10-Q 1 j9560401e10vq.txt PERIOD ENDED 6/30/2002 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 June 30, 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) 410-990-9501 (Registrant's telephone number, including area code) (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 August 8, 2002 ----- -------------------------- Common Stock, $0.01 50,944,454(1) par value (1) These shares consist of (i) 34,551,138 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 Preferential 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; and future decisions by management in response to changing conditions. PART I. FINANCIAL INFORMATION --------------------- ITEM 1. FINANCIAL STATEMENTS MYMETICS CORPORATION & SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in Thousands of Euros)
June 30, 2002 December 31, 2001 ------------------- ----------------- ASSETS Current Assets Cash E 122 E 888 Short term investments 20 354 Receivables 88 49 Prepaid expenses 19 31 ------------------- ---------------- Total current assets 249 1,322 Patents and Other 226 161 Goodwill, net 209 209 ------------------- ---------------- E 684 E 1,692 =================== ================ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable E 373 E 436 Taxes and social costs payable 113 83 Note payable - related party 437 228 Other 7 10 ------------------- ---------------- Total current liabilities 930 757 Payable to shareholders 242 242 Shareholders' Equity Common stock 562 562 Paid-in capital 17,430 17,422 Deficit accumulated during the development stage (18,573) (17,391) Cumulative translation adjustment 93 100 ------------------- ---------------- (488) 693 ------------------- ---------------- E 684 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 Months Ended Months Ended June 30, 2002 June 30, 2001 ------------- ------------- Revenue Sales E -- E -- Interest 3 3 ------------------------- ---------------------- 3 3 ------------------------- ---------------------- Expenses Research and development 152 70 General and administrative 459 270 Bank fee -- 9,612 Interest 6 23 Amortization 2 3 Other 10 -- ------------------------- ---------------------- 629 9,978 ------------------------- ---------------------- Net loss (626) (9,975) Other comprehensive loss Foreign currency translation (24) (12) adjustment ------------------------- ---------------------- Comprehensive loss E (650) E (9,987) ========================= ====================== Basic and diluted loss per share E (0.01) E (0.23) ========================= ======================
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 Six For Six Total Accumulated Months Ended Months Ended During the June 30, 2002 June 30, 2001 Development Stage ------------- ------------- ----------------- Revenue Sales E -- E -- E 224 Interest 8 6 34 ------------------------ ------------------- ---------------------- 8 6 258 ------------------------ ------------------- ---------------------- Expenses Research and development 384 184 1,228 General and 709 381 2,324 administrative Bank fee -- 12,666 14,869 Interest 15 42 110 Amortization 3 60 197 Other 79 -- 97 ------------------------ ------------------- ---------------------- 1,190 13,333 18,825 ------------------------ ------------------- ---------------------- Loss before income tax provision (1,182) (13,327) (18,567) Income tax provision -- -- 6 ------------------------ ------------------- ---------------------- Net loss (1,182) (13,327) (18,573) Other comprehensive income (loss) Foreign currency (7) (12) 93 translation adjustment ------------------------ ------------------- ---------------------- Comprehensive loss E (1,189) E (13,339) E (18,480) ======================== =================== ====================== Basic and diluted loss per share E (0.02) E (0.34) E (0.53) ======================== =================== ======================
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)
Total Accumulated For Six For Six During The Months Ended Months Ended Development June 30, 2002 June 30, 2001 Stage -------------- ------------- ------------ Cash flow from operating activities Net Loss E (1,182) E (13,327) E (18,573) Adjustments to reconcile net loss to net cash provided by (used in) operating activities Amortization 3 60 197 Fees paid in warrants -- 12,666 14,063 Fee paid in common stock -- -- 806 Changes in current assets and liabilities, net of effects from reverse purchase Decrease(increase) in receivables (39) 39 (50) Increase(decrease) in accounts (63) (335) 75 payable Increase(decrease) in taxes and 30 (22) 113 social costs payable Other 9 (16) 36 ----------------- --------------- ---------------- Net cash used in operating activities (1,242) (935) (3,333) ----------------- --------------- ---------------- Cash flows from investing activities Patents and other (68) (44) (303) Short-term investments 334 (85) (20) Cash acquired in reverse purchase -- 13 13 ----------------- --------------- ---------------- Net cashed used in (provided by) investing activities 266 (116) (310) ----------------- --------------- ---------------- Cash flows from financing activities Proceeds from issuance of common stock 8 2,124 2,851 Borrowing from shareholders -- -- 242 Increase in note payable and other short-term 209 553 709 advances Loan fees -- (144) (130) ----------------- --------------- ---------------- Net cash provided by financing activities 217 2,533 3,672 Effect of foreign exchange rate on cash (7) 424 93 ----------------- --------------- ---------------- Net change in cash (766) 1,906 122 Cash, beginning of period 888 185 -- ----------------- --------------- ---------------- Cash, end of period E 122 E 2,091 E 122 ================= =============== ================
The accompanying notes are an integral part of these financial statements. MYMETICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2002 (UNAUDITED) NOTE 1. BASIS OF PRESENTATION The interim period consolidated financial statements have been prepared by the Corporation 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 Corporation's latest annual report on Form 10-K for the fiscal year ended December 31, 2001. The accompanying financial statements of the Corporation are unaudited. However, in the opinion of the Corporation, 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 six month period ended June 30, 2002, were of a normal, recurring nature. The amounts presented for the six month period ended June 30, 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 49,267,266 for the six months ended June 30, 2002; 38,758,952 for the six months ended June 30, 2001; 49,271,962 for the three months ended June 30, 2002; 43,818,135 for the three months ended June 30, 2001; and 34,714,198 for the development stage period. The potentially dilutive common shares did not have an impact on diluted earnings per share for the six month and the three months ended June 30, 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 Corporation prepared its 2002 and 2001 financial statements in Euros. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001 The following discussion and analysis of the results of our operations and financial condition for the six months ended June 30, 2002 should be read in conjunction with our consolidated financial statements and related notes included elsewhere herein. Revenues for the six months ended June 30, 2002 were E8 compared to E6 for the six months ended June 30, 2001. Costs and expenses decreased to E1,190 for the six months ended June 30, 2002 from E13,333 for the six months ended June 30, 2001. Research and development expenses increased to E384 in the current period from E184 in the comparative period of 2001 as a result of an increase in research activities. General and administrative expenses increased to E709 in the six months ended June 30, 2002 from E381 in the comparative period of 2001. Bank fees were nil for the six months ended June 30, 2002 compare to E12,666 in the comparative period in 2001, primarily as a result of the reverse purchase transaction that occurred last year. We reported a net loss of E1,182, or E0.02 per share, for the six months ended June 30, 2002, compared to E13,327, or E0.34, for the six months ended June 30, 2001. RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001 Revenues were E3 for the three months ended June 30, 2002 and 2001, respectively. Costs and expenses decreased to E629 for the three months ended June 30, 2002 from E9,978 for the three months ended June 30, 2001. Research and development expenses increased to E152 in the current period from E70 in the comparative period of 2001 as a result of an increase in research activities. General and administrative expenses increased to E459 in the three months ended June 30, 2002 from E270 in the comparative period of 2001. Bank fees were nil for the three months ended June 30, 2002 compare to E9,612 in the comparative period in 2001, primarily as a result of the reverse purchase transaction that occurred last year. We reported a net loss of E626, or E0.01 per share, for the three months ended June 30, 2002, compared to E9,975, or E0.23, for the three months ended June 30, 2001. LIQUIDITY AND CAPITAL RESOURCES We had cash of E122 at June 30, 2002, compared to E888 at December 31, 2001. Net cash used in operating activities was E1,242 for the six months ended June 30, 2002, compared to E935 for the six months ended June 30, 2001. A decrease in accounts payable used cash of E63 for the six months ended June 30, 2002 compared to E335 for the six months ended June 30, 2001. Investing activities provided cash of E266 for the six months ended June 30, 2002 compared to using cash of E116 for the same period last year. Short term investment provided cash of E334 for the six months ended June 30, 2002 compared to using cash of E85 for the six months ended June 30, 2001. Financing activities provided cash of E217 for the six months ended June 30, 2002 compared to E2,533 in the same period last year. The revolving term facility is in the principal amount of up to E1.3 million and matures on August 31, 2002. At June 30, 2002, we had borrowed an aggregate of E437 pursuant to this revolving term facility. We are currently renegotiating this facility. However, there can be no assurance that we will be able to successfully negotiate a new facility at all or on terms that are satisfactory to us. This raises an uncertainty about our ability to operate as a going concern. In the event that we are not able to successfully negotiate a new facility, we may be required to restrict or halt our operations. We expect that we will require substantial additional capital to continue our research and development, clinical studies and regulatory activities necessary to bring our potential products to market and to establish production, marketing and sales capabilities. We anticipate that our operations will require approximately E1.0 million in the year ending December 31, 2002. We will seek to raise the required capital from lenders and/or equity or debt issuances. However, there can be no assurance that we will be able to raise additional capital on terms that are satisfactory to us, or at all, to finance our operations. This raises an uncertainty about our ability to operate as a going concern. In the event that we are not able to obtain such additional capital, we may be required us to restrict or even halt our operations. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk from changes in interest rates which could affect our financial condition and results of operations. We have not entered into derivative contracts for our 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. We have debt obligations which are sensitive to interest rate fluctuations. The following tables provide information about our exposure to interest rate fluctuations for the carrying amount of such debt obligations as of June 30, 2002 and 2001 and expected cash flows from these debt obligations:
As at June 30, 2002 (in thousands) Expected Future Cash Flow Year ending December 31, Carrying Fair -------------------------------------------------------------- Value Value 2002 2003 2004 2005 2006 Thereafter ----- ----- ---- ---- ---- ---- ---- ---------- --------------------- ----------- ------------ ------------ ----------- ------------ ---------- ----------- -------------- Debt obligations E437 E437 E437 E - E - E - E - E - --------------------- ----------- ------------ ------------ ----------- ------------ ---------- ----------- -------------- As at June 30, 2001 (in thousands) Expected Future Cash Flow Year ending December 31, Carrying Fair -------------------------------------------------------------- Value Value 2001 2002 2003 2004 2005 Thereafter ----- ----- ---- ---- ---- ---- ---- ---------- --------------------- ---------- ------------ ----------- ------------ ------------ --------- ------------ -------------- Debt obligations E228 E228 E228 E - E - E - E - E - --------------------- ---------- ------------ ----------- ------------ ------------ --------- ------------ --------------
PART II. OTHER INFORMATION ----------------- ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS SHARE EXCHANGE In March 2001, in connection with a share exchange transaction, we acquired 99.9% of the outstanding stock of Mymetics S.A. For more details on this share exchange transaction, see our Information Statement on Schedule 14C filed with the Securities and Exchange Commission on April 26, 2001. We recently acquired the remaining 0.1% of the outstanding common stock of Mymetics S.A. (consisting of a total of 11 shares of Mymetics S.A. common stock) pursuant to share exchanges with the remaining stockholders of Mymetics S.A. In these share exchanges, these 11 shares of Mymetics S.A. common stock were exchanged into a total of 46,925 shares of our common stock. The terms of these recent share exchanges were substantially similar to the terms of the share exchange that occurred in March 2001. WARRANTS In December 2000, we assumed the rights and obligations of a credit facility which our subsidiary, Mymetics S.A., previously entered into with MFC Merchant Bank S.A. MFC Merchant Bank S.A. has in the past been one of our significant stockholders. MFC Merchant Bank S.A. is a wholly-owned subsidiary of MFC Bancorp Ltd. Mr. Musacchio, our Chief Operating Officer, Chief Financial Officer, Secretary and a member of our board of directors, is currently a Vice President with MFC Bancorp Ltd. The credit facility is a revolving term facility which allows us to borrow a principal amount of up to E1,300,000, of which E228,000 is currently outstanding, at an interest rate of LIBOR plus 4%. The credit facility requires all funds borrowed to be used for working capital and general corporate activities and for paying the fees and expenses associated with registering and maintaining our patents. The credit facility matures on August 31, 2002. As partial consideration of the credit facility, we granted MFC Merchant Bank S.A. warrants to purchase 6,828,468 shares of our common stock for E.23 per share. The warrants provided that MFC Merchant Bank S.A. was entitled to convert the warrants into shares of our common stock in an amount equal to the maximum allowable principal balance under the credit facility including unpaid interest plus the arrangement and retainer fees. The warrants are exercisable during a three-year period beginning in August 2000 at approximately E.23 per common share. During 2001, MFC Merchant Bank S.A. exercised warrants to acquire 1,176,294 common shares in exchange for the arrangement fee and the retainer fee plus E52 in accrued interest. MFC Merchant Bank S.A. also exercised warrants to acquire 3,250,000 common shares for cash in December 2001. In July, 2002, MFC Merchant Bank S.A. exercised warrants to purchase 1,625,567 shares of our common stock. We used the proceeds from this warrant exercise to pay down some of our debt. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On June 20, 2001, we held our annual meeting of shareholders in Saint-Genis Laval, France (the "Annual Meeting"). At the Annual Meeting, our shareholders were given the opportunity to vote to elect two Class II directors whose term will expire at our annual meeting of stockholders to be held in 2005. 35,000,155 shares of our common stock were present to be voted at the Annual Meeting, either in person or by proxy, all of which were cast in favor of electing Patrice Pactol and John M. Musacchio as Class II directors. The results of the election described above became effective as of June 20, 2002. ITEM 5. OTHER INFORMATION None. 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.(1) 3(ii) Bylaws of the Corporation.(2) 10.1 Credit Facility Agreement dated July 27, 2000 between the Corporation and MFC Merchant Bank, S.A. (3) 10.2 Assignment Agreement dated December 29, 2000 among the Corporation, Mymetics S.A. and MFC Merchant Bank, S.A. (3) 10.3 Share Exchange Agreement dated July 30, 2002 among the Corporation and the stockholder listed on the signature pages thereto.(4) 99.1 Certification of Chief Executive Officer of this Form 10-Q. 99.2 Certification of Chief Financial Officer of this Form 10-Q. (1) Incorporated by reference to the Corporation's Form 10-Q filed with the Securities and Exchange Commission on May 15, 2002. (2) Incorporated by reference to the Corporation's Form 10-Q filed with the Securities and Exchange Commission on August 14, 2001. (3) Incorporated by reference to the Information Statement on Schedule 14C filed with the Securities and Exchange Commission on April 26, 2001. (4) Incorporated by reference to the Corporation's Amendment No. 1 to Form S-1 filed with the Securities and Exchange Commission on August 8, 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: August 14, 2002 MYMETICS CORPORATION By: /s/ Dr. Peter P. McCann -------------------------- Chief Executive Officer