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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO _____
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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.)
European Executive Office
14, rue de la Colombiere
CH-1260 Nyon (Switzerland)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 011 41 22 363 13 10
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
(Title of Class)
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
The aggregate market value of the voting common stock held by non-affiliates of
the Registrant (assuming officers and directors are affiliates) was
approximately U.S. $2,371,982.80 as of December 31, 2003, computed on the basis
of the average of the bid and ask prices on such date. The Registrant has no
non-voting common stock.
As of March 18, 2004, there were 59,394,454 shares of the Registrant's
Common Stock outstanding.
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USE OF EUROS
The financial information contained in this Form 10-K is provided in
Euros (E) (except in "Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters" which is provided in United States Dollars, and except as
expressly indicated otherwise herein). See Note 1 to the Consolidated Financial
Statements contained in this Form 10-K for further explanation. As of March 18,
2004, 1 Euro was convertible into 1.22354 United States Dollars.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements, which are identified by the words
"believe," "expect," "anticipate," "intend," "plan" and similar expressions. The
statements contained herein which are not based on historical facts are
forward-looking statements that involve known and unknown risks and
uncertainties that could significantly affect our actual results, performance or
achievements in the future and, accordingly, such actual results, performance or
achievements may materially differ from those expressed or implied in any
forward-looking statements made by or on our behalf. These risks and
uncertainties include, but are not limited to, risks associated with our ability
to successfully develop and protect our intellectual property, our ability to
raise additional capital to fund future operations and compliance with
applicable laws and changes in such laws and the administration of such laws.
These risks are described below and in "Item 1. Business," "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
"Item 7A. Quantitative and Qualitative Disclosures About Market Risk" included
in this Form 10-K. Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date the statements were
made.
RISK FACTORS
You should carefully consider the risks described below together with
all of the other information included in this report on Form 10-K. An investment
in our common stock is very risky. If any of the following risks materialize,
our business, financial condition or results of operations could be adversely
affected. In such an event, the trading price of our common stock could decline,
and you may lose part or all of your investment.
We are a company engaged exclusively in research and development
activities, focusing primarily on human and veterinary biology and medicine.
When used in these risk factors, the terms "we" or "our" refer to Mymetics
Corporation and its subsidiaries.
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WE HAVE A NOTE PAYABLE AMOUNTING TO E3,127 WHICH IS DUE JUNE 30, 2004, WHERE
THERE IS NO ASSURANCE THAT THE NOTE MAY BE PAID, EXTENDED, RESTRUCTURED OR
REFINANCED. THESE CONDITIONS RAISE SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO
CONTINUE AS A GOING CONCERN.
As more fully disclosed under Item 13 of this Form 10-K, we have no
reasonable hope to be able to reimburse the credit facility due to MFC Bank on
or before its present due date of June 30, 2004, and despite our efforts and
recent achievements, we have no assurance that MFC Bank will accept to
renegotiate it on terms acceptable to us.
WE NEED TO RAISE ADDITIONAL CAPITAL OR OBTAIN SIGNIFICANT GRANTS TO FUND OUR
RESEARCH EFFORTS AND TO FULLY DEVELOP COMMERCIALLY VIABLE PRODUCTS. WE CANNOT
ASSURE YOU THAT WE WILL BE ABLE TO OBTAIN ADDITIONAL CAPITAL OR OBTAIN
SIGNIFICANT GRANTS WHEN NEEDED OR THAT SUCH CAPITAL OR GRANTS WILL BE AVAILABLE
ON FAVORABLE TERMS, IF AT ALL. OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE
CANNOT RAISE ADDITIONAL CAPITAL OR OBTAIN SIGNIFICANT GRANTS WHEN NEEDED.
The costs for us to continue our research and to develop our
intellectual property will be substantial. We expect that our existing capital
resources will satisfy our capital requirements through approximately June 2004.
However, given the fact that we do not have any current sources of revenue,
substantial additional capital or grants will likely be needed to continue the
development and commercialization of our intellectual property. Currently there
are no firm commitments for any additional financing. Any additional equity
financing may be dilutive to stockholders, and debt financing, if available, may
include restrictive covenants and there can be no assurance that additional
financing will be available. While the amount of capital required cannot be
estimated with precision, we estimate it will require approximately 2 million
Euros just to move our business forward into a position of being prepared to
initiate clinical trials.
The availability of and the need for future capital will depend on many
factors, including:
- continued scientific progress in our research and development
program;
- results of pre-clinical tests;
- results of any clinical trials;
- the time and cost involved in obtaining regulatory approvals;
- future collaborative relationships; and
- the cost of manufacturing.
If adequate funds are not available, we may be required to curtail or
cease operations.
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WE HAVE A HISTORY OF OPERATING LOSSES AND WE EXPECT TO GENERATE OPERATING LOSSES
FOR THE FORESEEABLE FUTURE.
We currently are engaged in research and development activities, and do
not have any commercially marketed products. The product research and
development process requires significant capital expenditures, and we do not
have any other sources of revenue to off-set such expenditures. Accordingly, we
expect to generate additional operating losses at least until such time as we
are able to generate significant revenues.
IF WE ARE UNABLE TO SUCCESSFULLY DEVELOP AND COMMERCIALIZE OUR RESEARCH AND
INTELLECTUAL PROPERTY, WE MAY NEVER GENERATE SIGNIFICANT REVENUES OR ACHIEVE
PROFITABILITY.
Our current objective is to develop vaccine and therapeutic compounds
and specific therapies for certain retroviral diseases or diseases with a viral
autoimmune content. All of our potential products and production technologies
are in the research or pre-development stages and no revenues have been
generated from product sales. The first products and applications target human
immunodeficiency virus, or HIV, and feline immunodeficiency virus, or FIV, the
precursors to human and feline acquired immunodeficiency syndrome, or AIDS. We
will not become profitable, if ever, unless we develop our intellectual property
to a point where it can be licensed to third parties on financially favorable
terms or applied in the creation and development of one or more products that
can generate revenues.
Although our due diligence has indicated that our research and
discovery regarding "mimicry" may lead to important discoveries in the
scientific community regarding the HIV infection process, other discoveries may
be necessary to develop an effective vaccine, and we may never be able to
develop our research and intellectual property into a commercially profitable
product.
Our success will depend on our ability to:
- effectively commercialize the research through collaborative
relationships with third parties;
- prepare acceptable protocols necessary to obtain regulatory
approvals;
- effectively conclude clinical trials;
- effectively establish commercial viability; and
- effectively establish marketing and manufacturing
relationships.
If we are unable to commercialize the current research, we do not have
other products from which to derive revenue.
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WE MUST OVERCOME SIGNIFICANT OBSTACLES TO SUCCESSFULLY DEVELOP OR MARKET
PRODUCT CANDIDATES.
The development of product candidates is subject to significant risks
of failure, which are inherent in the development of new medical products and
products based on new technologies. These risks include:
- delays in pre-clinical testing, product development, clinical
testing or manufacturing;
- unplanned expenditures for product development, clinical
testing or manufacturing;
- failure of the technologies and products being developed to
have the desired effect or an acceptable safety profile;
- failure to receive regulatory approvals;
- emergence of equivalent or superior products;
- inability to manufacture (directly or through third parties)
product candidates on a commercial scale;
- inability to market products due to third party proprietary
rights;
- inability to find collaborative partners to pursue product
development; and
- failure by future collaborative partners to successfully
develop products.
If these risks materialize, our research and development efforts may
not result in any commercially viable products.
COMMERCIALIZATION OF OUR INTELLECTUAL PROPERTY AND CREATION OF VIABLE PRODUCTS
DEPEND ON COLLABORATIONS WITH OTHERS. IF WE ARE UNABLE TO FIND COLLABORATORS IN
THE FUTURE, WE MAY NOT BE ABLE TO DEVELOP PROFITABLE PRODUCTS.
Our strategy for the research, development and commercialization of
products requires us to enter into contractual arrangements with corporate
collaborators, licensors, licensees and others. We do not have the funds to
develop products on our own, and intend to depend on collaborators to develop
products on our behalf. If collaborative relationships cannot be found, we may
not be able to continue our development programs.
Moreover, we could become involved in disputes with collaborative
partners, which could lead to delays or termination of development programs and
time-consuming, expensive and distracting litigation or arbitration. Even if we
fulfill our obligations under a collaborative agreement, a partner may terminate
the agreement. If any collaborative partner terminates or breaches an agreement
with us, or otherwise fails to complete its obligations in a timely manner, our
ability to successfully commercialize our intellectual property will be
adversely affected.
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IF WE ARE NOT ABLE TO DEMONSTRATE THE RESULTS OF OUR RESEARCH IN CLINICAL
TRIALS, OR IF CLINICAL TRIALS ARE DELAYED, WE MAY NOT BE ABLE TO OBTAIN
REGULATORY CLEARANCE TO MARKET OUR PRODUCTS IN THE UNITED STATES OR IN FOREIGN
COUNTRIES ON A TIMELY BASIS, OR AT ALL.
Assuming we are able to successfully develop our research into
potential products, such products will require regulatory approval. Before
obtaining regulatory approvals for the commercial sale of any of the products
under development, pre-clinical studies and clinical trials must demonstrate
that the product is safe and effective for use in each target indication. If any
of the products fail in clinical trials, the approval of the United States Food
and Drug Administration (the "FDA") and similar agencies operating in foreign
countries will not be obtained for such products, and we will not be able to
generate revenues from such products.
Clinical testing is a long, expensive and uncertain process. One cannot
be certain that the data collected from the clinical trials will be sufficient
to support approval by the FDA or any foreign regulatory authorities, that the
clinical trials will be completed on schedule or, even if the clinical trials
are successfully completed and on schedule, that the FDA or any foreign
regulatory authorities will ultimately approve the product for commercial use.
Clinical trials could be delayed for a variety of reasons, including:
- delays in enrolling volunteers;
- lower than anticipated retention rate of volunteers in the
trials; and
- serious adverse events related to the products being
developed.
Our research is presently focused on developing vaccines and
therapeutics to prevent and treat HIV. Trials will be conducted on animals prior
to humans. Results of animal trials, even if successful, may not be relevant for
determining the preventive or therapeutic effect of any potential product
designed to prevent or treat HIV infection in humans. In addition, results from
early clinical trials are not necessarily indicative of future results. A number
of companies in the biotechnology and pharmaceutical industries have suffered
significant setbacks in late stage clinical trials even after promising results
in early stage development. Furthermore, pre-clinical and clinical data can be
interpreted in different ways, which could delay, limit or prevent regulatory
approvals. Negative or inconclusive results or interpretations could cause the
trials to be unacceptable for submission to regulatory authorities.
IF WE ARE UNABLE TO ATTRACT AND RETAIN KEY EMPLOYEES AND CONSULTANTS, WE WILL BE
UNABLE TO DEVELOP AND COMMERCIALIZE PRODUCTS.
We are dependent on the principal members of our management and
scientific staff. In order to successfully complete our research and development
activities and our commercialization plans, we will need to hire personnel with
experience in clinical testing, drug discovery, government regulation,
manufacturing, marketing and finance. We may not be able to attract and retain
personnel on acceptable terms given the intense competition for such personnel
among high technology enterprises, including biotechnology, pharmaceutical and
healthcare companies, universities and non-profit research institutions.
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IF WE FAIL TO ENTER INTO SUCCESSFUL MARKETING ARRANGEMENTS WITH THIRD PARTIES,
WE WILL NOT BE ABLE TO COMMERCIALIZE PRODUCTS.
We do not currently have any sales or marketing infrastructure, and we
do not have significant experience in marketing, sales and distribution. Future
profitability will depend in part on plans to enter into successful marketing
arrangements with third parties. To the extent that we enter into marketing and
sales arrangements with other companies, revenues will depend on the efforts of
others. These efforts may not be successful. If we are unable to enter into
successful third-party arrangements, we may not be able to commercialize our
products.
IF WE DO NOT SUCCESSFULLY COMPETE IN THE DEVELOPMENT AND COMMERCIALIZATION OF
PRODUCTS AND KEEP PACE WITH RAPID TECHNOLOGICAL CHANGE, WE WILL BE UNABLE TO
CAPTURE AND SUSTAIN A MEANINGFUL MARKET POSITION.
The biotechnology and pharmaceutical industries are highly competitive
and subject to significant and rapid technological change. We are aware of
several companies that are actively engaged in research and development in areas
related to our research focus. Many of these companies are addressing the same
diseases and disease indications that we are addressing. As a result of this
intense competition, any products that we develop may become obsolete before we
are able to recover the expenses incurred in their development. Moreover, many
of these companies, either alone or together with their collaborative partners,
have substantially greater financial resources and larger research and
development staffs. These competitors, either alone or together with their
collaborative partners, also have significantly greater experience in:
- developing products;
- undertaking pre-clinical testing and human clinical trials;
- obtaining FDA and other regulatory approvals of products; and
- manufacturing and marketing products.
IF OUR INTELLECTUAL PROPERTY DOES NOT ADEQUATELY PROTECT PRODUCT CANDIDATES, WE
COULD ENCOUNTER MORE DIRECT COMPETITION, WHICH COULD ADVERSELY IMPACT REVENUES.
Our success depends, in part, on our ability to:
- obtain and maintain patents or rights to patents;
- protect trade secrets;
- operate without infringing upon the proprietary rights of
others; and
- prevent others from infringing on our proprietary rights.
We will be able to protect proprietary rights from unauthorized use by
third parties only to the extent that our proprietary rights are covered by
valid and enforceable patents or are effectively maintained as trade secrets.
The patent position of biotechnology companies involves complex legal and
factual questions and, therefore, enforceability cannot be predicted with
certainty. Patents, if issued, may be challenged, invalidated or circumvented.
Thus, any patents that are owned or licensed from third parties may not provide
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adequate protection against competitors. Pending patent applications, those
applications that we may file in the future, or those applications that may be
licensed from third parties, may not result in patents being issued. Also,
patent rights may not provide adequate proprietary protection or competitive
advantages against competitors with similar technologies. The laws of certain
foreign countries do not protect intellectual property rights to the same extent
as do the laws of the United States.
In addition to patents, we rely on trade secrets and proprietary
know-how. Protection of trade secrets and know-how is sought, in part, through
confidentiality and proprietary information agreements and customary principles
of "work-for-hire." These agreements may not provide meaningful protection or
adequate remedies in the event of unauthorized use or disclosure of confidential
and proprietary information. Failure to protect proprietary rights could
seriously impair our competitive position.
IF THIRD PARTIES CLAIM WE ARE INFRINGING THEIR INTELLECTUAL PROPERTY RIGHTS, WE
COULD BECOME SUBJECT TO SIGNIFICANT LITIGATION OR LICENSING EXPENSES OR BE
PREVENTED FROM MARKETING OUR PRODUCTS.
The areas in which we have focused our research and development have a
number of competitors. This has resulted in a number of issued patents and
still-pending patent applications. Patent applications in the United States are,
in most cases, maintained in secrecy until the patents issue. The publication of
discoveries in the scientific or patent literature frequently occurs
substantially later than the date on which the underlying discoveries were made.
Commercial success depends significantly on our ability to operate without
infringing the patents and other proprietary rights of third parties. In the
event of such infringement, we may be prevented from pursuing certain product
development or commercialization and may be required to obtain a license for the
use of the proprietary rights or patents. We may also be required to pay damages
for past infringement.
The biotechnology and pharmaceutical industries have been characterized
by extensive litigation regarding patents and other intellectual property
rights. The defense and prosecution of intellectual property lawsuits, U.S.
Patent and Trademark Office interference proceedings and related legal and
administrative proceedings in the United States and in foreign countries involve
complex legal and factual questions. As a result, such proceedings are costly
and time consuming to pursue and their outcome is uncertain.
Litigation may be necessary in the future to:
- enforce patents that we own or license;
- protect trade secrets or know-how that we own or license; or
- determine the enforceability, scope and validity of the
proprietary rights of others.
We believe that our technology has been independently developed and
does not infringe upon the proprietary or intellectual property rights of
others. We cannot, however, guarantee that our technology does not, and will not
in the future, infringe upon the rights of third parties. We may be a party to
legal proceedings and claims relating to the proprietary information of others
from time to time in the ordinary course of our business. If we become involved
in any litigation, interference or other administrative proceedings, we will
8
incur substantial expense and the efforts of technical and management personnel
will be significantly diverted. An adverse determination may subject us to loss
of proprietary position or to significant liabilities, or require licenses that
may not be available from third parties. We may be restricted or prevented from
manufacturing and selling products, if any, in the event of an adverse
determination in a judicial or administrative proceeding or if we fail to obtain
necessary licenses. Costs associated with these arrangements may be substantial
and may include ongoing royalties. Furthermore, the necessary licenses may not
be available on satisfactory terms, if at all.
WE CAN NOT BE SURE THAT ANY FUTURE OR CURRENTLY PENDING PATENT APPLICATIONS
RELATING TO OUR PRODUCTS WILL ISSUE ON A TIMELY BASIS, IF EVER.
Since patent applications in the United States are maintained in
secrecy until 18 months from the priority date, and since publication of
discoveries in the scientific or patent literature often lag behind actual
discoveries, we cannot be certain that we were the first to develop the
inventions covered by each of our pending patent applications or that we were
the first to file patent applications for such inventions. Even if patents are
issued, the degree of protection afforded by such patents will depend upon the:
- scope of the patent claims;
- validity and enforceability of the claims obtained in such
patents; and
- our willingness and financial ability to enforce and/or defend
them.
EVEN IF WE OBTAIN REGULATORY APPROVAL TO MARKET AND SELL OUR PRODUCTS, WE WILL
BE SUBJECT TO ONGOING REGULATORY REVIEW, WHICH WILL BE EXPENSIVE AND MAY AFFECT
OUR ABILITY TO SUCCESSFULLY COMMERCIALIZE OUR PRODUCTS.
Even if regulatory approval for a product is secured, such approval may
be subject to limitations on the indicated uses for which the product may be
marketed. Such limitations may restrict the size of the available market for the
product or contain requirements for costly post-marketing surveillance studies.
Manufacturers of medical products are subject to continued review and periodic
inspections by the FDA and other regulatory authorities. The subsequent
discovery of previously unknown problems with the product, clinical trial
subjects, or with the manufacturer or its manufacturing facility may result in
the imposition of restrictions on the product or manufacturer, including
withdrawal of the product from the market. If we or any of our collaborative
partners fail to comply with applicable regulatory requirements, we may be
subject to fines, suspension or withdrawal of regulatory approvals, product
recalls, seizure of products, operating restrictions and criminal prosecution.
9
IF OUR PRODUCTS ARE NOT ACCEPTED BY THE MARKET, WE ARE NOT LIKELY TO GENERATE
SIGNIFICANT REVENUES OR BECOME PROFITABLE.
Even if we are able to successfully develop a viable product and obtain
regulatory approval of such product, such product may not gain market acceptance
among physicians, patients, healthcare payors and the medical community. The
degree of market acceptance of any medical product depends on a number of
factors, including:
- demonstration of clinical efficacy and safety;
- cost-effectiveness;
- potential advantages over alternative therapies;
- reimbursement policies of government and third party payors;
- effectiveness of marketing and distribution capabilities; and
- the success of physician education programs.
Physicians will not recommend therapies using products until clinical
data or other factors demonstrate their safety and efficacy as compared to other
drugs or treatments. Even if the clinical safety and efficacy of therapies using
the products is established, physicians may elect not to recommend the therapies
for other reasons, including whether the mode of administration of products is
effective for certain indications.
WE ARE A PARTY TO LITIGATION WHICH HAS BEEN DETERMINED ADVERSELY TO US AND WE
ARE UNABLE TO PAY THE PLAINTIFF WITH THE FUNDS NOW AVAILABLE TO US.
We and our French subsidiary were party to several lawsuits seeking
damages from our company and our subsidiary, as described under "Item 3. Legal
Proceedings.". All except one case were immaterial and have been settled, either
in court or out of court, with all amounts previously accounted for in our
financial statements. One material case was lost and although the full amount
had been provided for in our financial statements, we do not have sufficient
funds to meet our obligations should the plaintiff demand immediate payment of
the amount we now owe him, unless we are able to raise a sufficient amount of
additional capital. Our inability to meet such obligations would have a material
adverse effect on our liquidity and could threaten our business.
OUR STOCK PRICE MAY EXPERIENCE SIGNIFICANT VOLATILITY, WHICH COULD ADVERSELY
AFFECT THE VALUE OF YOUR INVESTMENT.
The market price of our common stock, like that of the common stock of
many other development stage biotechnology companies, may be highly volatile. In
addition, the stock market has experienced extreme price and volume
fluctuations. This volatility has significantly affected the market prices of
securities of many biotechnology and pharmaceutical companies for reasons
frequently unrelated to, or disproportionate to, the operating performance of
the specific companies. These broad market fluctuations may adversely affect the
market price of our common stock.
10
THE MARKET FOR OUR COMMON STOCK IS VERY LIMITED
Our common stock is currently traded only on the OTC Bulletin Board.
Accordingly, we cannot provide assurances as to the future liquidity of our
common stock or the price at which you would be able to sell your shares in any
available market.
THE ISSUANCE OF ADDITIONAL EQUITY SECURITIES MAY DILUTE YOUR INVESTMENT.
We currently have 59,394,454 shares of common stock outstanding, 1
share of Special Voting Preferred Stock, options to purchase an aggregate of
606,250 shares of common stock and warrants to purchase an aggregate of
6,080,166 shares of common stock. We are authorized to issue up to 80 million
shares of common stock and 5 million shares of preferred stock without
additional stockholder approval. The issuance of additional common stock or
preferred stock will dilute our stockholders' percentage ownership, and,
depending on the offering price of such stock, may also serve to dilute the
value of such ownership interest.
WE CURRENTLY DO NOT INTEND TO PAY CASH DIVIDENDS ON OUR SHARES.
We have never declared or paid any cash dividends on our common stock,
nor do we intend on doing so in the foreseeable future. The payment of
dividends, if any, in the future is within the discretion of our board of
directors and will depend upon our earnings, capital requirements and financial
condition as well as other relevant factors. We currently intend to retain all
earnings, if any, to finance our continued growth and the development of our
business. Furthermore, our ability to declare or pay dividends may be limited in
the future by the terms of any then-existing credit facilities, which may
contain covenants that restrict the payment of cash dividends.
POLITICAL OR SOCIAL FACTORS MAY ADVERSELY IMPACT REVENUES BY DELAYING OR
IMPAIRING THE CORPORATION'S ABILITY TO MARKET ITS PRODUCTS.
We are focused on developing vaccines and products for the treatment
and prevention of HIV. Products developed to address the HIV/AIDS epidemic have
been, and may continue to be, subject to competing and changing political and
social pressures. The political and social response to the HIV/AIDS epidemic has
been emotionally charged and unpredictable. Such political and social forces may
serve to delay or prevent introduction of our products into the marketplace or
to place restrictions upon the pricing, availability and marketing of such
products.
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TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS............................................. 13
ITEM 2. PROPERTIES .......................................... 26
ITEM 3. LEGAL PROCEEDINGS ................................... 26
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.. 27
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.................................. 28
ITEM 6. SELECTED FINANCIAL DATA ............................. 31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................. 31
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.......................................... 33
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ......... 34
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.................. 34
ITEM 9A. CONTROLS AND PROCEDURES.............................. 34
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT .. 35
ITEM 11. EXECUTIVE COMPENSATION .............................. 38
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS....... 42
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ...... 43
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES............... 49
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.......................................... 51
SIGNATURES............................................................. 71
12
PART I
ITEM 1. BUSINESS
THE CORPORATION
We are a holding company conducting business through our subsidiaries
6543 Luxembourg S.A., a joint stock company organized in 2001 under the laws of
Luxembourg ("LuxCo"), and Mymetics S.A. (formerly Hippocampe S.A.), a company
organized in 1990 under the laws of France ("Mymetics S.A."). We were
incorporated in July 1994 pursuant to the laws of the Commonwealth of
Pennsylvania under the name "PDG Remediation, Inc." In November 1996, we
reincorporated under the laws of the State of Delaware and changed our name to
"ICHOR Corporation." In July 2001, we changed our name to "Mymetics
Corporation." We own all of the outstanding voting stock of LuxCo and Mymetics
S.A. is a wholly-owned subsidiary of LuxCo. In this document, unless the context
otherwise requires, "Mymetics" and the "Corporation" refer to Mymetics
Corporation and its subsidiaries.
We currently do not make, market or sell any products or services, and
thus, we have no revenues. We believe that our research and development
activities, and the resulting intellectual property, will lead to the creation
of commercially viable products, which can generate revenues for us in the
future. If financially favorable terms are available, we may license or sell our
intellectual property to third parties. If we fail to develop our intellectual
property, we are unlikely to generate significant revenues.
DEVELOPMENT OF THE CORPORATION
From our inception in 1994 to December 1997, we operated in the
environmental services industry, focusing on thermal treatment (in Florida),
remediation services (in Florida and Pennsylvania) and waste oil recycling (in
Illinois). In February 1995, we completed an initial public offering. In 1998
and 1999, after disposing of our thermal treatment, remediation services and
waste oil recycling businesses, we provided consulting services to an industrial
customer in Europe. In June 1999, we acquired a majority interest in Nazca
Holdings Ltd., whose business involved the exploration for and development of
groundwater resources in Chile. Following the disposal of our interest in Nazca
in July 2000, we did not have an operating business.
In March 2001, we acquired 99.9% of the outstanding shares of Mymetics
S.A. in consideration for shares of our common stock and shares of Class B
Exchangeable Preferential Non-Voting Stock of LuxCo, or Preferential Shares,
which are convertible into shares of our common stock. In 2002, we acquired the
remaining 0.1% of the outstanding common stock of Mymetics S.A. pursuant to
share exchanges with the remaining stockholders of Mymetics S.A. The terms of
these recent share exchanges were substantially similar to the terms of the
share exchange that occurred in March 2001. Mymetics S.A. was, and continues to
be, a biotechnology research and development company.
On June 30, 2001, we closed on a private offering of 1,333,333 shares
of our common stock, at E1.77 (U.S. $1.50) per share, for an aggregate price of
E2,355,600 (U.S. $2,000,000). This private placement was exempt from
registration pursuant to Regulation S of the Securities Act of 1933, and the
shares were sold to foreign investors meeting the requirements of Regulation S.
13
In August, 2002 the Company formed Mymetics Deutschland GmbH for the
purpose of applying for German government support of research activities to be
conducted in Germany. This company never became active and was finally sold to
MFC Securities (Deutschland) GmbH, an affiliate of our lender, MFC Merchant Bank
S.A.
MYMETICS CORPORATION
Prior to 2002, our activities were primarily conducted in Europe.
During the second quarter of 2002, through our operations in the United States,
we launched programs in the United States in an attempt to reinforce our
intellectual property portfolio and to accelerate the commercialization of our
technology. This was done, in part, by attempting to target products and
business development in the United States. Again, prior to this time, activities
such as design of the prototype molecules, synthesis, and in vitro testing had
been conducted exclusively in Europe. We believed that expanding our operating
activities in the United States offered numerous advantages, including greater
access to expertise, grants, subsidies, intellectual property and public and
private research teams. Due to financial constraints, we were forced to limit
these activities in January 2003.
MYMETICS S.A.
Our subsidiary, Mymetics S.A., is a biotechnology research and
development company devoted to fundamental and applied research in the area of
human and veterinary biology and medicine. Mymetics S.A.'s primary objective is
to develop therapies to treat certain retroviruses, including the human
immunodeficiency virus, or HIV, the virus that leads to acquired
immunodeficiency syndrome, or AIDS. Additional applications of Mymetics S.A.'s
research include potential treatments and/or vaccines for animal AIDS, human and
animal oncoviral leukemias, multiple sclerosis and organ transplantation. To
date, Mymetics S.A. has conducted its fundamental research in Europe.
Mymetics S.A.'s research strategy is to structure and manage a network
of public and private best-in-class research teams, each with a clearly
delineated focus. Mymetics S.A. has segmented its primary research into modules,
which are then out-sourced, under its direct supervision, to high-level,
specialized and complementary public and private research teams. Mymetics S.A.
retains all intellectual property rights in the combined research and applies
for domestic and international patents whenever justified. As agreed and
coordinated by Mymetics S.A., the research teams are authorized to co-publish
their results.
MYMETICS GMBH
Mymetics Deutschland GmbH was formed in 2002 for the purpose of
applying for German government support of research activities to be conducted in
Germany. The German government offers subsidy programs as a means of attracting
business investment into parts of eastern Germany. In particular, Mymetics
Deutschland GmbH was organized to take advantage of (i) an investment matching
program offered by the German government, whereby the German government matches
the amount of certain investments made by companies in eastern Germany and (ii)
a broader program, whereby the German government offers significant amounts of
grant money to companies in eastern Germany that satisfy certain conditions.
Mymetics Deutschland GmbH solicited interest from existing research teams in
eastern Germany, formulated four distinct research programs and applied for
German government grants. In December 2002, Mymetics Deutschland GmbH was
14
informed that two of its programs would be eligible for matching grants.
However, the broader program described above, which may have served as a source
of substantial working capital, was suspended by the German government for
biotechnology companies. Consequently, the former Board of Directors elected to
suspend its planned expansion of research activities into Germany and sold the
German company to MFC Securities (Deutschland) GmbH, an affiliate of our lender,
MFC Merchant Bank S.A., in July 2003.
RECENT INDUSTRY DEVELOPMENTS
During the first quarter of 2003, one of our major competitors received
approval from the United States Food and Drug Administration of its fusion
inhibitor candidate drug. This development, combined with advances in our
research activities, served to validate our basic technology in the area of
fusion inhibitors and, in particular, the efficacy of gp41-derived peptide
product. Given this validation, as well as (i) advances in the our research and
development efforts, (ii) poor worldwide capital market conditions and (iii)
lack of sufficient long term working capital, we have decided to re-direct our
business development strategy: rather than independently funding the completion
of research and development programs prior to the sale or licensing of our
technology to a major international pharmaceutical or biotechnology firm, we
have opted to accelerate the exploration of potential partnerships with major
international pharmaceutical and biotechnology firms. We have also accelerated
the development of our patent portfolio.
SCIENCE OVERVIEW
Virus. A virus is a non-cellular organism consisting of
deoxyribonucleic acid ("DNA") or ribonucleic acid ("RNA") and a protein coat.
During the free and infectious stage of their life cycle, viruses do not perform
the usual functions of living cells, such as respiration and growth. Rather,
when viruses enter a living plant, animal or bacterial cell, they utilize the
host cell's chemical energy and synthesizing ability to replicate. After the
replication of the viral components by the infected host cell, virus particles
are released and the host cell is often destroyed. The approximately 2,450 viral
species identified to date are divided into about 75 groups. HIV belongs to the
group of retroviruses, so called because they contain the reverse transcriptase
enzyme that copies viral RNA back into DNA (the reverse of what usually occurs:
DNA is copied into RNA). Retroviruses include three main groups: spumaviruses,
oncoviruses that are often associated with cancers and lentiviruses that cause
slow evolving pathologies, e.g. AIDS-associated lentiviruses.
HIV. The human immunodeficiency virus (HIV) is a lentivirus that
belongs to Retroviridae family that has RNA as genetic material. Once inside the
target cells (mostly T cells, monocytes/macrophages and dendritic cells), HIV
uses it's own reverse transcriptase enzyme in combination with the cell's
machinery to copy it's RNA into DNA. Afterward, the HIV DNA can be integrated
into the host chromosomes. If integration happened, it means that after each
cell division, the HIV genome is transmitted to the daughter cell with the host
chromosomes. In other words, HIV can be spread to the next cell generation
forever. HIV infection is characterized by the inability of the host immune
system to mount an efficient immune response capable of neutralizing the HIV.
Therefore, HIV is still replicating and spreading in the infected host,
affecting and killing numerous cells of the immune system, leading to the
life-threatening late stage of the disease called AIDS (Acquired Immuno
Deficiency Syndrome).
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The global HIV epidemic is composed of multiple subtypes (clades)and
inter-subtypes recombinant forms, each with a distinct geographic distribution.
Two strains of HIV capable of causing AIDS have been identified, HIV-1 and
HIV-2. The genetic material of these two strains is approximately 60% identical.
HIV-1 is world-wide spread (pandemic), while HIV-2 seems to be more limited to
certain areas of Africa (epidemic). Each strain contains a number of subtypes,
which are slight genetic variations of the virus. These variations result from
the high mutation rate of HIV's genetic material. HIV uses these mutations as a
mechanism to evade the immune system. Indeed, mutations in HIV genome may
decrease or abolish the recognition of viral proteins by the host antibodies or
cellular immune response toward HIV. Most variations occur in the gene encoding
the GP120 protein, and these mutations can alter the protein's structure and
consequently, the recognition by the host immune system.
AIDS. AIDS is a fatal epidemic disease caused by an infection by HIV
(HIV-1 or HIV-2). In most cases, HIV invades the host and slowly attacks and
destroys the immune system, the body's defense against disease, leaving the
infected individual vulnerable to malignancies and infections that eventually
cause death. The immune system's response (antibodies and cellular immune
response) is usually sufficient to temporarily arrest progress of the infection
and reduce levels of the virus in the blood. Virus replication continues,
however, and gradually destroys the immune system by infecting and destroying
critical white blood cells known as CD4 cells. The main cellular target of HIV
is a special subtype of white blood cells critical to the immune system, known
as helper T lymphocytes, or T4 helper cells. These cells play a central role in
the orchestration of the immune responses by stimulating or activating virtually
all of the other cells involved in immune protection. These cells include B
lymphocytes that produce antibodies needed to fight infection; cytotoxic T
lymphocytes, which destroy cells infected with virus; and macrophages and other
effector cells, which attack invading pathogens. Furthermore, helper T cells are
the main producer of a small molecule named IL-2 cytokine. This IL-2 acts as a
key messenger between helper T cells and other effector cells of the immune
system. Once HIV has entered into the helper T cell, it can impair the
functioning of or destroy the cell. Therefore, it will contribute to lower this
IL-2 messenger concentration present in the HIV-infected host and consequently,
leading to a major defect in cell communication.
A hallmark of the onset of AIDS is a drastic reduction in the number of helper T
cells in the body of HIV-infected subjects. HIV can also infect other cells,
including certain monocytes and macrophages, dendritic cells as well as brain
cells. All these cells express a common protein at their cell surface called
CD4. This CD4 protein serves usually as primary receptor for the HIV surface
envelope glycoprotein called gp160, which explain why HIV preferred target cells
expressing the CD4 molecule. Destruction of CD4+ lymphocytes is the major cause
of the immunodeficiency observed in AIDS, and decreasing CD4+ lymphocyte levels
appear to be the best indicator of morbidity in these patients. As the infection
progresses, the immune system's control of HIV levels weakens, the number of
viruses in the blood rises and the level of critical T cells declines to a
fraction of their normal level.
Viral Envelope of HIV. The viral envelope of HIV is covered with
mushroom-shaped spikes called gp160 that enable the virus to attach itself to
the target cell. The cap of each "mushroom" is comprised of gp120 molecules and
its stem is comprised of gp41 molecules that is anchored into the viral
envelope(gp120+gp41=gp160). Gp120 is a glycoprotein that protrudes from the
surface of HIV and binds to the CD4 receptor of the CD4+ T-cells. In a two-step
process that allows HIV to breach the membrane of T-cells, the gp120-CD4 complex
16
refolds to reveal a second structure that binds to CCR5 or CXCR4, one of several
chemokine co-receptors used by the virus to gain entry into T cells. Gp41 is a
glycoprotein embedded in the outer envelope of HIV and plays a key role in HIV's
infection of cells by carrying out the fusion of the viral and cell membranes.
Immune System. The immune system functions to protect the body against infection
and foreign substances, including viruses and bacteria. This defensive function
is performed by certain body's white blood cells (T cells that belong to
leukocytes) capable of recognizing foreign substances presented by a number of
accessory cells like dentritic cells. When an immunocompetent T cell recognizes
foreign material or a biological invader presented by dendritic cells or
macrophages, it normally induces an immune response. For example, B lymphocytes
may be stimulated to produce and secrete antibodies capable of binding and
neutralizing the pathogene, while cytotoxic T lymphocytes might be activated to
destroy cells infected with viruses. This recognition function relies on the
immune system's ability to recognize specific foreign molecular configurations,
generically referred to as antigens. After specific recognition by T4 helper T
cells, the most central cell of the immune system, interleukine-2 ("IL-2") is
produced by these same T4 helper T cells. IL-2 is a central interleukine that
can activate most of the cells of the immune system, including B cells, NK
cells, CD4+ helper and cytotoxic T lymphocytes.
BUSINESS STRATEGY
Our current objective is to develop a platform of both therapeutic
compounds and vaccines. We have made a series of discoveries about how the
body's immune system responds to retroviruses, specifically HIV. The foundation
of our platform technology and product pipeline is our discovery of a subtle
mimicry between the virus and the host cells. By understanding the precise
dynamics of the virus's GP41 and the host-cell's IL-2, we strongly believe we
have the potential to design and develop specific therapeutic molecules and
antibodies to disrupt or even prevent the disease. In addition to targeting HIV
and AIDS, we plan to apply these findings to the potential treatment or even
prevention of a range of additional diseases, including certain echoviruses
causing leukemia.
Some biotechnology companies are focusing on slowing or impeding the
progress of the virus once it has infected the body's host cells. Other
biotechnology firms are attempting to develop therapies that prevent the virus
from fusing with host cells. If the virus cannot fuse, it cannot reproduce, and
the body's immune system then succeeds in arresting the invasion. Our approach
is also based on the concept of preventing viral fusion. Our scientific strategy
is unique in that its design is based on a series of discoveries involving
mimicry, more specifically between the HIV envelope glycoprotein GP41 and the
host's IL-2, one of the most central cytokine of the immune system. By
exploiting this mimicry, HIV has found a new mechanism to evade the immune
response. Indeed, the body's immune system responds to HIV invasion, but fails
to differentiate properly between the viral GP41 and the host's IL-2 cytokine.
As a result, we believe that the immune system attacks both of them with equal
vigor. The unfortunate consequence is that the body, in turning on itself,
undercuts its own defenses overtime. By better understanding these precise
dynamics, we believe we will be able to design vaccines and to develop specific
therapeutic molecules to prevent HIV from entering the host cells and the body's
immune system to recognize HIV. Our current scientific strategy is based on the
gp41-IL-2 mimicry to create therapeutic peptides to prevent HIV fusion and
vaccines capable of inducing neutralizing antibodies that recognize strictly the
GP41 as a separate and distinct entity from IL-2. If this can be accomplished,
17
the body's immune system should be able to identify and attack the virus instead
of inducing an autoimmune disease directed toward the IL-2 and affecting the
quality of the immune system.
The Discovered Molecular Mimicry Between Trimeric GP41 AND IL-2. We
have discovered a molecular mimicry between the trimeric ectodomain of the
transmembrane protein of immunosuppressive lentiviruses (HIV-SIV-FIV) and the
IL-2 of the infected host species. Our initial results were published with the
French Academy of Sciences in November 2000.
Autoimmune Consequences for HIV Infected Subjects. We have found some
of the expected autoimmune consequences of the described virus-host molecular
mimicry in HIV infected subjects. As expected, HIV positive sera recognize human
IL-2. The tests included 2,352 HIV+ and HIV-sera, and the results demonstrated
that 100% of HIV+ patients (stages II, III and IV) were positive for the
presence of anti IL-2 antibodies. Later, antibody cross-reactivities were found
between the structurally and physically antigenic analogous sites of GP41
(HIV-1) and human IL-2. The first results were presented in the Journal of
Autoimmunity in 2001 and were also presented in a poster session at the Cold
Springs Harbor, New York meeting on infectious disease in December 2001.
VACCINAL USE OF THE MIMICRY DISCOVERY
Our current research modules focus on the following three fields:
- FUNDAMENTAL RESEARCH. We believe that our insight
into the GP41/IL-2 mimicry can help to explain, in
large part, the main AIDS-associated disorders: drop
of peripheral IL-2, decrease of non-infected T helper
lymphocytes, apoptosis of non-infected cells,
lymphoproliferation disorders and (alpha)2
microglobulin increase and hypergammaglobulinemia.
Some of the possible effects of the tridimensional
GP41 (HIV-1)/human IL-2 molecular mimicry on the
AIDS-associated disorders are being evaluated by our
research teams. These teams are also studying
molecular mimicry in FIV, between the viral envelope
protein gp36 and feline IL-2.
- THERAPEUTIC MOLECULES. Based on insights into
mimicry, we have developed a series of synthetic
peptides that might inhibit the fusion between HIV or
FIV and its target cell in an infected host. For the
in vitro work, these synthetic peptides have been
effective for blocking both HIV and FIV infections,
while in vivo experiments with FIV peptides is under
investigation to validate our HIV model. These
therapeutic molecules would prevent the virus entry
into the target cell, inhibiting its attempts to
reproduce. Having demonstrated that the transmission
of HIV depends on the viral load, and that no
transmission has been observed below 1500 viral
copies/ml., treatment with therapeutic agents may
provide a strategy to control AIDS epidemicity. This
application would complement available antiretroviral
drugs, or may even provide a substitute for the
available antiretroviral drugs. In a series of
independent in vitro experiments, our rationally
designed peptide compounds were proven to effectively
block viral fusion. These compounds also showed a
potency that is equivalent to the gp41 compound
recently approved by the United States Food and Drug
18
Administration (FDA). The relative potency of our
compounds were presented in a poster presentation
given at Interscience Conference on Antimicrobal
Agents and Chemotherapy in San Diego CA in September
2002. An additional poster presentation at the
International Feline Retrovirus Research Symposium
conference in December 2002 showed the potency of a
series of our FIV gp36-derived peptides, and in
particular highlighted the surprising potency of a
short compound (consisting of 8 amino acids only).
Results were also recently published in the Journal
of Virology (March 2003) in an article entitled
"Antiviral Activity and Conformational Features of an
Octapeptide Derived from the membrane-Proximal
Ectodomain of the Feline Immunodeficiency Virus
Transmembrane Glycoprotein." An additional poster
presentation at the annual International Conference
on Retroviruses and Opportunistic Infection in Boston
in February 2003 communicated the results of a series
of benchmarking in vitro assays, highlighting the
potency of our HIV gp41 "IL-2 like"-derived peptide
compounds across a wide array of clades or strains of
the virus. These data appear to validate our strategy
of creating compounds from well-conserved,
IL-2-homologous regions, for the greatest possible
application for patients worldwide. Based on the
success of in vitro compounds, we launched our first
in vivo tests in the feline model, collaborating with
well-known research partners at the Retroviral Center
at the University of Pisa, Italy. These tests are
expected to provide valuable insight into the actual
efficacy of the potential peptides, in particular the
shorter peptides, which would offer a number of
practical advantages in terms of commercialization,
including less complexity, lower cost to manufacture,
less immunogenicity, and potential greater
bio-availability.
- PREVENTIVE VACCINES. We believe that our discovery of
the host-virus IL-2 mimicry opens the door to novel
therapeutic and preventive vaccine strategies for
both humans and animals. We believe that properly
mutated trimeric gp41 and gp36 represent excellent
candidate vaccines because they are devoid of the
"IL-2" like structure and its harmful associated side
effects. Furthermore, these engineered gp41 and gp36
have conserved their antigenic properties and
correspond to the most conserved region of the viral
envelope glycoprotein, which otherwise exhibits
considerable genetic diversity. Our specific
preventive vaccine would be "universal" in that it
would train the body's immune system to recognize and
defeat a broad array of HIV strains, while preventing
the induction of the autoimmune reaction toward IL-2.
Our recent advances in protein engineering and
production allowed us to obtain very good soluble and
stable trimeric gp41 and gp36, which has accelerated
the preliminary vaccine program. A first round of
rabbit immunizations with various protocols testing
different adjuvants, protein doses and route of
administration is already under investigation. A
second round of immunizations is planned for June
2004. Results are expected in November 2004.
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We currently have compound prototypes potentially capable of
commercialization, including:
- Therapeutic molecules (pharmacological agents) - administered
to infected subjects to prevent cell infection by HIV and FIV.
- Preventive vaccines - administered to healthy subjects to
prevent infection by HIV or FIV.
The Company is exploring both HIV and FIV in parallel, and gaining insight into
product design through the synergies between these two programs.
KEY STAFF
Our Board of Directors and management team have changed over the past
few months. As disclosed in our form 10-Q for the quarter ended September 30,
2003, Michael K. Allio, John M. Musacchio and Rober Demers have been replaced as
Directors by Christian J.-F. Rochet, Ernst Luebke and Robert Zimmer. As regards
officers, Michael K. Allio has been replaced as Interim Chief Executive Officer
by Christian J.-F. Rochet, President and Chief Executive Officer, while John M.
Musacchio has been replaced as Chief Financial Officer and Treasurer by Ernst
Luebke.
Research and Development activities have been spearheaded since
November 3, 2003 by our new Chief Scientific Officer, Dr. Sylvain Fleury, Ph.D.,
in replacement of Dr. Pierre-Francois Serres, who was appointed on that same day
Head of Exploratory Research. Dr. Fleury is an experienced research and
development scientist in the fields of biology, virology, immunology and AIDS.
RESEARCH AND DEVELOPMENT EXPENSES
For the year ended December 31, 2003, we focused on research and
development and, as a result, did not generate any revenues or engage in any
marketing activities. For the years ended December 31, 2003, December 31, 2002
and December 31, 2001, we spent E 1,263,000, E 1,878,000 and E 482,000
respectively, on research and development activities.
INTELLECTUAL PROPERTY
We are the exclusive owner of intellectual property relating to our
core business which is focused on the development of novel HIV and FIV
therapeutics and vaccines. Particularly, we own two issued French patents FR99
06528 and FR01 15424 and one US issued patent US 6,455,265 and its corresponding
national filings and divisional filings in various countries including US,
Japan, Canada, EP and Israel. We also filed two Patent Cooperation Treaty, or
PCT, applications, WO 03/048187 and WO 03/104262, with national phases in US and
EP. We have additionally filed four United States provisional applications
related to the field.
We rely primarily on a combination of patent, copyright, trademark and
trade secret laws, as well as contractual restrictions, to protect our
intellectual property. These legal protections afford limited protection. We
generally require employees, strategic research partners and consultants with
access to our intellectual property to execute confidentiality agreements.
Despite our efforts to protect our intellectual property, unauthorized parties
20
may attempt to copy the research and research methods that form the basis of our
intellectual property. The laws of many countries do not afford the same level
of protection as those provided by United States intellectual property laws.
Litigation may be necessary to protect and enforce our rights in our
intellectual property.
COMPETITION
We have not yet developed an actual product or generated any revenues.
Our future competitive position depends on our ability to successfully develop
our intellectual property, and to either use such intellectual property to
produce one or more products capable of generating significant revenues or to
license or sell such intellectual property to third parties on financially
favorable terms. Although we believe that the results of our research and
development activities have been favorable, there are numerous entities and
individuals conducting research and development activities in the area of human
and veterinary biology and medicine all of which could be considered
competitors. While many of these individuals and entities have greater
financial, manufacturing, technical, human resource, marketing and distribution
capabilities, and greater experience in conducting pre-clinical and clinical
trials and in obtaining regulatory and FDA approvals, we believe that our
technologies nonetheless provide us with a competitive advantage.
Further, we may face significant competition in the design and
development of some of our therapeutic compounds and preventive vaccines.
Therapeutic Molecules (pharmacological agents). The biopharmaceutical industry
is intensely competitive, especially in the field of HIV. If we are successful
in developing and proving our therapeutic agents, we will compete with existing
developed and approved therapies. The FDA has approved 16 antiviral drugs to
treat HIV and AIDS, which fall into two categories depending on whether they
target one or two viral enzymes: either HIV protease or reverse transcriptase
("RT"). RT drugs aim to block reverse transcriptases and prevent transcription
of the virus' generic material from RNA to DNA. There are two classes of RT
drugs: nucleoside analogues inhibitors and non-nucleoside inhibitors. The
approved nucleoside analogues inhibitors include drugs such as Retrovir
(ziduvodine; AZT), Videx (didanosine; ddl), Hivid (zalcitabine; ddc), Zerit
(stavudine; d4T), Epivir (larnivudine; 3TC), Combivir (ziduvodine + lamivudine),
Ziagen (abacavir; ABC). These drugs are manufactured by companies such as
GlaxoSmithKline Plc, Bristol-Myers Squibb Company, Roche Holding AG and BioChem
Pharma Inc. The approved non-nucleoside inhibitors include drugs such as
Viramuno (nevlrapine), Rescriptor (delavirdine), Sustiva (efavirenz; EFV) which
are produced by Boehringer Ingelhelm Gmbh, Pharmacia & Upjohn Inc. and E. I. Du
Pont de Nemours and Company. The objective of approved protease inhibitor drugs
is to prevent the assembly of new virus particles. The approved protease
inhibitors include drugs such as Invirase (saquinavir), Fortovase (saquinavir),
Norvir (ritonavir), Crixivan (indinavir), Viracept (nellinavir) and Agenerase
(amprenavir), which are manufactured by companies including Roche Holding AG,
Abbot Laboratories, Merck & Co. Inc., Agouron Pharmaceuticals Inc., Vertex
Pharmaceuticals Incorporated and Glaxo Wellcome Plc.
Both HIV protease and RT drugs have demonstrated their efficacy in
terms of HIV blood concentration and HIV-positive period and are used to slow
the progression of the disease. Furthermore, efficacy has been higher with drug
combinations. None of these drugs are, however, a cure, and mutations of HIV's
envelope produce viral strains resistant to both classes of drugs. These drugs
also produce toxic side effects on the peripheral nervous system and
gastrointestinal tract. Non-compliance on combination therapies and
21
interruptions in dosing could have an effect on, and trigger, accelerated viral
replication.
If successful in developing and validating our therapeutic molecules,
we believe that there are significant existing and future markets for the
treatment of HIV and AIDS. There can be no assurance that currently approved
drugs or products developed in the future for the treatment of HIV/AIDS by our
competitors (which may include Roche Holding AG, Abbot Laboratories, Merck & Co.
Inc., Agouron Pharmaceuticals Inc., Vertex Pharmaceuticals Incorporated, Glaxo
Wellcome Plc, Bristol-Myers Squibb Company, Trimeris, Inc., Progenics, Inc., and
BioChem Pharma Inc.) will not be effectively marketed and sold. We believe,
however, that our unique approach and fundamental understanding of molecular
mimicry will provide an advantage over existing and future competitors.
The progress of Trimeris Inc. in securing FDA approval for its fusion
inhibitor product, "Fuzeon", a gp41-derived peptide comprised of 36 amino acids,
represents excellent proof-of-concept for us by demonstrating, through human
trials, that such a compound is safe and effective in lowering viral load.
Industry experts estimate that the annual revenue generated from this drug may
reach U.S. $500,000,000 - U.S. $750,000,000, which confirms the significant
demand for fusion inhibitor drugs. The media has also, however, published that
Trimeris and its partner Roche face significant challenges and limitations,
including prohibitive cost of goods, a complex manufacturing process involving
106 separate steps in chemical synthesis, an elevated retail price (recent
estimates exceed $20,000 per patient per annum, more than double the cost of
current therapies), significant supply shortages and difficult delivery of the
drug (requiring subcutaneous injection twice/day of 90 mg. of the drug). These
challenges suggest that a drug that can be made less expensively, and delivered
more easily, will have significant competitive advantages.
Preventive Vaccines. We are conducting research aimed at developing a
preventive vaccine for the HIV-1 virus, which vaccine will provide protection
against a broad array of viral strains.
In the field of HIV vaccines, the recent failure of the VAXGEN product
in Phase III clinical trials underscores the need for an effective solution to
the global challenge posed by HIV. As this particular candidate was based on
technology unrelated to our technology, we do not feel that the cessation of
clinical trials with respect to VAXGEN negatively impacts our prospects for
developing a viable preventive vaccine.
In the field of FIV vaccines, Ft. Dodge, a division of Wyeth
Pharmaceuticals, launched the industry's first FIV preventive vaccine in late
2002. We consider this development as further validation of the demand and
viability of this product category. Press releases issued by Ft. Dodge cite a
significant potential market for this drug. Like the Trimeris product, the Ft.
Dodge feline vaccine appears to suffer from a range of drawbacks, so we consider
the competitive threat of Ft. Dodge's FIV preventive vaccine to be moderate.
The worldwide vaccine market is dominated by four large multinational
companies: Merck & Co., SmithKline Beecham Plc, Wyeth Lederle Vaccines &
Pediatrics (a division of American Home Products Corporation), and Aventis
Pasteur S.A. Companies such as The Immune Response Corporation, VaxGen Inc.,
Trimeris, Inc., and Progenics Pharmaceuticals, Inc. are also developing
preventive vaccines.
22
We believe that while these companies have greater financial,
manufacturing, technical, human resource, marketing and distribution
capabilities, and greater experience in conducting pre-clinical and clinical
trials and in obtaining regulatory and FDA approvals, our technologies,
nonetheless, provide us with a competitive advantage. Our innovative approach to
vaccine development is based on the observed immunological cross-reactivity (or
mimicry) between the well preserved, antigenic and immunodominant domain of GP41
and IL-2, and relies on the observation of expected autoimmune consequences in
HIV infected subjects.
We believe that our approach is most promising in comparison with the
approaches that have been pursued so far, including:
- Sub-unit vaccine: a technology addressing a piece of the outer
surface of HIV, such as GP160 or GP120, produced by genetic
engineering.
- Live vector vaccine: a live bacterium or virus such as
vaccinia (used in the smallpox vaccine) modified so it cannot
cause disease, but can transport into the body one or more
genes that makes one or more HIV proteins.
- Vaccine combination: an example includes a "prime-boost
strategy", use of a recombinant vector vaccine to induce
cellular immune responses followed by booster shots of a
sub-unit vaccine to stimulate antibody production.
- Peptide vaccine: chemically synthesized pieces of HIV proteins
(peptides) known to stimulate HIV-specific immunity.
- Virus-like particle vaccine (pseudovirion vaccine): a
non-infectious HIV look-alike that has one or more, but not
all, HIV proteins.
- DNA vaccine: direct injection of genes coding for HIV
proteins.
- Whole-killed virus vaccine: HIV that has been inactivated by
chemicals, irradiation or other means rendering it
non-infectious.
- Live-attenuated virus vaccine: live HIV from which one or more
apparent disease-promoting genes of the virus have been
deleted.
GOVERNMENTAL REGULATION
We contract with third parties to perform research projects related to
our business. These third parties are located in various countries and are
subject to the applicable laws and regulations of their respective countries.
Accordingly, regulation by government authorities in the United States and
foreign countries is a significant factor in the development, manufacture and
marketing of our proposed products and in our ongoing research and product
development activities. Any products that we develop will require regulatory
approval by government agencies prior to commercialization. In particular, human
therapeutic products are subject to rigorous pre-clinical studies and clinical
23
trials and other approval procedures of the FDA and similar regulatory
authorities in foreign countries. In addition, various federal and state
statutes and regulations will also govern or influence testing, manufacturing,
safety, labeling, storage and record keeping related to such products and their
marketing. The process of obtaining these approvals and the subsequent
substantial compliance with appropriate federal and state statutes and
regulations require the expenditure of substantial time and financial resources.
The success of our business will depend on our ability to obtain and maintain
the necessary regulatory approvals.
Pre-clinical studies generally are conducted on laboratory animals to
evaluate the potential safety and the efficacy of a product. In the United
States, we must submit the results of pre-clinical studies to the FDA as a part
of an investigational new drug application, or IND, which application must
become effective before we can begin clinical trials in the United States. An
IND becomes effective 30 days after receipt by the FDA unless the FDA objects to
it. Typically, clinical evaluation involves a time-consuming and costly
three-phase process.
Phase I. Refers typically to closely monitored clinical trials and
includes the initial introduction of an investigational new drug into human
patients or normal volunteer subjects. Phase I clinical trials are designed to
determine the metabolism and pharmacologic actions of a drug in humans, the side
effects associated with increasing drug doses and, if possible, to gain early
evidence on effectiveness. Phase I trials also include the study of
structure-activity relationships and mechanism of action in humans, as well as
studies in which investigational drugs are used as research tools to explore
biological phenomena or disease processes. During Phase I clinical trials,
sufficient information about a drug's pharmacokinetics and pharmacological
effects should be obtained to permit the design of well-controlled,
scientifically valid, Phase II studies. The total number of subjects and
patients included in Phase I clinical trials varies, but is generally in the
range of 20 to 80 people.
Phase II. Refers to controlled clinical trials conducted to evaluate
the effectiveness of a drug for a particular indication or indications in
patients with a disease or condition under study and to determine the common
short-term side effects and risks associated with the drug. These clinical
trials are typically well-controlled, closely monitored and conducted in a
relatively small number of patients, usually involving no more than several
hundred subjects.
Phase III. Refers to expanded controlled clinical trials, which many
times are designated as "pivotal trials" designed to reach end points that the
FDA has agreed in advance, if met, would allow approval for marketing. These
clinical trials are performed after preliminary evidence suggesting
effectiveness of a drug has been obtained. They are intended to gather
additional information about the effectiveness and safety that is needed to
evaluate the overall benefit-risk relationship of the drug and to provide an
adequate basis for physician labeling. Phase III trials can include from several
hundred to several thousand subjects depending on the specific indication being
treated.
The FDA closely monitors the progress of each of the three phases of
clinical trials that are conducted in the United States and may, at its
discretion, reevaluate, alter, suspend or terminate the testing based upon the
data accumulated to that point and the FDA's assessment of the risk/benefit
ratio to the patient. We have not yet conducted any clinical trials and are
currently focused on research.
24
Once Phase III trials are completed, drug developers submit the results
of pre-clinical studies and clinical trials to the FDA, in the form of an new
drug application, or NDA, for approval to commence commercial sales. In
response, the FDA may grant marketing approval, request additional information
or deny the application if the FDA determines that the application does not meet
the predetermined study end points and other regulatory approval criteria.
Furthermore, the FDA may prevent a drug developer from marketing a product under
a label for its desired indications, which may impair commercialization of the
product.
If the FDA approves the new drug application, the drug becomes
available for physicians to prescribe in the United States. After approval, the
drug developer must submit periodic reports to the FDA, including descriptions
of any adverse reactions reported. The FDA may request additional studies, known
as Phase IV trials, to evaluate long-term effects. We will be required to comply
with similar regulatory procedures in countries other than the United States.
In addition to studies requested by the FDA after approval, a drug
developer may conduct other trials and studies to explore use of the approved
compound for treatment of new indications. The purpose of these trials and
studies and related publications is to broaden the application and use of the
drug and its acceptance in the medical community.
We will have to complete an approval process, similar to the one
required in the United States, in virtually every foreign target market in order
to commercialize our product candidates in those countries. The approval
procedure and the time required for approval vary from country to country and
may involve additional testing. Approvals (both foreign and in the United
States) may not be granted on a timely basis, or at all. In addition, regulatory
approval of prices is required in most countries other than the United States.
We face the risk that the resulting prices would be insufficient to generate an
acceptable return to us or our collaborators. A failure to obtain or maintain
the necessary regulatory approvals will have an materially adverse effect on our
business.
EMPLOYEES
As of December 31, 2003, neither Mymetics S.A. nor Mymetics Corporation
had any full-time employees. Indeed, all formerly reported employment agreements
were either i) of a predetermined duration and not renewed, ii) resigned by
their respective holders or iii) terminated by the former management, as
disclosed in our form 10-Q for the quarter ended September 30, 2003.
WWW.MYMETICS.COM
News and information about Mymetics Corporation and its subsidiaries
were available on our web site, www.mymetics.com, until August 2003, after which
the site was temporarily shut off, as some of its contents had to be
substantially updated. We intend to provide again, free of charge and as soon as
practically feasible, news and other information about the Corporation,
including access to our annual reports on Form 10-K, our quarterly reports on
Form 10-Q, our current reports on Form 8-K and all amendments to those reports
as soon as reasonably practicable after we file or furnish them electronically
with the United States Securities and Exchange Commission.
25
ITEM 2. PROPERTIES
Until February 2004, Mymetics S.A. leased approximately 170 square
meters of office space in Saint-Genis Laval (Near Lyon, France), in which the
Corporation's European administrative activities had been conducted until July
31, 2003. The all inclusive rent for such facilities was approximately E 1,641
per month, with a lease expiring on January 31, 2006. From March 2004, this
space has been reduced to approximately 45 square meters at an approximate all
inclusive rent of E 500 per month. This office space is now used exclusively by
Dr. P.-F. Serres, our Head of Exploratory Research. This amended lease still
expires on January 31, 2006. Up until January 31, 2003, we leased approximately
250 square feet of space in Annapolis, Maryland. The rent under our Annapolis
lease was $1,000 per month prior to its termination. From February 2003 until
July 2003, the former management of the Company used a small amount of space at
the office of our former Chairman, Michael K. Allio, as its principal executive
office. This space was being provided by Mr. Allio at no charge, keeping however
in mind that between January 1, 2003 and July 31, 2003, charged Mymetics USD
217,750 for services rendered, USD 8,500 as director's fee and USD 32,528.69 for
travel and other expenses, i.e. a total of USD 250,278.69 or USD 35,754.10 per
month. Following the July 31, 2003 changes in the Company's management, our
executive office was transferred to Nyon (Near Geneva, Switzerland), initially
at our CEO and CFO's respective offices. On February 1, 2004, our European
Executive Office was moved to a new leased office of approximately 60 square
meter in Nyon, at an approximate all inclusive cost of E 1,000 per month. All of
the furniture and office equipment being provided free of charge by our CEO and
CFO. As regards our research activities. these are conducted at the properties
of third parties with whom the Corporation contracts to perform research
projects.
ITEM 3. LEGAL PROCEEDINGS
On December 19, 2000, the Swiss Law firm which had been retained by the
Directors of our French subsidiary Mymetics S.A. (formerly Hippocampe S.A.) to
advise them during their loan and reverse merger negotiations with MFC Merchant
Bank S.A. filed a claim in the Court of Geneva (Switzerland) against Mymetics
S.A. following the latter's decision to refuse to pay more than 13.3% of the
firm's invoice for legal services. Following initial hearings, the Court ordered
an amount of CHF 89,188, accruing interest at 5% p.a., to be put in receivership
by MFC Merchant Bank S.A. on that day. The sum claimed in principal, interests
and expenses amounts to approx. CHF 120'000 (E80,000). On December 18, 2003, our
French subsidiary Mymetics S.A. was formally notified of the December 2nd, 2003
judgement rendered by the court of Geneva (Switzerland) in this matter, by which
Mymetics S.A. was condemned to pay the full amount claimed by the plaintiff (CHF
89,188), plus interest at 5% p.a. from November 24, 2000 and CHF 10,000 as a
participation to the plaintiff's legal costs.
Although the full amount had been provided for in our financial
statements, we do not have sufficient funds to meet our obligations should the
plaintiff demand immediate payment of the amount we now owe him, unless we are
able to raise a sufficient amount of additional capital. Our inability to meet
such obligations would have a material adverse effect on our liquidity and could
threaten our business.
On April 21, 2003 our former Vice President of Development, Joseph D.
Mosca,filed a claim against us in the Circuit Court of Maryland for Howard
County. Mr. Mosca claims that we breached the employment agreement between him
and us and that we violated the Maryland wage payment and collection law by not
paying him all the amounts he is owed. He was demanding $375,000 in damages as a
result of such claims. On May 22, 2003, this case was moved to the U.S. District
Court in Maryland. Following settlement discussions, we reached an agreement
with Mr. Mosca in October 2003 whereby Mymetics will pay Mr. Joseph D. Mosca, no
later than November 1, 2004, a final settlement of $10,000, in exchange of which
Mr. Mosca is waiving all further charges and claims against the Company.
This amount had previously been provided for in our financial
statements.
26
In late June 2003, Dr. Pierre-Francois Serres, our former chief
scientific officer and a current member of our board, filed a claim against our
French subsidiary, Mymetics S.A., claiming he is entitled to benefits arising
out of his termination from employment. In a judgment passed on October 14,
2003, the court ruled in favor of Dr. Pierre-Francois Serres and consequently,
allowed him a total compensatory amount of E46,735. In a further agreement with
the current Board of Directors, Dr. Serres pledged not to claim payment of this
amount following the Board's decision to reinstate him as Chief Scientific
Officer of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
27
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Market Information. The Corporation's common stock is quoted on the
OTC Bulletin Board under the trading symbol "MYMX". The Corporation's trading
symbol changed from ICHR to MYMX in July 2001, pursuant to a corporate name
change from ICHOR Corporation to Mymetics Corporation. The following table sets
forth the quarterly high and low sale price per share of the Corporation's
common stock for the periods indicated. The prices represent inter-dealer
quotations, which do not include retail mark-up, mark-down or commission and may
not necessarily represent actual transactions.
FISCAL QUARTER ENDED HIGH LOW
2002
March 31......................................... $ 3.85 $ 2.15
June 30.......................................... 3.70 2.70
September 30..................................... 3.45 0.06
December 31...................................... 0.36 0.09
2003
March 31......................................... $ 0.22 $ 0.09
June 30.......................................... 0.14 0.09
September 30..................................... 0.12 0.07
December 31...................................... 0.14 0.04
(b) Stockholders. At March 18, 2004, the Corporation had approximately
640 holders of record of its common stock, some of which are securities clearing
agencies and intermediaries.
(c) Dividends. The Corporation has not paid any dividends on its common
stock and does not anticipate that it will pay any dividends in the foreseeable
future.
(d) Securities Authorized for Issuance Under Equity Compensation Plans.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about the common stock that
may be issued upon the exercise of options, warrants and rights under all of our
existing equity compensation plans as of December 31, 2003.
- ----------------------------------------------------------------------------------------------------------------------
Number of Securities
remaining available for
Number of Securities to be Weighted Average Exercise issuance under equity
issued upon exercise of Price of Outstanding compensation plans
Outstanding Options, Options, Warrants and (excluding securities
Warrants and Rights Rights reflected in column (a))
Plan Category (a) (b) (c)
- ----------------------------------------------------------------------------------------------------------------------
Equity Compensation Plans
Approved by Security
Holders (1) 606,250 (2) U.S. $0.92 4,557,500
- ----------------------------------------------------------------------------------------------------------------------
Equity Compensation Plans not 1,500,000 (4) U.S. $0.10
Approved by Security Holders 80,166 (3) U.S. $1.725 N/A
- ----------------------------------------------------------------------------------------------------------------------
Total 2,186,416 U.S. $0.39 4,557,500
- ----------------------------------------------------------------------------------------------------------------------
28
(1) Equity compensation plans approved by our security holders include (i) our
1994 Amended and Restated Stock Option Plan, (ii) our 1995 Qualified Incentive
Stock Option Plan and (iii) our 2001 Stock Option Plan. Our 1994 Amended and
Restated Stock Option Plan and our 1995 Qualified Incentive Stock Option Plan
were both terminated in March 2001, but some options granted under these plans
prior to such termination remain outstanding and are included in this table.
(2) Includes (i) 442,500 shares of common stock underlying options granted under
our 2001 Stock Option Plan, (ii) 100,000 shares of common stock underlying
options granted under our 1995 Qualified Incentive Stock Option Plan and (iii)
63,750 shares of common stock underlying options granted under our 1994 Amended
and Restated Stock Option Plan.
(3) From time to time we have granted our lender, MFC Merchant Bank S.A.,
warrants to purchase shares of our common stock. These warrants are granted in
connection with certain credit facilities provided to us by MFC Merchant Bank
S.A., and placement services provided by MFC Merchant Bank S.A. in connection
with a private placement of our securities in June 2001. These warrants were not
granted pursuant to any formal equity compensation plan approved by our board of
directors, but rather, each grant was an individual equity compensation
arrangement, authorized by our board of directors and granted as compensation
for services provided. All of the outstanding warrants were granted pursuant to
similar forms of warrants, and each has an exercise price of U.S. $1.725.
(4) We do not have any formal equity compensation plan that has not been
authorized by our stockholders. These grants are made on an individual basis and
are approved by our board of directors. Accordingly, there are no shares of
common stock reserved for issuance under these arrangements.
ISSUANCES OF UNREGISTERED SECURITIES
Set forth below is information regarding our sales of unregistered
securities during the period commencing on January 1, 2003 and ending on January
31, 2004. These issuances were made in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as
transactions by an issuer not involving any public offering.
The present Board of directors believes that until such time as the
Company has fully recovered from its present difficult situation, it should be
managed exclusively by major shareholders to ensure that stakeholders' long term
interests would prevail over short term mercenary considerations.
The present Board of directors further believes that the Company needs
to have rapid access to the inner circle of world opinion leaders in matters of
HIV-AIDS if it wants to have its ideas, work and results peer recognized and
accepted to qualify for grants and other donations. With this in mind, we have
been able to attract world class personalities such as Mr. Jacques-Francois
Martin, former CEO of Laboratoires Merieux, member of the Board of the IAVI and
CEO of the vaccine Fund chaired by Mr. Nelson Mandela, and Professor Marc
Girard, DVM, D. Sc., former Head of the Laboratory of Molecular Virology at the
Pasteur Institute in Paris (France), former Director, European Research Center
29
for Virology and Immunology (CERVI) in Lyon (France), former Head of the HIV
Task Force at the French National Agency for AIDS Research (ANRS), Paris, former
Director General of the Merieux Foundation in Lyon (France), former Chairman of
the European Consortium for an HIV Vaccine (EuroVac), Brussels. But one doesn't
attract bees with vinegar, thus:
- - In September 2003, we issued Dr. Robert Zimmer, our only director which
was not also a major shareholder of the Company, 400,000 common shares
as a one-off remuneration as outside director and in recognition of the
fact that he had accepted to serve the Company despite the absence of
D&O insurance coverage.
- - In November 2003, we issued Dr. Sylvain Fleury, Ph. D., 500,000 common
shares of Mymetics Corporation in recognition of his support of the
Company since 1997 (he was instrumental in having Aralis Participations
S.A., still a major shareholder of Mymetics Corporation, support
Hippocampe S.A. - now Mymetics S.A. - between 1997 and 2000) and in
compensation for his modest remuneration as CSO of Mymetics.
- - In November 2003, we issued Mr. Jacques-Francois Martin 1,000,000
common shares of Mymetics Corporation in recognition of his support of
the Company and more specifically, for his early introduction to the
inner circle of world class experts and opinion makers in matter of
HIV-AIDS.
- - In November 2003, we agreed to issue Mr. Jacques-Francois Martin an
additional 2,000,000 common shares of Mymetics Corporation, contingent
upon his accepting to be elected Chairman of Mymetics Corporation.
- - In December 2003, we issued two investors 1,500,000 common shares of
Mymetics Corporation for E124,800, or approximately $.10 per share.
- - In December 2003, we issued the same two investors warrants to acquire,
before July 31, 2004, an additional 1,500,000 common shares of Mymetics
Corporation at $.10 per share.
- - In January 2004, we issued two investors 2,000,000 common shares of
Mymetics Corporation for E166,400, or approximately $.10 per share.
- - In January 2004, we issued the same two investors warrants to acquire,
before July 31, 2004, an additional 2,000,000 common shares of Mymetics
Corporation at $.10 per share.
- - In January 2004, we issued Professor Marc Girard, DVM, D. Sc., 500,000
common shares of Mymetics Corporation in recognition of his support of
the Company and in compensation for his modest remuneration as Head of
our Vaccines Development.
- - In February 2004, we issued one investors 2,500,000 common shares of
Mymetics Corporation for $250,000, or $.10 per share.
- - In February 2004, we issued the same investor a warrant to acquire,
before July 31, 2004, an additional 2,500,000 common shares of Mymetics
Corporation at $.10 per share.
All such issues of shares and warrants were made under an informal Equity
Compensation Plan not approved by Security holders. These grants were made on an
individual basis and were approved by our Board of directors.
In addition, the Board has offered 2,000,000 common shares to Mr. J.-F. Martin
upon acceptance of an offer as board chairman. The fair value of these shares
was approximately E33 at December 31, 2003. These shares have not been
considered issued for purposes of these financial statements.
30
ITEM 6. SELECTED FINANCIAL DATA
The following table reflects selected consolidated financial data for
the Corporation for the fiscal years ended December 31, 2003, 2002, 2001, 2000,
and 1999, respectively.
For THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31 DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
(EUROS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA
Operating revenues ..................... 0 8 26 13 47
Research & Development Expenses ........ 1,263 1,878 482 101 94
General & Administrative Expenses ...... 1,090 1,293 1,034 351 37
Loss from continuing operations ........ 2,786 (3,622) (15,701) (1,314) (99)
COMMON SHARE DATA(1)
Loss from continuing operations per
common share ........................ (0.05) (0.07) (0.37) (0.04) (0.00)
Weighted average common shares
outstanding (in thousands) .......... 51,285 50,046 42,460 33,311 33,311
BALANCE SHEET DATA
Working capital ........................ (4,294) (2,306) 565 (652) (24)
Total assets ........................... 367 477 1,692 625 146
Long-term obligations .................. 242 242 242 242 242
Total stockholders' equity ............. (4,400) (2,349) 693 (765) (257)
- ----------------
(1) Basic and diluted common share data is the same.
ITEM 7. 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 for the years ended December 31,
2002, 2001 and 2000 should be read in conjunction with the Corporation's audited
consolidated financial statements and related notes included elsewhere herein.
RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEARS ENDED
DECEMBER 31, 2002 AND DECEMBER 31, 2001
Revenues of the year ended December 31, 2003 were nil compared to E8,000 for the
year ended December 31, 2002 and E26,000 for the year ended December 31, 2001.
Costs and expenses decreased to E2,786,000 for the year ended December 31, 2003
from E3,630,000 for year ended December 31, 2002 (-23.3%) and E15,727,000 for
the year ended December 31, 2001, in this particular case as a result of a
decrease in bank fees to E63,000 for the year ended December 31, 2002 from
E14,063,000 in the comparative period in 2001 (-99.6%).
31
Research and development expenses decreased to E1,263,000 in the current year
from E1,878,000 in the comparative period of 2002 (-32.7%) as a result of our
current cash shortfall, this after having increased from E482,000 during the
year ended December 31, 2001 to E1,878,000 (+290%) during the year ended
December 31, 2002 as a result of our increase in research activities.
General and administrative expenses decreased to E1,090,000 in the year ended
December 31, 2003 from E1,293,000 in the comparative period of 2002 (-15.7%) as
a result of cuts initiated by the new management since July 31, 2003, mostly in
management salaries and/or fees and travel expenses. General and administrative
expenses had previously increased to E1, 293,000 in the year ended December 31,
2002 from E1,034,000 in the comparative period of 2001 (+25.0%), mostly due to
increases in said management salaries, fees and travel expenses.
The Corporation reported a net loss of 2,786,000 or E0.05 per share, for the
year ended December 31, 2003, compared to E3,622,000 or E0.07, for the year
ended December 31, 2002 and E15,701,000 for the year ended December 31, 2001.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation had cash E125,000 at December 31, 2003, compared to E183,000 at
December 31, 2002 and E888,000 at December 31, 2001.
Net cash used by operating activities was E1,773,000 for the year ended December
31, 2003, compared to E3,235,000 for the year ended December 31, 2002 and
E2,000,000 for the year ended December 31, 2001. The major factor was successive
increases in accounts payable, which provided cash of E780,000 and E16,000 for
the years ended December 31, 2003 and 2002 respectively, compared to a decrease
of accounts payable of E508,000 for the year ended December 31, 2001.
Investing activities provided no/immaterial cash for the year ended December 31,
2003 compared to E252,000 for the year ended December 31, 2002 and used cash of
E237,000 for 2001.
Financing activities provided cash of E1,263,000 for the year ended December 31,
2003 compared to E2,181,000 in the same period last year.
Proceeds from issuance of common stock provided cash of E125,000 for the year
ended December 31, 2003 compared to E8,000 in the same period in 2002 and
E2,724,000 during the year 2001.
Increases in borrowing pursuant to a non-revolving term facility and other short
term advances provided cash of E1,138,000 in current year, E2,173,000 in the
comparative period last year and E116,000 in 2001. The non-revolving term
facility is in the principal amount of up to E3.150 million and matures on June
30, 2004. At December 31, 2003, Mymetics had borrowed an aggregate of E3,127,000
pursuant to this non-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 anticipates its
operations will require approximately E1.5 million in the year ending December
31, 2004. The Corporation will seek to raise the required capital from lenders,
equity or debt issuances, donors and/or potential partnerships with major
international pharmaceutical and biotechnology firms. However, there can be no
32
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 further restrict or even halt its operations.
OFF-BALANCE SHEET ARRANGEMENTS
The Corporation does not have any off-balance sheet arrangements.
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
- ------------------------------------------------------------------------------------------------------------------
Payment due by period
- ------------------------------------------------------------------------------------------------------------------
Less than 1 1-3 Years 3-5 Years More than 5
Contractual Obligations Total Year years
- ------------------------------------------------------------------------------------------------------------------
Long-term Debt Obligations - - - - -
- ------------------------------------------------------------------------------------------------------------------
Capital (Finance) Lease Obligations - - - - -
- ------------------------------------------------------------------------------------------------------------------
Operating Lease Obligations E12,500 E6,000 (2) E6,500 (2) - -
- ------------------------------------------------------------------------------------------------------------------
Purchase Obligations E162,000 E72,000 (1) E45,000 (3) E45,000(3) -
- ------------------------------------------------------------------------------------------------------------------
Other Long-term Liabilities Reflected on E242,000 - - E242,000(4) -
the Registrant's Balance Sheet under U.S.
GAAP
- ------------------------------------------------------------------------------------------------------------------
Total E416,500 E78,000 E51,500 E287,000 -
- ------------------------------------------------------------------------------------------------------------------
(1) Includes E62,000 with our supplier of gp41 proteins and E10,000 for
neutralizing antibodies tests currently under way.
(2) Office lease rent in France.
(3) French auditors ("Commissaire aux Comptes") are elected for 6 years and
cannot be terminated. Our French auditor has just been reelected. Based
on current cost estimates, we posted E15,000 per year from 2004 until
2009.
(4) Due to a shareholder, repayable only after our French subsidiary's
financial situation has been stable and its equity reconstituted. We
hope to achieve this condition within 3 years.
ITEM 7A. 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.
33
INTEREST RATE RISK
Fluctuations in interest rates may affect the fair value of financial
instruments. An increase in market interest rates may increase interest payments
and a decrease in market interest rates may decrease interest payments 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 December 31, 2003 and 2002 and expected cash flows from these debt
obligations.
EXPECTED FUTURE CASH FLOW
YEAR ENDING DECEMBER 31, 2003
(IN THOUSANDS)
--------------
CARRYING FAIR
VALUE VALUE 2004 2005 2006 2007 2008 THEREAFTER
----- ----- ---- ---- ---- ---- ---- ----------
Debt obligations...... E3,127 E3,127 E3,221 E-- E-- E-- E-- E--
YEAR ENDING DECEMBER 31, 2002
(IN THOUSANDS)
--------------
CARRYING FAIR
VALUE VALUE 2003 2004 2005 2006 2007 THEREAFTER
----- ----- ---- ---- ---- ---- ---- ----------
Debt obligations...... E1,989 E1,989 E2,082 E-- E-- E-- E-- E--
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary data required
with respect to this Item 8, and as identified in Item 14 of this annual report,
are included in this annual report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES.
(a) Disclosure Controls and Procedures. As of the end of the
registrant's fiscal year ended December 31, 2003, an evaluation of the
effectiveness of the registrant's "disclosure controls and procedures" (as such
term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) was carried out by the registrant's
principal executive officer and principal financial officer. Based upon that
evaluation, the registrant's principal executive officer and principal financial
officer have concluded that as of the end of that fiscal year, the registrant's
disclosure controls and procedures are effective to ensure that information
required to be disclosed by the registrant in reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in Securities and Exchange Commission rules and
forms.
It should be noted that while the registrant's principal executive
officer and principal financial officer believe that the registrant's disclosure
controls and procedures provide a reasonable level of assurance that they are
effective, they do not expect that the registrant's disclosure controls and
procedures or internal control over financial reporting will prevent all errors
and fraud. A control system, no matter how well conceived or operated, can
provide only reasonable, not absolute, assurance that the objectives of the
control system are met.
(b) Changes in Internal Control Over Financial Reporting. During the
fiscal year ended December 31, 2003, there were no changes in the registrant's
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
34
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
The number of directors of the Company is established at six.
Our six person board is divided into three classes, designated as Class I, Class
II and Class III. The term of the Class I directors will expire at our 2004
annual meeting of stockholders, the term of the Class II directors will expire
at our 2005 annual meeting of stockholders, and the term of the Class III
directors will expire at our 2003 annual meeting of stockholders. A plurality of
the votes of the shares of our common stock present in person or represented by
proxy at the annual meeting and entitled to vote on the election of directors
are required to elect the directors.
There currently are two vacancies on the Board caused by the resignation of
Peter P. McCann, Ph.D., who was a Class III director whose term would have
expired at our 2003 annual meeting of stockholders, and Patrice Pactol, who was
a Class II director, whose term would have expired at our 2005 annual meeting of
stockholders. We intend to have Dr. Sylvain Fleury, Ph. D., our current Chief
Scientific Officer, elected to fill the vacancy caused by the resignation of Mr.
Patrice Pactol. The position left vacant by the resignation of Dr. Peter McCann
will be reserved for a potential candidate related to the securing of a
strategic partner.
35
The following table sets forth information regarding each of our current
directors and executive officers.
EXPIRATION OF TERM
NAME CURRENT POSITION WITH THE COMPANY AGE AS A DIRECTOR
- ---- --------------------------------- --- ---------------
Pierre-Francois Serres Head of Exploratory Research, Founder 54 2003 (Class III)
and Director (appointed November 3, 2003)
Christian Rochet Chief Executive Officer, President 55 2005 (Class II)
And Director (appointed July 31, 2003)
Ernst Lubke Chief Financial Officer, Treasurer 58 2004 (Class I)
And Secretary (appointed July 31, 2003)
Robert Zimmer Director (appointed July 31, 2003) 57 2005 (Class II)
Sylvain Fleury, Ph. D. Chief Scientific Officer 41 n/a
(appointed November 3, 2003)
Dr. Pierre-Francois Serres first became our Chief Scientific Officer on February
7, 2002 and has been a Director since March 28, 2001. On May 2, 2003, Dr.
Serres' position as Chief Scientific Officer was terminated by the former Board
of Directors. As a result of the changes in the Company's Board of July 31,
2003, Dr. Serres was reinstated in his former office of Chief Scientific
Officer. He was then promoted as Head of our Exploratory Research efforts on
November 3, 2003, and replaced as Chief Scientific Officer by Dr. Sylvain
Fleury, Ph. D. Dr. Serres previously served as the Company's Chief Executive
Officer and President and was the founder, Chief Executive Officer and President
of our subsidiary, Mymetics S.A. (formerly, Hippocampe S.A.), a French human and
veterinary research and development company.
Christian Jean-Francois Rochet is an independent business consultant on
development and diversification strategies. He became a shareholder of
Hippocampe S.A. (now our subsidiary Mymetics S.A.) in 1997, on the scientific
advice of Dr. Sylvain Fleury, Ph. D., and was a director of that company between
1999 and 2001. Between March 2003 and July 31, 2003, Mr. Rochet, in his capacity
as Mymetics shareholder, initiated and spearheaded the efforts of a group of
nine dissatisfied shareholders representing a majority of shares, which led to
the resignation of the former Company directors and officers (with the exception
of Dr. Serres) on July 30, 2003. On July 31, 2003, Mr. Rochet was elected as
President and Director, and appointed as Chief Executive Officer of the Company.
Ernst Lubke is an independent international business consultant and the founder
of several companies active in the medical and biotech sectors. Along with
Christian J.-F. Rochet, he became a major shareholder of Hippocampe S.A. (now
our subsidiary Mymetics S.A.) in 1997, and was a director of that company
between 1999 and 2001. On July 31, 2003, Mr. Lubke, one of the nine dissatisfied
shareholders of Mymetics referred to above, was elected as Director, and
appointed as Chief Financial Officer and Treasurer of the Company. Mr. Lubke was
further appointed Secretary of the Company on August 29, 2003.
36
Robert Zimmer is a graduate of the prestigious Ecole Centrale de Paris, M.D.,
Sc.D., a former: (i) assistant-professor at the Faculty of Medicine of
Strasbourg (France), (ii) department head at the Foundation for hormonology
research in Paris, (iii) responsible for the coordination of the Clinical
Pharmacology department at Hoffmann La Roche in Basle (Switzerland), (iv) Senior
Executive President and CSO of Jago Pharma AG, a drug delivery specialist later
acquired by Skyepharma. Dr. Zimmer is currently Managing Director of Bio
Delivery Systems S.A. (BDS), a French company specializing in drug delivery
technologies, and Chairman of Zimmer & Associates, a Swiss consulting firm
specialized in strategic development of pharmaceutical products. On July 30,
2003, Dr. Zimmer was elected as Director, and appointed as Vice President, Head
of Business development of Mymetics Corporation. Owing however to unexpected but
positive developments at BDS which interfered with his capacity to effectively
discharge his duties as an officer of Mymetics, Dr. Zimmer resigned his officer
position on September 1, 2003, while accepting to remain as an outside director
of the Company.
Dr. Sylvain Fleury, Ph. D., obtained his B. Sc. in microbiology, his M. Sc. In
Virology and his Ph. D. in immunology from various prestigious institutions in
Canada between 1982 and 1992. A recipient of several awards and prizes, Dr.
Fleury completed his post graduate studies on HIV-AIDS at the NIAID, National
Institutes of Health (NIH), in Bethesda, Maryland, USA, before moving in 1997 to
Lausanne (Switzerland), first as Assistant to Professor Giuseppe Pantaleo, a
leading expert on AIDS at the Centre Hospitalier Universitaire Vaudois (CHUV)
until 2000, then as Project Leader at said CHUV's Division of cardiology and,
currently, at its Department of Experimental Surgery. Dr. Fleury was the first
expert Christian Rochet and Ernst Lubke consulted before they decided to invest
in Hippocampe S.A. in 1997. Dr. Fleury was also consulted by the former
management of Mymetics. He was appointed as our New Chief Scientific Officer on
November 3, 2003, in replacement of Dr. Serres, then promoted as Head of
Exploratory Research. Dr. Fleury has been sharing his time between CHUV and
Mymetics since that date. We intend to elect Dr. Fleury as a Director of the
Company within the next foreseeable future.
AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has not determined that we have an "audit committee
financial expert" sitting on the board. Given the recent turmoil our company has
faced, our directors and management believe that their time and our resources
would be better spent focusing on our operations than on searching for an audit
committee financial expert.
CODE OF ETHICS
We have not adopted a "code of ethics" that applies to our principal executive
officer, principal financial officer, principal accounting officer or
controller, and persons performing similar functions. Given the very small
number of our company's employees and the recent turmoil our company has faced,
our directors and management believe that adopting a code of ethics is not
necessary at this time, and that their time and our resources would be better
spent focusing on our operations.
37
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires our executive officers, directors and persons who own more than 10% of
a registered class of our equity securities to file reports of ownership and
changes of ownership with the SEC within specified due dates. These persons are
required by SEC regulations to furnish us with copies of all such reports they
file. Based solely on the review of the copies of such reports furnished to us,
we believe that, with respect to our fiscal year ended December 31, 2003, all of
our executive officers, directors and 10% stockholders filed all required
reports under Section 16(a) in a timely manner, except as follows: the Company,
on behalf of Mr. Allio, Mr. Demers, Dr. McCann, Mr. Musacchio, Mr. Pactol,
Professor Girard, Dr. Fleury, Dr. Serres and Dr. Zimmer individually, did not
timely report grants of stock options or stock such persons received in 2002 and
2003.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth for the last three fiscal years
information on the annual compensation earned by Dr. Peter P. McCann, who served
as our President and Chief Executive Officer from February 7, 2002 until January
31, 2003, and Dr. Pierre-Francois Serres, who served as our President and Chief
Executive Officer from March 28, 2001 until February 7, 2002. No named executive
officer received an aggregate annual consideration (salary and bonus) from the
Company in excess of $100,000 during the fiscal year ended December 31, 2003.
Annual Compensation Long Term Compensation
Awards Payouts
Securities All
Underlying Other
Name and Principal Position Year Salary Bonus Options/SARs Compensation
--------------------------- ---- ------ ----- ------------ ------------
Peter P. McCann, Ph.D. (1) 2003 $ 16,164 -- 75,000 --
2002 $ 144,667 -- 11,250 --
2001 -- -- -- --
Pierre-Francois Serres (2) 2003 Euro 82,317 (3) -- -- --
2002 Euro 91,464 (4) -- 1,250 --
2001 Euro 86,181 (4) -- 10,000 Euro 1,630 (5)
Michael K. Allio (6) 2003 -- (7) -- -- $ 8,500 (8)
2002 -- (7) -- 101,250 $ 26,000 (8)
2001 -- (7) -- 60,000 $ 5,750 (8)
Christian J.-F. Rochet (9) 2003 Euro 40'000 (11) -- -- --
2002 -- -- -- --
2001 -- -- -- --
Ernst Lubke (10) 2003 Euro 40'000 (11) -- -- --
2002 -- -- -- --
2001 -- -- -- --
Robert Zimmer, M.D. (12) 2003 0 (13) -- -- --
2002 -- -- -- --
2001 -- -- -- --
Sylvain Fleury, Ph. D. (14) 2003 0 (15) -- -- --
2002 -- -- -- --
2001 -- -- -- --
- ----------
(1) Dr. McCann was our President and Chief Executive Officer from February 7,
2002 to January 31, 2003.
(2) Dr. Serres was our President and Chief Executive Officer from March 28, 2001
until February 7, 2002. He was our Chief Scientific Officer from March 28, 2001
until terminated by the former Board of directors on May 5, 2003. Dr. Serres was
reinstated as Chief Scientific Officer by the new Board of directors
retroactively from May 5, 2003 until November 3, 2003, when he was promoted as
Head of Exploratory Research, his current position with the Company. In exchange
for being reinstated retroactively, Dr Serres accepted to forfeit all legal and
punitive compensation for having been terminated without cause. The French
Industrial Tribunal ("Prud'hommes") has indeed granted Dr. Serres Euro 45,735 to
that effect in its emergency injunction of October 14, 2003. The final amount
which Mymetics would most probably be ordered to pay Dr. Serres in terms of
legal and punitive compensation if the case had been allowed to run its full
course would have been in excess of Euro 91,000. This agreement between Dr.
Serres and the Company has yet to be finalized in writing by our respective
lawyers.
(3) This amount includes Euro 46,317 credited as compensation to Dr. Serres
under his former status by our subsidiary Mymetics S.A. from January 1, 2003
until August 15, 2003 and Euro 36,000 (i.e. Euro 8,000 per month) credited to
Dr. Serres since August 16, 2003 as compensation for his reinstated positions,
as disclosed under (2) above. No payments in relation to this amount have
actually been made in 2003 to Dr. Serres who, in accordance with the temporary
policy set by the new Board, has accepted that the actual of any compensation
due to him be deferred, either totally or partially, until the Company's
financial position would allow such payments to be made without jeopardizing the
Company's prospects.
(4) These represent amounts paid to Dr. Serres by our subsidiary, Mymetics S.A.
(5) Dr. Serres received Euro 1,630 for his participation on the Board of
Directors of our subsidiary, Mymetics S.A.
(6) Mr. Allio was our Interim Chief Executive Officer from January 1, 2003 until
July 30, 2003.
(7) Mr. Allio received $ 73,176 in 2001, $ 260,302 in 2002 and $ 217,500 in 2003
under the consulting agreement referred to below. We believe that in the context
of a small start up company like ours, the services Mr. Allio was to provide us
under his consulting agreement make him a de facto executive of the Company.
(8) Mr. Allio received $ 5,750 in 2001, $ 26,000 in 2002 and $ 8,500 in 2003 for
his participation on the Board of Directors of Mymetics Corporation.
(9) Mr. Rochet has been our President and Chief Executive Officer since July 31,
2003.
(10) Mr. Lubke has been our Chief Financial Officer and Treasurer since July 31,
2003 and our Secretary since August 29, 2003.
38
(11) As explained under (3) above, the temporary policy set by the new Board,
states that the actual payment of any compensation due to directors and officers
of Mymetics be deferred, either totally or partially, until the Company's
financial position would allow such payments to be made without jeopardizing the
Company's prospects. As a result, these amounts have remained unpaid at December
31, 2003. In addition, the Company owed Mr. Rochet and Mr. Lubke at year end
respectively Euro 21,325 and Euro 12,046 as reimbursement of actual travel and
other expenses disbursed by them on account of Mymetics.
(12) Dr. Zimmer has been our VP, Business Development from July 31, 2003 until
September 1, 2003.
(13) Dr. Zimmer has given up any direct compensation for his short tenure as VP,
Business Development. As outside director since September 1, 2003, Dr Zimmer
receives no compensation other than the 400,000 common shares of Mymetics the
Board has decided to issue him, as disclosed elsewhere in this Form 10-K.
(14) Dr. Fleury has been appointed as our Chief Scientific Officer on November
3, 2003.
(15) Dr. Fleury has given up any direct compensation for the interim period
between his formal appointment as our Chief Scientific Officer on November 3,
2003 and January 1, 2004, the reference date of the Consulting Agreement signed
by Dr. Fleury, Mymetics and the Centre Hospitalier Universitaire Vaudois (CHUV),
with which Dr. Fleury shares his time.
The Board has decided to issue Dr. Fleury 500,000 common shares of
Mymetics in appreciation of his past services and as partial compensation for
the sacrifices Dr. Fleury has accepted in terms of compensation and career when
he accepted to join the Company.
OPTION GRANTS IN LAST FISCAL YEAR
On January 31, 2003, Dr. McCann resigned from our Board and as our
Chief Executive Officer and President. In connection with Dr. McCann's
resignation, the former Board granted him options to purchase 75,000 shares of
our common stock at an exercise price of $0.14 per share.
On May 1, 2003, the former Board granted one of the members of our
scientific advisory board, Prabhavathi B. Fernandes, Ph.D., stock options to
purchase 150,000 shares of our common stock at an exercise price of U.S. $0.12
per share.
COMPENSATION OF DIRECTORS
Employee directors are not compensated for their role as directors.
Until July 30, 2003, our outside directors received an annual fee of $7,500, a
fee of $750 for each meeting they attended and a fee of $250 for each committee
meeting they attended. This policy has been temporarily suspended by the new
Board, all of the new members, as well as Dr. Serres, having accepted to serve
without receiving any direct remuneration until the Company's financial position
allows it to resume past practice. As all meetings are now either held by
telephone or whenever the directors meet on other business matters, no
reimbursement for expenses incurred in attending such meetings are necessary any
more.
Pursuant to our 2001 Stock Option Plan, all directors are entitled to
receive stock options pursuant to the terms and provisions of such plan. Until
July 30, 2003, the Company practice had been to grant each director (i) 10,000
stock options upon initial election as a director and (ii) 1,250 additional
stock options for each subsequent year of service after the initial year. During
the fiscal year ended December 31, 2003, 225,000 stock options were granted by
the former board to directors under our 2001 Stock Option Plan. We do not expect
to grant any such options in the near future. As disclosed elsewhere in this
Form
39
10-K, we have instead issued common shares to certain persons, the involvement
of which we consider as crucial to save the Company from its present difficult
financial situation.
CONSULTING AGREEMENT WITH MICHAEL ALLIO
In August, 2001, the former Board entered into a Consulting Agreement
with Michael Allio, one of the Company's Directors. Pursuant to this agreement,
which was amended by the First Amendment to Consulting Agreement dated August
21, 2002, and the Second Amendment to Consulting Agreement dated April 14, 2003,
Mr. Allio agreed to provide Mymetics with strategic management consulting
services. Mr. Allio's engagement under this agreement included, without
limitation, (i) developing the scope of the business, (ii) establishing a
European-North American operations team, (iii) directing and coordinating
initial corporate identity and branding efforts, (iv) crafting a coherent
business plan, (v) assisting the Company in establishing a viable U.S. identity
and (vi) exploring strategic partnerships in the U.S., Europe and possibly
elsewhere. In consideration for those services, Mr. Allio was to receive $25,000
per month, plus reimbursement of reasonable business expenses. In addition and
pursuant to the Consulting Agreement, as amended, Mr. Allio was granted options
to purchase (i) 50,000 shares of our common stock at an exercise price of $2.50
per share (granted as of August 31, 2001) and (ii) 100,000 shares of our common
stock at an exercise price of $0.55 per share (granted as of August 21, 2002),
all of which are currently vested. The Consulting Agreement could be terminated
by either party on 15 days' prior written notice. One of the first decisions
made by the new Board of directors was to terminate this Agreement in August
2003.
SERVICES AGREEMENT WITH MFC MERCHANT BANK, S.A.
In May 2001, the former Board entered into a Services Agreement with
MFC Merchant Bank, S.A. ("MFC Bank"), which previously beneficially owned more
than 5% of our outstanding common stock. Pursuant to the Services Agreement, MFC
Bank agreed to provide Mymetics with the services of Mr. Musacchio, the
Company's Secretary, Chief Operating Officer, Chief Financial Officer and a
Director. In consideration for such services, MFC Bank was paid Euro 5,000 per
month until Mr. Musacchio resigned on July 30, 2003.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES AT
DECEMBER 31, 2003
None of our named former executive officers exercised any stock options
during 2003. The following table provides information concerning the number and
value of unexercised options held by our named executive officer(s) at December
31, 2003.
40
Name Shares Value Number of Securities Value of
Acquired Realized Underlying Unexercised Options Unexercised
on Exercise at December 31, 2003 In-the-Money Options at
December 31, 2003(3)
Exercisable Unexercisable Exercisable Unexercisable
Dr. Pierre- - - - - 10,000(1) - - - -(4) - -(4)
Francois
Serres
- - - - 1,250(2) - - - -(4) - -(4)
- ----------
(1) These options are fully vested and exercisable at $3.15 per share.
(2) These options are fully vested and exercisable at $3.50 per share.
(3) The value of unexercised in-the-money options held at December 31, 2003
represents the total gain which an option holder would realize if he or she
exercised all of the in-the-money options held at December 31, 2003, and is
determined by multiplying the number of shares of common stock underlying the
options by the difference between an assumed fair market value per share and the
per share option exercise price. An option is in-the-money if the exercise price
per share of the option is below the assumed fair market value per share.
(4) The fair market value of the stock underlying these options was $0.05 per
share on December 31, 2003, based on the closing market price of our common
stock on such date. The exercise price of these options exceeds the fair market
value on December 31, 2003. Accordingly, these options were not in-the-money on
December 31, 2003.
EMPLOYMENT AGREEMENTS
On May 3, 2001, Mymetics entered into an employment agreement with Dr.
Serres pursuant to which he received a monthly salary of Euro 7,622 (paid by our
subsidiary Mymetics S.A.) and normal benefits. In addition, Dr. Serres was
permitted to participate in our 2001 Stock Option Plan, as well as receive
discretionary bonuses as approved by the Board. On May 5, 2003, Dr. Serres'
employment agreement was terminated by the former Board. On July 31, 2003, Dr.
Serres was reinstated by the new Board, however on different terms as explained
below.
On March 18, 2002, Mymetics entered into an employment agreement with
Dr. McCann, pursuant to which he received an annual salary of one hundred
seventy thousand U.S. Dollars ($170,000) and normal benefits. In addition, Dr.
McCann was permitted to participate in our 2001 Stock Option Plan, as well as
receive discretionary bonuses as approved by the Board. Effective January 31,
2003, Dr. McCann resigned from our Board and as our Chief Executive Officer and
President. In connection with Dr. McCann's resignation, the former Board granted
him options to purchase 75,000 shares of our common stock at an exercise price
of $0.14 per share.
41
The new directors and officers elected and/or appointed since July 31,
2003 have agreed to work without the benefit of a written agreement, relying
only on general terms agreed by the Board of directors in the matter of
compensation, which was set at nil for directors, and at E8,000 per month on a
full time basis for officers, plus reimbursement of reasonable travel and other
expenses. The actual payment of such amounts shall be deferred until the
Company's financial position has been stabilized. The directors and officers
have further agreed to work without the benefit of D&O insurance coverage, no
insurance company having accepted so far to cover such risks.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All executive officer compensation decisions are made by the
Compensation Committee of the Board. The Compensation Committee reviews and
recommends the compensation arrangements for officers and other senior level
employees, and takes such other action as may be required in connection with the
Company's compensation and incentive plans. From January 1, 2003 until July 30,
2003, the members of the Compensation Committee were Mr. Allio, Mr. Demers and
Dr. McCann. For part of 2002 and 2003, Dr. McCann served as our chief executive
officer. From July 31, 2003, the members of the Compensation Committee were Mr.
Rochet, Mr. Lubke, Dr. Serres and Dr. Zimmer.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information about the beneficial
ownership of our common stock as of March 18, 2004, by: (a) each of our named
executive officers; (b) each of our directors; (c) each person known to us to be
the beneficial owner of more than 5% of our outstanding voting securities; and
(d) all of our current executive officers and directors as a group. The
following is based solely on statements and reports filed with the Securities
and Exchange Commission or other information we believe to be reliable.
There were 59,394,454 shares of our common stock outstanding on March
18, 2003. We have determined beneficial ownership in accordance with the rules
of the Securities and Exchange Commission. Except as indicated by the footnotes
below, we believe, based on the information furnished to us, that the persons
and entities named in the tables below have sole voting and investment power
with respect to all shares of common stock that they beneficially own, subject
to applicable community property laws.
In computing the number of shares of common stock beneficially owned by
a person and the percentage ownership of that person, shares of common stock
subject to options or warrants held by that person that are currently
exercisable or exercisable within 60 days of March 29, 2004, are deemed
outstanding. These shares of common stock, however, are not deemed outstanding
for the purposes of computing the percentage ownership of any other person.
42
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER TITLE OF CLASS BENEFICIAL OWNERSHIP PERCENT OF CLASS
---------------- -------------- -------------------- ----------------
Martine Reindle Common 10,819,874 (2) 7.42%
CP 18
CH - 1295 Mies, Switzerland
Ernst Lubke (1) Common 5,881,638 (2) 4.03%
Chief Financial Officer, Secretary and Director
Christian Rochet (1) Common 377,138 (3) 0.25%
Chief Executive Officer, President and Director
Dr. Sylvain Fleury (1) Common 500,000 (4) 0.34%
Chief Scientific Officer
Prof. Marc Girard (1) Common 400,000 (4) 0.27%
Head of Vaccine Development and member of the SAB
Dr. Robert Zimmer (1) Common 400,000 (4) 0.27%
Dr. Pierre-Francois Serres (1) Common 6,585,618 (5) 4.51%
Head of Exploratory Research and Director
All current executive officers and Common 14,144,394 9.70%
directors as a group (3 persons)
- ----------
(1) Address is Mymetics Corporation, European Executive Office, 14, rue de la
Colombiere, CH-1260 Nyon (Switzerland).
(2) Includes 1,797,221 shares of our common stock owned by Aralis Participations
S.A. Martine Reindle is the Chairperson, a substantial equity holder and a
member of the Board of Directors of Aralis Participations S.A. Ernest Lubke is
an officer, a substantial equity holder and a member of the Board of Directors
of Aralis Participations S.A. Accordingly, Ms. Reindle and Mr. Lubke may be
deemed to have or share voting and/or investment power over the shares of our
common stock owned by Aralis Participations S.A.
(3) Acquired prior to being elected as director and appointed as officer.
(4) Granted for services.
(5) Includes 11,250 shares of common stock which Dr. Serres presently has the
right to acquire pursuant to vested stock options granted under our 2001 Stock
Option Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
During 2003, there were no transactions (or series of similar
transactions), and there are currently no proposed transactions (or series of
similar transactions), to which we were, are or will be a party in which the
amount involved exceeds $60,000 and in which any of our directors, executive
officers or holders of more than 5% of our common stock, or an immediate family
member of any of the foregoing, had or will have a direct or indirect interest,
other than the transactions described below.
43
With the exception noted hereafter (already reported on our Form 10-Q
for the quarter ended September 30, 2003), we believe that all of the
transactions set forth below were executed on terms no less favorable to us than
we could have obtained from unaffiliated third parties. It is our intention to
ensure that all future transactions, including loans, between us and our
officers, directors and principal stockholders and their affiliates are on terms
no less favorable to us than those that we could obtain from unaffiliated third
parties.
CREDIT FACILITY AND RELATIONSHIP WITH MFC MERCHANT BANK S.A.
MFC Merchant Bank S.A. ("MFC Bank") is a wholly-owned Swiss banking
subsidiary of MFC Bancorp Ltd., a Canadian company currently listed on the
NASDAQ. MFC Bank has been instrumental in arranging in December 2000: (i) the
acquisition of a French biotech company, Hippocampe S.A. (later renamed Mymetics
S.A.), and (ii) a credit facility in the amount of Euro 1.3 million. As
compensation for its decisive role in this material transaction, MFC Bank
received various fees and warrants which allowed it, during 2001 and 2002, to
acquire substantially in excess of 5% of the outstanding shares of our common
stock. MFC Bank and its parent company MFC Bancorp Ltd., have effectively
controlled Mymetics from December 2000 until July 2003. During this period, Mr.
Musacchio, the second highest paid officer of MFC Bancorp Ltd. according to that
company's filings with the Securities and Exchange Commission, was Mymetics'
chief operating officer, chief financial officer, secretary and a member of its
Board of directors. During that same period, key Company functions such as
budgeting, authorization of vendor agreements and/or payments, accounting and
reporting, were either conducted by service companies close to, or by officers
provided on a temporary basis by MFC Bancorp Ltd.
This state of affairs was completely modified in July 2003, when a
group of 9 shareholders took control of the Company and replaced all of its
directors and officers (with the exception of Dr. Pierre-Francois Serres, the
founder of Hippocampe S.A.) with shareholders of the Company. Owing to the
materiality of this change, we quote hereafter certain material facts and events
that were previously disclosed in our Form 10-Q for the quarter ended September
30, 2003 to the Securities and Exchange Commission, indicating in square
brackets and full capitals any material subsequent events or results.
Quote ------------
On July 20, 2003, Messrs. Christian Rochet and Ernst Lubke (now
President and Chief Executive Officer and Chief Financial Officer of the
Company) then representing a group of 9 Swiss and French shareholders (including
the Founder of Mymetics, Dr. Pierre-Francois Serres) holding at that time over
55% of the Company's share capital, met with Mr. John M. Musacchio, then Chief
Operating Officer and Chief Financial Officer of the Company, to inform him of
the decision of said group of shareholders to request the resignation of all the
Directors and Officers of the Company (except Dr. Serres) and their intent to
have some of the Company's major shareholders appointed as new Directors and
officers. Mr. Musacchio acknowledged this decision and pledged an orderly
transfer of responsibilities.
The reasons for this group of shareholders' decision were the alarming
Company disclosures (or absence of disclosures), and in particular:
44
> the continuously high ratio of general and administrative expenses
compared to R&D expenses,
> the scarcity of significant, published scientific results,
> the refusal of the Board of Directors to acknowledge and act on
nominations to the Board of Mymetics of prestigious and well connected
personalities, made in August 2001 by Messrs. Rochet and Lubke,
> the apparent inability of the Company to attract new capital following
the significant decline of the Company's share price in August 2002,
> the resignation of key executives (the CEO and the VP of development)in
February 2003,
> and finally, the unfriendly removal of Dr. Serres, the Company's
Founder and Chief Scientific Officer in May 2003.
The aforementioned shareholders intend to redress the situation by
severely limiting G&A expenses, in particular salaries, consulting fees and
travel expenses, and to devote a higher proportion of funds to the Company's
core business, i.e. R&D related to AIDS and other autoimmune related
pathologies. [THE NEW DIRECTORS AND OFFICERS HAVE ACCEPTED COMPENSATIONS WHICH
REPRESENT APPROXIMATELY ONE THIRD OF WHAT OUR FORMER DIRECTOR AND INTERIM CEO
HAD RECEIVED AS FEES UP UNTIL HIS LAST DAY IN OFFICE. THEY HAVE ALSO ACCEPTED
THE DEFERRAL OF ACTUAL PAYMENT OF THEIR COMPENSATION UNTIL THE COMPANY CAN
SAFELY PAY THEM AND FURTHER ACCEPTED TO WORK WITHOUT THE BENEFIT OF D&O
INSURANCE. TRAVEL EXPENSES HAVE BEEN REDUCED TO THE BAREST MINIMUM, IN
PARTICULAR AS REGARDS TRANSATLANTIC TRAVEL. ALL BOARD MEETINGS ARE NOW HELD BY
TELEPHONE. OFFICE EXPENSES HAVE BEEN DRATICALLY REDUCED. RECOURSE TO OUTSIDE
SERVICE PROVIDERS HAS BEEN LIMITED TO THE BARE MINIMUM, WITH MORE WORK DONE
IN-HOUSE RATHER THAN BEING OUTSOURCED TO EXPENSIVE SERVICE PROVIDERS. WE EXPECT
TO OPERATE IN THIS MODE UNTIL THE COMPANY HAS FULLY RECOVERED, AND MAINTAIN A
MODEST WAY OF LIFE BEYOND THAT, IN RESPECT OF OUR STAKEHOLDERS].
To achieve this goal, we can rely on the backing of some prominent
personalities in matters of AIDS, such as Mr. Jacques Martin, former CEO of
Laboratoires Merieux, member of the Board of the IAVI and CEO of the vaccine
Fund chaired by Mr. Nelson Mandela, and Professor Marc Girard, former CSO of
Laboratoires Merieux, present CEO of the Merieux Foundation, a most respected
expert on vaccines. [MR. MARTIN HAS BEEN INSTRUMENTAL IN OUR ABILITY TO GAIN
ACCESS TO KEY PLAYERS IN THE WORLD OF HIV-AIDS. THE APPOINTMENT OF PROFESSOR
MARC GIRARD AS HEAD OF OUR VACCINE DEVELOPMENT AND MEMBER OF OUR SCIENTIFIC
BOARD AS BEEN REPORTED IN OUR FORM 8-K DATED FEBRUARY 20, 2004]
On July 24, 2003, a letter formally requesting the resignation of the
Company Directors and Officers (except Dr. Serres) was sent by said group of
shareholders to the Company Counsel, following which new Directors were elected
and new Officers appointed on July 30 and 31, 2003. A management audit of the
Company's position, procedures, operations and material transactions since July
20, 2003 was immediately performed. Critical findings and subsequent, related
events since our takeover are listed hereafter.
45
> On July 28, 2003, Messrs. Michael K. Allio (Director, interim President
and CEO) and John M. Musacchio (Director, COO, CFO and Secretary of the
Mymetics) closed all the "Non MFC" bank accounts of Mymetics
Corporation and transferred their remaining cash balances to the
Company's account with MFC Merchant Bank SA. It is worth noting that
according to various filings of MFC Bancorp, a US publicly traded
Canadian company and the dominant shareholder of MFC Merchant Bank SA,
Mr. John M. Musacchio, is also a Vice president of MFC Bancorp Ltd., in
fact its second highest paid officer as of December 31, 2002.
> On July 30, Messrs. Michael K. Allio and John M. Musacchio executed on
behalf of the Company (the Borrower) a second amendment to the existing
credit facility agreement with MFC Merchant Bank SA (the Lender) and
MFC Bancorp Ltd. (Guarantor). Purpose of this amendment was essentially
to: (i) increase the principal amount from E3,000,000 to E3,150,000,
(ii) convert the credit facility from "Term Credit" to "On Demand
Credit" and (iii) reaffirm and strengthen the bank's lien on
substantially all of the Company's Intellectual Property. We believe
that this so-called second amendment to the credit facility agreement,
which considerably increases the domination of the MFC group over the
Company, could not have been negotiated and executed on such short
notice if Mr. John M. Musacchio had not been a party to both sides of
the amendment, or in other words, we do not consider this amendment as
having been negotiated and concluded at arm's length by the former
management of Mymetics Corporation.
> On September 19, 2003, MFC Merchant Bank SA formally cancelled its 3.2
ME credit facility.
> On October 8, 2003, Messrs. Christian Rochet and Ernst Lubke met with
the management of MFC Merchant Bank SA to discuss the latest
developments and in particular, to draw the bank's attention to the
fact that the Company was in immediate danger of losing its key
Intellectual Property as a result of its inability to pay certain
creditors following the bank's decision to cancel its recently amended
credit facility. Indeed, The Intellectual Property counsel was denying
any further services to the Company, which faced the risk of losing
certain key US patent applications. In addition, former unpaid staff
members of our French subsidiary had initiated legal action against
their former employer, who could be put into forced receivership as a
result of its inability to pay what was legally due to them. Such a
development would represent a real threat to the Company's ability to
continue as a going concern because Mymetics SA, our French subsidiary,
is the legal owner of certain key Mymetics patents. Despite these
pressing facts, Messrs. Rochet and Libke were informed that the banks'
decision to cancel the credit facility was final. However, after a
personal plea by Mr. Jacques-Francois Martin, the bank agreed that
repayment of the cancelled loan would not be requested before June 30,
2004. [ALL IMMEDIATE THREATS TO THE FRENCH SUBSIDIARY'S SURVIVAL HAVE
BEEN REMOVED].
> On November 4, 2003, MFC Merchant Bank SA confirmed its decision not to
request repayment of the outstanding cancelled credit facility amount
before June 30, 2004.
46
> On November 13, 2003, MFC Merchant Bank SA also accepted our analysis
that our IP portfolio was being jeopardized due to our inability to
make payments of patent registration and/or renewal fees as well as our
inability to meet the expenses of prosecution of critical outstanding
patent application. As a result, MFC Merchant Bank SA, which holds a
lien on substantially all our IP portfolio as explained above, has
instructed our IP counsel to prepare a docket of actions needed to
maintain our portfolio and confirmed that it would make all payments
required to that effect, such sums to be added to the balance of the
cancelled credit line previously mentioned. The bank however refused to
consider any rescue plan for our French subsidiary, claiming it did not
own any significant assets any more and could therefore be left to
become bankrupt. We took issue with this analysis and pleaded in vain
that the bank reconsiders its position on this account, but to no
avail.
On December 8, 2003, we learned from our IP counsel that on June 25,
2003, a key US patent owned by our French subsidiary had been sold and assigned
to Mymetics Corporation "for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged". It appears so far that this
transfer was only authorized by the former CEO of our French subsidiary, without
authority being granted to her by the company Board ("Conseil de Surveillance"),
as required by French law. As regards adequate consideration, no traces of
either a reasonable contract nor any other evidence have been found so far in
the records of either companies. The auditor of our French subsidiary
("Commissaires aux Comptes"), who enjoys a wide and compelling role of whistle
blower under French Law, believes that such patent transfer is likely to be
interpreted by French tax authorities as criminal misuse of Company property and
tax evasion. In a formal letter dated December 9, 2003 and addressed to the
French company's management, he demands that all details of this transaction be
made available to him no later than December 31, 2003, failing which he would be
compelled to submit the case to the Attorney General ("Procureur General de la
Republique"). We intend of course to heed to that request and to cooperate fully
with any investigation that might follow. [WE HAVE MEANWHILE COMPLIED WITH OUR
FRENCH AUDITOR'S DEMANDS].
> Last but not least, the late filing of this Form 10-Q was due to the
difficulties we faced in assembling all the required data under the
hardship described above, but also to the fact that critical service
firms needed to do so in accordance with US regulations were denying us
their services until their outstanding invoices were settled. [NORMAL
RELATIONS WITH OUR KEY SERVICE PROVIDERS HAVE SINCE BEEN RESUMED]
Now, despite all of the above and the fact that several key scientific
partners of the Company have not been paid, some of them since early 2003,
Mymetics has been able to show significant results based on Dr. Pierre-Francois
Serres hypothesis, and most notably:
> A "world's first" in the pursuit of a universal vaccine against AIDS:
the successful synthesis, in an economically sustainable and scalable
fashion, of a stable trimeric form of gp41, the HIV's membrane protein
now regarded by several key scientists as having the highest potential
as a base for a successful AIDS vaccine.
47
> The successful synthesis of short and economically feasible therapeutic
anti-HIV peptides, having the potential to become serious competitors
to some of today's most successful, but problems beset, antiviral
drugs. [WE HAVE INITIATED DISCUSSIONS WITH A MAJOR LEADER IN SUCH
ANTIVIRAL THERAPY WHO IS CURRENTLY FACING SERIOUS PROBLEMS WITH SAID
PRODUCT].
Since taking office on July 31, 2003, the new Directors and Officers of
the Company have achieved some significant results despite the absence of cash
and/or credit facilities, and in particular:
> Presentation during the "AIDS Vaccine 2003" venue in New York of our
scientific results to several key scientists of the US National
Institute of Health (NIH) and other public and private AIDS research
institutes. As a result of such presentations, we have been offered to
cooperate with certain key institutes such as SCRIPPS and been invited
to apply for initial NIH AIDS related grants. [WE HAVE SINCE SIGNED AN
INITIAL AGREEMENT WITH SCRIPPS AND APPLIED FOR A FIRST NIAID GRANT
AIMED AT OBTAINING DECISIVE SCIENTIFIC PROOFS OF CONCEPT WITHIN A
LIMITED TIME FRAME].
> Successful discussions with several outstanding and high profile
scientists and managers who accepted to join the Company as soon as its
current cash crisis is resolved. [THE APPOINTMENT OF PROFESSOR MARC
GIRARD AS HEAD OF OUR VACCINE DEVELOPMENT AND MEMBER OF OUR SCIENTIFIC
BOARD AS BEEN REPORTED IN OUR FORM 8-K DATED FEBRUARY 20, 2004]
> Initiation of partnership discussion with pharmaceutical companies, all
world leaders in the respective human or veterinary vaccine related
(AIDS) fields. [DISCUSSIONS WITH THREE SUCH POTENTIAL PARTNERS WILL BE
CONDITIONNED BY THE INITIAL RESULTS FROM OUR RECENTLY INITIATED
SCIENTIFIC TRIALS, SOME OF WHICH COULD HAVE BEEN COMPLETED LONG BEFORE
JULY 31, 2003]
> Initiation of discussions with three potential new investors willing in
principle to acquire from the Company 1 million shares at USD 0.10 per
share. Such discussions are nevertheless hampered by the fact that only
publicly available data such as past Company filings, published
scientific papers and patents, could be produced and used to convince
said potential investors. In addition, critical partners needed to
execute such transactions such as legal counsel, were unwilling to
provide the services needed to perform such transactions in accordance
with US regulations. We are nevertheless hopeful that such discussions
will proceed and be successful after this 10-Q filing has been made.
[FOUR NEW INVESTORS HAVE SINCE ACQUIRED 6 MILLION COMMON SHARES OF THE
COMPANY AT APPROXIMATELY $.10 PER SHARE, PLUS WARRANTS FOR THE SAME
NUMBER OF SHARES AT THE SAME PRICE TO BE EXERCIZED BEFORE JULY 31,
2004, AS REPORTED IN OUR FORMS 8-K DATED FEBRUARY 20 AND MARCH 22,
2004]
- --------- Unquote
48
Despite limited means and impressive hurdles to overcome, we have been able
since July 31, 2003 to graduate from an assured crash to a (still) bumpy ride.
In more practical terms, we have been able to (i) attract four new investors,
(ii) remove all immediate threats of bankruptcy or forced liquidation, (iii)
normalize our relations with our critical suppliers of scientific or corporate
services, (iv) launch critical scientific tests aimed at reinforcing our
position in the discussions we have initiated with certain pharmaceutical
companies, (v) gain reasonable assurance that results will be encouraging, never
forgetting however that biology remains a complex and largely unpredictable
science, and (vi) applied for grants from public and private donors.
We intend to devote in the future more time and efforts to grant applications
(which are very time consuming), as such sources of funds are non dilutive by
essence. We believe that our chances of obtaining such funds in a reasonable
time span are high enough to continue justifying our directors' and officers'
efforts and personal sacrifices.
Despite our efforts and achievements, we have no reasonable hope to be able to
reimburse the Euro 3.2 million credit facility due to MFC Bank on or before its
present due date of June 30, 2004, and have no assurance that MFC Bank will
accept to renegotiate it on terms acceptable to us.
COMPENSATION AND SERVICES AGREEMENTS
In May 2001, Mymetics entered into a services agreement with MFC
Merchant Bank S.A. pursuant to which MFC Merchant Bank S.A. agreed to provide
the Company with the services of Mr. Musacchio to act as Chief Operating
Officer, Chief Financial Officer, Secretary and a member of our board of
directors. As explained above, Mr. Musacchio resigned all his positions with the
Company and its affiliates on July 30, 2003, effectively terminating the service
agreement between Mymetics and MFC Merchant Bank S.A.
We have entered into compensation arrangements with certain of our
directors. The terms of these arrangements are described in more detail under
"Compensation of Directors"
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table provides information about the fees billed to the registrant
for professional services rendered by Peterson Sullivan PLLC during fiscal 2003
and 2002:
2003 2002
-------- --------
Audit Fees $ 30,461 $ 34,030
Audit-Related Fees - -
Tax Fees $ 20,547 22,572
All Other Fees - -
-------- --------
Total $ 51,008 $ 56,602
======== ========
49
Audit Fees. Audit fees consist of fees for the audit of the registrant's annual
financial statements or services that are normally provided in connection with
statutory and regulatory filings or engagements.
Audit-Related Fees. Audit-related fees consist of fees for assurance and related
services that are reasonably related to the performance of the audit or review
of the registrant's financial statements and are not reported as Audit Fees.
During fiscal 2003 and 2002, the services provided in this category included due
diligence reviews, audits of employee benefit funds, and consulting on
accounting standards and transactions.
Tax Fees. Tax fees consist of fees for tax compliance services, tax advice and
tax planning. During fiscal 2003 and 2002, the services provided in this
category included assistance and advice in relation to the preparation of
corporate income tax returns.
All Other Fees. Any other fees not included in Audit Fees, Audit-Related Fees
or Tax Fees.
Pre-Approval Policies and Procedures.
Our Board of Directors pre-approves all services to be provided by Sullivan
Peterson PLLC.
50
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Index to Financial Statements
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Changes in Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(a)(2) ALL OTHER SCHEDULES HAVE BEEN OMITTED BECAUSE THEY ARE NOT
APPLICABLE OR THE REQUIRED INFORMATION IS SHOWN IN THE FINANCIAL STATEMENTS OR
NOTES THERETO.
(3) List of Exhibits
2.1 Share Exchange Agreement dated December 13, 2001 between the
Corporation and the stockholders of Mymetics S.A. listed on the
signature page thereto (1)
2.2 Share Exchange Agreement dated December 13, 2001 between the
Corporation and the stockholders of Mymetics S.A. listed on the
signature page thereto (1)
2.3 Purchase Agreement dated October 17, 1998 between the
Corporation and the majority stockholders of Nazca Holdings Ltd.
(2)
2.4 Amendment to the Purchase Agreement dated October 17, 1998
between the Corporation and the majority stockholders of Nazca
Holdings Ltd. (3)
2.5 Revised Purchase Agreement dated July 28, 1999 between the
Corporation and the majority stockholders of Nazca Holdings Ltd.
(4)
2.6 Share Exchange Agreement dated July 30, 2002 between the
Corporation and the stockholders of Mymetics S.A. listed on the
signature page thereto (5)
3(i) Articles of Incorporation of the Corporation (as amended through
May 10, 2002) (6)
3(ii) Bylaws (7)
4.1 Form of Specimen Stock Certificate (8)
4.2 Form of letter regarding Warrant
4.3 Form of Share Exchange Agreement
9.1 Voting and Exchange Trust Agreement dated March 28, 2001,
Among the Corporation, 6543 Luxembourg S.A. and MFC Merchant
Bank S.A. (8)
51
10.1 Services Agreement dated May 31, 2001, between the Corporation
and MFC Merchant Bank, S.A.(7)
10.2 Employment Agreement dated May 3, 2001, between Pierre-Francois
Serres and the Corporation (7)
10.3 Indemnification Agreement dated March 28, 2001, between the
Corporation and MFC Bancorp Ltd. (7)
10.4 Agreement dated for reference May 15, 2000, between the
Corporation and Maarten Reidel (7)
10.5 Preferred Stock Redemption and Conversion Agreement dated for
reference December 21, 2000, between the Corporation and Sutton
Park International Ltd. (10)
10.6 Preferred Stock Conversion Agreement dated for reference
December 21, 2000, between the Corporation and Med Net
International Ltd. (11)
10.7 Preferred Stock Conversion Agreement dated December 21, 2000,
between the Corporation and Dresden Papier GmbH (11)
10.8 Assignment Agreement dated December 29, 2000, among the
Corporation, Mymetics S.A. and MFC Merchant Bank S.A. (1)
10.9 Credit Facility Agreement dated July 27, 2000, between MFC
Merchant Bank, S.A. and the Corporation (1)
10.10 Amended Credit Facility Agreement dated for reference August 13,
2001, between MFC Merchant Bank, S.A. and the Corporation (16)
10.11 Second Amended Credit Facility Agreement dated for reference
February 27, 2002, between MFC Merchant Bank, S.A. and the
Corporation (16)
10.12 Amended and Restated Credit Facility Agreement dated for
reference February 28, 2003, among MFC Merchant Bank, S.A., MFC
Bancorp Ltd., and the Corporation (16)
10.13 Guarantee dated for reference February 28, 2003, by MFC Bancorp
Ltd. to MFC Merchant Bank S.A. (16)
10.14 Shareholder Agreement dated March 28, 2001, among the
Corporation, the Holders of Class B Exchangeable Preferential
Non-Voting Shares of 6543 Luxembourg S.A. signatory thereto and
6543 Luxembourg S.A.(8)
10.15 Support Agreement dated March 28, 2001, between the Corporation
and 6543 Luxembourg S.A. (8)
10.16 1995 Qualified Incentive Stock Option Plan (12)
10.17 Amended 1994 Stock Option Plan (13)
10.18 2001 ICHOR Corporation Stock Option Plan (7)
52
10.19 Employment Agreement dated March 18, 2002, between the
Corporation and Peter P. McCann (14)
10.20 Consulting Agreement dated August 31, 2001, between the
Corporation and Michael K. Allio (8)
10.21 Amendment to Consulting Agreement dated August 21, 2002, between
the Corporation and Michael K. Allio (16)
10.22 Employment Agreement dated March 18, 2002, between the
Corporation and Dr. Joseph D. Mosca (15)
10.23 Separation Agreement and Release dated January 31, 2003, between
the Corporation and Peter P. McCann (16)
10.24 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Corporation and Robert Demers (8)
10.25 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Corporation and Michael K. Allio (8)
10.26 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Corporation and John M. Musacchio (8)
10.27 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Corporation and Patrice Pactol (8)
10.28 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Corporation and Pierre-Francois Serres (8)
10.29 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and Pierre-Francois Serres (16)
10.30 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and Patrice Pactol (16)
10.31 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and Robert Demers (16)
10.32 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and John M. Musacchio (16)
10.33 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and Michael K. Allio (16)
10.34 Director and Non-Employee Stock Option Agreement dated August
21, 2002, between the Corporation and Michael K. Allio (16)
10.35 Director and Non-Employee Stock Option Agreement dated June 20,
2002, between the Corporation and Peter P. McCann (16)
10.36 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and Peter P. McCann (16)
10.37 Director and Non-Employee Stock Option Agreement dated February
6, 2003, between the Corporation and Peter P. McCann (16)
53
10.38 Patent Pledge Agreement dated November __, 2002 among Mymetics
S.A., Mymetics Deutschland GmbH, the Corporation and MFC
Merchant Bank S.A. (16)
11.1 Statement Regarding Calculation of Per Share Earnings.
21.1 List of Subsidiaries
24.1 Powers of Attorney (included on the signature page hereto)
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) or 15d-14 of the Securities Exchange Act of 1934
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) or 15d-14 of the Securities Exchange Act of 1934
32.1 Section 1350 Certification of Chief Executive Officer and Chief
Financial Officer
- ----------------
(1) Incorporated by reference to the Corporation's Schedule 14C filed with
the Securities and Exchange Commission on April 26, 2001.
(2) Incorporated by reference to the Corporation's report on Form 8-K filed
with the Securities and Exchange Commission on October 22, 1998.
(3) Incorporated by reference to the Corporation's report on Form 8-K/A
filed with the Securities and Exchange Commission on April 15, 1999.
(4) Incorporated by reference to the Corporation's report on Form 8-K/A
filed with the Securities and Exchange Commission on August 13, 1999.
(5) 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.
(6) Incorporated by reference to the Corporation's report on Form 10-Q for
the quarter ended March 31, 2002, filed with the Securities and
Exchange Commission on May 15, 2002.
(7) Incorporated by reference to the Corporation's report on Form 10-Q for
the quarter ended June 30, 2001, filed with the Securities and Exchange
Commission on August 14, 2001.
(8) Incorporated by reference to the Corporations Registration Statement on
Form S-1, File No. 333-88782, filed with the Securities and Exchange
Commission on May 22, 2002.
(9) Incorporated by reference to the Corporation's report on Form 8-K/A
filed with the Securities and Exchange Commission on August 9, 2000.
(10) Incorporated by reference to Schedule 13D/A filed by MFC Bancorp Ltd.
with the Securities and Exchange Commission on dated January 2, 2001.
54
(11) Incorporated by reference to the Corporation's report on Form 10-K for
the fiscal year ended December 31, 2000, filed with the Securities and
Exchange Commission on March 14, 2001.
(12) Incorporate by reference to the Corporation's Registration Statement on
Form S-8, File No. 333-15831, filed with the Securities and Exchange
Commission on November 8, 1996.
(13) Incorporated by reference to the Corporation's Registration Statement
on Form S-8, File No. 333-15829, filed with the Securities and
Exchange Commission on November 8, 1996.
(14) Incorporated by reference to the Corporation's report on Form 10-K for
the fiscal year ended December 31, 2001, and filed with the Securities
and Exchange Commission on March 29, 2002.
(15) Incorporated by reference to the Corporation's report on Form 10-Q for
the quarter ended March 31, 2002, filed with the Securities and
Exchange Commission on May 15, 2002.
(16) Incorporated by reference to the Corporation's report on Form 10-K for
the fiscal year ended December 31, 2002, and filed with the Securities
and Exchange Commission on March 27, 2003.
(b) Reports on Form 8-K
None.
55
PETERSON SULLIVAN PLLC
601 UNION STREET SUITE 2300 SEATTLE WA 98101 (206) 382-7777 FAX 382-7700
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
To the Shareholders
Mymetics Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of Mymetics
Corporation (a development stage company) and Subsidiaries as of December 31,
2003 and 2002, and the related consolidated statements of operations and
comprehensive loss, changes in shareholders' equity, and cash flows for the
years ended December 31, 2003, 2002 and 2001, and for the period from May 2,
1990 (inception) to December 31, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Mymetics Corporation
(a development stage company) and Subsidiaries as of December 31, 2003 and 2002,
and the results of their operations and their cash flows for the years ended
December 31, 2003, 2002 and 2001, and for the period from May 2, 1990
(inception) to December 31, 2003, in conformity with accounting principles
generally accepted in the United States.
The accompanying 2003 consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 1 to
the consolidated financial statements, the Company has not developed a
commercially viable product and, therefore, has not been able to generate
revenues which resulted in significant losses being incurred. Further, the
Company has a note payable amounting to E3,127 which is due June 30, 2004, where
there is no assurance that the note may be paid, extended, restructured or
refinanced. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans regarding these matters are
also described in Note 1. These consolidated financial statements do not include
any adjustments that might result from the outcome of these uncertainties.
/s/ Peterson Sullivan PLLC
Peterson Sullivan PLLC
Seattle, Washington
March 18, 2004
56
MYMETICS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31, 2003 and 2002
(In Thousands of Euros)
ASSETS 2003 2002
--------- ---------
Current Assets
Cash E 125 E 183
Receivables 100 59
Prepaid expenses 6 36
--------- ---------
Total current assets 231 278
Patents 136 199
--------- ---------
E 367 E 477
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable E 1,232 E 452
Taxes and social costs payable 53 119
Note payable 3,127 1,989
Other 113 24
--------- ---------
Total current liabilities 4,525 2,584
Payable to Shareholders 242 242
--------- ---------
Total liabilities 4,767 2,826
Shareholders' Equity
Common stock, U.S. $.01 par value; 80,000,000 shares
authorized; issued and outstanding 54,344,454
at December 31, 2003 and 50,944,505 at
December 31, 2002 607 579
Additional paid-in capital 18,142 17,888
Deficit accumulated during the development stage (23,799) (21,013)
Accumulated other comprehensive income 650 197
--------- ---------
(4,400) (2,349)
--------- ---------
E 367 E 477
========= =========
The accompanying notes are an integral part of these financial statements.
57
MYMETICS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Years Ended December 31, 2003, 2002 and 2001,
and the Period from May 2, 1990 (Inception) to December 31, 2003
(In Thousands of Euros, Except Per Share Data)
Total
Accumulated
During
Development
Stage
(May 2, 1990 to
December 31,
2003 2002 2001 2003)
--------- --------- --------- ----------
Revenues
Sales E - E - E - E 224
Interest - 8 26 34
--------- --------- --------- ----------
- 8 26 258
Expenses
Research and development 1,263 1,878 482 3,985
General and administrative 1,090 1,293 1,034 3,998
Bank fee - 63 14,063 14,932
Interest 176 60 79 331
Goodwill impairment - 209 - 209
Amortization 64 64 51 322
Directors' fees 193 63 18 274
--------- --------- --------- ----------
2,786 3,630 15,727 24,051
--------- --------- --------- ----------
Loss before income tax provision (2,786) (3,622) (15,701) (23,793)
Income tax provision - - - 6
--------- --------- --------- ----------
Net loss (2,786) (3,622) (15,701) (23,799)
Other comprehensive income
Foreign currency translation
adjustment 453 97 100 650
--------- --------- --------- ----------
Comprehensive loss E (2,333) E (3,525) E (15,601) E (23,149)
========= ========= ========= ==========
Basic and diluted loss per share E (0.05) E (0.07) E (0.37) E (0.65)
========= ========= ========= ==========
The accompanying notes are an integral part of these financial statements.
58
MYMETICS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Period from May 2, 1990 (Inception) to December 31, 2003
(In Thousands of Euros)
Date of Number of
Transaction Shares Par Value
------------- ------------ ----------
Balance at May 2, 1990 E -
Shares issued for cash June 1990 33,311,361 119
Net losses to December 31, 1999 - -
------------ -------
Balance at December 31, 1999 33,311,361 119
Bank fee - -
Net loss for the year - -
------------ -------
Balance at December 31, 2000 33,311,361 119
Effect on capital structure resulting from a business combination March 2001 8,165,830 354
Issuance of stock purchase warrants for bank fee March 2001 - -
Issuance of shares for bank fee March 2001 1,800,000 21
Issuance of shares for bank fee June 2001 225,144 3
Issuance of shares for cash June 2001 1,333,333 15
Exercise of stock purchase warrants in repayment of debt June 2001 1,176,294 13
Exercise of stock purchase warrants for cash December 2001 3,250,000 37
Net loss for the year - -
Translation adjustment - -
------------ -------
Balance at December 31, 2001 49,261,962 562
Exercise of stock options March 2002 10,000 -
Issuance of stock purchase warrants for bank fee June 2002 - -
Exercise of stock purchase warrants in repayment of debt and
for cash July 2002 1,625,567 16
Issuance of remaining shares from 2001 business combination August 2002 46,976 1
Net loss for the year - -
Translation adjustment - -
------------ -------
Balance at December 31, 2002 50,944,505 579
Issuance of shares for services September 2003 400,000 4
Shares retired October 2003 (51) -
Issuance of shares for services November 2003 1,500,000 12
Issuance of shares for cash December 2003 1,500,000 12
Issuance of stock purchase warrants for financing fee December 2003 - -
Net loss for the year - -
Translation adjustment - -
------------ -------
Balance at December 31, 2003 54,344,454 E 607
============ =======
59
Accumulated
Other
Deficit Comprehensive
Accumulated Income - Foreign
Additional During the Currency
Paid-in Development Translation
Capital Stage Adjustment
----------- --------------- ----------------
Balance at May 2, 1990 E - E - E -
Shares issued for cash - - -
Net losses to December 31, 1999 - (376) -
----------- ------------ -------
Balance at December 31, 1999 - (376) -
Bank fee 806 - -
Net loss for the year - (1,314) -
----------- ------------ -------
Balance at December 31, 2000 806 (1,690) -
Effect on capital structure resulting from a business combination (354) - -
Issuance of stock purchase warrants for bank fee 14,063 - -
Issuance of shares for bank fee (21) - -
Issuance of shares for bank fee (3) - -
Issuance of shares for cash 2,109 - -
Exercise of stock purchase warrants in repayment of debt 259 - -
Exercise of stock purchase warrants for cash 563 - -
Net loss for the year - (15,701) -
Translation adjustment - - 100
----------- ------------ -------
Balance at December 31, 2001 17,422 (17,391) 100
Exercise of stock options 8 - -
Issuance of stock purchase warrants for bank fee 63 - -
Exercise of stock purchase warrants in repayment of debt 396 - -
Issuance of remaining shares from 2001 business combination (1) - -
Net loss for the year - (3,622) -
Translation adjustment - - 97
----------- ------------ -------
Balance at December 31, 2002 17,888 (21,013) 197
Issuance of shares for services 29 - -
Shares retired - - -
Issuance of shares for services 100 - -
Issuance of shares for cash 113 - -
Issuance of stock purchase warrants for financing fee 12 - -
Net loss for the year - (2,786) -
Translation adjustment - - 453
----------- ------------ -------
Balance at December 31, 2003 E 18,142 E (23,799) E 650
=========== ============ =======
60
Total
------------
Balance at May 2, 1990 E -
Shares issued for cash 119
Net losses to December 31, 1999 (376)
------------
Balance at December 31, 1999 (257)
Bank fee 806
Net loss for the year (1,314)
------------
Balance at December 31, 2000 (765)
Effect on capital structure resulting from a business combination -
Issuance of stock purchase warrants for bank fee 14,063
Issuance of shares for bank fee -
Issuance of shares for bank fee -
Issuance of shares for cash 2,124
Exercise of stock purchase warrants in repayment of debt 272
Exercise of stock purchase warrants for cash 600
Net loss for the year (15,701)
Translation adjustment 100
------------
Balance at December 31, 2001 693
Exercise of stock options 8
Issuance of stock purchase warrants for bank fee 63
Exercise of stock purchase warrants in repayment of debt 412
Issuance of remaining shares from 2001 business combination -
Net loss for the year (3,622)
Translation adjustment 97
------------
Balance at December 31, 2002 (2,349)
Issuance of shares for services 33
Shares retired -
Issuance of shares for services 112
Issuance of shares for cash 125
Issuance of stock purchase warrants for financing fee 12
Net loss for the year (2,786)
Translation adjustment 453
-------------
Balance at December 31, 2003 E (4,400)
============
The accompanying notes are an integral part of these financial statements.
61
MYMETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2003, 2002 and 2001 and the Period
from May 2, 1990 (Inception) to December 31, 2003
(In Thousands of Euros)
Total
Accumulated
During
Development
Stage
(May 2, 1990 to
December 31,
2003 2002 2001 2003)
---------- ---------- ---------- ---------------
Cash Flows from Operating Activities
Net loss E (2,786) E (3,622) E (15,701) E (23,799)
Adjustments to reconcile net loss to net cash
used in operating activities Amortization 64 64 51 322
Goodwill impairment - 209 - 209
Fees paid in warrants 12 63 14,063 14,138
Services and fees paid in common stock 145 - - 951
Changes in current assets and liabilities
net of effects from reverse purchase
Receivables (41) (10) 53 (62)
Accounts payable 780 16 (508) 934
Taxes and social costs payable (66) 36 (26) 53
Other 119 9 68 155
---------- ---------- ---------- ---------
Net cash used in operating activities (1,773) (3,235) (2,000) (7,099)
Cash Flows from Investing Activities
Patents and other (1) (102) (45) (338)
Short-term investments - 354 (205) -
Cash acquired in reverse purchase - - 13 13
---------- ---------- ---------- ---------
Net cash provided by (used in)
investing activities (1) 252 (237) (325)
Cash Flows from Financing Activities
Proceeds from the issuance of common stock 125 8 2,724 2,976
Borrowings from shareholders - - - 242
Increase in note payable and other
short-term advances 1,138 2,173 116 3,811
Loan fees - - - (130)
---------- ---------- ---------- ---------
Net cash provided by financing activities 1,263 2,181 2,840 6,899
Effect of exchange rate changes on cash 453 97 100 650
---------- ---------- ---------- ---------
Net increase (decrease) in cash (58) (705) 703 125
Cash, beginning of period 183 888 185 -
---------- ---------- ---------- ---------
Cash, end of period E 125 E 183 E 888 E 125
========== ========== ========== =========
The accompanying notes are an integral part of these financial statements.
62
MYMETICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The Company and Summary of Significant Accounting Policies
Basis of Presentation
The amounts in the notes are rounded to the nearest thousand except for per
share amounts.
Mymetics Corporation ("the Company") was created for the purpose of engaging in
research and development of human health products. Its main research efforts
have been concentrated in the prevention and treatment of the AIDS virus. The
Company has established a network which enables it to work with education
centers, research centers, pharmaceutical laboratories and biotechnology
companies.
These financial statements have been prepared treating the Company as a
development stage company. As of December 31, 2003, the Company had not
performed any clinical testing and a commercially viable product is not expected
for several more years. As such, the Company has not generated significant
revenues. Revenues reported by the Company consist of incidental serum
by-products of the Company's research and development activities and interest
income. For the purpose of these financial statements, the development stage
started May 2, 1990.
These financial statements have also been prepared assuming the Company will
continue as a going concern. The Company has experienced significant losses
since inception resulting in a deficit in shareholders' equity of E4,400 at
December 31, 2003. Deficits in operating cash flows since inception have been
financed through debt and equity funding sources. In order to remain a going
concern and continue the Company's research and development activities,
management intends to seek additional funding. Further, the Company has a note
payable amounting to E3,127 which is due June 30, 2004, where there is no
current source of cash to pay it when due. Management is planning to negociate a
further extension of the due date, restructure the note terms or refinance it.
But there can be no assurance that management will be successful in any of these
efforts.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Significant intercompany accounts and transactions have been
eliminated.
Foreign Currency Translation
The Company translates non-Euro assets and liabilities of its subsidiaries at
the rate of exchange at the balance sheet date. Revenues and expenses are
translated at the average rate of exchange throughout the year. Unrealized gains
or losses from these translations are reported as a separate component of
comprehensive income. Transaction gains or losses are included in general and
administrative expenses in the consolidated statements of operations. The
translation adjustments do not recognize the effect of income tax because the
Company expects to reinvest the amounts indefinitely in operations. The
Company's reporting currency is the Euro because a substantial portion of the
Company's activities have been conducted in Europe.
63
Cash
Cash deposits are occasionally in excess of insured amounts. Interest paid was
E176 in 2003, E60 in 2002 and E42 in 2001. The Company has paid no income tax
since its inception.
Revenue Recognition
The Company records the sale of products when the products are delivered and the
Company has only a security interest in the products should a customer default
on payment.
Receivables
Receivables are stated at their outstanding principal balances. Management
reviews the collectibility of receivables on a periodic basis and determines the
appropriate amount of any allowance. Based on this review procedure, management
has determined that the allowances at December 31, 2003 and 2002, are
sufficient. The Company charges off receivables to the allowance when management
determines that a receivable is not collectible.
Goodwill and Other Intangibles
As required, the Company adopted Statement of Financial Standards ("SFAS") No.
142, "Goodwill and Other Intangible Assets," beginning January 1, 2002. Under
this standard, goodwill of a reporting unit and intangible assets that have
indefinite useful lives are not amortized but are tested annually for
impairment. Intangible assets with a finite life are amortized over their
estimated useful lives.
Research and Development
Research and development costs are expensed as incurred.
Taxes on Income
The Company accounts for income taxes under an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax consequences, the
Company generally considers all expected future events other than enactments of
changes in the tax laws or rates.
Earnings per Share
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding in the
period. The weighted average number of shares was 51,285,044 for the year ended
December 31, 2003, 50,045,658 for the year ended December 31, 2002, and
42,459,784 for the year ended December 31, 2001. The weighted average number of
shares for the period May 2, 1990 through December 31, 2003, was 36,520,581.
Diluted earnings per share takes into consideration common shares outstanding
(computed under basic earnings per share) and potentially dilutive securities.
Warrants and options were not included in the computation of diluted earnings
per share because their effect would be anti-dilutive due to net losses
incurred.
64
Stock-Based Compensation
The Company has a stock-based employee compensation plan, which is described
more fully in Note 6. 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. Compensation cost for stock options and
warrants to purchase stock granted to non-employees is measured using the
Black-Scholes valuation model at the date of grant multiplied by the number of
options granted, amortized over the estimated life of the option or warrant.
This compensation cost is recognized ratably over the vesting period. In
accordance with APB No. 25, the Company records compensation costs only for
stock options issued to non-employees. 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.
Total Accumulated
During Development
Stage (May 2, 1990
2003 2002 2001 to December 31, 2003)
---------- ---------- ---------- ---------------------
Net Income (Loss)
- -----------------
As reported E (2,786) E (3,622) E (15,701) E (23,799)
Deduct: Total stock-based employee
compensation expense determined under
fair value based methods for all
awards, net of any related tax effects (27) (72) (221) (320)
---------- ---------- ---------- -------------
Pro forma E (2,813) (3,694) E (15,922) E (24,119)
========== ========== ========== =============
Basic and Diluted Earnings (Loss) Per Share
- -------------------------------------------
As reported E (.05) E (.07) E (.37) E (.65)
Pro forma E (.05) E (.07) E (.38) E (.66)
The fair value of each option granted was estimated for proforma purposes on the
grant date using the Black-Scholes model (use of this model for proforma
purposes is not intended to indicate the value of the Company as a whole). The
assumptions used in calculating fair value are as follows:
2003 2002 2001
--------------- ---------------- ----------------
Risk-free interest rate 4.00% 4.75% 4.5%
Expected life of the options 7 years 7 years 8 years
Expected volatility 164.02%-206.16% 71.10% - 243.12% 63.91% - 160.97%
Expected dividend yield 0% 0% 0%
The issuance of common shares for services is recorded at the quoted price of
the shares on the date the services are rendered.
The Company has offered 2,000,000 common shares to an individual upon acceptance
of an offer as board chairman. The fair value of these shares was approximately
E33 at December 31, 2003. These shares have not been considered issued for
purposes of these financial statements.
65
Estimates
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to the 2002 financial statement
amounts in order for them to conform to current year presentation.
New Accounting Standards
Statement of Financial Accounting Standards ("SFAS") No. 147 gives guidance on
accounting for the acquisition of financial institutions (effective for
acquisitions on or after October 1, 2002). SFAS No. 148 clarifies treatment of
stock-based compensation (effective for fiscal years ending after December 15,
2002). SFAS No. 149 amends existing standards on derivatives (effective for
derivatives entered into or modified after June 30, 2003). SFAS No. 150 gives
guidance on the accounting for certain financial instruments with
characteristics of both liabilities and equity (effective for financial
instruments entered into after May 31, 2003). Financial Accounting Standards
Board Interpretation No. 46 requires consolidation of certain variable interest
entities (effective for fiscal years ending after December 15, 2003). These new
standards do not have an effect on the Company's consolidated financial
statements.
Note 2. Receivables
2003 2002
--------- ----------
Trade receivables (including E23 from a
shareholder in 2003 and 2002) E 37 E 37
Value added tax 72 41
Other 20 15
-------- ----------
129 93
Allowance for doubtful accounts (including
E23 from a shareholder in 2003 and 2002) (29) (34)
-------- ----------
E 100 E 59
======== ==========
Note 3. Goodwill and Other Intangible Assets
Prior to January 1, 2002, the Company was amortizing goodwill over a five-year
period. In accordance with current accounting standards, goodwill is not to be
amortized beginning January 1, 2002. Goodwill was acquired during 2001 at a cost
of E247 and amortization amounted to E38 for the year ended December 31, 2001.
Had goodwill not been amortized in 2001, net loss would have amounted to
E(15,663) and basic and diluted loss per share would not have changed. No
additional acquisitions have occurred. Based on a review of the fair value of
the Company's only reporting unit at December 31, 2002, management has
determined that the goodwill is fully impaired. Accordingly, an impairment loss
was recorded in the 2002 statement of operations.
Other intangible assets consist of patents which are stated at cost of the fees
paid to the French patent office. At December 31, 2003 and 2002, the carrying
amount of patents was E136 and E199 net of accumulated amortization of E189 and
E125, respectively. Amortization expense relating to patents was E64, E64 and
E13 for 2003, 2002 and 2001, respectively. Amortization expense is expected to
amount to E64 during each of the next two years and E8 during 2006, which will
completely amortize this asset.
66
Note 4. Transactions With Affiliates
During 2000, the Company agreed to pay a fee in common stock to MFC Merchant
Bank SA ("MFC Bank") for services provided in a business combination
transaction. The parent of MFC Bank is a shareholder of the Company. The common
shares were not issued in 2000. The fair value of the shares at the measurement
date, amounting to E806 (which may not be indicative of the value of the Company
as a whole), was included in additional paid-in capital at December 31, 2000. In
2001, a total of 2,025,144 common shares were issued to MFC Bank which resulted
in E24 being reclassified to common stock based on the par value of the shares.
The Company has a non-revolving term credit facility with MFC Bank which allowed
the Company to borrow up to E3,150 at LIBOR plus 4% (approximately 6.1 % at
December 31, 2003) repayable on June 30, 2004, as extended, collateralized by
all of the Company's assets plus any future patents. The Company owed E3,127 and
E1,989 under this facility as of December 31, 2003 and 2002, respectively. The
fair value of this note approximates carrying value because the note is
short-term and has a market rate of interest.
The Company incurred fees of E37 and E155 to MFC Bank in 2003 and 2002,
respectively, related to management services.
In March 2001, the Company granted warrants under the agreements with MFC Bank
which entitled MFC Bank to purchase 6,001,693 of the Company's common shares.
The warrants allowed MFC Bank to convert to shares an amount equal to the
maximum of the credit facility including unpaid interest plus the arrangement
and retainer fees. The warrants are exercisable within a three-year period
beginning August 2000 at approximately E.2319 per common share. The fair value
of the beneficial conversion feature amounting to E14,063 (which may not be
indicative of the value of the Company as a whole) was calculated on March 28,
2001, the grant date, using the Black-Scholes model. This amount was recorded as
paid-in capital of E14,063 and allocated to bank fee expense in 2001. During
2001, MFC Bank 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
also exercised warrants to acquire 3,250,000 common shares for cash in 2001. In
2002, the Company granted 26,775 additional warrants under the original
agreements with MFC Bank. The fair value of the beneficial conversion feature on
these warrants was calculated using the Black-Scholes model which amounted to
E63. This amount was recorded as paid-in capital of E63 and allocated to bank
fee expense in 2002. During 2002, MFC Bank exercised the remaining warrants to
acquire 1,602,174 common shares. This resulted in a decrease of E372 due on the
revolving term credit facility with MFC Bank. This is a non-cash transaction for
purposes of the statement of cash flows.
In June 2001, the Company issued additional warrants to MFC Bank to purchase
103,559 common shares at U.S. $1.725 per share exercisable during a three-year
period. These warrants were issued in connection with MFC Bank's placement of
1,333,333 of the Company's common shares. The warrants were valued at E118 based
on the fair value of the placement fees rendered and was a cost of the
placement. In 2002, MFC Bank exercised warrants to acquire 23,393 common shares.
This resulted in a decrease of E40 due on the revolving term credit facility
with MFC Bank. This is a non-cash transaction for purposes of the statement of
cash flows.
In July 2003 the Company sold a nonoperating subsidiary to an affiliate of MFC
Bank for cash of E25, resulting in no gain or loss.
The amounts payable to shareholders bear no interest, have no collateral, and
are repayable upon the Company becoming profitable. Since the timing of the
Company becoming profitable cannot be determined, the fair value of the amounts
payable to shareholders cannot be determined. The Company is not expected to
become profitable in the near-term, therefore, the amounts payable to
shareholders have been classified as long-term.
During 2003 and 2002, the Company incurred fees to its Chairman of E239 and E275
for consulting from a company owned by him, and E27 in 2001 from a company owned
by the former Chief Financial Officer of the Company. Accounts payable at
December 31, 2002, includes E23 of these fees.
67
Note 5. Income Taxes
The reconciliation of income tax on income computed at the federal statutory
rates to income tax expense is as follows:
2003 2002 2001
--------- ---------- ----------
U.S. Federal statutory rates on loss from
operations E (947) E (1,231) E (5,338)
Nondeductible fee paid in warrants and common
stock 50 21 4,781
Effect of exchange rate changes on
U.S. net operating loss
carryforward 242 101 -
Change in valuation allowance 582 1,114 514
Other 73 (5) 43
--------- ---------- ----------
Income tax expense E - E - E -
========= ========== ==========
Deferred tax asset is composed of the following:
2003 2002
----------- ----------
Difference in book and tax basis of amounts payable to shareholder E 82 E 82
Net operating loss carryforwards
United States 1,373 1,063
France 787 515
----------- ----------
2,242 1,660
Less valuation allowance for deferred tax asset (2,242) (1,660)
----------- ----------
Net deferred tax asset E - E -
=========== ==========
The Company's provision for income taxes was derived from U.S. and French
operations. At December 31, 2003, the Company had estimated net operating loss
carryforwards which expire as follows:
United States France
------------- -----------
2004 E - E -
2005 - 94
2006 - 381
2007 - 1,039
2008 - 801
2021-2023 4,038 -
--------- ----------
E 4,038 E 2,315
========== ==========
68
Note 6. Stock Option Plans
1994 Amended Stock Option Plan
The Company's 1994 stock option plan provided for the issuance of up to 350,000
shares of the Company's common stock to employees and non-employee directors.
The plan was terminated during 2002. The following table summarizes information
with respect to this plan:
Weighted
Average
Number of Shares Exercise Price
---------------- ----------------
Outstanding and exercisable at December 31, 2001 73,750 U.S. $ .82
======
Exercised in 2002 (10,000)
--------
Outstanding and exercisable at December 31, 2003 and 2002 63,750 U.S. $ .83
======== =======
Reserved for future grants at December 31, 2003 -
========
1995 Qualified Incentive Stock Option Plan
The Company's board of directors approved a stock option plan on August 15, 1996
which provided for the issuance of up to 150,000 shares of the Company's common
stock to key employees. The plan was terminated during 2002. The following table
summarizes information with respect to this plan:
Weighted
Average
Number of Shares Exercise Price
---------------- ----------------
Outstanding and exercisable at December 31, 2003, 2002 and 2001 100,000 U.S. $ .75
======== =======
Reserved for future grants at December 31, 2003 -
========
69
2001 Qualified Incentive Stock Option Plan
The Company's board of directors approved a stock option plan on June 15, 2001,
which provides for the issuance of up to 5,000,000 shares of the Company's
common stock to employees and non-employee directors. The weighted average fair
value of these options at the grant dates were E.12, E.62 and E2.24 per option
in 2003, 2002 and 2001, respectively. The following table summarizes information
with respect to this plan:
Weighted
Average
Number of Shares Exercise Price
----------------- ----------------
Granted in 2001 100,000 U.S. $ 2.86
----------
Outstanding and exercisable at December 31, 2001 100,000 U.S. $ 2.86
========
Granted in 2002 117,500 U.S. $ .99
----------
Outstanding and exercisable at December 31, 2002 217,500 U.S. $ 1.83
========== ========
Granted in 2003 225,000 U.S. $ .14
----------
Outstanding and exercisable at December 31, 2003 442,500 U.S. $ .97
Reserved for future grants at December 31, 2003 4,557,500
==========
Almost all options have an expiration date ten and a half years after issuance.
Note 7. Commitments and Contingencies
The Company leases property under noncancelable operating leases through January
2006. Future minimum lease payments under noncancelable operating leases are as
follows:
2004 E 7
2005 7
2006 1
------
E 15
======
Total rent expense per year was E24 for 2003, E30 for 2002 and E7 for 2001.
The Company is involved in various matters of litigation arising in the ordinary
course of business. In the opinion of management, the estimated outcome of such
issues will not have a material effect on the Company's financial statements.
Note 8. Subsequent events
In January 2004, the Company issued a total of 2,000,000 common shares to two
investors for cash of E166. In February 2004, the Company issued 2,500,000
common shares to an investor for cash of E208. As part of this new financing,
the Company also issued warrants entitling the investors to acquire an
additional 4,500,000 common shares at a price of $.10 per share. The total fair
value of these warrants at the grant dates was E102. All warrants expire July
31, 2004.
70
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on March 30, 2004.
Mymetics Corporation
By: /s/ Christian J. F. Rochet
-------------------------------
Name: Christian J. F. Rochet
Title: Chief Executive Officer
POWERS OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Ernst Luebke as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments to this Annual
Report on From 10-K, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the U.S. Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacity and on March 29, 2004.
Signature Title
--------- -----
/s/ Christian J.F. Rochet Chief Executive Officer and
--------------------------- Director (Principal Executive
Christian J.F. Rochet Officer)
/s/ Ernst Luebke Chief Financial Officer and
--------------------------- Director (Principal Financial and
Ernst Luebke Accounting Officer)
/s/ Pierre-Francois Serres Director
---------------------------
Pierre-Francois Serres
/s/ Robert Zimmer Director
---------------------------
Robert Zimmer
71
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
2.1 Share Exchange Agreement dated December 13, 2001 between the
Corporation and the stockholders of Mymetics S.A. listed on the
signature page thereto (1)
2.2 Share Exchange Agreement dated December 13, 2001 between the
Corporation and the stockholders of Mymetics S.A. listed on the
signature page thereto (1)
2.3 Purchase Agreement dated October 17, 1998 between the Corporation
and the majority stockholders of Nazca Holdings Ltd. (2)
2.4 Amendment to the Agreement dated October 17, 1998 between the
Corporation and the majority stockholders of Nazca Holdings Ltd.
(3)
2.5 Revised Purchase Agreement dated July 28, 1999 between the
Corporation and the majority stockholders of Nazca Holdings Ltd.
(4)
2.6 Share Exchange Agreement dated July 30, 2002 between the
Corporation and the stockholders of Mymetics S.A. listed on the
signature page thereto (5)
3(i) Articles of Incorporation of the Corporation (as amended through
May 10, 2002) (6)
3(ii) Bylaws (7)
4.1 Form of Specimen Stock Certificate (8)
4.2 Form of letter regarding Warrant
4.3 Form of Share Exchange Agreement
9.1 Voting and Exchange Trust Agreement dated March 28, 2001, among
the Corporation, 6543 Luxembourg S.A. and MFC Merchant Bank S.A.
(8)
10.1 Services Agreement dated May 31, 2001, between the Corporation
and MFC Merchant Bank, S.A.(7)
10.2 Employment Agreement dated May 3, 2001, between Pierre-Francois
Serres and the Corporation (7)
10.3 Indemnification Agreement dated March 28, 2001, between the
Corporation and MFC Bancorp Ltd. (7)
10.4 Agreement dated for reference May 15, 2000, between the
Corporation and Maarten Reidel (7)
72
10.5 Preferred Stock Redemption and Conversion Agreement dated for
reference December 21, 2000, between the Corporation and Sutton
Park International Ltd. (10)
10.6 Preferred Stock Conversion Agreement dated for reference December
21, 2000, between the Corporation and Med Net International Ltd.
(11)
10.7 Preferred Stock Conversion Agreement dated December 21, 2000,
between the Corporation and Dresden Papier GmbH (11)
10.8 Assignment Agreement dated December 29, 2000, among the
Corporation, Mymetics S.A. and MFC Merchant Bank S.A. (1)
10.9 Credit Facility Agreement dated July 27, 2000, between MFC
Merchant Bank, S.A. and the Corporation (1)
10.10 Amended Credit Facility Agreement dated for reference August 13,
2001, between MFC Merchant Bank, S.A. and the Corporation (16)
10.11 Second Amended Credit Facility Agreement dated for reference
February 27, 2002, between MFC Merchant Bank, S.A. and the
Corporation (16)
10.12 Amended and Restated Credit Facility Agreement dated for
reference February 28, 2003, among MFC Merchant Bank, S.A., MFC
Bancorp Ltd., and the Corporation (16)
10.13 Guarantee dated for reference February 28, 2003, by MFC Bancorp
Ltd. to MFC Merchant Bank S.A. (16)
10.14 Shareholder Agreement dated March 28, 2001, among the
Corporation, the Holders of Class B Exchangeable Preferential
Non-Voting Shares of 6543 Luxembourg S.A. signatory thereto and
6543 Luxembourg S.A.(8)
10.15 Support Agreement dated March 28, 2001, between the Corporation
and 6543 Luxembourg S.A. (8)
10.16 1995 Qualified Incentive Stock Option Plan (12)
10.17 Amended 1994 Stock Option Plan (13)
10.18 2001 ICHOR Corporation Stock Option Plan (7)
10.19 Employment Agreement dated March 18, 2002, between the
Corporation and Peter P. McCann (14)
10.20 Consulting Agreement dated August 31, 2001, between the
Corporation and Michael K. Allio (8)
10.21 Amendment to Consulting Agreement dated August 21, 2002, between
the Corporation and Michael K. Allio (16)
10.22 Employment Agreement dated March 18, 2002, between the
Corporation and Dr. Joseph D. Mosca (15)
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10.23 Separation Agreement and Release dated January 31, 2003, between
the Corporation and Peter P. McCann (16)
10.24 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Corporation and Robert Demers (8)
10.25 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Corporation and Michael K. Allio (8)
10.26 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Corporation and John M. Musacchio (8)
10.27 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Corporation and Patrice Pactol (8)
10.28 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Corporation and Pierre-Francois Serres (8)
10.29 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and Pierre-Francois Serres (16)
10.30 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and Patrice Pactol (16)
10.31 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and Robert Demers (16)
10.32 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and John M. Musacchio (16)
10.33 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and Michael K. Allio (16)
10.34 Director and Non-Employee Stock Option Agreement dated August 21,
2002, between the Corporation and Michael K. Allio (16)
10.35 Director and Non-Employee Stock Option Agreement dated June 20,
2002, between the Corporation and Peter P. McCann (16)
10.36 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and Peter P. McCann (16)
10.37 Director and Non-Employee Stock Option Agreement dated February
6, 2003, between the Corporation and Peter P. McCann (16)
10.38 Patent Pledge Agreement dated November __, 2002 among Mymetics
S.A., Mymetics Deutschland GmbH, the Corporation and MFC Merchant
Bank S.A. (16)
11.1 Statement Regarding Calculation of Per Share Earnings.
21.1 List of Subsidiaries
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24.1 Powers of Attorney (included on the signature page hereto)
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) or 15d-14 of the Securities Exchange Act of 1934
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) or 15d-14 of the Securities Exchange Act of 1934
32.1 Section 1350 Certification of Chief Executive Officer and Chief
Financial Officer
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(1) Incorporated by reference to the Corporation's Schedule 14C filed with
the Securities and Exchange Commission on April 26, 2001.
(2) Incorporated by reference to the Corporation's report on Form 8-K filed
with the Securities and Exchange Commission on October 22, 1998.
(3) Incorporated by reference to the Corporation's report on Form 8-K/A
filed with the Securities and Exchange Commission on April 15, 1999.
(4) Incorporated by reference to the Corporation's report on Form 8-K/A
filed with the Securities and Exchange Commission on August 13, 1999.
(5) 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.
(6) Incorporated by reference to the Corporation's report on Form 10-Q for
the quarter ended March 31, 2002, filed with the Securities and Exchange
Commission on May 15, 2002.
(7) Incorporated by reference to the Corporation's report on Form 10-Q for
the quarter ended June 30, 2001, filed with the Securities and Exchange
Commission on August 14, 2001.
(8) Incorporated by reference to the Corporations Registration Statement on
Form S-1, File No. 333-88782, filed with the Securities and Exchange
Commission on May 22, 2002.
(9) Incorporated by reference to the Corporation's report on Form 8-K/A
filed with the Securities and Exchange Commission on August 9, 2000.
(10) Incorporated by reference to Schedule 13D/A filed by MFC Bancorp Ltd.
with the Securities and Exchange Commission on dated January 2, 2001.
(11) Incorporated by reference to the Corporation's report on Form 10-K for
the fiscal year ended December 31, 2000, filed with the Securities and
Exchange Commission on March 14, 2001.
(12) Incorporate by reference to the Corporation's Registration Statement on
Form S-8, File No. 333-15831, filed with the Securities and Exchange
Commission on November 8, 1996.
(13) Incorporated by reference to the Corporation's Registration Statement
on Form S-8, File No. 333-15829, filed with the Securities and Exchange
Commission on November 8, 1996.
75
(14) Incorporated by reference to the Corporation's report on Form 10-K for
the fiscal year ended December 31, 2001, and filed with the Securities
and Exchange Commission on March 29, 2002.
(15) Incorporated by reference to the Corporation's report on Form 10-Q for
the quarter ended March 31, 2002, filed with the Securities and Exchange
Commission on May 15, 2002.
(16) Incorporated by reference to the Corporation's report on Form 10-K for
the fiscal year ended December 31, 2002, filed with the Securities and
Exchange Commission on March 27, 2003.
76