10-Q 1 j9453901e10-q.txt MYMETICS CORPORATION 10-Q/QTR END 3-31-2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO _________ COMMISSION FILE NUMBER: 000-25132 MYMETICS CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 25-1741849 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 706 GIDDINGS AVENUE, SUITE 1C ANNAPOLIS, MARYLAND 21401-1472 (Address of principal executive offices) 410-990-9596 (Registrant's telephone number, including area code) 50-52 AVENUE CHANOINE CARTELLIER 69230 SAINT-GENIS LAVAL, FRANCE (Former address, if changed since last report) Indicate by check mark whether the Registrant (1) has filed all reports required 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 Registrant's classes of common stock, as of the latest practicable date: Class Outstanding at May 6, 2002 ----- -------------------------- Common Stock, $0.01 49,271,962(1) par value (1) These shares consist of (i) 32,878,646 shares of common stock which are currently issued and outstanding and (ii) 16,393,316 shares of common stock which are issuable upon the conversion of 15,372 outstanding exchangeable preferred shares of the Corporation's subsidiary 6543 Luxembourg S.A., which are presently convertible. FORWARD-LOOKING STATEMENTS Statements in this report, to the extent that they are not based on historical events, constitute forward-looking statements. Forward-looking statements include, without limitation, statements regarding the outlook for future operations, forecasts of future costs and expenditures, the evaluation of market conditions, the outcome of legal proceedings, the adequacy of reserves or other business plans. Investors are cautioned that forward-looking statements are subject to an inherent risk that actual results may vary materially from those described herein. Factors that may result in such variance, in addition to those accompanying the forward-looking statements, include changes in interest rates, prices and other economic conditions; actions by competitors; natural phenomena; actions by government authorities; uncertainties associated with legal proceedings; technological development; future decisions by management in response to changing conditions; and misjudgments in the course of preparing forward-looking statements. PART I. FINANCIAL INFORMATION --------------------- ITEM 1. FINANCIAL STATEMENTS MYMETICS CORPORATION & SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS OF EUROS)
MARCH 31, 2002 DECEMBER 31, 2001 -------------- ----------------- ASSETS Current Assets Cash (E) 674 (E) 888 Short term investments 76 354 Receivables 89 49 Prepaid expenses 52 31 ---------------------- ---------------------------- Total current assets 891 1,322 Patents and Other 215 161 Goodwill 209 209 ---------------------- ---------------------------- (E) 1,315 (E) 1,692 ====================== ============================ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable (E) 588 (E) 436 Taxes and social costs payable 85 83 Note payable, related party 232 228 Other 6 10 ---------------------- ---------------------------- Total current liabilities 911 757 Payable to shareholders 242 242 Shareholders' Equity Common stock 562 562 Paid-in capital 17,430 17,422 Deficit accumulated during the development stage (17,947) (17,391) Cumulative translation adjustment 117 100 ---------------------- ---------------------------- 162 693 ---------------------- ---------------------------- (E) 1,315 (E) 1,692 ====================== ============================
The accompanying notes are an integral part of these financial statements. MYMETICS CORPORATION & SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) (IN THOUSANDS OF EUROS, EXCEPT FOR PER SHARE AMOUNTS)
FOR THREE FOR THREE TOTAL ACCUMULATED MONTHS ENDED MONTHS ENDED DURING THE MARCH 31, 2002 MARCH 31, 2001 DEVELOPMENT STAGE -------------- -------------- ----------------- Revenue Sales (E) - (E) - (E) 224 Interest 5 3 31 ---------------------- ----------------------- ---------------------------- 5 3 255 ---------------------- ----------------------- ---------------------------- Expenses Research and development 232 114 1,076 General and administrative 250 127 1,865 Bank fee - 3,054 14,869 Interest 9 19 104 Amortization 1 41 195 Other 69 - 87 ---------------------- ----------------------- ---------------------------- 561 3,355 18,196 ---------------------- ----------------------- ---------------------------- Loss before income tax provision (556) (3,352) (17,941) Income tax provision - - 6 ---------------------- ----------------------- ---------------------------- Net loss (556) (3,352) (17,947) Other comprehensive income Foreign currency translation 17 - 117 Adjustment ----------------------- ----------------------- --------------------------- Comprehensive loss (E) (539) (E) (3,352) (E) (17,830) ======================= ======================= =========================== Basic and diluted loss per share (E) (0.01) (E) (0.10) (E) (0.52) ======================= ======================= ===========================
The accompanying notes are an integral part of these financial statements. MYMETICS CORPORATION & SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS OF EUROS)
FOR THREE FOR THREE TOTAL ACCUMULATED MONTHS ENDED MONTHS ENDED DURING THE MARCH 31, 2002 MARCH 31, 2001 DEVELOPMENT STAGE -------------- -------------- ----------------- Cash flow from operating activities Net Loss (E) (556) (E) (3,352) (E) (17,947) Adjustments to reconcile net loss to net cash used in operating activities Amortization 1 41 195 Fees paid in warrants - 3,054 14,063 Fee paid in common stock - - 806 Changes in current assets and liabilities, net of effects from reverse purchase Decrease (increase) in receivables (40) 12 (51) Increase (decrease) in accounts payable 152 153 290 Increase (decrease) in taxes and social costs payable 2 (24) 85 Other (25) (1) 2 ------------------- ------------------- --------------- (466) (117) (2,557) ------------------- ------------------- --------------- Cash flows from investing activities Patents and other (55) (34) (290) Short-term investments 278 (82) (76) Cash acquired in reverse purchase - 13 13 ------------------- ------------------- --------------- 223 (103) (353) ------------------- ------------------- ---------------
Cash flows from financing activities Proceeds from issuance of common stock 8 - 2,851 Borrowing from shareholders - - 242 Increase in note payable and other short-term advances 4 200 504 Loan fees - - (130) ----------- ------------- --------------- 12 200 3,467 Effect of foreign exchange rate on cash 17 - 117 ----------- ------------- --------------- Net change in cash (214) (20) 674 Cash, beginning of period 888 185 - ----------- ------------- --------------- Cash, end of period (E) 674 (E) 165 (E) 674 =========== ============= ===============
The accompanying notes are an integral part of these financial statements. MYMETICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2002 (UNAUDITED) NOTE 1. BASIS OF PRESENTATION The interim period consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such SEC rules and regulations. The interim period consolidated financial statements should be read together with the audited financial statements and the accompanying notes included in the Company's latest annual report on Form 10-K for the fiscal year ended December 31, 2001. The accompanying financial statements of the Company are unaudited. However, in the opinion of the Company, the unaudited consolidated financial statements contained herein contain all adjustments necessary to present a fair statement of the results of the interim periods presented. All adjustments made during the three month period ended March 31, 2002, were of a normal, recurring nature. The amounts presented for the three month period ended March 31, 2002, are not necessarily indicative of the results of operations for a full year. NOTE 2. (LOSS) EARNINGS PER SHARE Basic (loss) earnings per share is computed by dividing (loss) income available to common shareholders by the weighted average number of common shares outstanding in the period. Diluted (loss) earnings per share takes into consideration common shares outstanding (computed under basic (loss) earnings per share) and potentially dilutive common shares. The weighted average number of shares outstanding for the purposes of calculating basic and diluted earnings per share was 49,262,518 for the three months ended March 31, 2002 and 33,585,685 for the three months ended March 31, 2001 and 34,409,516 for the development stage period. The potentially dilutive common shares did not have an impact on diluted earnings per share for the three months ended March 31, 2002 and 2001, respectively, because the warrants and stock options to purchase common stock were anti-dilutive. NOTE 3. REPORTING CURRENCY Consistent with the location of its activities, beginning January 1, 1999, the Corporation adopted the euro (E) as its corporate currency. Accordingly, the Company prepared its 2001 and 2000 financial statements in euros. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the results of operations and financial condition of Mymetics Corporation (the "Corporation") for the three months ended March 31, 2002 should be read in conjunction with the Corporation's consolidated financial statements and related notes included elsewhere herein. RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001 Revenue for the three months ended March 31, 2002 was (E)5,000 compared to (E)3,000 for the three months ended March 31, 2001. Expenses decreased to (E)561,000 for the three months ended March 31, 2002 from (E)3,355,000 for the three months ended March 31, 2001. Research and development expenses increased to (E)232,000 in the current period from (E)114,000 in the comparative period of 2001 as a result of an increase in research activities. General and administrative expenses increased to (E)250,000 in the three months ended March 31, 2002 from (E)127,000 in the comparative period of 2001 primarily as a result of the Company's business and structure, an expansion of the management team of the Corporation to include a Chief Executive Officer, a Chief Scientific Officer and a Vice-President of Development, and the additional use of consultants. Bank fees were nil for the three months ended March 31, 2002 compared to (E)3,054,000 over the comparative period in 2001, primarily as a result of a reverse purchase transaction that occured last year. The Corporation reported a net loss of (E)556,000, or (E)0.01 per share, for the three months ended March 31, 2002, compared to (E)3,352,000, or (E)0.10, for the three months ended March 31, 2001. LIQUIDITY AND CAPITAL RESOURCES The Corporation had cash (E)674,000 at March 31, 2002, compared to (E)888,000 at December 31, 2001. Net cash used by operating activities was (E)466,000 for the three months ended March 31, 2002, compared to (E)117,000 for the three months ended March 31, 2001. An increase in accounts payable provided cash of (E)152,000 for the three months ended March 31, 2002 compared to (E)153,000 for the three months ended March 31, 2001. Investing activities provided cash of (E)223,000 for the three months ended March 31, 2002 compared to using cash of (E)103,000 for the same period last year. Short term investment provided cash of (E)278,000 for the three months ended March 31, 2002 compared to using cash of (E)82,000 for the three months ended March 31, 2001. Financing activities provided cash of (E)12,000 for the three months ended March 31, 2002 compared to (E)200,000 in the same period last year. The revolving term facility is in the principal amount of up to (E)1.3 million and matures on August 31, 2002. At March 31, 2002, Mymetics had borrowed an aggregate of (E)232,000 pursuant to this revolving term facility. The Corporation expects that it will require substantial additional capital to continue its research and development, clinical studies and regulatory activities necessary to bring its potential products to market and to establish production, marketing and sales capabilities. The Corporation will seek to raise the required capital from lenders and/or equity or debt issuances. However, there can be no assurance that the Corporation will be able to raise additional capital on terms satisfactory to the Corporation, or at all, to finance its operations. In the event that the Corporation is not able to obtain such additional capital, it would be required to restrict or even halt its operations. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Corporation is exposed to market risk from changes in interest rates which could affect its financial condition and results of operations. The Corporation has not entered into derivative contracts for its own account to hedge against such risk. INTEREST RATE RISK Fluctuations in interest rates may affect the fair value of financial instruments sensitive to interest rates. An increase in interest rates may decrease the fair value and a decrease in interest rates may increase the fair value of such financial instruments. The Corporation has debt obligations which are sensitive to interest rate fluctuations. The following tables provide information about the Corporation's exposure to interest rate fluctuations for the carrying amount of such debt obligations as of March 31, 2002 and 2001 and expected cash flows from these debt obligations:
AS AT MARCH 31, 2002 (IN THOUSANDS) EXPECTED FUTURE CASH FLOW ------------------------- YEAR ENDING DECEMBER 31, CARRYING FAIR ------------------------ VALUE VALUE 2002 2003 2004 2005 2006 THEREAFTER ----- ----- ---- ---- ---- ---- ---- ---------- ---------------------------------------------------------------------------------------------------------------- Debt obligations (E)232 (E)232 (E)232 (E) - (E) - (E) - (E) - (E) - ----------------------------------------------------------------------------------------------------------------
PART II. OTHER INFORMATION ----------------- ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION BOARD OF DIRECTORS On February 7, 2002, the board of directors of the Corporation (the "Board of Directors"), in accordance with Section 4.03 of the Corporation's bylaws, voted to expand the Board of Directors from 5 directors to 6 directors. Pursuant to Section 4.04 of the Corporation's bylaws, the Board of Directors elected Dr. Peter P. McCann to fill the newly created vacancy. Dr. McCann is designated a Class 3 Director and will serve until the next selection of the Class 3 Directors at the Corporation's annual meeting in 2003. Mr. McCann was also appointed as President and Chief Executive Officer of the Corporation. The Board of Directors also appointed Dr. Pierre Francois Serres, former President and Chief Executive Officer, as the Corporation's Chief Scientific Officer. As Chief Scientific Officer, Dr. Serres will be responsible for developing and implementing the Corporation's scientific strategy, recruiting, managing and supervising the Corporation's scientific staff, and collaborating with potential corporate and academic partners. The changes described above were all effective as of February 7, 2002. EMPLOYMENT AGREEMENTS On March 18, 2002, the Corporation entered into an employment agreement with its President and Chief Executive Officer, Dr. Peter P. McCann, pursuant to which he receives an annual salary of one hundred seventy thousand U.S. Dollars ($170,000) and normal benefits. In addition, Dr. McCann may participate in the Corporation's 2001 Stock Option Plan, as well as receive discretionary bonuses as approved by the Board of Directors. The employment agreement provides for an initial term of one year, with automatic one-year renewal periods unless either the Corporation or Dr. McCann elect to terminate the agreement by providing 60 days' prior notice. If the Corporation terminates Dr. McCann during the initial one-year term without "cause" (as defined in the employment agreement), the employment agreement, which is governed by Delaware law, requires the Corporation to continue to pay Dr. McCann's base salary for the greater of (a) the remainder of the initial one-year term or (b) six months. If the Corporation terminates Dr. McCann without cause during a renewal period, the Corporation must continue to pay Dr. McCann his base salary for a period of 24 months from the date of such termination. In addition, if Dr. McCann resigns due to a substantial change in ownership or in the membership of the Board of Directors, the Corporation must continue to pay Dr. McCann his base salary for a period of one year following the date of such resignation. On March 18, 2002, the Corporation entered into an employment agreement with its Vice-President of Development Dr. Joseph D. Mosca, pursuant to which Dr. Mosca receives an annual salary of one hundred twenty-five thousand U.S. Dollars ($125,000) and normal benefits. In addition, Dr. Mosca may participate in the Corporation's 2001 Stock Option Plan, as well as receive discretionary bonuses as approved by the Board of Directors. The employment agreement provides for an initial term of one year, with automatic one-year renewal periods unless either the Corporation or Dr. Mosca elect to terminate the agreement by providing 60 days' prior notice. If the Corporation terminates Dr. Mosca during the initial one-year term without "cause" (as defined in the agreement), the employment agreement, which is governed by Delaware law, requires the Corporation to continue to pay Dr. Mosca's his base salary for the greater of (a) the remainder of the initial one-year term or (b) six months. If the Corporation terminates Dr. Mosca without cause during a renewal period, the Corporation must continue to pay Dr. Mosca his base salary for a period of 12 months from the date of such termination. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS EXHIBIT NUMBER DESCRIPTION ------ ----------- (3)(i) Certificate of Incorporation of the Corporation as amended through May 10, 2002 (3)(ii) Bylaws of the Corporation(1) (10)(i) Employment Agreement dated March 18, 2002, between Dr. Peter P. McCann and the Corporation(2) (10)(ii) Employment Agreement dated March 18, 2002, between Dr. Joseph D. Mosca and the Corporation ------------------------- (1) Incorporated by reference to the Corporation's Form 10-Q filed with the Securities and Exchange Commission on August 14, 2001. (2) Incorporated by reference to the Corporation's Form 10-K filed with the Securities and Exchange Commission on March 29, 2002. (b) REPORTS ON FORM 8-K ------------------- None. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: May 15, 2002 MYMETICS CORPORATION By: /s/ Peter P. McCann -------------------------- Chief Executive Officer