Company Leterhead
Hemispherx Biopharma, Inc.
1617 JFK Blvd.
Philadelphia, PA. 19103-1806
July 24, 2008
Jeffrey Riedler
Assistant Director
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: Hemispherx Biopharma, Inc.
Schedule 14A
Filed July 16, 2008
File No. 1-13441
Dear Mr. Riedler:
Hemispherx Biopharma, Inc. (the "Company"), hereby responds to the comment
contained in your July 18, 2008 comment letter.
Proposal No. 3
Comment 1. Please revise your disclosure in the proxy statement to provide a
complete description of the terms of the common stock purchase agreement.
Response: Per our counsel's conversation with the staff, our proposed revised
language is provided on Attachment A hereto. After the staff has had a chance to
review the revised language and discuss it with our counsel, the Company will
file either an amended Preliminary Schedule 14A or a Definitive Schedule 14A.
The Company acknowledges that: (i) it is responsible for the adequacy and
accuracy of the disclosure in the filing; (ii) staff comments or changes to
disclosure in response to staff comments do not foreclose the Commission from
taking any action with respect to the filing; and (iii) the Company may not
assert staff comments as a defense in any proceeding initiated by the Commission
or any person under the federal securities laws of the United States.
Very truly yours,
/s/ Robert E. Peterson
----------------------
Robert E. Peterson
Chief Financial Officer
Jeffrey Riedler
July 24, 2008
Page - 2
Attachment A
Proposal 3, as revised would read as follows:
APPROVAL OF THE ISSUANCE OF COMMON STOCK TO
COMPLY WITH AMEX COMPANY GUIDE SECTION 713
In connection with the transaction described below with Fusion Capital
Fund II, LLC ("Fusion Capital"), we are seeking approval of the issuance of
Common Stock that could exceed 14,823,651 shares, or 19.99% of the outstanding
shares of Common Stock. Section 713 of the American Stock Exchange ("AMEX")
Company Guide provides that we must obtain stockholder approval before issuance,
at a price per share below market value, of common stock, or securities
convertible into common stock, equal to 20.0% or more of our outstanding common
stock (the "Exchange Cap"). The Purchase Agreement described below provides that
no sales can be made if they would cause us to violate the Exchange Cap.
Fusion Transaction
On July 2, 2008, we entered into a Common Stock Purchase Agreement with
Fusion Capital, an Illinois limited liability company as amended on July 23,
2008 ("Purchase Agreement"). Under the Purchase Agreement, Fusion Capital is
obligated, under certain conditions, to purchase shares from us in an aggregate
amount of up to $30 million from time to time over a twenty-five (25) month
period. Under the terms of the Purchase Agreement, Fusion Capital has received a
commitment fee consisting of 650,000 shares of our common stock. Also, we will
issue to Fusion Capital up to an additional 650,000 shares as a commitment fee
pro rata as we receive the $30 million of future funding.
Under the Purchase Agreement and a related Registration Rights
Agreement with Fusion Capital we are required to file a registration statement
with the Securities and Exchange Commission ("SEC") and register under the
Securities Act of 1933 (1) 650,000 shares which have already been issued as a
commitment fee, (2) an additional 650,000 shares which we may issue in the
future as a commitment fee pro rata as we receive up to the $30 million of
future funding and (3) at least 13,523,651 shares which we may sell to Fusion
Capital after the registration statement is declared effective.
We do not have the right to commence any sales of our shares to Fusion
Capital until the SEC has declared effective the registration statement. After
the SEC has declared effective such registration statement, generally we have
the right but not the obligation from time to time to sell our shares to Fusion
Capital in amounts between $120,000 and $1.0 million depending on certain
conditions. We have the right to control the timing and amount of any sales of
our shares to Fusion Capital. The purchase price of the shares will be
determined based upon the market price of our shares without any fixed discount
at the time of each sale. Fusion Capital does not have the right nor the
obligation to purchase any shares of our common stock on any business day that
the price of our common stock is below $0.40. There are no negative covenants,
restrictions on future fundings, penalties or liquidated damages in the Purchase
Agreement or the Registration Rights Agreement. The Purchase Agreement may be
terminated by us at any time at our discretion without any cost to us.
Jeffrey Riedler
July 24, 2008
Page - 3
Purchase Of Shares Under The Common Stock Purchase Agreement
Under the common stock purchase agreement, on any business day selected
by us, we may direct Fusion Capital to purchase up to $120,000 of our common
stock. The purchase price per share is equal to the lesser of:
o the lowest sale price of our common stock on the purchase date; or
o the average of the three lowest closing sale prices of our common stock
during the twelve consecutive business days prior to the date of a
purchase by Fusion Capital.
The purchase price will be equitably adjusted for any reorganization,
recapitalization, non-cash dividend, stock split, or other similar transaction
occurring during the business days used to compute the purchase price. We may
direct Fusion Capital to make multiple purchases from time to time in our sole
discretion; no sooner then every two business days.
Our Right To Increase the Amount to be Purchased
In addition to purchases of up to $120,000 from time to time,
we may also from time to time elect on any single business day selected by us to
require Fusion Capital to purchase our shares in an amount up to $150,000
provided that our share price is not below $0.80 during the two business days
prior to and on the purchase date. We may increase this amount to up to $250,000
if our share price is not below $1.25 during the two business days prior to and
on the purchase date. This amount may also be increased to up to $500,000 if our
share price is not below $1.75 during the two business days prior to and on the
purchase date. This amount may also be increased to up to $1,000,000 if our
share price is not below $4.00 during the two business days prior to and on the
purchase date. We may direct Fusion Capital to make multiple large purchases
from time to time in our sole discretion; however, at least two business days
must have passed since the most recent large purchase was completed. The price
at which our common stock would be purchased in this type of larger purchases
will be the lesser of (i) the lowest sale price of our common stock on the
purchase date and (ii) the lowest purchase price (as described above) during the
previous ten business days prior to the purchase date.
Minimum Purchase Price
Under the common stock purchase agreement, we have set a minimum
purchase price ("floor price") of $0.40. However, Fusion Capital does not have
the right nor the obligation to purchase any shares of our common stock in the
event that the purchase price would be less the floor price. Specifically,
Fusion Capital does not have the right or the obligation to purchase shares of
our common stock on any business day that the market price of our common stock
is below $0.40.
Jeffrey Riedler
July 24, 2008
Page - 4
Events of Default
Generally, Fusion Capital may terminate the common stock purchase
agreement without any liability or payment to us upon the occurrence of any of
the following events of default:
o the effectiveness of the registration statement lapses for any reason
(including, without limitation, the issuance of a stop order) or is
unavailable to Fusion Capital for sale of our common stock offered
hereby and such lapse or unavailability continues for a period of ten
consecutive business days or for more than an aggregate of 30 business
days in any 365-day period;
o suspension by the AMEX of our common stock from trading for a period of
three consecutive business days;
o the de-listing of our common stock from the AMEX provided our common
stock is not immediately thereafter trading on the Nasdaq OTC Bulletin
Board Market, the Nasdaq Global Market, the Nasdaq Capital Market, or
the New York Stock Exchange;
o the transfer agent`s failure for five business days to issue to Fusion
Capital shares of our common stock which Fusion Capital is entitled to
under the common stock purchase agreement;
o any material breach of the representations or warranties or covenants
contained in the common stock purchase agreement or any related
agreements which has or which could have a material adverse effect on
us subject to a cure period of five business days; or
o any participation or threatened participation in insolvency or
bankruptcy proceedings by or against us; or
o the issuance of an aggregate of 14,823,651 shares to Fusion Capital
under our agreement if we fail to obtain the requisite stockholder
approval.
Our Termination Rights
We have the unconditional right at any time for any reason to give
notice to Fusion Capital terminating the Purchase Agreement without any cost to
us.
No Short-Selling or Hedging by Fusion Capital
Fusion Capital has agreed that neither it nor any of its affiliates
shall engage in any direct or indirect short-selling or hedging of our common
stock during any time prior to the termination of the common stock purchase
agreement.
Jeffrey Riedler
July 24, 2008
Page - 5
Use of Proceeds
We anticipate using the proceeds from this financing to fund
infrastructure growth including manufacturing, regulatory compliance and market
development, as well as to prospectively fund market opportunities and strategic
partnerships.
As of July 8, 2008, the closing bid price for our common stock on the
American Stock Exchange was $1.07 per share. Assuming a purchase price of $1.07
per share, approximately 28,037,383 shares of common stock (exclusive of the
shares issuable as a commitment fee "Commitment Shares") would be issued under
the Purchase Agreement to realize the entire $30,000,000.
On July 2, 2008, we had 74,155,334 outstanding shares of Common Stock.
Accordingly, we cannot issue more than 14,823,651 shares (the "Exchange Cap")
under the Purchase Agreement (inclusive of the Commitment Shares) without
obtaining stockholder approval.
To assure that we are in compliance with Company Guide Section 713 and
to permit us to sell shares under the Purchase Agreement in excess of the
Exchange Cap, we are requesting your approval of the issuance of Common Stock
that could exceed 19.99% of the outstanding shares of Common Stock (inclusive of
the Commitment Shares).
Copies of the Purchase Agreement and the Registration Rights Agreement
have been filed as exhibits to our Current Report on Form 8-K dated and filed on
July 8, 2008.
Previous transactions with Fusion Capital
In July 2005 we entered into a prior common stock purchase agreement
with Fusion Capital, pursuant to which we sold an aggregate of 8,791,838 shares
for total gross proceeds of $20,000,000.
In April 2006 we entered into a prior common stock purchase agreement
with Fusion Capital, pursuant to which we sold an aggregate of 10,682,032 shares
for total gross proceeds of $19,739,131 through November, 2007.
Effects of issuance of the shares
A significant number of shares will be issuable pursuant to the
Purchase Agreement. To the extent that a significant number of these shares are
issued, there will be a substantial pro rata dilution to our current
stockholders. In addition, because these shares will be registered for public
sale, such sales, or the anticipation of the possibility of such sales,
represents an overhang on the market and could depress the market price of our
common stock.
If issuance of these shares is not approved by stockholders, we most
likely will not be able to realize the entire $30,000,000 under the Purchase
Agreement.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 3 TO BE IN THE BEST INTERESTS OF
HEMISPHERX AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.