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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 MARCH 31, 2003
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.)
150 CHESTNUT STREET
PROVIDENCE, RHODE ISLAND 02903
(Address of principal executive offices)
401-861-7604
(Registrant's telephone number, including area code)
706 Giddings Avenue, Suite 1C
Annapolis, Maryland 21401-1472
(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 by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
--- ---
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 12, 2003
----- ---------------------------
Common Stock, $0.01 50,944,505 (1)
par value
(1) This number assumes the conversion of 16,393,316 shares of Class B
Exchangeable Preferential Non-Voting Stock of our subsidiary, 6543
Luxembourg S.A., into 16,393,316 shares of our common stock.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MYMETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS OF EUROS)
MARCH 31, 2003 DECEMBER 31, 2002
-------------- -----------------
ASSETS
Current Assets
Cash E 91 E 183
Receivables 51 59
Prepaid expenses 28 36
---------- ------------
Total current assets 170 278
Patents and Other 182 199
---------- ------------
E 352 E 477
========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable E 447 E 452
Taxes and social costs payable 124 119
Note payable 2,500 1,989
Other 20 24
---------- ------------
Total current liabilities 3,091 2,584
Payable to shareholders 242 242
Shareholders' Equity
Common stock 579 579
Paid-in capital 17,888 17,888
Deficit accumulated during the development stage (21,703) (21,013)
Cumulative translation adjustment 255 197
---------- ------------
(2,981) 2,349
---------- ------------
E 352 E 477
========== ============
The accompanying notes are an integral part of these financial statements.
MYMETICS CORPORATION
(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, 2003 MARCH 31, 2002 DEVELOPMENT STAGE
-------------- -------------- -----------------
Revenue
Sales E - E - E 224
Interest - 5 34
-------- -------- -----------
- 5 258
-------- -------- -----------
Expenses
Research and development 390 232 3,112
General and administrative 246 250 3,154
Bank fee - - 14,932
Interest 37 9 192
Goodwill Impairment - - 209
Amortization 17 1 275
Other - 69 81
-------- -------- -----------
690 561 21,955
-------- -------- -----------
Loss before income tax provision (690) (556) (21,697)
Income tax provision - - 6
-------- -------- -----------
Net loss (690) (556) (21,703)
Other comprehensive income
Foreign currency translation
Adjustment 58 17 255
-------- -------- -----------
Comprehensive loss E (632) E (539) E (21,448)
======== ======== ===========
Basic and diluted loss per share E (0.01) E (0.01) E (0.60)
======== ======== ===========
The accompanying notes are an integral part of these financial statements.
MYMETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS OF EUROS)
TOTAL
FOR THREE FOR THREE ACCUMULATED
MONTHS ENDED MONTHS ENDED DURING THE
MARCH 31, 2003 MARCH 31, 2002 DEVELOPMENT STAGE
-------------- -------------- -----------------
Cash flow from operating activities
Net Loss E (690) E (556) E (21,703)
Adjustments to reconcile net loss to
net cash provided by (used in) operating
activities
Amortization 17 1 275
Goodwill impairment - - 209
Fees paid in warrants - - 14,126
Fee paid in common stock - - 806
Changes in current assets and
liabilities, net of effects from
reverse purchase
Decrease (increase) in receivables 8 (40) (13)
Increase (decrease) in
accounts payable (5) 152 149
Increase in taxes and social
costs payable 5 2 124
Other 4 (25) 40
---------- ---------- --------
Net cash used in operating activities (661) (466) (5,987)
---------- ---------- --------
Cash flows from investing activities
Patents and other - (55) (337)
Short-term investments - 278 -
Cash acquired in reverse purchase - - 13
---------- ---------- --------
Net cash provided by (used in) investing activities - 223 (324)
---------- ---------- --------
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 511 4 3,184
Loan fees - - (130)
---------- ---------- --------
Net cash provided by financing activities 511 12 6,147
Effect of foreign exchange rate on cash 58 17 255
---------- ---------- --------
Net change in cash (92) (214) 91
Cash, beginning of period 183 888 -
---------- ---------- --------
Cash, end of period E 91 E 674 E 91
========== ========== ========
The accompanying notes are an integral part of these financial statements.
MYMETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying interim period consolidated financial statements of Mymetics
Corporation (the "Company") set forth herein 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, 2002. 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, 2003, were of a normal, recurring nature. The
amounts presented for the three month period ended March 31, 2003, are not
necessarily indicative of the results of operations for a full year.
NOTE 2. EARNINGS (LOSS) PER SHARE
In accordance with SFAS No. 128, Earnings Per Share, and SEC Staff Accounting
Bulletin (SAB) No. 98, basic net income (loss) per common share is computed by
dividing the net income (loss) for the period by the weighted average number of
common shares outstanding during the period. Under SFAS No. 128, diluted net
income (loss) per share is computed by dividing the net income (loss) for the
period by the weighted average number of common and common equivalent shares,
such as stock options and warrants, outstanding during the period.
The weighted average number of shares outstanding for the purposes of
calculating basic and diluted earnings per share for the three month periods
ended March 31, 2003 and March 31, 2002 were 50,944,505 and 49,262,518,
respectively. The weighted average number of shares outstanding for the purpose
of calculating basic and diluted earnings per share for the development stage
period is 35,652,582. Common equivalent shares, such as stock options and
warrants, were excluded from the calculations of diluted earnings per share for
the three month period ended March 31, 2003 and 2002 as their effect would be
antidilutive.
NOTE 3. STOCK-BASED COMPENSATION
The Company has a stock-based employee compensation plan. The Company accounts
for the plan under the recognition and measurement principles of APB Opinion
No. 25. "Accounting for Stock Issued to Employees," and related
interpretations. No stock-based employee compensation cost is reflected in net
income, as all options granted under the plan had an exercise price equal to or
greater than the market value of the underlying common stock on the date of
grant. The following table illustrates the effect on net income and earnings
per share if the Company had applied the fair value recognition provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation," to stock-based
employee compensation.
FOR THREE FOR THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, 2003 MARCH 31, 2002
-------------- --------------
Loss
As reported E (690) E (556)
Deduct: Total stock-based employee compensation
expense determined under fair value based methods
for all awards, net of any related tax effects (12) -
Pro forma E (702) E (556)
Basic and Diluted Loss Per Share
As reported E (0.01) E (0.01)
Pro forma E (0.01) E (0.01)
NOTE 4. REPORTING CURRENCY
Consistent with the location of its activities, beginning January 1, 1999, the
Company adopted the euro (E) as its corporate currency. Accordingly, the Company
prepared its 2003 and 2002 financial statements in euros.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains forward-looking statements that involve risks and
uncertainties. The statements contained in this report that are not purely
historical, but are forward-looking statements within the meaning of Section 21E
of the Securities Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended. These forward looking statements concern
matters that involve risks and uncertainties that could cause actual results to
differ materially from those projected in the forward-looking statements. Words
such as "may," "will," "should," "could," "expect," "plan," "anticipate,"
"believe," "estimate," "predict," "potential" or continue" or similar words are
intended to identify forward looking statements, although not all forward
looking statements contain these words.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of the forward-looking
statements. We are under no duty to update any of the forward-looking statements
after the date hereof to conform such statements to actual results or to changes
in our expectations.
Readers are urged to carefully review and consider the various disclosures made
by us which attempt to advise interested parties of the factors which affect our
business, including without limitation" disclosures made under the captions
"Management Discussion and Analysis of Financial Condition and Results of
Operations," "Risk Factors," "Consolidated Financial Statements" and "Notes to
Consolidated Financial Statements" included in our annual report on Form 10-K
for the year ended December 31, 2002.
OVERVIEW
In March 2001, we acquired substantially all of the shares of Mymetics S.A.
(formerly Hippocampe S.A.) as our primary operating business. Mymetics S.A. is a
biotechnology research and development company devoted to fundamental and
applied research in the areas of human and veterinary biology and medicine. The
Company's primary objective is to develop therapies to treat certain
retroviruses including human immunodeficiency virus, or HIV, the virus that
leads to acquired immunodeficiency syndrome, or AIDS. Additional applications of
our research include potential treatments and/or vaccines for animal AIDS, human
and animal oncoviral leukemias, multiple sclerosis and organ transplantation.
Since the acquisition of Mymetics S.A., our financial statements have been
prepared treating us as a development stage company. We currently do not make,
market or sell any products or services. As of March 31, 2003, we had not
performed any clinical testing and a commercially viable product is not expected
for several more years. As such, we have not generated any significant revenues.
Revenues reported by us consist of incidental serum by-products of our research
and development activities and interest income. For the purpose of our financial
reporting, the development stage started on May 2, 1990, which is the date that
Mymetics S.A. was originally organized in France.
As of March 31, 2003, we have an accumulated deficit of approximately E 21.7
million. Our losses have resulted primarily from research and development
activities, related general and administrative expenses and bank fees incurred
in connection with the acquisition of Mymetics S.A. To date, our principal
sources of funding have been private equity financings and bank financings. We
expect to continue to incur substantial operating losses for the foreseeable
future as we continue our research and development activities.
The following discussion and analysis of our results of operations and financial
condition for the three months ended March 31, 2003 should be read in
conjunction with our consolidated financial statements and related notes
included in this report on Form 10-Q.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2003 and 2002
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO
THREE MONTHS ENDED MARCH 31, 2002
Revenues for the three months ended March 31, 2003 was nil compared to E5,000
for the three months ended March 31, 2002.
Costs and expenses increased to E690,000 for the three months ended March 31,
2003 from E561,000 for the three months ended March 31, 2002. Research and
development expenses increased to E390,000 in the current period from E232,000
in the comparative period of 2002 as a result of an increase in research
activities. General and administrative expenses were E246,000 in the three
months ended March 31, 2003 compared to E250,000 in the comparative period of
2002.
We reported a net loss of E690,000, or E0.01 per share, for the three months
ended March 31, 2003, compared to E556,000, or E0.01, for the three months ended
March 31, 2002.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2003, we had approximately E91,000 in cash compared to E183,000
in cash at December 31, 2002.
Net cash used in operating activities was E661,000 for the three months ended
March 31, 2003, compared to E466,000 for the three months ended March 31, 2002.
A decrease in accounts payable used cash of E5,000 for the three months ended
March 31, 2003 compared to an increase of the same providing cash of E152,000
for the three months ended March 31, 2002.
Investing activities provided cash of nil for the three months ended March 31,
2003 compared to provided cash of E223,000 for the same period last year. Short
term investment provided cash of nil in current period compared to provided cash
of E278,000 for the three months ended March 31, 2002.
Financing activities provided cash of E511,000 for the three months ended March
31, 2003 compared to E12,000 in the same period last year. We have a
non-revolving term facility in the principal amount of up to E2.8 million, which
matures on August 31, 2003. As of March 31, 2003, Mymetics had borrowed an
aggregate of E2.5 million pursuant to this non-revolving term facility.
These financial statements have been prepared assuming the Corporation will
continue as a going concern. The Corporation has experienced significant losses
since inception resulting in a deficit in shareholders' equity of E3.0 million
as of March 31, 2003, which raises doubts about the corporations ability to
remain as a going concern. Deficits in operating cash flows since inception have
been financed through debt and equity finding sources. In order to remain a
going concern, the Corporation intends to seek additional capital to continue
our research and development, pre-clinical and clinical studies and regulatory
activities necessary to bring our potential products to market and to establish
production, marketing and sales capabilities. The timing and amount of spending
of such capital resources cannot be accurately predicted and will depend on
several factors, including the progress of our research and development efforts
and pre-clinical and clinical activities, competing technological and market
developments, the time and costs of obtaining regulatory approvals, the time and
costs
33
involved in filing, prosecuting and enforcing patent claims, the progress
and cost of commercialization of products currently under development, market
acceptance and demand for our products and other factors beyond our control. The
Corporation will seek to raise the required capital from lenders and/or equity
or debt issuance and/or potential partnership with major international
pharmaceutical and biotechnology firms. 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. If adequate funds are not available, we
could be required to delay development or commercialization of our products or
technologies that we would otherwise seek to commercialize for ourselves, or
reduce the marketing, customer, support or other resources devoted to our
products, any of which could have a material adverse effect on our business,
financial condition and results of operations.
ITEM 3. 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 March 31, 2003 and 2002 and expected cash
flows from these debt obligations:
AS AT MARCH 31, 2003
(IN THOUSANDS)
EXPECTED FUTURE CASH FLOW
YEAR ENDING DECEMBER 31,
CARRYING FAIR -----------------------------------------------------
VALUE VALUE 2003 2004 2005 2006 2007 THEREAFTER
- ----------------------------------------------------------------------------------------------------------------------------
Debt obligations E2,500 E2,500 E2,500 E - E - E - E - E -
- ----------------------------------------------------------------------------------------------------------------------------
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 E232 E232 E232 E - E - E - E - E -
- ----------------------------------------------------------------------------------------------------------------------------
34
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. Within 90 days prior to the
filing date of this report, our principal executive officer and principal
financial officer, carried out an evaluation of the effectiveness and design of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-14(c) and 15d-14(c)) and have concluded that, based on such evaluation, our
disclosure controls and procedures were adequate and effective to ensure that
material information relating to us, including our consolidated subsidiaries,
was made known to them by others within those entities, particularly during the
period in which this Quarterly Report on Form 10-Q was being prepared.
Changes in Internal Controls. There were no significant changes in our internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, nor were there any significant
deficiencies or material weaknesses in our internal controls. Accordingly, no
corrective actions were required or undertaken.
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
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
(99)(1) Section 906 Certification of Chief Executive Officer and
Chief Financial Officer
(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, 2003 MYMETICS CORPORATION
By: /s/ Michael K. Allio
------------------------------
Interim Chief Executive Officer
I, Michael K. Allio, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Mymetics
Corporation;
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Quarterly Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
Quarterly Report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this Quarterly Report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
Quarterly Report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003 By: /s/ Michael K. Allio
-------------------------------------
Michael K. Allio
Interim Chief Executive Officer
I, John M. Musacchio, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Mymetics
Corporation;
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Quarterly Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
Quarterly Report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this Quarterly Report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
Quarterly Report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003 By: /s/ John M. Musacchio
----------------------------------
John M. Musacchio
Chief Financial Officer