors, including: • announcements of the results of clinical trials by us or our competitors; • announcements of availability or projections of our products for commercial sale; • announcements of legal actions against us and/or settlements or verdicts adverse to us; • adverse reactions to products; • governmental approvals, delays in expected governmental approvals or withdrawals of any prior governmental approvals or public or regulatory agency comments regarding the safety or effectiveness of our products, or the adequacy of the procedures, facilities or controls employed in the manufacture of our products; • changes in U.S. or foreign regulatory policy during the period of product development; • developments in patent or other proprietary rights, including any third party challenges of our intellectual property rights; • announcements of technological innovations by us or our competitors; • announcements of new products or new contracts by us or our competitors; • actual or anticipated variations in our operating results due to the level of development expenses and other factors; • changes in financial estimates by securities analysts and whether our earnings meet or exceed the estimates; • conditions and trends in the pharmaceutical and other industries; • new accounting standards; • overall investment market fluctuation; • restatement of prior financial results; • notice of NYSE MKT non-compliance with requirements; and • occurrence of any of the risks described in these "Risk Factors". |
Pursuant to the Warrants, the Put rights enable the Warrant Holders to receive cash in the amount of the Black-Scholes-Merton value obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Warrant expiration date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Warrant expiration date. |
The principal functions of the Audit Committee are to (i) assist the Board in fulfilling its oversight responsibility relating to the annual independent audit of our consolidated financial statements and internal control over financial reporting, the engagement of the independent registered public accounting firm and the evaluation of the independent registered public accounting firm’s qualifications, independence and performance; (ii) prepare the reports or statements as may be required by NYSE MKT or the securities laws; (iii) assist the Board in fulfilling its oversight responsibility relating to the integrity of our financial statements and financial reporting process and our system of internal accounting and financial controls; (iv) discuss the financial statements and reports with management, including any significant adjustments, management judgments and estimates, new accounting policies and disagreements with management; and (v) review disclosures by our independent registered public accounting firm concerning relationships with us and the performance of our independent accountants. |
In its review of each member of the Executive Team, the Committee utilized a weighted-average rating process regarding the goals and responsibilities specific to each individual as well as their contribution in meeting Company’s overall goals; • Reviewed peer group financial data of comparable publicly-traded companies for 2011 and 2010 with emphasis on a comparison of executive compensation as a factor to various Balance Sheet ratios to determine reasonableness to the respective companies; • Considered the change in the market value of the Company’s stock during the year in relation to Management’s efforts and ability to impact the results; • Mandated that the standard terms of future employee options issued by the Company require that such options not vest sooner than one year from the date of issuance and that, to the extent that any such options have not vested on the date of an Executive’s termination, the options will expire; • Issued new options to employees at the rate of 110% of the Company’s NYSE MKT stock market trading value at the time of award; and • Adopted a policy to facilitate compliance with Dodd-Frank’s Claw-Back Compensation Recoupment provisions. |
The following Options were issued to NEO in their role as employees during 2014: • On June 6, 2014, we granted options to William A. Carter, Chairman, Chief Executive Officer and Chief Scientific Officer, consistent with his employment agreement, to purchase 500,000 ten year options to purchase common stock at $0.36 per share which vest in entirety in one year; • On June 6, 2014, we granted options to Thomas K. Equels, Executive Vice Chairman, Secretary and General Counsel, consistent with his employment agreement 300,000 ten year options to purchase common stock at $0.36 per share which vest in entirety in one year; and • On June 6, 2014, we granted options to Wayne Springate, SVP Operations, consistent with his employment agreement 50,000 ten year options to purchase common stock at $0.36 per share which vest in entirety in one year; The following Options were issued to NEO in their role as employees during 2013: • On June 6, 2013, we granted options to William A. Carter, Chairman, Chief Executive Officer and Chief Scientific Officer, consistent with his employment agreement, to purchase 500,000 ten year options to purchase common stock at $0.31 per share which vest in entirety in one year; and • On June 6, 2013, we granted options to Thomas K. Equels, Executive Vice Chairman, Secretary and General Counsel, consistent with his employment agreement 300,000 ten year options to purchase common stock at $0.31 per share which vest in entirety in one year; The following Options were issued to NEOs in their role as employees during 2012: • On April 13, 2012, we granted 10 year term replacement options to purchase 10,000 shares of our common stock at an exercise price of $4.03 per share that vested immediately to both Dr. William Carter, Chairman, Chief Executive Officer and Chief Scientific Officer, and Dr. David Strayer, Chief Medical Officer and Medical Director, respectively; • On June 5, 2012, we granted options to purchase 50,000 shares of our common stock at an exercise price of $0.29 per share, or 110% of the closing price of the stock on the NYSE MKT as of June 4, 2012 with total vesting in twelve months, to Robert Dickey, Senior Vice President; • On June 11, 2012, we granted options to purchase 500,000 shares of our common stock at an exercise price of $0.31 per share, or 110% of the $0.28 closing price of the stock on the NYSE MKT as of June 10, 2012 with total vesting in twelve months, to William A. Carter, Chairman, Chief Executive Officer and Chief Scientific Officer, consistent with his employment agreement; and • On June 11, 2012, we granted options to purchase 300,000 shares of our common stock at an exercise price of $0.31 per share, or 110% of the $0.28 closing price of the stock on the NYSE MKT as of June 10, 2012 with total vesting in twelve months, to Thomas K. Equels, Executive Vice Chairman, Secretary and General Counsel, consistent with his employment agreement. |
The Company plans to use the net proceeds from the offering as follows: (1) Costs to upgrade the Alferon N Injection® manufacturing facility and to prepare for the FDA pre-approval inspections, (2) Potential new pre-clinical or clinical studies in order to gain commercial approval for Ampligen® and broader approvals for Alferon® and Alferon LDO®, (3) Working capital to build and maintain sufficient inventory by procuring raw materials, supplies and other items for the New Brunswick manufacturing facility, as well as to remunerate outside contractors for necessary services, such as, final filling and finishing operations in order to meet any anticipated demand from normal operations as well as through the possible pursuit of other disease areas and/or geographic regions that may present themselves, (4) Pursuit of potential partnering opportunities for Ampligen®, and (5) Potential establishment of sales and marketing capabilities, as well as consideration towards the expansion of the Company’s manufacturing capacity. |
The Board may provide for options to become immediately exercisable upon a "change in control”, which is defined in the Plans to occur upon any of the following events: (a) the acquisition by any person or group, as beneficial owner, of 20% or more of the outstanding shares or the voting power of the outstanding securities of the Company; (b) either a majority of the Directors of the Company at the annual stockholders meeting has been nominated other than by or at the direction of the incumbent Directors of the Board, or the incumbent Directors cease to constitute a majority of the Company’s Board; (c) the Company’s stockholders approve a merger or other business combination pursuant to which the outstanding common stock of the Company no longer represents more than 50% of the combined entity after the transaction; (d) the Company’s stockholders approve a plan of complete liquidation or an agreement for the sale or disposition of all or substantially all of the Company’s assets; or (e) any other event or circumstance determined by the Company’s Board to affect control of the Company and designated by resolution of the Board as a change in control. |
In 2014, equity was granted as a form of compensation to these Officers: • Chief Executive Officer was granted 500,000 ten year options to purchase common stock at $0.36 per share which vest in entirety in one year and 320,000 ten year options to purchase common stock at $2.60 which vest in entirety in one year; and • General Counsel was granted 300,000 ten year options to purchase common stock at $0.36 per share which vest in entirety in one year, and; In 2013, equity was granted as a form of compensation to these Officers: • Chief Executive Officer was granted 500,000 ten year options to purchase common stock at $0.31 per share which vest in entirety in one year; and • Chief Executive Officer was granted 150,000 ten year options to purchase common stock at $0.25 per share which vest in entirety in one year; and • General Counsel was granted 300,000 ten year options to purchase common stock at $0.31 per share which vest in entirety in one year, and; • General Counsel was granted 150,000 ten year options to purchase common stock at $0.25 per share which vest in entirety in one year. |
In 2012, equity was granted as a form of compensation to these Officers: • Chief Executive Officer was granted 100,000 ten year options to purchase common stock at $0.29 per share which vest in entirety in one year; • Chief Executive Officer was granted 500,000 ten year options to purchase common stock at $0.31 per share which vested immediately; • Chief Executive Officer was granted 10,000 ten year options, as replacement for similar options that had expired, to purchase common stock at $4.03 per share which vested immediately; • General Counsel was granted 100,000 ten year options to purchase common stock at $0.29 per share which vest in entirety in one year; • General Counsel was granted 300,000 ten year options to purchase common stock at $0.31 per share; • Chief Medical Officer was granted 10,000 ten year options, as replacement for similar options that had expired, to purchase common stock at $4.03 per share which vested immediately; The Company recorded stock compensation expense of $223,000, $219,000 and $271,000, respectively, during the years ended December 31, 2014, 2013 and 2012 respectively with regard to these issuances. |
Even after completing clinical trials and other studies, a product candidate could fail to receive regulatory approval for many reasons, including the following: • not be able to demonstrate to the satisfaction of the FDA that our product candidate is safe and effective for any indication; • the FDA may disagree with the design or implementation of our clinical trials or other studies; • the results of the clinical trials or other studies may not demonstrate that a product candidate's clinical and other benefits outweigh its safety risks; • the FDA may disagree with our interpretation of data from clinical trials or other studies; • the data collected from clinical trials and other studies of a product candidate may not be sufficient to support the submission of a NDA; • the approval policies or regulations of the FDA may significantly change in a manner rendering our clinical and other study data insufficient for approval; and • the FDA may not approve the proposed manufacturing processes and facilities for a product candidate. |
In addition to general economic, political and market conditions, the price and trading volume of our stock could fluctuate widely in response to many factors, including: • announcements of the results of clinical trials by us or our competitors; • announcements of availability or projections of our products for commercial sale; • announcements of legal actions against us and/or settlements or verdicts adverse to us; • adverse reactions to products; • governmental approvals, delays in expected governmental approvals or withdrawals of any prior governmental approvals or public or regulatory agency comments regarding the safety or effectiveness of our products, or the adequacy of the procedures, facilities or controls employed in the manufacture of our products; • changes in U.S. or foreign regulatory policy during the period of product development; • developments in patent or other proprietary rights, including any third party challenges of our intellectual property rights; • announcements of technological innovations by us or our competitors; • announcements of new products or new contracts by us or our competitors; • actual or anticipated variations in our operating results due to the level of development expenses and other factors; • changes in financial estimates by securities analysts and whether our earnings meet or exceed the estimates; • conditions and trends in the pharmaceutical and other industries; • new accounting standards; • overall investment market fluctuation; • restatement of prior financial results; • notice of NYSE MKT non-compliance with requirements; and • occurrence of any of the risks described in these "Risk Factors". |
Pursuant to the Warrants, the Put rights enable the Warrant Holders to receive cash in the amount of the Black-Scholes-Merton value obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Warrant expiration date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Warrant expiration date. |
This $8,339,000 increase in loss was primarily due to: 1) an increase in Research and Development costs in 2012 of approximately $2,786,000 or 41% as compared to the same period in 2011; 2) an increase in Production/Cost of Goods Sold in 2012 of approximately $946,000 or 91%; 3) an increase in General and Administrative expenses of approximately $2,365,000 or 35% as compared to the same period in 2011; 4) the revaluation of the Liability related to the Redeemable Warrants resulting in a non-cash gain of approximately $85,000 in 2012 as compared to non-cash gain of approximately $2,425,000 for the same period in 2011, resulting in an increased loss of $2,340,000; 5) sale in January 2012 of $16,000,000 of our New Jersey state Net Operating Loss carry-forwards (for the years 2009 and 2010) for approximately $1,328,000 as compared to February 2011, when we effectively sold $28,000,000 of our New Jersey state Net Operating Loss carry-forwards (for the years 2003 through 2008) for approximately $2,272,000, representing a decrease in income of $944,000 or 42%; offset by 6) an increase in interest and other income of approximately $973,000 from funds invested in marketable securities. |
The principal functions of the Audit Committee are to (i) assist the Board in fulfilling its oversight responsibility relating to the annual independent audit of our consolidated financial statements and internal control over financial reporting, the engagement of the independent registered public accounting firm and the evaluation of the independent registered public accounting firm’s qualifications, independence and performance; (ii) prepare the reports or statements as may be required by NYSE MKT or the securities laws; (iii) assist the Board in fulfilling its oversight responsibility relating to the integrity of our financial statements and financial reporting process and our system of internal accounting and financial controls; (iv) discuss the financial statements and reports with management, including any significant adjustments, management judgments and estimates, new accounting policies and disagreements with management; and (v) review disclosures by our independent registered public accounting firm concerning relationships with us and the performance of our independent accountants. |
In its review of each member of the Executive Team, the Committee utilized a weighted-average rating process regarding the goals and responsibilities specific to each individual as well as their contribution in meeting Company’s overall goals; • Reviewed peer group financial data of comparable publicly-traded companies for 2011 and 2010 with emphasis on a comparison of executive compensation as a factor to various Balance Sheet ratios to determine reasonableness to the respective companies; • Considered the change in the market value of the Company’s stock during the year in relation to Management’s efforts and ability to impact the results; • Mandated that the standard terms of future employee options issued by the Company require that such options not vest sooner than one year from the date of issuance and that, to the extent that any such options have not vested on the date of an Executive’s termination, the options will expire; • Issued new options to employees at the rate of 110% of the Company’s NYSE MKT stock market trading value at the time of award; and • Adopted a policy to facilitate compliance with Dodd-Frank’s Claw-Back Compensation Recoupment provisions. |
The following Options were issued to NEO in their role as employees during 2013: • On June 6, 2013, we granted options to William A. Carter, Chairman, Chief Executive Officer and Chief Scientific Officer, consistent with his employment agreement, to purchase 500,000 ten year options to purchase common stock at $0.31 per share which vest in entirety in one year; and • On June 6, 2013, we granted options to Thomas K. Equels, Executive Vice Chairman, Secretary and General Counsel, consistent with his employment agreement 300,000 ten year options to purchase common stock at $0.31 per share which vest in entirety in one year, and; The following Options were issued to NEOs in their role as employees during 2012: • On April 13, 2012, we granted 10 year term replacement options to purchase 10,000 shares of our common stock at an exercise price of $4.03 per share that vested immediately to both Dr. William Carter, Chairman, Chief Executive Officer and Chief Scientific Officer, and Dr. David Strayer, Chief Medical Officer and Medical Director, respectively; • On June 5, 2012, we granted options to purchase 50,000 shares of our common stock at an exercise price of $0.29 per share, or 110% of the closing price of the stock on the NYSE MKT as of June 4, 2012 with total vesting in twelve months, to Robert Dickey, Senior Vice President; • On June 11, 2012, we granted options to purchase 500,000 shares of our common stock at an exercise price of $0.31 per share, or 110% of the $0.28 closing price of the stock on the NYSE MKT as of June 10, 2012 with total vesting in twelve months, to William A. Carter, Chairman, Chief Executive Officer and Chief Scientific Officer, consistent with his employment agreement; and • On June 11, 2012, we granted options to purchase 300,000 shares of our common stock at an exercise price of $0.31 per share, or 110% of the $0.28 closing price of the stock on the NYSE MKT as of June 10, 2012 with total vesting in twelve months, to Thomas K. Equels, Executive Vice Chairman, Secretary and General Counsel, consistent with his employment agreement. |
The Board may provide for options to become immediately exercisable upon a "change in control”, which is defined in the Plans to occur upon any of the following events: (a) the acquisition by any person or group, as beneficial owner, of 20% or more of the outstanding shares or the voting power of the outstanding securities of the Company; (b) either a majority of the Directors of the Company at the annual stockholders meeting has been nominated other than by or at the direction of the incumbent Directors of the Board, or the incumbent Directors cease to constitute a majority of the Company’s Board; (c) the Company’s stockholders approve a merger or other business combination pursuant to which the outstanding common stock of the Company no longer represents more than 50% of the combined entity after the transaction; (d) the Company’s stockholders approve a plan of complete liquidation or an agreement for the sale or disposition of all or substantially all of the Company’s assets; or (e) any other event or circumstance determined by the Company’s Board to affect control of the Company and designated by resolution of the Board as a change in control. |
The Company plans to use the net proceeds from the offering as follows: (1) Costs to upgrade the Alferon N Injection® manufacturing facility and to prepare for the FDA pre-approval inspections of the Ampligen® facility, (2) Potential new preclinical or clinical studies in order to gain commercial approval for Ampligen® and broader approvals for Alferon® and Alferon LDO®, (3) Working capital to build and maintain sufficient inventory by procuring raw materials, supplies and other items for the New Brunswick manufacturing facility, as well as to remunerate outside contractors for necessary services, such as, final filling and finishing operations in order to meet any anticipated demand from normal operations as well as through the possible pursuit of other disease areas and/or geographic regions that may present themselves, (4) Pursuit of potential partnering opportunities for Ampligen®, (5) Potential establishment of sales and marketing capabilities, as well as consideration towards the expansion of the Company’s manufacturing capacity. |
In 2012, equity was granted as a form of compensation to these Officers: • Chief Executive Officer was granted 100,000 ten year options to purchase common stock at $0.29 per share which vest in entirety in one year; • Chief Executive Officer was granted 500,000 ten year options to purchase common stock at $0.31 per share which vested immediately; • Chief Executive Officer was granted 10,000 ten year options, as replacement for similar options that had expired, to purchase common stock at $4.03 per share which vested immediately; • General Counsel was granted 100,000 ten year options to purchase common stock at $0.29 per share which vest in entirety in one year; • General Counsel was granted 300,000 ten year options to purchase common stock at $0.31 per share; • Chief Medical Officer was granted 10,000 ten year options, as replacement for similar options that had expired, to purchase common stock at $4.03 per share which vested immediately; • Senior Vice President of Operations was granted 50,000 ten year options to purchase common stock at $0.29 per share which vest in entirety in one year; • Senior Vice President was granted 50,000 ten year options to purchase common stock at $0.29 per share which vest in entirety in one year; and • Vice President of Quality Control was granted 30,000 ten year options to purchase common stock at $0.85 per share which vest in entirety in one year. |
Even after completing clinical trials and other studies, a product candidate could fail to receive regulatory approval for many reasons, including the following: ·not be able to demonstrate to the satisfaction of the FDA that our product candidate is safe and effective for any indication; ·the FDA may disagree with the design or implementation of our clinical trials or other studies; ·the results of the clinical trials or other studies may not demonstrate that a product candidate's clinical and other benefits outweigh its safety risks; ·the FDA may disagree with our interpretation of data from clinical trials or other studies; ·the data collected from clinical trials and other studies of a product candidate may not be sufficient to support the submission of a NDA; ·the approval policies or regulations of the FDA may significantly change in a manner rendering our clinical and other study data insufficient for approval; and ·the FDA may not approve the proposed manufacturing processes and facilities for a product candidate. |
In addition to general economic, political and market conditions, the price and trading volume of our stock could fluctuate widely in response to many factors, including: ·announcements of the results of clinical trials by us or our competitors; ·announcement of legal actions against us and/or settlements or verdicts adverse to us; ·adverse reactions to products; ·governmental approvals, delays in expected governmental approvals or withdrawals of any prior governmental approvals or public or regulatory agency comments regarding the safety or effectiveness of our products, or the adequacy of the procedures, facilities or controls employed in the manufacture of our products; ·changes in U.S. or foreign regulatory policy during the period of product development; ·developments in patent or other proprietary rights, including any third party challenges of our intellectual property rights; ·announcements of technological innovations by us or our competitors; ·announcements of new products or new contracts by us or our competitors; ·actual or anticipated variations in our operating results due to the level of development expenses and other factors; ·changes in financial estimates by securities analysts and whether our earnings meet or exceed the estimates; ·conditions and trends in the pharmaceutical and other industries; ·new accounting standards; ·overall investment market fluctuation; ·restatement of prior financial results; ·notice of NYSE MKT non-compliance with requirements; and ·occurrence of any of the risks described in these "Risk Factors". |
Pursuant to the Warrants, the Put rights enable the Warrant Holders to receive cash in the amount of the Black-Scholes-Merton value obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Warrant expiration date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Warrant expiration date. |
The Company believes such an occurrence is highly unlikely because: a.The Company only has one product that is FDA approved for sale, but such product will not be available for commercial sales any sooner than the second half of 2013; b.The production of new Alferon N Injection® API inventory will not commence until the capital improvement and validation phases are complete; c.The Company is expected to be required to perform additional clinical trials for FDA approval of its flagship product as well as to diversify the applications of its FDA approved product; d.Industry and market conditions continue to include a global market recession, adding risk to any transaction; e.Available capital for a potential buyer in a cash transaction continues to be limited; f.The nature of a life sciences company is heavily dependent on future funding and high fixed costs, including Research & Development; g.The Company has minimal revenue streams which are insufficient to meet the funding needs for the cost of operations or construction at their manufacturing facility; and h.The Company's Rights Plan and Executive Employment Agreements make it less attractive to a potential buyer. |
This $8,339,000 increase in loss was primarily due to: 1)an increase in Research and Development costs in of approximately $2,786,000 or 41% as compared to the same period in 2011; 2)an increase in Production/Cost of Goods Sold in of approximately $946,000 or 91%; 3)an increase in General and Administrative expenses of approximately $2,365,000 or 35% as compared to the same period in 2011; 4)the revaluation of the Liability related to the Redeemable Warrants resulting in a non-cash gain of approximately $85,000 in as compared to non-cash gain of approximately $2,425,000 for the same period in 2011, resulting in an increased loss of $2,340,000; 5)sale in January of $16,000,000 of our New Jersey state Net Operating Loss carry-forwards (for the years and 2010) for approximately $1,328,000 as compared to February 2011, when we effectively sold $28,000,000 of our New Jersey state Net Operating Loss carry-forwards (for the years through 2008) for approximately $2,272,000, representing a decrease in income of $944,000 or 42%; offset by 6)an increase in interest and other income of approximately $973,000 from funds invested in marketable securities. |
The principal functions of the Audit Committee are to (i) assist the Board in fulfilling its oversight responsibility relating to the annual independent audit of our consolidated financial statements and internal control over financial reporting, the engagement of the independent registered public accounting firm and the evaluation of the independent registered public accounting firm’s qualifications, independence and performance; (ii) prepare the reports or statements as may be required by NYSE MKT or the securities laws; (iii) assist the Board in fulfilling its oversight responsibility relating to the integrity of our financial statements and financial reporting process and our system of internal accounting and financial controls; (iv) discuss the financial statements and reports with management, including any significant adjustments, management judgments and estimates, new accounting policies and disagreements with management; and (v) review disclosures by our independent registered public accounting firm concerning relationships with us and the performance of our independent accountants. |
In its review of each member of the Executive Team, the Committee utilized a weighted-average rating process regarding the goals and responsibilities specific to each individual as well as their contribution in meeting Company’s overall goals; ·Reviewed peer group financial data of comparable publicly-traded companies for and with emphasis on a comparison of executive compensation as a factor to various Balance Sheet ratios to determine reasonableness to the respective companies; ·Considered the change in the market value of the Company’s stock during the year in relation to Management’s efforts and ability to impact the results; ·Mandated that the standard terms of future employee options issued by the Company require that such options not vest sooner than one year from the date of issuance and that, to the extent that any such options have not vested on the date of an Executive’s termination, the options will expire; ·Issued new options to employees at the rate of 110% of the Company’s NYSE MKT stock market trading value at the time of award; and ·Adopted a policy to facilitate compliance with Dodd-Frank’s Claw-Back Compensation Recoupment provisions. |
The Compensation Committee, in light of established individual and Company-wide goals and objectives, evaluated the performance of each NEO, key executive and overall staff in order to determine each respective annual incentive opportunity including an analysis by the Compensation Committee that provides the following information: 1.The Company-wide goals and objectives along with individual performance goals for each NEO used to determine annual bonuses for the fiscal year; 2.How each goal individually or in totality was weighted, if applicable, to the extent that any of the performance goals were quantitatively and/or quantitatively measurable; 3.The threshold, target, and maximum levels of achievement of each performance goal, if applicable; 4.The intended relationship between the level of achievement of Company-wide performance goals and the amount of bonus to be awarded; 5.The intended relationship between the level of achievement of each NEO’s individual performance goals and the amount of bonus to be awarded; 6.The evaluation by the Committee of the level of achievement by each NEO of the Company-wide and individual performance goals applicable to him/her individually; 7.If applicable, whether the Committee reviewed any report(s) from compensation consultant(s) and/or web based organizations and data bases; 8.How this level of achievement translated into the actual bonuses awarded for the fiscal year; 9.The adequate disclosure of the percentage of base salary awarded in the form of an incentive bonus to each NEO as a result of their or the Company’s performance; and 10.If applicable, how the Company’s compensation policies and practices relate to the Company’s risk management. |
On an overall basis, all bonus eligible member of the Executive Team would share the following Company-wide goals: A.Continued productive interaction with the FDA concerning issues necessary for approval of Ampligen for CFS; B.Continued progress towards non-USA approval of Ampligen® for Chronic Fatigue Syndrome; C.An overall strategic plan for Ampligen® and Alferon® to be submitted to the Board; D.Strategic plans for the marketing and partners for Ampligen® to be submitted to the Board; E.Continued development of enhancement of vaccines requiring Ampligen®; F.Success in the protection of Company Intellectual Property; G.Continued development of Alferon® LDO; H.Progress in the return to commercialization of Alferon N Injection®; I.Continued development of Ampligen® and Alferon N Injection® for treatment of influenza; J.Maintaining the overall financial strength of the Company and operations consistent with the budget; K.Implementation of research & development partnerships; L.Implementation of Ampligen® clinical trials in cancer with commercial partner(s); M.Implementation of Ampligen® clinical trials in cancer with academic partner(s); N.Increase in clinical trials of Alferon N Injection® and additional indications; and O.Acquisition of complimentary pharmaceutical technologies and/or drugs/vaccines. |
The following Options were issued to NEO in their role as employees during 2012: · On April 13, 2012, we granted 10 year term replacement options to purchase 10,000 shares of our common stock at an exercise price of $4.03 per share that vested immediately to both Dr. William Carter, Chairman, Chief Executive Officer and Chief Scientific Officer, and Dr. David Strayer, Chief Medical Officer and Medical Director, respectively; ·On June 5, 2012, we granted options to purchase 50,000 shares of our common stock at an exercise price of $0.29 per share, or 110% of the closing price of the stock on the NYSE MKT as of June 4, 2012 with total vesting in twelve months, to Robert Dickey, Senior Vice President; ·On June 11, 2012, we granted options to purchase 500,000 shares of our common stock at an exercise price of $0.31 per share, or 110% of the $0.28 closing price of the stock on the NYSE MKT as of June 10, 2012 with total vesting in twelve months, to William A. Carter, Chairman, Chief Executive Officer and Chief Scientific Officer, consistent with his employment agreement; and · On June 11, 2012, we granted options to purchase 300,000 shares of our common stock at an exercise price of $0.31 per share, or 110% of the $0.28 closing price of the stock on the NYSE MKT as of June 10, 2012 with total vesting in twelve months, to Thomas K. Equels, Executive Vice Chairman, Secretary and General Counsel, consistent with his employment agreement. |
Director, Chief Executive Officer, President and Chief Scientific Officer /s/ Thomas K. Equels Executive Vice Chairman of March 18, 2013 Thomas K. Equels the Board, Director, Secretary and General Counsel /s/ Richard Piani Director March 18, 2013 Richard Piani /s/ William Mitchell Director March 18, 2013 William Mitchell, M.D., Ph.D. /s/ Iraj E. Kiani Director March 18, 2013 Iraj E. Kiani, N.D., Ph.D. /s/ Charles T. Bernhardt Chief Financial Officer and March 18, 2013 Charles T. Bernhardt CPA Chief Accounting Officer HEMISPHERx BIOPHARMA, INC AND SUBSIDIARIES Index to Consolidated Financial Statements REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders Hemispherx Biopharma, Inc. We have audited the accompanying consolidated balance sheets of Hemispherx Biopharma, Inc. and Subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of comprehensive loss, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2012. |
The Board may provide for options to become immediately exercisable upon a "change in control”, which is defined in the Plans to occur upon any of the following events: (a) the acquisition by any person or group, as beneficial owner, of 20% or more of the outstanding shares or the voting power of the outstanding securities of the Company; (b) either a majority of the Directors of the Company at the annual stockholders meeting has been nominated other than by or at the direction of the incumbent Directors of the Board, or the incumbent Directors cease to constitute a majority of the Company’s Board; (c) the Company’s stockholders approve a merger or other business combination pursuant to which the outstanding common stock of the Company no longer represents more than 50% of the combined entity after the transaction; (d) the Company’s stockholders approve a plan of complete liquidation or an agreement for the sale or disposition of all or substantially all of the Company’s assets; or (e) any other event or circumstance determined by the Company’s Board to affect control of the Company and designated by resolution of the Board as a change in control. |
The Board may provide for options to become immediately exercisable upon a "change in control", which is defined in the Equity Incentive Plan to occur upon any of the following events: (a) the acquisition by any person or group, as beneficial owner, of 20% or more of the outstanding shares or the voting power of the outstanding securities of the Company; (b) either a majority of the directors of the Company at the annual Stockholders Meeting has been nominated other than by or at the direction of the incumbent Directors of the Board, or the incumbent Directors cease to constitute a majority of the Company’s Board; (c) the Company’s stockholders approve a merger or other business combination pursuant to which the outstanding common stock of the Company no longer represents more than 50% of the combined entity after the transaction; (d) the Company’s shareholders approve a plan of complete liquidation or an agreement for the sale or disposition of all or substantially all of the Company’s assets; or (e) any other event or circumstance determined by the Company’s Board to affect control of the Company and designated by resolution of the Board as a change in control. |
In 2012, equity was granted as a form of compensation to these Officers: ·Chief Executive Officer was granted 100,000 ten year options to purchase common stock at $0.29 per share which vest in entirety in one year; ·Chief Executive Officer was granted 500,000 ten year options to purchase common stock at $0.31 per share which vested immediately; ·Chief Executive Officer was granted 10,000 ten year options, as replacement for similar options that had expired, to purchase common stock at $4.03 per share which vested immediately; ·General Counsel was granted 100,000 ten year options to purchase common stock at $0.29 per share which vest in entirety in one year; ·General Counsel was granted 300,000 ten year options to purchase common stock at $0.31 per share; ·Chief Medical Officer was granted 10,000 ten year options, as replacement for similar options that had expired, to purchase common stock at $4.03 per share which vested immediately; ·Senior Vice President of Operations was granted 50,000 ten year options to purchase common stock at $0.29 per share which vest in entirety in one year; ·Senior Vice President was granted 50,000 ten year options to purchase common stock at $0.29 per share which vest in entirety in one year; and ·Vice President of Quality Control was granted 30,000 ten year options to purchase common stock at $0.85 per share which vest in entirety in one year. |
In addition to general economic, political and market conditions, the price and trading volume of our stock could fluctuate widely in response to many factors, including: ·announcements of the results of clinical trials by us or our competitors; ·announcement of legal actions against us and/or settlements or verdicts adverse to us; ·adverse reactions to products; ·governmental approvals, delays in expected governmental approvals or withdrawals of any prior governmental approvals or public or regulatory agency comments regarding the safety or effectiveness of our products, or the adequacy of the procedures, facilities or controls employed in the manufacture of our products; ·changes in U.S. or foreign regulatory policy during the period of product development; ·developments in patent or other proprietary rights, including any third party challenges of our intellectual property rights; ·announcements of technological innovations by us or our competitors; ·announcements of new products or new contracts by us or our competitors; ·actual or anticipated variations in our operating results due to the level of development expenses and other factors; ·changes in financial estimates by securities analysts and whether our earnings meet or exceed the estimates; ·conditions and trends in the pharmaceutical and other industries; ·new accounting standards; ·overall investment market fluctuation; ·restatement of prior financial results; ·notice of NYSE Amex non-compliance with requirements; and ·occurrence of any of the risks described in these "Risk Factors". |
Pursuant to the Warrants, the Put rights enable the Warrant Holders to receive cash in the amount of the Black-Scholes value is obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Warrant expiration date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Warrant expiration date. |
The principal functions of the Audit Committee are to (i) assist the Board in fulfilling its oversight responsibility relating to the annual independent audit of our consolidated financial statements and internal control over financial reporting, the engagement of the independent registered public accounting firm and the evaluation of the independent registered public accounting firm’s qualifications, independence and performance; (ii) prepare the reports or statements as may be required by NYSE Amex or the securities laws; (iii) assist the Board in fulfilling its oversight responsibility relating to the integrity of our financial statements and financial reporting process and our system of internal accounting and financial controls; (iv) discuss the financial statements and reports with management, including any significant adjustments, management judgments and estimates, new accounting policies and disagreements with management; and (v) review disclosures by our independent registered public accounting firm concerning relationships with us and the performance of our independent accountants. |
In its review of each member of the Executive Team, the Committee utilized a weighted-average rating process regarding the goals and responsibilities specific to each individual as well as their contribution in meeting corporate goals; ·Reviewed peer group financial data of comparable publicly-traded companies for 2009 and 2010 with emphasis on a comparison of executive compensation as a factor to various Balance Sheet ratios to determine reasonableness to the respective companies; ·Considered the change in the market value of the Company’s stock during the year in relation to Management’s efforts and ability to impact the results; ·Mandated that the standard terms of future employee options issued by the Company require that such options not vest sooner than one year from the date of issuance and that, to the extent that any such options have not vested on the date of an Executive’s termination, the options will expire; and ·Adopted a policy to facilitate compliance with Dodd-Frank’s Claw-Back Compensation Recoupment provisions. |
The Compensation Committee, in light of established individual and Company-wide goals and objectives, evaluated the performance of each NEO, key executive and overall staff in order to determine each respective annual incentive opportunity including an analysis by the Compensation Committee that provides the following information: 1.The Company-wide goals and objectives along with individual performance goals for each NEO used to determine annual bonuses for the fiscal year; 2.How each goal individually or in totality was weighted, if applicable, to the extent that any of the performance goals were quantitatively and/or quantitatively measurable; 3.The threshold, target, and maximum levels of achievement of each performance goal, if applicable; 4.The intended relationship between the level of achievement of Company-wide performance goals and the amount of bonus to be awarded; 5.The intended relationship between the level of achievement of each NEO’s individual performance goals and the amount of bonus to be awarded; 6.The evaluation by the Committee of the level of achievement by each NEO of the Company-wide and individual performance goals applicable to him/her individually; 7.If applicable, whether the Committee reviewed any report(s) from compensation consultant(s) and/or web based organizations and data bases; 8.How this level of achievement translated into the actual bonuses awarded for the 2011 fiscal year; 9.The adequate disclosure of the percentage of base salary awarded in the form of an incentive bonus to each NEO as a result of their or the Company’s performance; and 10.If applicable, how the Company’s compensation policies and practices relate to the Company’s risk management. |
On an overall basis, all bonus eligible member of the Executive Team would share the following Company-wide goals: A.Continued productive interaction with the FDA concerning issues necessary for approval of Ampligen for CFS; B.Continued progress towards non-USA approval of Ampligen® for Chronic Fatigue Syndrome; C.An overall strategic plan for Ampligen® and Alferon® to be submitted to the Board; D.Strategic plans for the marketing and partners for Ampligen® to be submitted to the Board; E.Continued development of enhancement of vaccines requiring Ampligen®; F.Success in the protection of Company Intellectual Property; G.Continued development of Alferon® LDO; H.Progress in the return to commercialization of Alferon N Injection®; I.Continued development of Ampligen® and Alferon N Injection® for treatment of influenza; J.Maintaining the overall financial strength of the Company and operations consistent with the budget; K.Implementation of research & development partnerships; L.Implementation of Ampligen® clinical trials in cancer with commercial partner(s); M.Implementation of Ampligen® clinical trials in cancer with academic partner(s); N.Increase in clinical trials of Alferon N Injection® for additional indications; and O.Acquisition of complimentary pharmaceutical technologies and/or drugs/vaccines. |
Finally, the Committee considered the change in the market value of the Company’s stock during 2011 and reached a consensus that the impact of the 2011 stock trading value should be considered to have a neutral effect on employees’ performance evaluation due to their conclusion of the following observations: 1.The overall devaluation in the trading value of U.S. bio-pharmaceutical companies; 2.An overall depression in the global investment markets; 3.The current market value of the Company’s stock is less than either its book value or cash value; 4.A belief that the current adverse impact of the Company’s stock value is short-term; 5.Confidence that Company’s employees were working diligently in an attempt to return the market value to the stock; 6.The Senior Management team had a net loss of two members from 2010 to 2011, for which the remaining executives had assumed those respective duties and responsibilities; and 7.The recognition that a performance bonus would be desirable to acknowledge the persistence, loyalty, effort and dedication of the Senior Management team. |
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