As filed with the Securities and Exchange Commission on January 4,April 15, 1999
-----------------------------------------------------------------------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)(AMENDMENT NO. 2)
QUARTERLY REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
-------
For the Quarter Ended: SeptemberJune 30, 1998 Commission File Number 0-27352
Hybridon, Inc.
--------------
(Exact name of registrant as specified in its charter)
Delaware 04-3072298
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
organization or incorporation)
155 Fortune Blvd.
Milford, MA 01757
-----------------
(Address of principal executive offices, including zip code)
(508) 482-7500
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $.001 per share 15,306,825
- --------------------------------------- -------------------------------
Class Outstanding as of December 31, 1998April 13, 1999
HYBRIDON, INC.
Form 10-Q/A10-Q
INDEX
Part I - Financial Information
- ------------------------------
Item 1 - Financial Statements
Consolidated Condensed Balance Sheets as of SeptemberJune 30, 1998 and December
31, 1997. (As Restated)
Consolidated Condensed StatementsStatement of Operations for the Three Months
ended and NineSix Months ended SeptemberJune 30, 1998 and 1997 and Cumulative from
May 25, 1989 (Inception) to SeptemberJune 30, 19981998. (As Restated)
Consolidated Condensed Statements of Cash Flows for the NineSix Months ended
SeptemberJune 30, 1998 and 1997, and Cumulative from May 25, 1989 (Inception)
to SeptemberJune 30, 19981998. (As Restated)
Notes to Consolidated Condensed Financial StatementsStatements.
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II - Other Information
- ---------------------------
Items 1 throughItem 2 - Changes in Securities and Use of Proceeds
Item 4 - None
Item 5 - Other InformationSubmission of Matters to a Vote of Security Holders
Item 6 - Exhibits and Reports on Form 8-K
Signatures
HYBRIDON, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
ASSETS
SeptemberASSETS
June 30, December 31,
1998 1997
(As Restated)
CURRENT ASSETS:
Cash and cash equivalents $ 882,8255,518,682 $ 2,202,202
Restricted cash (Note 9) 1,592,368 -
Accounts receivable 825,668264,122 529,702
Accounts receivable related to real estate limited partnership 5,450,000 -
Prepaid expenses and other current assets 448,372383,926 1,005,825
----------- -------------------------- ---------------
Total current assets 7,606,86513,209,098 3,737,729
----------- -------------------------- ---------------
PROPERTY AND EQUIPMENT, NET 8,953,117AT COST:
Leasehold improvements 11,699,244 16,027,734
Laboratory equipment 9,041,452 6,770,402
Equipment under capital leases 1,601,535 4,879,190
Office equipment 1,839,824 1,947,818
Furniture and fixtures 1,474,862 645,264
Construction-in-progress 45,409 45,409
--------------- ---------------
25,702,326 30,315,817
Less -- Accumulated depreciation and amortization 13,199,366 11,085,013
--------------- ---------------
12,502,960 19,230,804
----------- -----------
OTHER ASSETS:
Restricted cash 659,618 3,050,982
NotesNote receivable from officers 255,800officer 252,950 247,250
Deferred financing costs and other assets 923,162982,289 3,354,767
Investment in real estate partnership - 5,450,000
----------- -----------
1,838,580--------------- ---------------
1,894,857 12,102,999
----------- -----------
$18,398,562 $35,071,532
----------- -----------$ 27,606,915 $ 35,071,532
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations 3,030,981$ 4,754,478 $ 7,868,474
Accounts payable 4,387,3534,194,048 8,051,817
Accrued expenses 3,003,9345,352,350 11,917,298
----------- -------------------------- ---------------
Total current liabilities 10,422,26814,300,876 27,837,589
----------- -------------------------- ---------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION 573,017596,431 3,282,123
----------- -------------------------- ---------------
9% CONVERTIBLE SUBORDINATED NOTES PAYABLE 1,306,000 50,000,000
----------- -------------------------- ---------------
STOCKHOLDERS' EQUITY(DEFICIT):
Preferred stock, $.01 par value-
Authorized--5,000,000Authorized -- 5,000,000 shares
Issued and outstanding--None - -
Series A convertible preferred stock, $.01 par value-
Authorized--5,000,000stock-
Designated -- 1,500,000 shares - -
Issued and outstanding--624,790outstanding -- 624,789 shares at SeptemberJune 30, 1998 6,248 -
Common stock, $.001 par value-
Authorized--100,000,000valueB
Authorized -- 100,000,000 shares
Issued and outstanding--15,254,825outstanding -- 15,254,825 and 5,059,650 shares 15,255 5,060
at SeptemberJune 30, 1998, and December 31, 1997,
respectively
15,255 5,060
Additional paid-in capital 240,301,274239,274,774 173,695,698
Deficit accumulated during the development stage (233,294,707)(226,907,528) (218,655,101)
Deferred compensation (930,793)(985,141) (1,093,837)
----------- -------------------------- ---------------
Total stockholders' equity(deficit) 6,097,27711,403,608 (46,048,180)
----------- -----------
18,398,562--------------- ---------------
$ 27,606,915 $ 35,071,532
=========== ========================== ===============
The accompanying notes are an integral part of these consolidated
condensed financial statements.
HYBRIDON, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended Cumulative from
June 30, June 30, May 25, 1989
Three Months Ended Nine Months Ended (Inception) to
SeptemberJune 30,
September 30, September 30,1998 1997 1998 1997 1998
(As Restated) (As Restated) (As Restated)
1998 1997 1998 1997 1998
REVENUES:
Research and development $ 150,000649,915 $ 200,000186,250 $ 949,915799,915 $ 980,150780,150 $ 6,449,1785,799,263
Product and service revenue 846,746 155,368 2,353,435 1,231,226 5,310,472681,620 727,704 1,506,689 1,075,858 4,963,641
Interest income 44,010 294,246 106,457 898,160 3,327,19644,602 486,502 62,447 603,914 3,283,186
Royalty and other income - 18,24714,971 - 33,21814,971 110,321
----------- ------------ ------------ ------------ -------------
1,040,756 667,861 3,409,807 3,142,754 15,197,167
----------- ------------ ------------ ------------ --------------------------- --------------- --------------- --------------- -------------------
1,376,137 1,415,427 2,369,051 2,474,893 14,156,411
-------------- --------------- --------------- --------------- -------------------
OPERATING EXPENSES:
Research and development 5,201,246 11,338,913 17,180,927 37,784,718 182,640,7425,577,144 14,969,366 11,979,681 26,445,805 177,439,496
General and administrative 1,503,845 3,057,380 5,217,864 9,011,879 53,034,4802,648,907 2,524,046 4,314,019 5,954,499 52,130,635
Restructuring charge - 3,100,000 - 3,100,000- - 11,020,000
Interest 296,344 1,605,918 2,880,307 3,223,473 9,026,337
----------- ------------ ------------ ------------ -------------
7,001,435 19,102,211 25,279,098 53,120,070 255,721,559
----------- ------------ ------------ ------------ -------------976,526 1,447,348 2,583,963 1,617,555 8,729,993
-------------- --------------- --------------- --------------- -------------------
9,202,577 18,940,760 18,877,663 34,017,859 249,320,124
-------------- --------------- --------------- --------------- -------------------
Loss from operations (5,960,679) (18,434,350) (21,869,291) (49,977,316) (240,524,392)(7,826,440) (17,525,333) (16,508,612) (31,542,966) (235,163,713)
EXTRAORDINARY ITEM:
Gain on conversionexchange of 9%
-convertible subordinated
notes payable 8,876,685 - 8,876,685 - 8,876,685
----------- ------------ ------------ ------------ -------------
convertible subordinated notes-------------- --------------- --------------- --------------- -------------------
NET LOSS (5,960,679) (18,434,350) (12,992,606) (49,977,316) (231,647,707)
----------- ------------ ------------ ------------ -------------INCOME (LOSS) 1,050,245 (17,525,333) (7,631,927) (31,542,966) (226,287,028)
ACCRETION OF PREFERRED 1,647,000STOCK
DIVIDENDS (620,500) - 1,647,000(620,500) - 1,647,000
----------- ------------ ------------ ------------ -------------
STOCK DIVIDEND
NET LOSS TO COMMON $(7,607,679) $(18,434,350) $(14,639,606) $(49,977,316) $(233,294,707)
===========(620,500)
-------------- ---------------- ---------------- -------------- ------------------
- -
Net income (loss)
applicable to common
stockholders $ 429,745 $ (17,525,333) $ (8,252,427) $ (31,542,966) $ (226,907,528)
============ ============ ============ =============
STOCKHOLDERS=============== =============== ============== ===============
BASIC AND DILUTED LOSSNET INCOME (LOSS)
PER COMMON SHARE FROM
(Note 3):
OPERATIONS, INCLUDINGLoss per share before
extraordinary item $ (0.50)(0.69) $ (3.65)(3.47) $ (2.21)(2.01) $ (9.90)
ACCRECTION OF PREFERRED
STOCK
EXTRAORDINARY GAIN(6.26)
Extraordinary item .78 - 1.08 -
0.83-------------- --------------- -------------- --------------
Net income (loss) per share .09 (3.47) (0.93) (6.26)
Accretion of preferred stock
dividends (0.05) - ----------- ------------ ------------ ------------
NET LOSS(0.08) -
--------------- -------------- -------------- --------------
Net income (loss) per share
applicable to common
stockholder $ (0.50).04 $ (3.65)(3.47) $ (1.37)(1.01) $ (9.90)
=========== ============ ============ ============(6.26)
============== =============== ============= ==============
SHARES USED IN COMPUTING BASIC AND
DILUTED NET LOSS PER COMMON SHARE
(Note 3) 15,254,825 5,055,513 10,648,116 5,046,806
=========== ============ ============ ============2) 11,333,604 5,048,391 8,196,627 5,042,369
============== =============== =============== ===============
The accompanying notes are an integral part of these consolidated
condensed financial statementsstatements.
HYBRIDON, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended Cumulative from
June 30, May 25, 1989
Nine Months Ended (inception)(Inception) to
SeptemberJune 30,
September 30,1998 1997 1998
(As Restated) (As Restated)
1998 1997 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(12,992,606) $(49,977,316) $(231,647,707)$ (7,631,927) $ (31,542,966) $ (226,287,028)
Adjustments to reconcile net loss to net cash used in
operating activities--activitiesB
Extraordinary gain on conversionexchange of 9% (8,876,685) - (8,876,685)
convertible subordinated notes payable
(8,876,685) - (8,876,685)
Depreciation and amortization 2,419,269 4,081,720 13,605,7231,785,353 2,241,374 12,971,807
Loss on disposal of fixed assets 424,675228,000 - 424,675228,000
Issuance of common stock for services rendered 1,195,398- 146,875 1,342,273146,875
Compensation on grant of stock options, 108,696 188,412 8,232,494
warrants and 163,044 261,519 8,286,842 restricted stock
Amortization of discount on convertible promissory
notes - - 690,157
promissory notes payable
Amortization of deferred financing costs 240,611 358,904 937,080225,816 250,395 922,285
Noncash interest on convertible promissory notes - - 260,799
notes payable
Write-down of assets related to restructuring 6,600,000 331,000 7,200,000- - 1,255,000
Changes in operating assets and liabilities-liabilitiesB
Accounts receivable (295,966) 276,545 (825,668)265,580 (70,609) (264,122)
Prepaid and other current assets 557,703 (541,718) (448,122)
Notes122,148 (108,610) (883,676)
Note receivable from officers (8,550) 55,952 (255,800)officer (5,700) (4,663) (252,950)
Amounts payable to related parties - - (200,000)
Accounts payable and accrued expenses (6,871,326) 3,349,962 13,097,789(330,465) (572,356) 18,983,650
Deferred revenue - (86,250) -
------------ ------------ ---------------------------- --------------- ------------------
Net cash used in operating activities (17,444,433) (41,742,807) (196,408,644)
------------ ------------ -------------(14,109,184) (29,558,398) (193,073,394)
--------------- --------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in short-term investments - (5,113,569)(16,267,615) -
Purchases of property and equipment, net (340,507) (6,645,439) (29,652,972)(285,509) (5,838,183) (29,597,974)
Proceeds from sale of fixed assets 460,000400,000 - 460,000400,000
Investment in real estate partnership - - (5,450,000)
------------ ------------ ---------------------------- --------------- ------------------
Net cash provided by (used in)
investing activities 119,493 (11,759,008) (34,642,972)
------------ ------------ -------------114,491 (22,105,798) (34,647,974)
--------------- --------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible preferred stock 6,804,5627,999,960 - 103,388,716104,584,114
Proceeds from issuance of common stock related to stock - 83,32762,327 1,260,928
options and restricted stock grants
Proceeds from issuance of common stock related to stock - 9,075 3,185,816
warrants
Net proceeds from issuance of common stock 6,876,676 - 59,232,000
Repurchase of common stock - - (263)
Proceeds from notes payable - - 9,450,000
Proceeds from issuance of convertible promissory notes 4,233,8324,233,833 50,000,000 63,425,57663,425,577
payable
Proceeds from long-term debt - - 662,107
Payments on long-term debt and capital leases (4,236,693) (1,169,656) (7,602,573)(2,489,782) (895,183) (5,855,662)
Proceeds from sale/leaseback - 1,165,236 4,001,018
Decrease (increase) in restricted cash and other 2,327,186 (626,985) (1,811,945)
assets 690,486 133,878 (3,448,646)
(Increase) decrease in deferred financing costs - (2,699,957)(2,849,958) (3,256,939)
------------ ------------ ---------------------------- --------------- ------------------
Net cash provided by financing activities 16,005,563 46,761,040 231,934,441
------------ ------------ -------------17,311,173 47,625,375 233,240,050
--------------- --------------- ------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,319,377) (6,740,775) 882,8253,316,480 (4,038,821) 5,518,682
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,202,202 12,633,742 -
------------ ------------ ---------------------------- --------------- ------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 882,8255,518,682 $ 5,892,9678,594,921 $ 882,825
============ ============ ==============5,518,682
=============== =============== ==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 1,494,3231,261,502 $ 786,005492,555 $ 5,124,773
============ ============ =============4,891,952
=============== =============== ==================
The accompanying notes are an integral part of these consolidated
condensed financial statements.
HYBRIDON, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(1) ORGANIZATION
Hybridon, Inc. (the "Company")Company) was incorporated in the State of Delaware
on May 25, 1989. The Company is engaged in the discovery and development
of novel genetic medicines based primarily on antisense technology. The
Company is in the development stage. Since inception, the Company has
been engaged primarily in research and development efforts, development
of its manufacturing capabilities and organizational efforts, including
recruiting of scientific and management personnel and raising capital.
To date, the Company has not received revenue from the sale of
biopharmaceutical products developed by it based on antisense
technology. In order to commercialize its own products, the Company will
need to address a number of technological challenges and comply with
comprehensive regulatory requirements. Accordingly, it is not possible
to predict the amount of funds that will be required or the length of
time that will pass before the Company receives revenues from sales of
any of these products. RevenuesAll revenues received by the Company to date have
been derived primarily from collaboration agreements, interest on investment funds
and revenues from the custom contract manufacturing of synthetic DNA and
reagent products by the Company's Hybridon Specialty Products Division.
As a result, although the Company has begun to generate revenues from
its custom contract manufacturing business, the Company is dependent on the
proceeds from possible future sales of equity securities, debt
financings and research and development collaborations in order to fund
future operations.
On May 5, 1998, the Company completed a private offering of equity
securities raising total gross proceeds of approximately $27.3$26.7 million
from the issuance of 9,597,476 shares of common stock, 114,285 shares of
Series A convertible preferred stock and warrants to purchase 2,657,2193,329,486
shares of common stock at $2.40 per share. The gross proceeds include
the conversion of approximately $6.2$5.9 million of accounts payable,
capital lease obligations and other obligations into common stock. The
Company incurred approximately $2.6$1.6 million of cash expenses related to
the private offering and issued 597,699 shares of common stock and
warrants to purchase 1,720,825 shares of common stock at $2.40 per share
to the placement agents. The compensation received by Pillar, Investments
Ltd. ("Pillar"), a company
affiliated with certain directors of the Company, with respect to the
offshore component of the private offering (the "Offshore
Offering")(Offshore Offering) consisted
of (i) 9% of gross proceeds of such Offshore Offering and (ii) a
non-accountable expense allowance equal to 4% of gross proceeds of such
Offshore Offering. Pillar received approximately $1.6 million and
warrants to purchase 1,111,630 shares of common stock at $2.40 per
share. In addition, Pillar is entitled to receive 300,000 shares of
common stock in connection with its efforts in assisting the Company in
restructuring its balance sheet. The Company has recorded $600,000 of
general and administrative expense in the accompanying statements of
operations, which represents the value of this common stock on May 5,
1998.
On February 6, 1998, the Company commenced an exchange offer to the
holders of the 9% Convertible Subordinated Notes (the "9% Notes")9% Notes) (see
Note 6) to exchange the 9% Notes for Series A convertible preferred
stock and certain warrants of the Company. On May 5, 1998,
noteholders
HYBRIDON, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Noteholders holding $48.7 million of principal and $2,361,850 of accrued
interest tendered such principal and accrued interest to the Company for
510,505 shares of Series A convertible preferred stock and warrants to
purchase 3,002,958 shares of common stock with an exercise price of
$4.25 per share. In accordance with Statement of Financial Accounting
("SFAS")(SFAS) No.15, Accounting by Debtors and Creditors for Troubled Debt
Restructurings, the Company recorded an extraordinary gain of
approximately $8.9 million related to the conversion. The extraordinary
gain represents the difference between the carrying value of the 9%
Notes plus accrued interest, less $2,249,173 of deferred financing costs
written off and the fair value of the Series A convertible preferred
stock, as determined by the per share sales price of Series A
convertible preferred stock sold in the private offering described
above, and warrants to purchase common stock issued by the Company.
HYBRIDON, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(2) UNAUDITED INTERIM FINANCIAL STATEMENTS
The unaudited consolidated condensed financial statements included
herein have been prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission and
include, in the opinion of management, all adjustments, consisting of
normal, recurring adjustments, necessary for a fair presentation of
interim period results. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The Company believes, however,
that its disclosures are adequate to make the information presented not
misleading. The results for the interim periods presented are not
necessarily indicative of results to be expected for the full fiscal
year. It is suggested that these financial statements be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997, as filed with the Securities and Exchange
Commission.
In April of 1999, the Company restated its June 30, 1998 financial
statements to reflect the accretion on the Series A preferred stock and
$600,000 of general and administrative expense related to common stock
issuable to Pillar (see Note 1). Such restatement resulted in a decrease
in the net loss applicable to common stockholders of $1,220,500 for the
three and six months ended June 30, 1998 (see Note 13).
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net LossIncome (Loss) per Common Share
The Company applies SFAS No. 128, Earnings per Share, in calculating
earnings per share. Basic net lossincome (loss) per share is computed by
dividing net loss applicable
to common stockholders (net loss plus cumulative preferred stock dividends) by the weighted average number of common shares
outstanding during the period. Diluted net loss per share for the
HYBRIDON, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
periods presented is the same as basic net loss per share as the
inclusion of the potential common stock equivalents would be
antidilutive.
Antidilutive securities which consist of stock options and
warrants that are not included in diluted net loss per common share were
12,568,143 and 2,686,863 for the nine month periods ended September 30, 1998 and
1997, respectively.
(4) CASH EQUIVALENTS
The Company applies SFAS No. 115, Accounting for Certain Investments in Debtconsiders all highly liquid investments with maturities of
three months or less when purchased to be cash equivalents. Cash and
Equity Securities. Under SFAS No. 115, debt securities that the Company has the
positive intent and ability to hold to maturity are recorded at amortized cost
and are classified as held-to-maturity securities. These securities include
cash equivalents and restricted cash. Cash equivalents have original maturities of
less than three months. Cash and cash equivalents at SeptemberJune 30, 1998 and December 31,
1997 consisted of the following:
September 30, December 31,
1998 1997
Cash and cash equivalents
Cash and moneyfollowing (at amortized cost, which approximates
fair market funds $ 400,949 $ 1,702,272
Corporate bond 481,876 499,930
-------------- -----------------
$ 882,825 $ 2,202,202
============== =================
Restricted cash - long-term
Certificates of deposit $ - $ 2,016,364
Savings account 659,618 1,034,618
-------------- -----------------
$ 659,618 $ 3,050,982
============== =================
HYBRIDON, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)value):
June 30, December 31,
1998 1997
Cash and cash equivalents-
Cash and money market funds $ 5,289,964 $ 1,702,272
Corporate bond 228,718 499,930
------------------ ------------------
$ 5,518,682 $ 2,202,202
================== ==================
Restricted cash-current
Certificates of deposit (Note 9) $ 1,592,368 $ -
================== ==================
Restricted cash-long term
Certificates of deposit $ - $ 2,016,364
Savings account 659,618 1,034,618
------------------ ------------------
$ 659,618 $ 3,050,982
================== ==================
(5) ACCOUNTS RECEIVABLE RELATED TO REAL ESTATE LIMITED PARTNERSHIP
Under the terms of the Cambridge, Massachusetts building lease
(the "Cambridge
Lease")(Cambridge Lease), the Company accounted for $5,450,000 of its payments
for a portion of the costs of construction of the leased premises as
contributions to the capital of the Cambridge landlord in exchange for a
limited partnership interest in the Cambridge landlord (the "Partnership Interest")Partnership
Interest). Under the terms of the Partnership Interest, the Company has
the right at any time prior to February 2000 to sell the Partnership
Interest back to the other limited partners of the landlord. In April
1998, the Company exercised its right to sell back the Partnership
Interest and accordingly theInterest. The contribution to the real estate partnership has been
classified as a current asset at September 30, 1998.
Subsequent to SeptemberJune 30, 1998, the sale of the building was finalized andsince the Company
receivedanticipates receiving payment in November 1998.within one year.
HYBRIDON, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(6) 9.0% CONVERTIBLE SUBORDINATED NOTES
On April 2, 1997, the Company issued $50,000,000 of the 9% Notes. As
discussed in Note 1, on May 5, 1998 noteholdersNoteholders holding $48.7 million of
principal value of the 9% Notes tendered such notes in exchange for
Series A convertible preferred stock and warrants to purchase common
stock. In addition, $2,361,850 of accrued interest thereon was converted
into shares of Series A convertible preferred stock and warrants to
purchase common stock. As of SeptemberJune 30, 1998, there is $1.3 million principal amount of 9%
Notes outstanding. Under the terms of the 9% Notes, the Company must
make semi-annual interest payments on the outstanding principal balance
through the maturity date of April 1, 2004. If the 9% Notes are
converted prior to April 1, 2000, the Noteholders are entitled to
receive accrued interest from the date of the most recent interest
payment through the conversion date. The 9% Notes are subordinate to substantially all
of the Company's existing indebtedness. The 9% Notes are convertible at any
time prior to the maturity date at a conversion price equal to $35.0625
per share, subject to adjustment under certain circumstances, as
defined.
Beginning April 1, 2000, the Company may redeem the 9% Notes at its
option for a 4.5% premium over the original issuance price, provided
that from April 1, 2000 to March 31, 2001, the 9% Notes may not be
redeemed unless the closing price of the common stock equals or exceeds
150% of the conversion price for a period of at least 20 out of 30
consecutive trading days and the 9% Notes redeemed within 60 days after
such trading period. The premium decreases by 1.5% each year through
March 31, 2003. Upon a change of control of the Company, as defined, the
Company will be required to offer to repurchase the 9% Notes at 150% of
the original issuance price.
(7) NEW ACCOUNTING STANDARDS
Effective January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 requires disclosure of all components
of comprehensive income on an annual and interim basis. Comprehensive
income is defined as the change in equity of a business enterprise
during a period from transactions and other events and circumstances
from non-owner sources. The Company's total comprehensive net lossincome
(loss) for the three and ninesix month periods ended SeptemberJune 30, 1998 and 1997
were the same as reported net lossincome (loss) for those periods.
In July 1997, the FASB issued SFAS No. 131, Disclosures About Segments
of an Enterprise and Related Information. SFAS No. 131 requires certain
financial and supplementary information to be disclosed on an annual and
interim basis for each reportable segment of an enterprise. SFAS No. 131
is effective for fiscal years beginning after December 15, 1997. Unless
impracticable, companies would be required to restate prior period
information
HYBRIDON, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
upon adoption. The Company believes that the adoption of
SFAS No. 131 will not have a material impact on its financial results or
financial position.
HYBRIDON, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(8) RESTRUCTURING
Beginning in July 1997, the Company implemented a restructuring plan to
reduce expenditures on a phased basis over the balance of 1997 in an
effort to conserve its cash resources. As a part of this restructuring
plan, the Company recorded an $11,020,000 restructuring charge in 1997
to provide for (i) the termination of certain research programs, (ii)
the abandonment of certain leased facilities (net of sublease income and related disposal of fixed assets)income),
(iii) severance obligations to nearly 100 terminated employees and (iv)
the cancellation of certain other contracts. During the third quarter ofJune 1998, the
Company completed
its restructuring plan after movingvacated the Cambridge, MA facility and moved its corporate
headquarters to Milford, Massachusetts.MA.
The total cash impact of the restructuring amounted to approximately
$3,426,000. The total cash paid as of June 30, 1998 was approximately
$2,721,000 and the remaining amount will be paid in 1998.
(9) NOTE PAYABLE TO A BANK
In December 1996, the Company entered into a five year $7,500,000 note
payable with a bank. The note contains certain financial covenants that
require the Company to maintain minimum tangible net worth and minimum
liquidity and prohibits the payment of dividends. The note is payable in
59 equal installments of $62,500 commencing on February 1, 1997 with a
balloon payment of the then remaining outstanding principal balance, due
on January 1, 2002. During 1997, the Company's minimum liquidity had
fallen below the required amount and the Company deposited $1,758,542 as
collateral under the cash pledge agreement. During 1998, the bank
withdrew the full amount of the restricted cash and applied it against
the outstanding balance of the note. The minimum liquidity requirements
were subsequently amended to provide that if as of the fifteenth and
last day of each calendar month the Company does not have minimum
liquidity of at least $8,000,000 or $4,000,000, as defined, the Company
will be required to immediately repay to the bank 35% and 100%,
respectively, of the then outstanding balance. Also, in connection with
the note, the Company issued five year warrants to purchase 13,000
shares of common stock at an exercise price of $34.49 per share. These
warrants were fully exercisable at December 31, 1997. As of SeptemberJune 30,
1998, $2,895,000approximately $4,611,000 was outstanding under the note, which is
classified as a current liability in the accompanying SeptemberJune 30, 1998
consolidated balance sheet. During AugustSubsequent to June 30, 1998, the Company placed
approximately $1.6 million in escrow at the bank's request, which was
withdrawn andrequest. In addition,
in August 1998 the $1.6 million will be applied against the outstanding
balanceamount of the note by the bank.note. Also, upon the closing of the sale of the
Partnership InterestInterests (see Note 5) the Company waswill be required to pay
down an additional $750,000 on the note.
The Company
is also required to pay to the bank one-half of any proceeds received from the
sale of certain assets. The Company intends to make payments relating to these
items to the bank during November 1998 in the event that the Loan is not
purchased as described in Note 13. On September 29, 1998, the Company received a
waiver of noncompliance since the Company was not in compliance with the minimum
liquidity and minimum tangible net worth covenants associated with the note.
Following the sale of the partnership interest, the Company was in compliance
with all such covenants.
HYBRIDON, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(10) METHYLGENE, INC. LICENSING AGREEMENT
In January 1996, the Company and MethylGene, Inc. ("MethylGene")(MethylGene) (a
Canadian company which is approximatelyover 30% owned by the Company) entered into a
licensing agreement for the purpose of researching and developing
compounds for the treatment of cancer and other indications. In May
1998, this agreement was amended to grant MethylGene a non-exclusive
right to use anyall and allany antisense chemistries discovered by the Company
or any of its affiliates for a period commencing on May 5, 1998 and
ending on the earlier of (i) the effective date of termination by
MethylGene of its contract for development services to be provided by
the Company, (ii) May 5, 1999, unless MethylGene exercises its option to
continue contracting for development services provided by the Company,
or (iii) May 5, 2000.
HYBRIDON, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED) As additional consideration for this non-exclusive
right, MethylGene is required to pay the Company certain milestone and
royalty amounts, as defined, and transfer 300,000 shares of MethylGene's
class B shares to the Company. The Company has placed no value on these
shares.
In the third quarter of 1998, the Company recorded
$250,000 of revenue received from MethylGene.
(11) UNITS ISSUED TO PRIMEDICA CORPORATION
TheIn connection with the unit financing (see Note 1) the Company has issued
250,000 shares of common stock and 62,500 warrants to purchase common
stock to Primedica Corporation ("Primedica")(Primedica) for $250 in cash
and future services to be
provided. The services shall commence upon the Company's request after
(i) the Company's securities are listed on a nationally recognized
exchange, and (ii) the average closing price of the Company's common
stock is at least $2.00 per share for the twenty daytwenty-day trading period
preceding the contract commencement date. In the event that the Company
does not use these services as a result of the failure to meet the
contract conditions, Primedica mayshall forfeit to the Company all or part
of the common stock and warrants held by Primedica. The Company has
recorded these shares as issued and outstanding at SeptemberJune 30, 1998 at par
value. The Company will record an expense forthe value of these services as the
services are provided.rendered.
HYBRIDON, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(12) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The accompanying consolidated financial statements include the following
information:
Cumulative from
May 25, 1989
Nine25,1989
Six Months Ended (Inception) to
SeptemberJune 30, SeptemberJune 30,
1998 1997 1998
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING
ACTIVITIES:
Issuance of Series A convertible preferred stock and
attached warrants in exchange for conversion of 9%
convertible subordinated notes payable and accrued interest $51,061,850 $ -51,055,850 $ 51,061,850--- $ 51,055,850
Accretion of Series A convertible preferred stock dividends $ 1,647,000620,500 $ ---- $ 1,647,000620,500
Issuance of common stock and attached warrants in exchange
for conversion of convertible subordinated notes payable $ 4,800,000 $ ---- $ 4,800,000
Issuance of common stock in exchange for conversion of
accounts payable capital leaseand other obligations and accrued
interest
$ 6,434,3085,934,558 $ ---- $ 6,434,308
Issuance of common stock for services rendered $ 1,195,398 $ - $ 1,342,2725,934,558
HYBRIDON, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(13) SUBSEQUENT EVENT
Subsequent to SeptemberRESTATEMENT OF JUNE 30, 1998
Forum Capital Markets, LLC ("Forum") and Pecks
Management Partners Ltd. ("Pecks"; Forum and Pecks collectively, the "Lender"),
affiliatesIn April of two members of the Company's Board of Directors, agreed to
purchase the Company's note payable to the bank (see Note 9). In connection with
this purchase, the Lender will lend an additional amount to1999, the Company as soon
as practicable so asrestated its 1998 financial statements to
increasereflect the outstanding principal amount ofaccretion on the note
payable to $6,000,000. In addition, the terms of the note payable will be
amended as follows: (i) the maturity will be extended to November 30, 2003; (ii)
the interest rate will be decreased to 8%; (iii) interest will be payable
monthly in arrears, with the principal due in full at maturity of the note
payable; (iv) the note payable will beSeries A convertible at the Lender's option, in
whole or in part, into shares of common stock of the Company; (v) the threshold
of the minimum liquidity covenant will be reduced from $4,000,000 to $2,000,000;
and (vi) the note payable may not be prepaid, in whole or in part, at any time
prior to December 1, 2000. The other terms of the note payable will remain
unchanged. In connection with the purchase of the note payable, Forum will
receive a fee of $400,000, which will be reinvested by Forum by purchasing from
the Company common or preferred stock and
warrants,$600,000 of general and will also receive
warrantsadministrative expense related to purchase $400,000 of shares ofthe common
stock ofissuable to Pillar (see Note 1). The following table presents the
Company.net income (loss), net income (loss) applicable to common stockholders
and net income (loss) per share as originally reported, and as restated.
Three Months Ended Six Months Ended
June 30, 1998 June 30, 1998
As Reported As Restated As Reported As Restated
----------- ----------- ----------- -----------
Net Income (Loss) $ 1,650,245 $ 1,050,245 $ (7,031,927) $ (7,631,927)
Net Income (Loss)
applicable to common
stockholders 1,650,245 429,745 (7,031,927) (8,252,427)
Net Income (Loss) per
share $ 0.15 $ 0.04 $ (0.86) $ (1.01)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company is engaged in the discovery and development of genetic medicines
based on antisense technology. The Company commenced operations in February 1990
and since that time has been engaged primarily in research and development
efforts, development of its manufacturing capabilities and organizational
efforts, including recruitment of scientific and management personnel, and
raising capital. To date, the Company has not received revenue from the sale of
biopharmaceutical products developed by it. In order to commercialize its own
products, the Company will need to address a number of technological challenges
and comply with comprehensive regulatory requirements. Accordingly, it is not
possible to predict the amount of funds that will be required or the length of
time that will pass before the Company receives revenues from sales of any of
these products. All revenues received by the Company to date have been derived
from collaborative and service agreements, interest on invested funds and revenues from the
custom contract manufacturing of synthetic DNA and reagent products by the
Hybridon Specialty Products ("HSP") Division.
The Company has incurred cumulative losses from inception through SeptemberJune 30, 1998
of approximately $231.6$226.3 million. InThe Company implemented a restructuring plan in
the second half of 1997 the Company
commenced a restructuring program that haswhich will significantly reducedreduce the Company's operating
expenses and cost requirements in 1998 from 1997 levels. However, the Company
expects that its research and development expenses will continue to be
significant in the fourth quarter of 1998 and in future years as it pursues its core drug development
programs and expects to continue to incur operating losses and have significant
capital requirements that it will not be able to satisfy with internally
generated funds. The Company continues to explore opportunities to reduce
operating expenses in an effort to conserve its cash resources. The number of
employees has continued to decline, through attrition;attrition, resulting in a total of
50 full time employees as of NovemberAugust 10, 1998,1998. In connection with the ongoing
restructuring, the Company had 49 full-time employees.completed the relocation of its corporate
headquarters to Milford, Massachusetts, the site of the Company's HSP Division.
See "Liquidity and Capital Resources."
This Quarterly Report on Form 10-Q contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes", "anticipates", "plans", "expects", "intends",
"may", and other similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the
Company's actual results to differ materially from those indicated by such
forward-looking statements. These factors include the matters set forth under
the heading "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Certain Factors that May Affect Future Results" in
the Company's Annual Report on Form 10-K for the year ended December 31, 1997
(the "1997 10-K") which information is incorporated herein by reference.
RESTATEMENT OF JUNE 30, 1998 FINANCIAL STATEMENTS
In April of 1999, the Company restated its 1998 financial statements to reflect
the accretion on the Series A convertible preferred stock and the issuance of
300,000 shares of common stock which Pillar is entitled to receive in connection
with its efforts in assisting the Company in restructuring its balance sheet
(see Notes 1, 2 and 13).
RESULTS OF OPERATIONS
The Company had total revenues of $1,041,000$1,376,000 and $668,000$1,415,000 in the three months
ended SeptemberJune 30, 1998 and 1997, respectively, and $3,410,000$2,369,000 and $3,143,000$2,475,000 in the
ninesix months ended SeptemberJune 30, 1998 and 1997, respectively. Revenues from research
and development collaborations were $150,000$650,000 and $200,000$186,000 for the three months
ended SeptemberJune 30, 1998 and 1997, respectively, and $950,000$800,000 and $980,000$780,000 for the
ninesix months ended SeptemberJune 30, 1998 and 1997, respectively. Product and service revenue from the HSP Division was $847,000 and $155,000Revenues for the three
months ended SeptemberJune 30, 1998 and 1997, respectively, and $2,353,000
and $1,231,000 forincreased primarily due to the nine months ended September 30, 1998 and 1997,
respectively. Included in the three months ended September 30, 1998 was $250,000
of revenue receivedCompany receiving
certain payments under its License Agreement with MethylGene, Inc.
("MethylGene") for certain services provided. The, an entity in
which the Company has an over 30% interest. Despite the increase in productrevenues for
the full six months ended June 30, 1998, primarily as a result of the MethylGene
payments, revenues for the full six months ended June 30, 1998 and service1997 were
approximately the same due to the cancellation of the Roche collaboration in
1997.
Product revenue infrom HSP was $682,000 and $728,000 for the three months ended
June 30, 1998 and 1997, respectively. The decrease was primarily due to the mix
of products sold during the periods. Product revenue was $1,507,000 and
$1,076,000 for the six months ended June 30, 1998 and 1997, respectively. The
increase was a result of an expansion in the customer base and increasing sales
to existing customers and revenue earned under the License
Agreement with MethylGene.customers.
Interest income was $44,000$45,000 and $294,000$487,000 for the three months ended SeptemberJune 30,
1998 and 1997, respectively, and $106,000$62,000 and $898,000$604,000 for the ninesix months ended
SeptemberJune 30, 1998 and 1997, respectively. The decrease in interest income is
attributable to the decrease in cash and investments held by the Company in 1998
as compared to 1997.
1
The Company had research and development expenses of $5,201,000$5,577,000 and $11,339,000$14,969,000
for the three months ended SeptemberJune 30, 1998 and 1997, respectively, and $17,181,000$11,980,000
and $37,785,000$26,446,000 for the ninesix months ended SeptemberJune 30, 1998 and 1997, respectively.
The decrease in research and development expenses in 1998 reflects the Company's
restructuring program that was commenced during the second half of 1997 and completed in the third quarter of 1998.1997. The restructuring
included the discontinuation of operations at the Company's facilities in
Europe, termination of the clinical development of GEM 91 and the reduction or
suspension of selected programs unrelated to the Company's core advanced
chemistry antisense drug development program, including the termination of its
ribozyme program. The restructuring resulted in significant reductions in
employee-related expenses, clinical and outside testing, consulting, materials
and lab expenses. The Company's facility costs in 1998 were also reduced by the
income received from subleasing its underutilizedunutilized facilities. The Company has now relocated its
headquarters to its manufacturing facility, which is located in Milford,
Massachusetts.
The Company had general and administrative expenses of $1,504,000$2,649,000 and $3,057,000$2,524,000
for the three months ended SeptemberJune 30, 1998 and 1997, respectively, and $5,218,000$4,314,000
and $9,012,000$5,954,000 for the ninesix months ended SeptemberJune 30, 1998 and 1997, respectively.
The increase in general and administrative expense for the three months ended
June 30, 1998 includes a $600,000 charge for common stock to be issued to Pillar
as discussed in Note 1. Excluding the $600,000 charge discussed above, the
decrease in general and administrative expenses in 1998 resulted primarily from
the Company's restructuring program initiated during the second half of 1997 and
its effect on employee-related expenses, consulting and net facilities costs.
The Company had interest expense of $296,000$977,000 and $1,606,000$1,447,000 for the three months
ended SeptemberJune 30, 1998 and 1997, respectively, and $2,880,000$2,584,000 and $3,223,000$1,618,000 for
the ninesix months ended SeptemberJune 30, 1998 and 1997, respectively. The decrease in
interest expense infor the three months ended June 30, 1998 is
mainly attributable to the conversion of approximately $48.748.7 million of the 9%
Convertible Subordinated Notes (the "9%("the 9% Notes"), issued in the second quarter of
1997, to Series A Convertible Preferred Stock on May 5, 1998. The increase in
interest expense for the six months ended June 30, 1998 is mainly attributable
to the first quarter's interest expense of the 9% Notes which were originally
issued in April 1997.
As a result of the above factors, the Company incurred losses from operations of
$5,961,000$7,826,000 and $18,434,000$17,525,000 for the three months ended SeptemberJune 30, 1998 and 1997,
respectively, and $21,869,000$16,509,000 and $49,977,000$31,543,000 for the ninesix months ended SeptemberJune 30,
1998 and 1997, respectively.
The Company had extraordinary income of $8,877,000 for the ninethree and six months
ended SeptemberJune 30, 1998 resulting from the conversion of the 9% Notes to Series A
Convertible Preferred Stock in the second quarter of 1998.Stock. See "Item 1 -
Financial Statements --- Notes to
Consolidated Condensed Financial Statements" for a discussion of the Company's
extraordinary income. As a result of this transaction, the Company recorded a
net income after extraordinary income of $1,050,000 for the three months ended
June 30, 1998 and reduced its net loss to $12,993,000$7,632,000 for the ninesix months ended
SeptemberJune 30, 1998.
RESTATEMENT OF JUNE 30, 1998
In April of 1999, the Company restated its 1998 financial statements to reflect
the accretion on the Series A convertible preferred stock and $600,000 of
general and administrative expense related to common stock issuable to Pillar.
The following table presents the net income (loss), net income (loss) applicable
to common stockholders and net income (loss) per share as originally reported,
and as restated.
Three Months Ended Six Months Ended
June 30, 1998 June 30, 1998
As Reported As Restated As Reported As Restated
----------- ----------- ----------- -----------
Net Income (Loss) $ 1,650,245 $ 1,050,245 $ (7,031,927) $ (7,631,927)
Net Income (Loss)
applicable to common
stockholders 1,650,245 429,745 (7,031,927) (8,252,427)
Net Income (Loss) per
share $ 0.15 $ 0.04 $ (0.86) $ (1.01)
LIQUIDITY AND CAPITAL RESOURCES
During the ninesix months ended SeptemberJune 30, 1998, the Company's net cash used in
operating activities amounted to $17,444,000.$12,914,000. The Company's operating cash
requirements were funded primarily through the utilization of existing cash,
proceeds from the Company's private placement described in Item 2 of Part II of
this Quarterly Report on Form 10-Q and proceeds raised in private equity offerings conductedNote 1 to the Consolidated Condensed
Financial Statements in the first half of 1998,
the collection of its accounts receivable from sales and services provided by
the Company, collaborative payments received, the rental payments from its
underutilized facilities,Item 1. hereof and the sale of excess equipment. TheIn
addition, a portion of the Company's restricted cash was utilized to reduce the
related debt and capital lease obligations.
Based on its current operating plan (which includes the sale of its interest in
its former Cambridge headquarters (the "Cambridge Headquarters Facility"), and
certain sales of equipment and furniture (collectively, the "Sales")), the
Company believes that its existing and expected capital resources, together with committed
collaborative research and development payments from G.D. Searle & Co., certain
research and development funding expected to be received from MethylGene, Inc.,
anticipated sales by the Company's HSP Division and anticipated margins on such
sales, and the anticipated net proceeds of the Sales, will be adequate to fund
the Company's cashcapital requirements into 1999.through 1998. The Company's existing capital resources includeoperating plan is based, in
part, on the following amounts received
inassumption that the fourth quarterCompany will be relieved of 1998. First, $6,163,000 received in connection with
relocation ofits obligations
under its lease for the Company's corporate
2
headquarters to Milford, Massachusetts,Cambridge Headquarters Facility and that the Company
will receive funds from the sale of the Company'sits limited partnership interest (the
"Limited Partnership Interest") in the Charles River Building Limited Partnership,
the entity which ownedowns the Company's
former headquarters facility; this amount includes a portion of the security
deposit relating to the Company's lease to its former headquarters facility and
the release of $660,000 in restricted cash. Second, $254,000 was received in
connection with the sale in October 1998 of certain equipment and furniture.
The Company's expected capital resources include committed collaborative
research and development payments from Searle, additional amounts expected to be
advanced under the CreditCambridge Headquarters Facility (as described below)(the "Cambridge
Landlord"), research and
development funding expected from MethylGene, Inc. and the profit margins on
anticipated sales by the HSP Division.
In June 1998, the Company relocated its headquarters from Cambridge,
Massachusetts to its manufacturing facility in Milford, Massachusetts.end of September 1998. The Cambridge facility was re-leasedLandlord is in September 1998the
process of both re-leasing the Cambridge Headquarters Facility to a third party
subjectand selling the Cambridge Headquarters Facility and has advised the Company that
it expects to a sublease of a portioncomplete such transactions by such date.
The Company has the right at any time prior to February 2000 to require the
other limited partners in the Cambridge Landlord to purchase its Limited
Partnership Interest. In April 1998, the Company exercised this right and
anticipates receiving approximately $4,000,000 from such sale, which it expects
will be funded from the Cambridge Landlord's sale of the facility. As a result,Cambridge Headquarters
Facility. In addition, the Company was relievedexpects to receive its security deposit of
its substantial lease obligations forapproximately $1,700,000 from the Cambridge facility, subject to a
contingent continuing liability for any defaults which may arise under the
sublease.
Forum Capital Markets, LLC ("Forum") and Pecks Management Partners Ltd.
("Pecks"; Forum and Pecks collectively, the "Lender"), affiliates of two members
of the Company's Board of Directors, have agreed to purchase the loan made by
Silicon Valley BankLandlord. There can be no assurance
as to the timing of such receipt, although the Company pursuant to the Loan and Security Agreement
dated December 31, 1996, between thehas been informed that it
should receive such funds by September 1998.
The Company and Silicon Valley Bank as amended
(the "Loan"), the outstanding principal amount of which is currently
approximately $2.8 million.
In connection with the purchase of the Loan, the Lender will lend an additional
amounthave agreed in principle to the Company as soon as practicable so as to increase the outstanding
principal amount of the Loan to $6,000,000. In addition, the terms of the Loan
will be amendedamend their
credit agreement as follows: (i) the maturityminimum liquidity and minimum tangible net
worth covenants will not be extended to Novembertested until the earlier of (x) September 30, 2003; (ii) the interest rate will be decreased to 8%; (iii) interest will be
payable monthly in arrears, with the principal due in full at maturity of the
Loan; (iv) the Loan will be convertible, at the Lender's option, in whole or in
part, into shares of common stock, par value $.001 per share, of the Company
("Common Stock") at a rate equal to the mid-point between the bid1998
and ask price
on(y) the date of closingthe Company's receipt of the purchasesale proceeds of the Loan; (v)Limited
Partnership Interest (the "Proceeds"); (ii) the threshold of the
Minimum Liquidityminimum liquidity covenant will
be reduced from $4,000,000 to $2,000,000; andrevised, including the Loan may not be prepaid, in whole or in part, at any time prior to December
1, 2000. The other termsremoval of the Loan$8,000,000 testing threshold, and (iii)
the Company will remain unchanged.
In connection with the purchaseprepay $1,592,386 of the Loan, Forum will receive a fee of
$400,000, which will be reinvested by Forum by purchasing from the Company
either (i) shares of Common Stock or shares of preferred stockloan upon execution of the definitive
agreement and will prepay an additional $750,000 upon receipt of the Proceeds.
The Company and accompanying warrants on the same terms as they are soldexpects to investorsenter into such definitive agreement in the Company's next equity offering to occur after November 13, 1998 (the "Placement
Price"), or (ii) if no equity offering is consummated prior to May 1, 1999,
160,000 shares of Common Stock at $3.00 per share and warrants to purchase an
additional 40,000 shares of Common Stock at $3.00 per share. In addition, Forum
will receive warrants exercisable until maturity of the Loan to purchase
$400,000 of shares of Common Stock priced at the Placement Price or, if no
equity offering is consummated prior to May 1, 1999, at $3.00 per share. These
shares and warrants will be issued as soon as practicable following satisfaction
of Section 4.10 of the Indenture dated as of March 26, 1997, governing the 9%
Notes.
3
near future.
The Company will be required to raise substantial additional funds through
external sources, including through collaborative relationships and public or
private financings, to support its operations and, except for research and
development funding from Searle (which is subject to early termination in
certain circumstances), revenue iscertain research and development funding expected to be
received from MethylGene, Inc. and sale of DNA products and reagents
manufactured on a custom contract basis by the HSP Division, the CompanyHybridon has no
current external sources of capital, and, as discussed above, expects no product
revenues for at least several years from sales of products that it is
developing.
No assurance can be given that such additional funds will be available to fund
the Company's operations or, if available, that such funds will be available on
acceptable terms. If additional funds are raised by issuing equity securities,
further dilution to then existing stockholders will result. Additionally, the
terms of any such additional financing may adversely affect the holdings or
rights of then existing stockholders.
If adequate funds are not available, the Company may be required to further
curtail significantly one or more of its core drug development programs, obtain
funds through arrangements with collaborative partners or others that may
require the Company to relinquish rights to certain of its technologies, product
candidates or products which the Company would otherwise pursue on its own or
terminate operations.
The Company's future capital requirements will depend on many factors, including
continued scientific progress in its research, drug discovery and development
programs, the magnitude of these programs, progress with preclinical and
clinical trials, sales of DNA products and reagents to third parties by the HSP
Division and the margins on such sales, the time and costs involved in obtaining
regulatory approvals, the costs involved in filing, prosecuting and enforcing
patent claims, competing technological and market developments, the ability of
the Company to establish and maintain collaborative academic and commercial
research, development and marketing relationships, the ability of the Company to
obtain third-party financing for leasehold improvements and other capital
expenditures and the costs of manufacturing scale-up and commercialization
activities and arrangements.
YEAR 2000 Compliance
As has been widely publicized, many computer systems and microprocessors are not
programmed to accommodate dates beyond the year 1999. The Company's exposure to
this year 2000 ("Y2K") problem comes not only from its own internal computer
systems and microprocessors, but also from the systems and microprocessors of
its key suppliers, including utility companies and payroll services.
The Company currently believes that all of its internal systems will be Y2K
compliant by the end of the third quarter of 1999. The Company is currently
evaluating all of its internal computer systems and microprocessors in light of
the Y2K problem. As part of this process, the Company is conducting an inventory
of its automated instruments and other computerized equipment and will be
contacting applicable vendors for information regarding Y2K compliance. The
Company will then upgrade or otherwise modify its internal computer systems and
microprocessors, to the extent necessary. Testing of all its internal computer
systems and microprocessors should be completed by the end of the first quarter
of 1999. The Company does not expect the cost of bringing all the Company's
systems and microprocessors into Y2K compliance will be material.
The Company's Y2K compliance efforts are in addition to other planned
information technology ("IT") projects. While these efforts have caused and may
continue to cause delays in other IT projects, the
4
Company does not expect that any of these delays will have a significant effect
on the Company's business or that any of the Company's other IT projects will be
canceled or postponed to pay for the Y2K upgrades.
With regard to potential supplier Y2K problems, the Company has compiled a list
of its critical suppliers, and has sent a Y2K questionnaire to each of them in
order to permit the Company to ascertain the Y2K compliance status of each. The
Company is awaiting the return of these questionnaires. The Company does not
know of any key supplier Y2K problems that could have a material effect on the
Company's business. If through a Y2K questionnaire or otherwise the Company
becomes aware of any such problems and is not satisfied that those problems are
being adequately addressed, it will take appropriate steps to find alternative
suppliers.
It has been acknowledged by governmental authorities that Y2K problems have the
potential to disrupt global economies, that no business is immune from the
potentially far-reaching effects of Y2K problems, and that it is difficult to
predict with certainty what will happen after December 31, 1999. Consequently,
it is possible that Y2K problems will have a material effect on the Company's
business even if the Company takes all appropriate measures to ensure that it
and its key suppliers are Y2K compliant.
It is possible that the conclusions reached by the Company from its analysis to
date will change, which could cause the Company's Y2K cost estimates and target
completion dates to change.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
This Form 1O-Q filing contains forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements. Such
forward-looking statements are based on management's current expectations and
involve known and unknown risks, uncertainties, and other factors which may
cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Without limiting the
foregoing, the words "believes," "anticipates," "plans," "expects," "intends,"
"may," and other similar expressions are intended to identify forward-looking
statements.
Factors which may cause actual future results to differ from forward-looking
statements include, among others, the matters set forth under the heading "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations - Certain Factors that May Affect Future Results" in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 (the "1997
10-K") which information is incorporated herein by reference.
5
HYBRIDON, INC.
PART II
OTHER INFORMATION
-------
Items 1-4 NoneItem 2. Changes in Securities and Use of Proceeds
- ---------
Item------- -----------------------------------------
During the quarter ended June 30, 1998, the Company issued and sold
the following securities that were not registered under the Securities Act of
1933, as amended (the "Securities Act"):
I. Unregistered Offerings Pursuant to Section 4(2) Under the
Securities Act
---------------------------------------------------------
The securities issued in each of the following transactions were
offered and sold in reliance upon the exemption from registration under Section
4(2) of the Securities Act, relating to sales by an issuer not involving a
public offering. The securities issued in each of the following transactions
were offered and sold solely to persons who were "accredited investors" as that
term is defined in Regulation D promulgated under the Securities Act.
(1) On May 5, OTHER INFORMATION
- ------
Stockholder Proposals1998, the Company accepted $48,694,000 principal amount of
its 9% Convertible Subordinated Notes Due 2004 (the "9% Notes") tendered to the
Company in exchange for 1999 Annual Meeting
---------------------------------------------510,505 shares of series A preferred stock (the "Series
A Preferred Stock") and warrants (the "Class A Warrants") to purchase 3,002,958
shares of common stock, par value $.001 per share (the "Common Stock"), of the
Company (the "Exchange Offer"). As set fortha result of the Exchange Offer, there is
$1,306,000 in principal amount of the 9% Notes outstanding.
Pursuant to the Exchange Offer, which commenced on February 6, 1998,
all tendering Noteholders received per $1,000 principal amount of the 9% Notes
(including accrued but unpaid interest on the 9% Notes) (i) 10 shares of Series
A Preferred Stock and (ii) Class A Warrants to purchase such number of shares of
Common Stock equal to 25% of the number of shares of the Company's Common Stock
into which the Series A Preferred Stock issued to such Noteholder pursuant to
the Exchange Offer would be convertible.
The Series A Preferred Stock ranks, as to dividends and liquidation
preference, senior to the Company's Common Stock. The Series A Preferred Stock
issued in this Exchange Offer and in the Preferred Stock Offering, as defined
below, will be convertible into an aggregate of 14,700,941 shares of Common
Stock, subject to adjustment, beginning May 5, 1999.
The Class A Warrants will be exercisable commencing on May 5, 1999
for a period of four years thereafter at $4.25 per share of Common Stock,
subject to adjustment. The Class A Warrants are not subject to redemption at the
option of the Company under any circumstances.
1
The Exchange Offer was undertaken by the Company as part of the
Company's Proxy Statementnew business plan contemplating a restructuring of its capital
structure to reduce debt service obligations, a significant reduction in its
burn rate and an infusion of additional equity capital.
(2) On May 5, 1998, the Company closed a private placement (the
"Preferred Stock Offering") of (i) 114,285 shares of Series A Preferred Stock,
which sold at $70 per share, and (ii) class D warrants (the "Class D Warrants")
to purchase 672,273 shares of the Company's Common Stock, subject to adjustment,
for an aggregate amount of approximately $8 million.
The Class D Warrants will be exercisable commencing on May 5, 1999
until May 4, 2003 at $2.40 per share of Common Stock, subject to adjustment.
The Company retained Forum Capital Markets, LLC ("Forum") as a
placement agent of the Company in connection with the Preferred Stock Offering
in the United States. As of the date hereof, Forum has received as compensation
for its services as placement agent with regard to the Preferred Stock Offering
and its assistance with the Exchange Offer, 597,699 shares of Common Stock and
warrants to purchase 609,195 shares of Common Stock exercisable at $2.40 per
share, in each case subject to adjustment, until May 4, 2003. In addition, in
consideration of the agreements made by Forum consenting to the Company's 1998
private placements described below and waiving certain obligations of the
Company to Forum, the Company agreed to amend Forum's warrant dated as of April
2, 1997, to purchase up to 71,301 shares of Common Stock of the Company so that
the exercise price will be equal to $4.25 per share, and the number of shares of
Common Stock purchasable upon exercise thereof will be increased to 588,235, in
each case subject to adjustment; provided, however, that such warrant will also
be amended to provide that such warrant may not be exercised until May 5, 1999
and the transactions contemplated by such private placements and by the Exchange
Offer will not trigger any anti-dilution adjustments to the exercise price
thereof or the number of shares of Common Stock subject thereto.
The net proceeds to the Company from the Preferred Stock Offering
are presently intended to be used for general corporate purposes, primarily
research and product development activities, including costs of preparing
investigational new drug applications and conducting preclinical studies and
clinical trials, the payment of payroll and other accounts payable and for debt
service required under the Company's debt obligations. The amounts actually
expended by the Company and the purposes of such expenditures may vary
significantly depending upon numerous factors, including the progress of the
Company's research, drug discovery and development programs, the results of
preclinical studies and clinical trials, the timing of regulatory approvals,
sales of DNA products and reagents to third parties manufactured on a custom
contract basis by the Hybridon Specialty Products Division and margins on such
sales, technological advances, determinations as to the commercial potential of
the Company's compounds and the status of competitive products. In addition,
expenditures will also depend upon the establishment of collaborative research
arrangements with other companies, the availability of other financing and other
factors. Under certain circumstances, the Company may be required to use net
proceeds to repay indebtedness under its credit agreement with Silicon Valley
Bank (the "Silicon Valley Bank Credit Facility").
(3) On May 5, 1998, the Company closed a private placement of units (the
"Unit Offering") consisting of (i) 2,754,654 shares of Common Stock, and (ii)
class C warrants (the "Class C Warrants")
2
to purchase 788,649 shares of Common Stock, subject to adjustment, which
securities were issued in consideration of the cancellation (or reduction) of
accounts payable, capital lease and other obligations aggregating $5,509,308.
The Class C Warrants are exercisable at $2.40 per share, subject to
adjustment from time to time, until May 4, 2003.
The Common Stock issued pursuant to the Unit Offering and the Common
Stock underlying the Class C Warrants are subject to a "lock-up" period ending
on May 5, 1999, except to the extent such securities are sold or transferred
pursuant to a Registration Statement. After the Company files a Registration
Statement under the Securities Act, 75% of each holder's Units and the
underlying securities will be subject to an additional "lock-up" for the first
three months following the effective date of the Registration Statement (the
"Effective Date"); thereafter, 50% of such securities will be subject to an
additional "lock-up" until six months following the Effective Date; and the
remaining 25% of such securities will be "locked-up" until nine months following
the Effective Date.
(4) On May 5, 1998, the Company sold to Dr. Paul Zamecnik 100,000 shares
of Common Stock and Class C Warrants to purchase 25,000 shares of Common Stock,
subject to adjustment, for a purchase price of $200,000.
The net proceeds of this offering were used to reduce accounts
payable, capital lease and other obligations.
(5) On May 5, 1998, the Company issued to certain suppliers a total of
362,500 shares of Common Stock and Class C Warrants to purchase a total of
90,625 shares of Common Stock. These issuances were in consideration of (i)
payment to the Company of a total of $362.50, the par value of all such issued
Common Stock, and (ii) the subsequent furnishing of specified services to the
Company by each supplier. The extent to which the suppliers have completed
performing the specified services varies.
The Common Stock issued to Dr. Paul Zamecnik and to the certain
suppliers and the Common Stock underlying the Class C Warrants issued to such
persons are subject to a "lock-up" period ending on May 5, 1999, except to the
extent such securities are sold or transferred pursuant to a Registration
Statement. After the Company files a Registration Statement under the Securities
Act, 75% of each holder's Units and the underlying securities will be subject to
an additional "lock-up" for the first three months following the Effective Date;
thereafter, 50% of such securities will be subject to an additional "lock-up"
until six months following the Effective Date; and the remaining 25% of such
securities will be "locked-up" until nine months following the Effective Date.
II. Unregistered Offerings Pursuant to Regulation S Under the
Securities Act
---------------------------------------------------------
The securities issued by the Company in the each of the following
transactions were offered and sold in reliance upon an exemption from
registration under Regulation S promulgated under the Securities Act, relating
to sales by an issuer in offshore transactions (the "Offshore Offerings"). The
securities issued in each of the following Offshore Offerings were offered and
sold solely to persons who were "accredited investors" as that term is defined
in Regulation D promulgated under the Securities Act.
3
(1) On January 15, 1998, the Company commenced a private placement of
units (the "Units"), each Unit consisting of 14% Convertible Subordinated Notes
Due 2007 (the "14% Notes") and warrants (the "Equity Warrants") to purchase
shares of the Company's Common Stock (the "14% Note Offering"). The 14% Notes
were subject to both mandatory and optional conversion into shares of series B
preferred stock, under certain circumstances which, in turn, were convertible
into Common Stock (the "Series B Preferred Stock").
On January 23, 1998, as part of the 14% Note Offering, the Company
sold $2,230,000 in principal amount of 14% Notes and Equity Warrants.
On February 9, 1998, as part of the 14% Note Offering, the Company
sold $2,384,000 in principal amount of 14% Notes and Equity Warrants.
On March 27, 1998, as part of the 14% Note Offering, the Company
sold $200,000 in principal amount of 14% Notes and Equity Warrants.
On April 21, 1998, as part of the 14% Note Offering, the Company
sold $300,000 in principal amount of 14% Notes and Equity Warrants.
On April 24, 1998, as part of the 14% Note Offering, the Company
sold $1,020,000 in principal amount of 14% Notes and Equity Warrants.
In each of the above closings, the 14% Notes were issued at face
value.
(2) On May 5, 1998, the Company closed a private placement of 3,223,000
shares of Common Stock and class B warrants (the "Class B Warrants") to purchase
805,750 shares of the Company's Common Stock, subject to adjustment, for
aggregate gross proceeds of $6,446,000.
The Class B Warrants are exercisable for a period of five years at
$2.40 per share of Common Stock, subject to adjustment from time to time.
The Common Stock issued in such private placement and the Common
Stock underlying the Class B Warrants issued in such private placement are
subject to a "lock-up" for a period ending on May 5, 1999, except to the extent
such securities are sold or transferred pursuant to a Registration Statement
filed by the Company under the Securities Act. After the Company files a
Registration Statement under the Securities Act, 75% of each holder's Common
Stock, including the Common Stock underlying the Class B Warrants, will be
subject to an additional "lock-up" for the first three months following the
Effective Date; thereafter, 50% of such securities will be subject to an
additional "lock-up" until six months following the Effective Date; and the
remaining 25% of such securities will be "locked-up" until nine months following
the Effective Date.
(3) The Company has exchanged all of the 14% Notes issued, including any
right to interest thereon, and all Equity Warrants issued together with the 14%
Notes, for 3,157,322 shares of Common Stock and Class B Warrants to purchase
947,195 shares of Common Stock.
4
The Company has retained Pillar Investments, Ltd. ("Pillar
Investments") as a placement agent of the Company in connection with the private
placements of securities of the Company in the Offshore Offerings. Pillar
Investments is entitled to receive fees consisting of (i) 9% of the gross
proceeds of each Offshore Offering, (ii) a non-accountable expense allowance
equal to 4% of such gross proceeds, (iii) the right to purchase, for nominal
consideration, warrants to purchase 473,598 shares of Common Stock, at an
exercise price of $2.40 per share, (iv) the right to purchase, for nominal
consideration, warrants to purchase such number of shares of the Common Stock of
the Company equal to 10% of the aggregate number of shares of Common Stock sold
by the Company for which Pillar Investments acts as placement agent, exercisable
at 120% of the relevant Common Stock offering price, for a period of five years
(resulting, as of the date hereof, in the right to receive warrants to purchase
638,032 shares at $2.40 per share, subject to adjustment), and (v) a
consulting/restructuring fee of $960,000 payable in Common Stock of the Company
valued at the market price and payable in three equal installments as net
proceeds of $25,000,000, $30,000,000 and $35,000,000 are received in the
aggregate from private placements effected by the Company in 1998 to the extent
contemplated by the Consent dated as of January 12, 1998 given by certain 9%
Noteholders of the Company, or otherwise to the extent contemplated by the
Placement Agency Agreement between the Company and Pillar Investments, subject
to the Company's receipt of a fairness opinion with regard thereto, provided,
however, that in no event shall Pillar Investments be permitted to receive
compensation in excess of the level which was approved by the holders of the 9%
Notes. Through the date hereof, Pillar Investments has received $1,635,400 in
cash pursuant to these arrangements.
The Company and Pillar Investments have entered into an advisory
agreement pursuant to which Pillar Investments acts as the Company's
non-exclusive financial advisor, which agreement provides that an affiliate of
Pillar Investments receive a monthly retainer of $5,000 (with a minimum
engagement of 24 months beginning on May 5, 1998), and further provides that
Pillar Investments is entitled to receive (i) out-of-pocket expenses, (ii)
subject to the Company's receipt of a fairness opinion with respect thereto,
300,000 shares of Common Stock in connection with Pillar Investments' efforts in
assisting the Company in restructuring its balance sheet, and (iii) certain cash
and equity success fees in the event Pillar Investments assists the Company in
connection with certain financial and strategic transactions.
The net proceeds to the Company from the Offshore Offerings are
presently intended to be used for general corporate purposes, primarily research
and product development activities, including costs of preparing investigational
new drug applications and conducting preclinical studies and clinical trials,
the payment of payroll and other accounts payable and for debt service required
under the Company's debt obligations. The amounts actually expended by the
Company and the purposes of such expenditures may vary significantly depending
upon numerous factors, including the progress of the Company's research, drug
discovery and development programs, the results of preclinical studies and
clinical trials, the timing of regulatory approvals, sales of DNA products and
reagents to third parties manufactured on a custom contract basis by the
Hybridon Specialty Products Division and margins on such sales, technological
advances, determinations as to the commercial potential of the Company's
compounds and the status of competitive products. In addition, expenditures will
also depend upon the establishment of collaborative research arrangements with
other companies, the availability of other financing and other factors. Under
certain circumstances, the Company may be required to use net proceeds to repay
indebtedness under the Silicon Valley Bank Credit Facility.
5
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
At the Company's Annual Meeting of Stockholders stockholder proposals submitted pursuantheld on June 15,
1998, the stockholders re-elected the following three individuals as Class III
Directors to Rule
14a-8 underhold office until the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), for inclusion in the Company's proxy material for its 19992001 Annual Meeting of Stockholders (the "1999 Annual Meeting") must be received
by the SecretaryStockholders:
For Against Abstain
--- ------- -------
Dr. Sudhir Agrawal 7,944,840 203,844 0
Youssef El-Zein 7,942,216 206,468 0
E. Andrews Grinstead 7,937,748 210,936 0
The term of office as a Director for each of the Company atfollowing
individuals continued after the principal officesmeeting:
Nasser Menhall
Mohamed A. El-Kheriji
Dr. James B. Wyngaarden
Dr. Paul C. Zamecnik
Pursuant to the Company's offer to exchange its 9% Convertible
Subordinated Notes due 2004 (the "9% Notes") for Series A Preferred Stock and
warrants, exchanging holders of the Company no
later than January 18, 1999.
In addition,9% Notes had the Company's by-laws require that the Company be given
advance notice of stockholder nominationsright to designate one
person for electionnomination to the Company's Board of DirectorsDirectors. The exchanging holder
of the 9% Notes selected Arthur W. Berry as their nominee and of other matters (other than matters included inMr. Berry was
appointed as a Class I Director. Harold L. Purkey was also appointed as a Class
I Director.
The stockholders also approved a proposal to amend the Company's
proxy statement in accordance with Rule 14a-8).1997 Stock Incentive Plan. The required notice
must be made in writingholders of 6,422,087 shares of Common Stock voted
for the proposal, the holders of 239,056 shares of Common Stock voted against
the proposal, the holders of 21,209 shares of Common Stock abstained from voting
and delivered or mailed by first class United States
mail, postage prepaid,the holders of 1,466,332 shares of Common Stock were broker non-votes.
Finally, the stockholders ratified the selection of Arthur Andersen
LLP as the independent public accountants to the Secretary of the Company at the principal
offices of the Company, and received not less than 60 days nor more than 90
days prior to the 1999 Annual Meeting; provided however, that if less than 70
days' notice or prior public disclosure of the date of the meeting is given
to stockholders, such nomination or other proposal shall have been mailed or
delivered to the Secretary no later than the close of business on the 10th
day following the date on which the notice of the meeting was mailed or such
public disclosure made, whichever occurs first. The 1999 Annual Meeting is
currently expected to be held on May 10, 1999. Assuming that this date does
not change, in order to comply with the time periods set forth inaudit the Company's by-laws, appropriate notice would need to be provided no earlier
than February 9, 1999consolidated
financial statements. The holders of 8,137,125 shares of Common Stock voted for
the ratification, the holders of 7,379 shares of Common Stock voted against and
no later than March 11, 1999. The advance notice
provisionsthe holders of the Company's by-laws supersede the notice requirements
contained in recent amendments to Rule 14a-4 under the Exchange Act.4,180 abstained from voting.
6
Item 6. Exhibits and Reports on Form 8-K
- ------------- --------------------------------
(a) Exhibits
27Exhibits.
27.1 Financial Data Schedule (EDGAR)
6
The following exhibits were previously filed as part of the
Company's Form 10-Q for the quarter ended June 30, 1998.
99.1 ThirdSecond Amendment to Loan and Security Agreement between
Hybridon, Inc. and Silicon Valley Bank.
99.2 Fourth Amendment to Loan and SecurityFinancial Advisory Agreement between Hybridon, Inc. and
Silicon Valley Bank.Pillar Investments, Ltd.
99.3 Placement Agency Agreement between Hybridon, Inc. and Pillar
Investments, Ltd.
(b) NoThe following Reports on Form 8-K have beenwere filed during the third quarter ended
SeptemberJune 30, 1998.1998:
1. On April 9, 1998, the Company filed a Current Report on Form 8-K
dated April 9, 1998 reporting the closing on March 27, 1998 of
$200,000 of Offering Notes and Warrants pursuant to the terms of the
Overseas Offering.
2. On April 27, 1998, the Company filed a Current Report on Form 8-K
dated April 27, 1998, reporting the closing on April 21, 1998 of
$300,000 of Offering Notes and Warrants pursuant to the terms of the
Overseas Offering.
3. On April 28, 1998, the Company filed a Current Report on Form 8-K
dated April 28, 1998, reporting the closing on April 24, 1998 of
$1,020,000 of Offering Notes and Warrants pursuant to the terms of
the Overseas Offering.
4. On May 8, 1998, the Company filed a Current Report on Form 8-K
dated May 8, 1998, reporting, inter alia, the closing on May 5, 1998
of approximately 6.6 million shares of Common Stock and
approximately 114,300 shares of Series A Convertible Preferred Stock
and that approximately $48.6 million principal amount of its 9%
Notes were tendered to the Company to be exchanged for Series A
Preferred Stock.
7
SIGNATURES
-------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
HYBRIDON, INC.
January 4,April 13, 1999 /s/ E. Andrews Grinstead, III
- ----------------- ----------------------------------------- ---------------------------------------
Date E. Andrews Grinstead, III
Chairman, President and Chief Executive
Officer (Principal Executive Officer)
January 4,April 13, 1999 /s/ Robert GG. Andersen
- ----------------- ---------------------------------- ---------------------------------------
Date Robert G. Andersen
Treasurer (Principal Accounting and
Financial Officer)
8
HYBRIDON, INC.
EXHIBIT INDEX
-------
27 Financial Data Schedule (EDGAR)
99.1 Third Amendment to Loan and Security Agreement between Hybridon, Inc.
and Silicon Valley Bank.
99.2 Fourth Amendment to Loan and Security Agreement between Hybridon, Inc.
and Silicon Valley Bank.
9