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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