SEC Company Response from AIM ImmunoTech Inc. (AIM) (CIK 0000946644) (AIM) — Jan 3, 2011
AIM ImmunoTech Inc. (AIM) (CIK 0000946644)
Date: Jan. 3, 2011 · CIK: 0000946644 · Accession: 0001144204-11-000189
AI Filing Summary & Sentiment
Reasoning
Letter
Division of Corporation Finance Securities and Exchange Commission Hemispherx Biopharma, Inc. Form 10-K for the year ended December 31, 2009 Form 10-K/A for the year ended December 31, 2009 (SEC filing No. 1-13441)
Re:
Dear Mr. Rosenberg:
We hereby respond to the comments contained in your December 29, 2010 comment letter (the “Comment Letter”) related to the above referenced Form 10-K and Form 10-K/A of Hemispherx Biopharma, Inc. (the "Company").Draft revised disclosure for inclusion in the next amended Form 10-K (the “10-K/A-2”) is attached hereto as Appendix A. Once the comments below are resolved, we will file the 10-K/A-2 reflecting the revisions in our responses below as well as the revisions contained in draft text attached to our prior responses.
Appendix A to your December 23, 2010 response
Critical Accounting Policies
Comment 1: We note you identify warrant liability as a critical policy in your proposed revised disclosure to be included in an amendment to your December 31, 2010 Form 10-K. The intent of identifying critical policies is to identify those that require material assumptions and estimates which if different assumptions and estimates were made would materially affect the financial statements. Please revise your proposed disclosure to explain how this policy requires significant estimates and quantify the effect on the financial statements of changes in estimates in each year presented and the reasons for those changes. Please also disclose why you selected the volatility measure that you selected. If the volatility assumption is based on an average method, please disclose why you chose not to rely exclusively on your historical volatility. Please also disclose the peer group of companies used to determine the average volatility assumption, the weight given to companies in the peer group in computing the average volatility assumption and whether the companies in the peer group of companies are similar to you in terms of size, product and market capitalization.
Corporate Headquarters
One Penn Center, 1617 JFK Blvd., Philadelphia, PA19103
t: 215-988-0080
f: 215-988-1739
Jim B. Rosenberg
January 3, 2011
Page -
Response:
Please see the revised disclosure in the “Critical Accounting Policies” subsection (A-1). As noted therein, we exclusively rely upon historical volatility so there is no need for disclosure of a calculation that utilized peer group companies. In addition, while we note that the computation is redone on each valuation date, the method of computing each assumption is described, thereby providing an understanding of how the estimates resulting from such assumptions change from computation date to computation date and specific disclosure in this section as to the quantitative changes in the years presented in the 10-K/A does not provide any additional insight to the reader.
(17) Fair Value
Comment 2: Please revise your disclosure regarding the warrant liability classified as level 3 to include a description of the inputs and valuation technique(s) used to measure fair value and a discussion of changes in valuation techniques and related inputs, if any, during the period as well as a reconciliation of the beginning and ending balances, separately presenting changes during the period. Refer to ASC 820-10-50.
Response:
Note 17 has been revised as requested by the Staff (A–1 - A-3).
Comment 3: Please provide us supplementally with the inputs used in the Black Scholes model at each valuation date (March 2010, June 2009/2010, September 2009/2010), to determine the fair value of the warrant liability, similar to that provided for the period ended December 31, 2009. In your response, explain why any assumptions remained consistent from those used at December 31, 2009 (i.e. volatility), if true, and the accounting literature that supports your accounting treatment.
Response:
Expected volatility is computed in accordance with FASB ASC 718 (formerly FAS 123R) using the Black- Scholes Pricing Model. The exercise period is based on the remaining life of the warrants at the date of each periodic computation. The computation utilizes yield rates based on U.S Treasury constant maturities for periods commensurate with the exercise periods of the warrants. Expected stock volatility in the exercise period is based exclusively on the Company’s historical publicly traded stock values for a period commensurate with the exercise period ending on the last day of the period for which the computation is made. For each quarterly financial reporting period, the exercise period is updated for the remaining life of the warrants and the expected volatility is recomputed using the Company’s historical stock values on the NYSE Amex for a period commensurate with the updated exercise period. Thus while the source of data and application of assumptions remains consistent from period to period, the results of the related computation change from computation date to computation date.
Jim B. Rosenberg
January 3, 2011
Page -
The following are the computation for the all the periods requested.
6/30/2009
6/30/2009
6/30/2009
6/30/2009
Total
Warrants
WARRANTS OUTSTANDING
6,136,364
750,000
2,272,440
654,884
9,813,688
INPUT VARIABLES
Stock Price
$ 2.54
$ 2.54
$ 2.54
$ 2.54
Purchase Price
$ 1.65
$ 1.38
$ 1.31
$ 1.34375
Term (period option expires)
3.00
3.00
2.50
2.75
Volatility
126.531118 %
126.531118 %
126.531118 %
126.531118 %
Annual Rate of Quarterly Dividends
0.00 %
0.00 %
0.00 %
0.00 %
Discount Rate-Bond Equivalent Yield
1.6300 %
1.6300 %
1.6300 %
1.6300 %
INTERMEDIATE COMPUTATIONS
Present Value of Stock Ex-dividend
$ 2.54
$ 2.54
$ 2.54
$ 2.54
Present Value of Exercise Price
$ 1.57
$ 1.31
$ 1.26
$ 1.29
Cumulative Volatility
219.16 %
219.16 %
200.06 %
209.83 %
CALL OPTION
Proportion of Stock Present Value
90.57 %
91.87 %
91.17 %
91.53 %
Proportion of exercise Price PV
-19.03 %
-21.33 %
-25.81 %
-23.44 %
Call Option Value
2.00143433
$ 2.0532048
$ 1.9911035
$ 2.0235265
PUT OPTION
Proportion of Stock PV
-9.43 %
-8.13 %
-8.83 %
-8.47 %
Proportion of Exercise Price PV
80.97 %
78.67 %
74.19 %
76.56 %
Put Option Value
$ 1.03
$ 0.83
$ 0.71
$ 0.77
NUMBER OF WARRANTS SHARES
6,136,364
750,000
2,272,440
654,884
VALUE OF WARRANTS SHARES
$ 12,281,530
$ 1,539,904
$ 4,524,663
$ 1,325,175
TOTAL
$ 13,821,433
$ 5,849,838
$ 19,671,271
Jim B. Rosenberg
January 3, 2011
Page -
9/30/2009
9/30/2009
9/30/2009
9/30/2009
Total
Warrants
WARRANTS OUTSTANDING
6,136,364
750,000
2,272,440
654,884
9,813,688
INPUT VARIABLES
Stock Price
$ 2.00
$ 2.00
$ 2.00
$ 2.00
Purchase Price
$ 1.65
$ 1.38
$ 1.31
$ 1.34375
Term (period option expires)
2.75
2.75
2.35
2.47
Volatility
121.159235 %
121.159235 %
121.159235 %
121.159235 %
Annual Rate of Quarterly Dividends
0.00 %
0.00 %
0.00 %
0.00 %
Discount Rate-Bond Equivalent Yield
1.1200 %
1.1200 %
1.1200 %
1.1200 %
INTERMEDIATE COMPUTATIONS
Present Value of Stock Ex-dividend
$ 2.00
$ 2.00
$ 2.00
$ 2.00
Present Value of Exercise Price
$ 1.60
$ 1.34
$ 1.28
$ 1.31
Cumulative Volatility
200.92 %
200.92 %
185.73 %
190.42 %
CALL OPTION
Proportion of Stock Present Value
86.77 %
88.58 %
87.91 %
88.01 %
Proportion of exercise Price PV
-18.58 %
-21.05 %
-24.61 %
-23.31 %
Call Option Value
1.43816014
$ 1.4899044
$ 1.4441696
$ 1.4554964
PUT OPTION
Proportion of Stock PV
-13.23 %
-11.42 %
-12.09 %
-11.99 %
Proportion of Exercise Price PV
81.42 %
78.95 %
75.39 %
76.69 %
Put Option Value
$ 1.04
$ 0.83
$ 0.72
$ 0.76
NUMBER OF WARRANTS SHARES
6,136,364
750,000
2,272,440
654,884
VALUE OF WARRANTS SHARES
$
Show Raw Text
CORRESP
1
filename1.htm
January
3, 2011
Jim B.
Rosenberg
Senior
Assistant Chief Accountant
Division
of Corporation Finance
Securities
and Exchange Commission
100 F
Street, NE
Washington,
DC 20549
Re:
Hemispherx
Biopharma, Inc.
Form
10-K for the year ended December 31, 2009
Form
10-K/A for the year ended December 31, 2009
(SEC filing No. 1-13441)
Dear Mr.
Rosenberg:
We hereby
respond to the comments contained in your December 29, 2010 comment letter (the
“Comment Letter”) related to the above referenced Form 10-K and Form 10-K/A of
Hemispherx Biopharma, Inc. (the "Company").Draft revised disclosure for
inclusion in the next amended Form 10-K (the “10-K/A-2”) is attached hereto as
Appendix A. Once the comments below are resolved, we will file the 10-K/A-2
reflecting the revisions in our responses below as well as the revisions
contained in draft text attached to our prior responses.
Appendix A to your December
23, 2010 response
Critical Accounting
Policies
Comment
1: We note you identify warrant liability as a
critical policy in your proposed revised disclosure to be included in an
amendment to your December 31, 2010 Form 10-K. The intent of
identifying critical policies is to identify those that require material
assumptions and estimates which if different assumptions and estimates were made
would materially affect the financial statements. Please revise your
proposed disclosure to explain how this policy requires significant estimates
and quantify the effect on the financial statements of changes in estimates in
each year presented and the reasons for those changes. Please also
disclose why you selected the volatility measure that you
selected. If the volatility assumption is based on an average method,
please disclose why you chose not to rely exclusively on your historical
volatility. Please also disclose the peer group of companies used to
determine the average volatility assumption, the weight given to companies in
the peer group in computing the average volatility assumption and whether the
companies in the peer group of companies are similar to you in terms of size,
product and market capitalization.
Corporate
Headquarters
One
Penn Center, 1617 JFK Blvd., Philadelphia, PA19103
t:
215-988-0080
f:
215-988-1739
Jim B.
Rosenberg
January
3, 2011
Page -
2
Response:
Please
see the revised disclosure in the “Critical Accounting Policies” subsection
(A-1). As noted therein, we exclusively rely upon historical volatility so there
is no need for disclosure of a calculation that utilized peer group companies.
In addition, while we note that the computation is redone on each valuation
date, the method of computing each assumption is described, thereby providing an
understanding of how the estimates resulting from such assumptions change from
computation date to computation date and specific disclosure in this section as
to the quantitative changes in the years presented in the 10-K/A does not
provide any additional insight to the reader.
(17) Fair
Value
Comment
2: Please revise your disclosure regarding the
warrant liability classified as level 3 to include a description of the inputs
and valuation technique(s) used to measure fair value and a discussion of
changes in valuation techniques and related inputs, if any, during the period as
well as a reconciliation of the beginning and ending balances, separately
presenting changes during the period. Refer to ASC
820-10-50.
Response:
Note 17
has been revised as requested by the Staff (A–1 - A-3).
Comment
3: Please provide us supplementally with the
inputs used in the Black Scholes model at each valuation date (March 2010, June
2009/2010, September 2009/2010), to determine the fair value of the warrant
liability, similar to that provided for the period ended December 31,
2009. In your response, explain why any assumptions remained
consistent from those used at December 31, 2009 (i.e. volatility), if true, and
the accounting literature that supports your accounting treatment.
Response:
Expected
volatility is computed in accordance with FASB ASC 718 (formerly FAS 123R) using
the Black- Scholes Pricing Model. The exercise period is based on the
remaining life of the warrants at the date of each periodic
computation. The computation utilizes yield rates based on U.S
Treasury constant maturities for periods commensurate with the exercise periods
of the warrants. Expected stock volatility in the exercise period is
based exclusively on the Company’s historical publicly traded stock values for a
period commensurate with the exercise period ending on the last day of the
period for which the computation is made. For each quarterly
financial reporting period, the exercise period is updated for the remaining
life of the warrants and the expected volatility is recomputed using the
Company’s historical stock values on the NYSE Amex for a period commensurate
with the updated exercise period. Thus while the source of data and
application of assumptions remains consistent from period to period, the results
of the related computation change from computation date to computation
date.
Jim B.
Rosenberg
January
3, 2011
Page -
3
The
following are the computation for the all the periods requested.
6/30/2009
6/30/2009
6/30/2009
6/30/2009
Total
Warrants
WARRANTS
OUTSTANDING
6,136,364
750,000
2,272,440
654,884
9,813,688
INPUT
VARIABLES
Stock
Price
$
2.54
$
2.54
$
2.54
$
2.54
Purchase
Price
$
1.65
$
1.38
$
1.31
$
1.34375
Term
(period option expires)
3.00
3.00
2.50
2.75
Volatility
126.531118
%
126.531118
%
126.531118
%
126.531118
%
Annual
Rate of Quarterly Dividends
0.00
%
0.00
%
0.00
%
0.00
%
Discount
Rate-Bond Equivalent Yield
1.6300
%
1.6300
%
1.6300
%
1.6300
%
INTERMEDIATE
COMPUTATIONS
Present
Value of Stock Ex-dividend
$
2.54
$
2.54
$
2.54
$
2.54
Present
Value of Exercise Price
$
1.57
$
1.31
$
1.26
$
1.29
Cumulative
Volatility
219.16
%
219.16
%
200.06
%
209.83
%
CALL
OPTION
Proportion
of Stock Present Value
90.57
%
91.87
%
91.17
%
91.53
%
Proportion
of exercise Price PV
-19.03
%
-21.33
%
-25.81
%
-23.44
%
Call
Option Value
2.00143433
$
2.0532048
$
1.9911035
$
2.0235265
PUT
OPTION
Proportion
of Stock PV
-9.43
%
-8.13
%
-8.83
%
-8.47
%
Proportion
of Exercise Price PV
80.97
%
78.67
%
74.19
%
76.56
%
Put
Option Value
$
1.03
$
0.83
$
0.71
$
0.77
NUMBER
OF WARRANTS SHARES
6,136,364
750,000
2,272,440
654,884
VALUE
OF WARRANTS SHARES
$
12,281,530
$
1,539,904
$
4,524,663
$
1,325,175
TOTAL
$
13,821,433
$
5,849,838
$
19,671,271
Jim B.
Rosenberg
January
3, 2011
Page -
4
9/30/2009
9/30/2009
9/30/2009
9/30/2009
Total
Warrants
WARRANTS
OUTSTANDING
6,136,364
750,000
2,272,440
654,884
9,813,688
INPUT
VARIABLES
Stock
Price
$
2.00
$
2.00
$
2.00
$
2.00
Purchase
Price
$
1.65
$
1.38
$
1.31
$
1.34375
Term
(period option expires)
2.75
2.75
2.35
2.47
Volatility
121.159235
%
121.159235
%
121.159235
%
121.159235
%
Annual
Rate of Quarterly Dividends
0.00
%
0.00
%
0.00
%
0.00
%
Discount
Rate-Bond Equivalent Yield
1.1200
%
1.1200
%
1.1200
%
1.1200
%
INTERMEDIATE
COMPUTATIONS
Present
Value of Stock Ex-dividend
$
2.00
$
2.00
$
2.00
$
2.00
Present
Value of Exercise Price
$
1.60
$
1.34
$
1.28
$
1.31
Cumulative
Volatility
200.92
%
200.92
%
185.73
%
190.42
%
CALL
OPTION
Proportion
of Stock Present Value
86.77
%
88.58
%
87.91
%
88.01
%
Proportion
of exercise Price PV
-18.58
%
-21.05
%
-24.61
%
-23.31
%
Call
Option Value
1.43816014
$
1.4899044
$
1.4441696
$
1.4554964
PUT
OPTION
Proportion
of Stock PV
-13.23
%
-11.42
%
-12.09
%
-11.99
%
Proportion
of Exercise Price PV
81.42
%
78.95
%
75.39
%
76.69
%
Put
Option Value
$
1.04
$
0.83
$
0.72
$
0.76
NUMBER
OF WARRANTS SHARES
6,136,364
750,000
2,272,440
654,884
VALUE
OF WARRANTS SHARES
$