FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For the year ended December 31, 2002
Commission File Number: 001-12033
Nymox Pharmaceutical Corporation
9900 Cavendish Blvd., St. Laurent, QC, Canada, H4M 2V2
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F:
Form 20-F X Form 40-F
----- -----
Indicate by check mark if the registrant is submitting Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(l): ___
Indicate by check mark if the registrant is submitting Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): ___
Indicate by check mark whether by furnishing the information contained in
this Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
----- -----
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):
82-______________
CORPORATE PROFILE
Nymox Pharmaceutical Corporation is a biotechnology company with three unique
proprietary products on the market, and a significant R&D pipeline of products
in development. Nymox is a leader in the research and development of products
for the diagnosis and treatment of Alzheimer's disease, an affliction of more
than 15 million people around the world. Nymox developed and is currently
offering its AlzheimAlert(TM) test, a CLIA certified reference laboratory
urinary test that is the world's only accurate, non-invasive aid in the
diagnosis of Alzheimer's disease. Nymox also developed and markets NicAlert(TM)
and NicoMeter(TM), tests that use urine or saliva to detect use of and exposure
to tobacco products. In October 2002, NicAlert(TM) received clearance from the
U.S. Food and Drug Administration (FDA). Nymox also is developing treatments
aimed at the causes of Alzheimer's disease. One program targets spherons, which
Nymox researchers believe are a source of the senile plaques found in the brains
of patients with Alzheimer's disease. Another distinct program targets the brain
protein (neural thread protein) detected by its AlzheimAlert(TM) test and
implicated in widespread brain cell death seen in Alzheimer's disease. In 2002,
Nymox was issued an important U.S. patent for the use of statin drugs for the
treatment and prevention of Alzheimer's disease. Nymox is developing new
antibacterial agents for the treatment of urinary tract and other bacterial
infections in humans and for the treatment of E. coli O157:H7 contamination in
meat and other food and drink products. Nymox is developing NX-1207, a novel
treatment for benign prostatic hyperplasia. The Company filed an Investigational
New Drug application with the FDA in 2002, and has begun the Phase I stage U.S.
clinical testing of NX-1207 in humans. Nymox also has several other drug
candidates and diagnostic technologies in development.
TABLE OF CONTENTS
Corporate Information .........................................................2
Message to Shareholders .......................................................3
Management's Discussion and Analysis..........................................10
Management's Report ..........................................................14
Auditor's Report to the Shareholders .........................................16
Consolidated Balance Sheets ..................................................18
Consolidated Statements of Operations ........................................19
Consolidated Statements of Deficit ...........................................20
Consolidated Statements of Cash Flows.........................................21
Notes to Consolidated Financial Statements ...................................22
1
CORPORATE INFORMATION
Directors & Corporate Officers
------------------------------
Paul Averback, M.D., D.A.B.P. - C.E.O., President and Chairman
Roy M. Wolvin - Secretary-Treasurer
Michael Munzar, M.D. - Medical Director
Jack Gemmell, LL.B. - General Counsel and Director
Hans Black, M.D. - Director
Michael Sonnenreich, J.D. - Director
Prof. Walter von Wartburg - Director
Auditors KPMG LLP
Legal Counsel Foley & Lardner
Transfer Agent Computershare Investor Services
Bankers CIBC / Bank of America
Stock Exchange Listings The NASDAQ Stock Market
Stock Trading Symbol NASDAQ - NYMX
Operating Facilities 9900 Cavendish Blvd.
St.-Laurent, PQ, Canada H4M 2V2
230 West Passaic St.
Maywood, NJ, USA, 07607
Website www.nymox.com
E-mail info@nymox.com
Investor Relations Sitrick and Company
2
MESSAGE TO SHAREHOLDERS
Nymox is pleased to present its audited financial statements for its fiscal year
ended December 31, 2002.
Nymox offers a proprietary product called AlzheimAlert(TM), which is a state of
the art urine test designed to aid physicians in the diagnosis of Alzheimer's
disease. AlzheimAlert(TM) is Nymox's unique patented urinary test for neural
thread protein, a key protein involved in the Alzheimer's disease process. We
are in the early stages of making the tests available to doctors throughout the
U.S. through a medical field force of over 60 medical representatives. The test
costs $295 and is performed by the company's clinical reference laboratory in
New Jersey.
On January 30, Scientists at Nymox announced that a significant new study had
underlined the importance of the Company's emerging diagnostic technology for
Alzheimer's disease. The independent study involved 150 patients and over 100
physicians from across the U.S. Each patient received an AlzheimAlert(TM) test,
and their clinical evolution was subsequently followed by their physician. The
AlzheimAlert(TM) test results were independently documented and compared with
the diagnosis after up to a year's follow-up. The results demonstrated a high
accuracy and usefulness for the AlzheimAlert(TM) test as an aid to physicians.
On March 14, Nymox announced that the Company's AlzheimAlert(TM) urine test will
be used in a study on nutrition, cognitive functioning, dementia and Alzheimer's
disease being conducted by researchers at the Jean Mayer USDA Human Nutrition
Research Center on Aging at Tufts University. On April 2, Nymox announced that
the company anticipates a positive impact from the change in Medicare policy to
authorize coverage for the treatment of Alzheimer's disease. The change was
first reported in a front page story in the Sunday, March 31st New York Times.
Diseases which are covered under Medicare need to be optimally diagnosed. The
same holds true for Alzheimer's disease, but poses considerable problems, which
may be alleviated by the use of AlzheimAlert(TM).
On April 16, Nymox announced the publication of a large new national clinical
study in Alzheimer's Reports, a peer-reviewed medical journal, providing further
confirmation of the accuracy and efficacy of the company's AlzheimAlert(TM)
urinary test. The article contained the results of a successful double-blind
study involving Alzheimer's disease patients and controls totaling 139
participants from across the U.S. Each patient received an AlzheimAlert(TM)
test, and their clinical evolution was subsequently followed by their physician.
The AlzheimAlert(TM) test results were independently documented and compared
with the diagnosis after up to a year's follow-up. The results demonstrated
again the high accuracy and usefulness for the AlzheimAlert(TM) test as an aid
to physicians. The findings also confirmed that later stage Alzheimer cases had
higher levels on their AlzheimAlert(TM) tests than earlier stage cases. The
study was co-authored by Dr. Suzanna Levy of Mount Sinai School of Medicine, New
York; Dr. Robert Rush of Bendiner & Schlesinger, New York; and Nymox scientists.
On May 7, scientists from Nymox presented new positive results from clinical
studies of the Company's AlzheimAlert(TM) test at the 2002 Annual Scientific
Meeting of the American
3
Geriatrics Society in Washington DC. The studies demonstrated the accuracy of
the AlzheimAlert(TM) test in real clinical situations. The studies showed that
AlzheimAlert(TM) levels correlate with the stage of the patient's Alzheimer's
disease: patients who had shown clinical signs of Alzheimer's disease for more
than a year had significantly higher AlzheimAlert(TM) readings than patients
with clinical signs of AD of less than a year, and significantly higher readings
than age-matched normal controls. The AlzheimAlert(TM) test was performed on 144
cases of Alzheimer's Disease and non-Alzheimer control cases. All samples were
tested in triplicate without knowledge of the clinical diagnosis. Patients with
clinical Alzheimer's Disease and symptoms for over one year had average
AlzheimAlert(TM) values of 34 units, significantly greater than patients with
symptoms of under one year, who had an average value of 25.2 units, and controls
(average 14.3 units).
On July 23, Nymox announced that recent scientific studies were providing a
significant new link between NTP, the brain protein detected by the Nymox
AlzheimAlert(TM) urine test, and key aspects of the Alzheimer's disease process.
The studies were conducted at Brown University by Dr. Suzanne de la Monte and
colleagues and were presented at the 8th International Conference on Alzheimer's
Disease and Related Disorders held in Stockholm, Sweden. In the studies, the
role of AD7c-NTP in AD neurodegeneration was characterized in neuronal cells in
culture. Dr. de la Monte and colleagues at Brown University examined NTP
expression, cell viability, and gene expression. They found that AD7c-NTP, the
specific protein measured in the AlzheimAlert(TM) test, was particularly
associated with the accumulation of harmful protein complexes in the dying nerve
cells associated with the neurodegeneration of AD. Phospho-tau is the main
component of neurofibrillary tangles, one of the hallmarks of AD. These new
results point to an important connection of NTP to phospho-tau accumulation in
Alzheimer's disease.
On July 29, Nymox announced that positive results of a successful clinical study
of the Company's AlzheimAlert(TM) test were presented at the 54th Annual Meeting
of the American Association for Clinical Chemistry. Michael Munzar MD, the
Medical Director of Nymox, presented the paper on the study.
On March 7, Nymox announced results from a highly successful study of its
NicAlert(TM) product in children exposed to environmental tobacco smoke (ETS)
("second hand smoke"). ETS is a major health problem associated with lung
cancer, respiratory and cardiovascular disease. Exposure to ETS may occur in the
home, in the workplace, in social settings and in public places. As a public
health measure, NicAlert(TM) is useful for all children to detect important risk
such as wheezing, coughing, asthma, allergy, and airway obstruction in
association with repeated school absence, and increased physician visits and
infections. It is the only quantitative single step test available for ETS
exposure. In the study, NicAlert(TM) readings were compared in smokers,
non-smokers, adults exposed to second hand smoke, and children with smoking or
non-smoking adults in the household. The study found that NicAlert(TM) testing
of urine could detect smoke exposure in children with smokers in their homes and
distinguish these individuals from those with a smoke-free environment.
On April 4, Nymox announced that NicAlert(TM) can play a role in child custody
cases where exposure to second-hand smoke or environmental tobacco smoke (ETS)
can affect access,
4
visitation and custody rights for smoking parents. In a recent, widely reported
decision, New York Supreme Court Justice Robert F. Julian prohibited a mother
from smoking in the presence of her 13 year old son because of the detrimental
effect of second-hand smoke on the health of children in general. The decision
was thought to be a first because, unlike earlier such decisions, the child did
not have any pre-existing health condition such as asthma that could be
exacerbated by exposure to second-hand smoke.
On April 18, Nymox announced that recently released statistics from the Centers
for Disease Control and Prevention (CDC) on the premature deaths caused by
smoking in the United States provide smokers with a powerful incentive to quit
smoking. Nymox's NicAlert(TM) and NicoMeter(TM) tests for smoking and tobacco
product exposure can be of value to smokers willing to quit. The CDC report
entitled "Annual Smoking-Attributable Mortality, Years of Potential Life Lost,
and Economic Costs -- United States, 1995-1999" (Morbidity and Mortality Weekly
Report (MMWR), 51(14): 300-303, April 12, 2002) estimated that smoking caused
over 440,000 premature deaths annually from 1995 through 1999 in the United
States. The report put the annual health-related economic loss caused by smoking
at approximately $157 billion a year. The report reiterated the CDC's
long-standing recommendation of the implementation of comprehensive
tobacco-control programs in order to reduce smoking and its grim consequences.
On August 15, Nymox announced that its NicAlert(TM) test had been found "to be
an invaluable part" of the innovative, on-site tobacco cessation programs run by
the Wellness Council of West Virginia that promote tobacco cessation and
restriction for employees at their work sites. The Wellness Council of West
Virginia runs the Worksite Wellness Tobacco Policy Program under a grant
provided by the West Virginia Tobacco Prevention Program. According to Debbie
Marion, Program Director of the Worksite Wellness Tobacco Policy Program, they
have successfully used NicAlert(TM) on-site in order to provide "a concrete
example to individual tobacco users of the presence of nicotine in their
bodies." This "in turn makes them more receptive to cessation counseling at that
point. In addition, we have found NicAlert to be useful in raising awareness of
environmental smoke exposure issues at many sites," said Debbie Marion. "Many of
our companies find these demonstrations to be useful in facilitating an
atmosphere conducive to tobacco cessation and tobacco restriction
implementation. One of our most dramatic examples of the effectiveness of these
NicAlert demonstrations is from our experience with one of the largest law firms
in our state. As a result of our attendance and NicAlert demonstration at their
employee health fair, the company took immediate action to close the employee
smoking room. This response was due to a non-smoker's NicAlert(TM) results, and
subsequent concerns addressed to management." The Wellness Council said they
have been receiving almost daily requests about NicAlert(TM) from other health
agencies, businesses and organizations.
New guidelines for the prevention of heart disease and stroke recommend no
exposure to tobacco smoke, including ETS (second-hand smoke). The recommendation
of no exposure to tobacco smoke contained in the American Heart Association
Guidelines for Primary Prevention of Cardiovascular Disease and Stroke: 2002
Update is the latest in a series of research studies and practice guidelines
linking second-hand smoke exposure to increased risk of heart disease and
stroke. Second-hand smoke is also a known human carcinogen
5
according to the National Institute of Environmental Health Sciences. In
response to these public health concerns, there has been a growing movement
among municipalities and states to ban smoking in the workplace, restaurants and
bars and other public places. Physicians should routinely assess, review and
document the smoking status of every patient, according to A Clinical Practice
Guideline for Treating Tobacco Use and Dependence (JAMA 2000; 283:3244-54)
issued by the U.S. Public Health Service and formal policy positions adopted by
the American Medical Association, the American Heart Association, the American
Academy of Family Physicians, the American Diabetes Association and other
medical associations. Studies have shown that a significant percentage of
patients at risk do not always truthfully report their smoking status.
On September 12, Nymox announced that the Company is pursing marketing
opportunities and initiatives for its products through its new partner,
Health4u, an innovative marketing company based in Allschwil near Basel,
Switzerland. Health4u is a patient-oriented marketing services company,
specializing in innovative approaches to healthcare and quality of life issues
(info@health4u.ch; www.health4u.ch). The Managing Partner of Health4u AG is
Jorge Wernli, a former senior marketing executive at Ciba-Geigy (Novartis).
Nymox and Health4u have developed a website for NicAlert(TM) (www.nicalert.ch)
and have launched NicAlert(TM) in Switzerland.
On September 16, Nymox announced that its tobacco exposure test, NicAlert(TM),
was used in a nationwide stop-smoking campaign in Switzerland. The Swiss
campaign, "let it be," is jointly run by the Swiss Federal Office of Public
Health, the Swiss Association for Smoking Prevention, the Swiss League Against
Cancer and the Swiss Lung Association. NicAlert(TM) was used to test the winners
of a month-long stop-smoking contest that awarded prizes ranging from CHF 500
($340) to CHF 5000 ($3400) to some of the over 4,000 people who participated.
On September 18, Nymox announced that its NicAlert(TM) test is being used in
large studies at the Lung-Center Hirslanden in Zurich, Switzerland. Dr. Karl
Klingler from the Lung-Center Hirslanden Zurich, Switzerland, said "Effective
smoking cessation and/or reduction is the single most important intervention in
medicine to improve public health and reduce healthcare cost. Among the top 10
diseases listed by WHO, lung cancer and COPD (Chronic Obstructive Pulmonary
Disease) are strongly related to smoking with increasing incidence in the
smoking and non-smoking population". Dr. Klingler added, "Accurate measurement
is a key success factor to achieve objectives in an effective way: NicAlert and
Nicometer have proven to be cost-effective, easy-to-use point-of care devices on
the road to stop and/or reduce the population's exposure to tobacco smoking".
On October 1, Nymox announced that a newly published peer-reviewed independent
study reported in the current issue of Nicotine & Tobacco Research found the
company's Nicometer(TM) product for tobacco exposure accurate and
cost-effective. According to the article, Nymox's Nicometer(TM) is "promising as
an inexpensive and rapid method to routinely biochemically confirm smoking
status at a clinical visit." The authors describe Nicometer(TM) as "a simple,
inexpensive and rapid measure to immediately confirm smoking status in field
settings." The authors of the study entitled "The Accuracy of Self-Reported
Smoking Status
6
Assessed by Cotinine Test Strips" (Nicotine & Tobacco Research 2002; 4: 305-9)
were Donna R. Parker, ScD, and Thomas M Lasater, PhD, Brown University School of
Medicine; Richard Windsor, PhD, MPH, George Washington University Medical
Center; Jeff Wilkins, MD, Greater Los Angeles VA Healthcare Center, David
Upegui, BA, Memorial Hospital of Rhode Island; and James Heimdal, PhD, The
Hoffman Heart Institute, Saint Francis Hospital and Medical Center, Hartford,
CT. Nicotine & Tobacco Research is the official journal for the Society for
Research on Nicotine and Tobacco. The study measured cotinine levels in urine
samples from 256 subjects using Nicometer(TM) and gas chromatography. Cotinine
is a major metabolite of nicotine widely regarded as the best biochemical marker
for tobacco use and exposure. The study found that Nicometer(TM) accurately
determined the smoking status of over 97% of the smokers and 95% of the
non-smokers at a cutoff of 250 ng/mL. The study also found good agreement
between Nicometer(TM) and the considerably more complex, expensive and
time-consuming laboratory method of gas chromatography. The study used an
earlier version of Nicometer(TM).
On October 17, Nymox announced that an independent study of patients at the
University of Pennsylvania Cancer Center Group found that the company's
Nicometer(TM) product was "easy to use", "relatively inexpensive", and "a valid
method for confirming smoking status." The peer-reviewed study found that the
Nicometer(TM) results had an "excellent agreement" with complex laboratory
chemical measurements but at a substantially lower cost (over 90% less). In the
study, researchers used Nicometer(TM) and gas chromatography/mass spectrometry
(GC/MS) to test urine samples given by consecutive new outpatients at the
Hospital of the University of Pennsylvania in order to verify self-reported
smoking status. Smokers may not always be reliable in reporting smoking status,
particularly where they feel strong pressure to quit but are unable to do so.
The study found that Nicometer(TM) detected 100% of the self-reported smokers;
and over 96% of the non-smokers as well as a number of lung cancer patients who
had misrepresented their non-smoking status. Overall, the study found that some
15% of the lung cancer patients had incorrectly reported that they were not
smoking. The study was supported by a grant from the American Cancer Society.
The study, "Validating a Dipstick Method for Detecting Recent Smoking," was
published in the prestigious peer-reviewed journal, Cancer Epidemiology,
Biomarkers & Prevention (2002; 11: 1123-1125) and was authored by Peter Gariti
of the University of Pennsylvania Cancer Center Group, Philadelphia Veterans
Affairs Medical Center and the Univ. of Pennsylvania School of Medicine, David
I. Rosenthal of the M.D. Anderson Cancer Center in Houston, Kathleen Lindell of
the University of Pittsburgh and John Hansen-Flaschen, Joseph Shrager, Craig
Lipkin, Arthur I. Alterman and Lawrence R. Kaiser of the University of
Pennsylvania School of Medicine. Cancer Epidemiology, Biomarkers & Prevention is
published by the American Association for Cancer Research.
On October 23, Nymox announced that its NicAlert(TM) product had received
clearance from the U. S. Food and Drug Administration (FDA).
On October 25, Nymox announced that it had entered into a new sales and
marketing agreement with Mizuho Medy Co. Ltd. of Japan for the non-exclusive
marketing and sale of NicAlert(TM) in Japan.
7
On December 11, Nymox announced that new studies had demonstrated an expanded
role for NicAlert(TM). New multi-center clinical trials showed that NicAlert(TM)
accurately identifies and quantifies second-hand smoke exposure. The new studies
were performed at Clinical Research Centers of Tennessee, led by Wayne Wells MD,
and at West Virginia University, led by Dr. Norman Montalto.
On December 30, Nymox and health4u (Basel, Switzerland) announced the successful
conclusion of the first phase of a stop smoking campaign in high school students
in Basel. The students are using the NicAlert(TM) test to determine smoking
product exposure levels in a competition to reduce their health risk. The
initiative is running under the patronage of the Lungenliga beider Basel
Association, and involves over 100 students ages 11-16, at the International
school "FG-Freies Gymnasium Basel" in Basel, Switzerland. The first test was
followed by an intervention meeting orientating the children on smoking exposure
consequences and options to reduce or stop smoking. 23% of the children in this
group were smokers, and 37% were passive smokers. The Vice-Director Mr. Bear
Wyss of the FG- Freies Gymnasium Basel commented: " It is part of our program to
make children aware of the consequences of their lifestyle", he said.
"Nicalert(TM) is an amazing new technology to measure the cotinine level within
20 minutes with the children's participation. This allows also better buy-in."
During the year, we continued to make significant progress in our several major
drug development programs. Nymox's R&D activities have been increasingly
productive in the past year in generating patentable products and company patent
applications. In the past eighteen months, the company and its affiliates have
drafted, filed and prosecuted over fourteen U.S. patent applications, as well as
a substantially larger number of foreign patent applications.
On January 22, Nymox announced that it had entered into a new sponsored research
and licensing agreement with the Rhode Island Hospital Corporation and Brown
University. The agreement concerns research in the laboratories of Dr. Suzanne
de la Monte and Dr. Jack Wands into the role of neural thread protein (NTP) in
the Alzheimer's disease process. One of Nymox's ongoing programs to develop
treatments for Alzheimer's disease targets NTP and its role in the extensive
brain cell loss associated with Alzheimer's disease.
On March 5, Nymox announced that one of its leading new Alzheimer drug
candidates had been highly effective in recent preclinical laboratory studies.
The Company's NXD-9062 works in animals by stopping cell damage. The drug
candidate has been extensively tested by Nymox scientists in animal models of
cell loss where it has been safely tolerated and has been shown to significantly
limit the damage. Nymox is developing the compound for human testing.
On July 24, Nymox announced that its U.S. patent application for the use of
statin drugs for Alzheimer's disease had been officially allowed. There have
been numerous highly publicized studies on the benefit of statin drug use and
Alzheimer's disease (see the Wall Street Journal, April 17 and July 18, 2002).
Many international authorities believe that statins (a class of cholesterol
lowering drugs) offer the best hope yet for controlling Alzheimer's disease.
8
On July 31, 2002, Nymox announced that studies presented at the 8th
International Conference on Alzheimer's Disease and Related Disorders in
Stockholm, Sweden reported new evidence linking high cholesterol levels with
Alzheimer's disease and showing the benefit of statins in lowering the risk of
acquiring the fatal illness. Statins are a class of drugs known as HMG CoA
reductose inhibitors, which lower cholesterol. The current global market for
statin drugs is over $14 billion per year. The relationship between cholesterol
and Alzheimer's disease and the potential use of statins as a therapeutic was a
major topic at the conference. One epidemiological study of 2,378 participants
conducted by Dr. R. Green and colleagues at Boston University School of Medicine
found individuals taking statins had a 39 % lower risk of developing Alzheimer's
disease. This finding confirmed the data reported in the Archives of Neurology
(Wolozin et al., Arch Neurol 2000; 57:1439-43). Another study conducted by Dr.
B. Austen and colleagues at St. George's Hospital Medical School in London found
that using statins in cell cultures lowered cholesterol levels and dramatically
reduced beta-amyloid production. Beta-amyloid is a constituent of senile
plaques, the pathological hallmark of Alzheimer's disease. Many other studies at
the Stockholm meeting explored links between cholesterol and Alzheimer's disease
and the potential therapeutic uses of statins.
On April 5, Nymox announced that it had entered into a new sponsored research
and licensing agreement with the Rhode Island Hospital Corporation at Brown
University. The agreement concerns research in the laboratories of Jack R. Wands
M.D. into novel cancer markers that have potential application both for the
diagnosis and treatment of specific cancers. Dr. Wands is an internationally
prominent medical researcher, particularly in the fields of gastroenterology and
hepatology. He is the Jeffrey and Kimberly Greenberg - Artemis and Martha
Joukowsky Professor in Gastroenterology and Professor of Medical Science at the
Brown University School of Medicine and is the Director of the Liver Research
Center and Director of the Division of Gastroenterology at Lifespan and Rhode
Island Hospital. Dr. Wands is the author of more than 350 publications, the
recipient of numerous national and international awards and an inventor of more
than 30 patents.
On June 26, Nymox announced that it had filed an Investigational New Drug (IND)
application with the FDA for the Company's prostate drug candidate NX-1207.
NX-1207 is a prospective drug for the treatment of benign prostatic hyperplasia
(BPH), the common form of prostate enlargement in the aging male population.
NX-1207 showed excellent progress in the required pre-clinical studies.
We wish to thank our over 4,000 shareholders for their valued strong support.
Nymox is confident that it will meet or surpass its significant milestones, and
we welcome the important challenges ahead.
Paul Averback MD
President
March 31, 2003
9
MANAGEMENT'S DISCUSSION AND ANALYSIS
(in US dollars)
The following discussion should be read in conjunction with the consolidated
financial statements of the Company.
Overview
The business activities of the Company since inception have been devoted
principally to research and development. Accordingly, the Company has had
limited revenues from sales and has not been profitable to date. We refer to the
Corporate Profile for a discussion of the Company's research and development
projects and its product pipeline.
Critical Accounting Policies
----------------------------
In December 2001, the Securities and Exchange Commission ("SEC") released
"Cautionary Advice Regarding Disclosure About Critical Accounting Policies".
According to the SEC release, accounting policies are among the "most critical"
if they are, in management's view, most important to the portrayal of the
company's financial condition and most demanding on their calls for judgement.
Our accounting policies are described in the notes to our consolidated financial
statements. We consider the following policies to be the most critical in
understanding the judgements that are involved in preparing our financial
statements and the matters that could impact our results of operations,
financial condition and cash flows.
Revenue Recognition
-------------------
The Corporation applies guidance from SAB 101 (Staff Accounting Bulletin 101)
issued by the Securities and Exchange Commission in the recognition of revenue.
The Company derives its revenue from product sales, research contracts, license
fees and interest. Revenue from product sales is recognized when the product or
service has been delivered or obligations as defined in the agreement are
performed. Revenue from research contracts is recognized at the time research
activities are performed under the agreement. Revenue from license fees,
royalties and milestone payments is recognized upon the fulfillment of all
obligations under the terms of the related agreement. These agreements may
include upfront payments to be received by the Corporation. Upfront payments are
recognized as revenue on a systematic basis over the period that the related
services or obligations as defined in the agreement are performed. Interest is
recognized on an accrual basis. Deferred revenue presented in the balance sheet
represents amounts billed to and received from customers in advance of revenue
recognition.
10
The Company currently markets AlzheimAlert(TM) as a service provided by our CLIA
certified reference laboratory in New Jersey. Physicians send urine samples
taken from their patients to our laboratory where the AlzheimAlert(TM) test is
performed. The results are then reported back to the physicians. We recognize
the revenues when the test has been performed. The Company sometimes enters into
bulk sales of its diagnostic products to customers under which it has a
continuing obligation to perform related testing services at its laboratory.
Although the Company receives non-refundable upfront payments under these
agreements, revenue is recognized in the period that the Company fulfils its
obligation or over the term of the arrangement. For research contracts and
licensing revenues, the Company usually enters into an agreement specifying the
terms and obligations of the parties. Revenues from these sources are only
recognized when there are no longer any obligations to be performed by the
Company under the terms of the agreement.
Valuation of Capital Assets
---------------------------
The Company reviews the unamortized balance of intellectual property rights and
patents on an annual basis and recognizes any impairment in carrying value when
it is identified. Factors we consider important, which could trigger an
impairment review include:
o Significant changes in the manner of our use of the acquired assets or the
strategy for our overall business; and
o Significant negative industry or economic trends.
No impairment losses were recognized for the periods ended December 31, 2002,
2001 and 2000.
Valuation of Future Income Tax Assets
-------------------------------------
Management judgement is required in determining the valuation allowance recorded
against net future tax assets. We have recorded a valuation allowance of $7.7
million as of December 31, 2002, due to uncertainties related to our ability to
utilize some of our future tax assets, primarily consisting of net operating
losses carried forward and other unclaimed deductions, before they expire. In
assessing the realizability of future tax assets, management considers whether
it is more likely than not that some portion or all of the future tax assets
will not be realized. The ultimate realization of future tax assets is dependent
upon the generation of future taxable income and tax planning strategies. The
generation of future taxable income is dependent on the successful
commercialization of its products and technologies.
Results of Operations
Revenues
--------
Revenues from sales amounted to $356,162 for the year ended December 31, 2002,
compared with $235,288 for the year ended December 31, 2001. The increase is
attributable principally to higher sales volumes for NicAlert(TM) (increase of
94%). Interest revenue was $5,586 in 2002 compared to $17,918 in 2001, due to
lower average cash balances.
11
Research and Development
------------------------
Research and development expenditures were $1,706,086 for the year ended
December 31, 2002, compared with $1,499,654 for the year ended December 31,
2001. The increase is attributable to higher spending in the development of the
therapeutic products in the Company's pipeline. In 2002, research tax credits
amounted to $16,656 compared to $20,052 in 2001.
Marketing Expenses
------------------
Marketing expenditures were $235,925 for the year ended December 31, 2002, in
comparison to expenditures of $343,244 for the year ended December 31, 2001. The
decrease is attributable to reduced costs relating to marketing agreements.
Administrative Expenses
-----------------------
General and administrative expenses amounted to $1,230,439 for the year ended
December 31, 2002, compared with $1,087,326 in the year ended December 31, 2001,
due primarily to increased Directors & Officers insurance premiums (increase of
240%).
Foreign Exchange
----------------
The Company incurs expenses in the local currency of the countries in which it
operates, which include the United States and Canada. Approximately 75% of 2002
expenses (75% in 2001) were in U.S. dollars. Foreign exchange fluctuations had
no meaningful impact on the Company's results in 2002 or 2001.
Inflation
---------
The Company does not believe that inflation has had a significant impact on its
results of operations.
Long-Term Commitments
---------------------
Nymox has no financial obligations of significance other than long-term lease
commitments for its premises in the United States and Canada of $14,583 per
month and ongoing research funding payments to a U.S. medical facility totaling
$478,750 over the next two years.
Results of Operations
---------------------
Net losses for the period ended December 31, 2002 were $3,422,019, or $0.15 per
share, compared to $3,049,504, or $0.14 per share, for the same period in 2001.
The weighted, diluted, average number of common shares outstanding for the year
ending December 31, 2002 were 22,965,668 compared to 21,995,694 for the same
period in 2001.
12
Financial Position
Liquidity and Capital Resources
-------------------------------
As of December 31, 2002, cash totaled $660,629 and receivables totaled $101,364.
In January 2003, the Corporation signed a common stock private purchase
agreement whereby the investor is committed to purchase up to $5 million of the
Corporation's common shares over a twenty-four month period commencing January
2003. As at January 30, 2003, one drawing has been made under this purchase
agreement, for total proceeds of $400,000. Specifically, on January 30, 2003,
107,382 common shares were issued at a price of $3.725 per share. The Company
intends to access financing under this agreement when appropriate to fund its
research and development.
During 2002, the Company completed seven private placements and issued 714,574
common shares for total proceeds of $2,995,525. On January 24, 74,074 shares
were issued at a price of $4.05 in a private placement for total proceeds of
$300,000. On March 18, 195,000 shares were issued at a price of $4.20 in a
private placement for total proceeds of $819,000. On June 18, 90,000 shares were
issued at a price of $4.00 in a private placement for total proceeds of
$360,000. On July 17, 86,000 shares were issued at a price of $4.68 in a private
placement for total proceeds of $403,000. On September 9, 91,000 shares were
issued at a price of $4.40 in a private placement for total proceeds of
$400,400. On November 27, 53,500 shares were issued at a price of $3.75 in a
private placement for total proceeds of $200,625. On December 17, 125,000 shares
were issued at a price of $4.10 in a private placement for total proceeds of
$512,500. The Company believes that funds from operations as well as from
existing financing agreements will be sufficient to meet the Company's cash
requirements for the next twelve months.
This message contains certain "forward-looking statements" as defined in the
United States Private Securities Litigation Reform Act of 1995 that involve a
number of risks and uncertainties. There can be no assurance that such
statements will prove to be accurate and the actual results and future events
could differ materially from management's current expectations. Such factors are
detailed from time to time in Nymox's filings with the Securities and Exchange
Commission and other regulatory authorities.
13
MANAGEMENT'S REPORT
-------------------
The accompanying consolidated financial statements have been prepared by
management and were approved by the Board of Directors of the Company.
Management is responsible for the information and representations contained in
these financial statements and other sections of this Annual Report. The
financial statements have been prepared in accordance with accounting principles
generally accepted in Canada. Reconciliation to U.S. GAAP is presented in Note
12 to the Consolidated Financial Statements. In preparing these consolidated
financial statements, management selects appropriate accounting policies and
uses its judgement and best estimates to report events and transactions as they
occur. Management has determined such amounts on a reasonable basis in order to
ensure that the financial statements are presented fairly, in all material
respects. Financial data included throughout this Annual Report is prepared on a
basis consistent with that of the financial statements.
To assist management in discharging these responsibilities, the Company
maintains a system of internal controls which are designed to provide reasonable
assurance that its assets are safeguarded, that transactions are executed in
accordance with management's authorization and that the financial records form a
reliable base for the preparation of accurate and timely financial information.
KPMG LLP, the Company's auditors, are appointed by the shareholders. They
independently review the Company's system of internal controls and perform the
necessary tests of accounting records and procedures to enable them to report
their opinions as to the fairness of the consolidated financial statements and
their conformity with generally accepted accounting principles.
The Board of Directors ensures that the management fulfills its responsibilities
for financial reporting and internal control. The Board exercises this
responsibility through an Audit Committee composed of three Directors. The Audit
Committee meets periodically with management and with the external auditors, to
review audit recommendations and any matters, which the auditors believe, should
be brought to the attention of the Board of Directors. The Audit Committee also
reviews the consolidated financial statements and recommends to the Board of
Directors that the statements be approved for issuance to the shareholders.
Paul Averback Roy Wolvin
Chief Executive Officer & Chief Financial Officer &
President Secretary-Treasurer
February 28, 2003
14
kpmg
Consolidated Financial Statements of
NYMOX PHARMACEUTICAL
CORPORATION
Years ended December 31, 2002, 2001 and 2000
15
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of Nymox Pharmaceutical
Corporation as at December 31, 2002 and 2001 and the consolidated statements of
operations, deficit and cash flows for the years ended December 31, 2002, 2001
and 2000. These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
With respect to the consolidated financial statements for the years ended
December 31, 2002 and 2001, we conducted our audits in accordance with United
States generally accepted auditing standards and Canadian generally accepted
auditing standards. With respect to the consolidated financial statements for
the year ended December 31, 2000, we conducted our audit in accordance with
Canadian generally accepted auditing standards. Those standards require that we
plan and perform an audit to obtain reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Corporation as at December 31,
2002 and 2001 and the results of its operations and its cash flows for the years
ended December 31, 2002, 2001 and 2000 in accordance with Canadian generally
accepted accounting principles.
/s/ KPMG LLP
Chartered Accountants
Montreal, Canada
February 28, 2003
16
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Financial Statements
Years ended December 31, 2002, 2001 and 2000
Financial Statements
Consolidated Balance Sheets........................................... 18
Consolidated Statements of Operations................................. 19
Consolidated Statements of Deficit.................................... 20
Consolidated Statements of Cash Flows................................. 21
Notes to Consolidated Financial Statements............................ 22
17
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Balance Sheets
December 31, 2002 and 2001
(in US dollars)
============================================================================================
2002 2001
--------------------------------------------------------------------------------------------
Assets
Current assets:
Cash $ 660,629 $ 488,987
Accounts receivable 101,364 52,459
Research tax credits receivable 47,165 30,509
Inventories 53,208 17,567
Prepaid expenses and deposits 17,500 55,000
---------------------------------------------------------------------------------------
879,866 644,522
Long-term receivables (note 6) 70,000 70,000
Property and equipment (note 3) 185,293 217,083
Patents and intellectual property (note 4) 3,223,498 3,154,441
Deferred share issuance costs (note 7 (c)) - 106,195
--------------------------------------------------------------------------------------------
$ 4,358,657 $ 4,192,241
============================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 870,925 $ 295,393
Notes payable (note 5) 544,872 396,775
Deferred revenue 55,930 55,325
--------------------------------------------------------------------------------------------
1,471,727 747,493
Non-controlling interest (note 6) 800,000 800,000
Shareholders' equity:
Share capital (note 7) 28,407,600 25,376,557
Warrants and options 336,438 336,438
Additional paid-in capital 85,200 85,200
Deficit (26,742,308) (23,153,447)
--------------------------------------------------------------------------------------------
2,086,930 2,644,748
Commitments and contingencies (note 8)
Subsequent events (note 15)
--------------------------------------------------------------------------------------------
$ 4,358,657 $ 4,192,241
============================================================================================
See accompanying notes to consolidated financial statements.
On behalf of the Board:
/s/ Paul Averback, MD Director
---------------------
/s/ Hans Black, MD Director
---------------------
18
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Statements of Operations
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
=======================================================================================================
2002 2001 2000
-------------------------------------------------------------------------------------------------------
Revenues:
Sales $ 356,162 $ 235,288 $ 157,688
License fees - 97,403 -
Research contracts - 30,000 -
Interest 5,586 17,918 68,179
-------------------------------------------------------------------------------------------------------
361,748 380,609 225,867
Expenses:
Research and development 1,706,086 1,499,654 2,084,232
Less research tax credits (16,656) (20,052) (10,457)
-------------------------------------------------------------------------------------------------------
1,689,430 1,479,602 2,073,775
General and administrative 1,230,439 1,087,326 1,335,500
Marketing 235,925 343,244 363,142
Cost of sales 216,637 131,904 87,450
Depreciation and amortization 397,269 381,582 375,810
Interest and bank charges 46,967 6,455 14,169
-------------------------------------------------------------------------------------------------------
3,816,667 3,430,113 4,249,846
Gain on disposal of property and equipment (32,900) - -
-------------------------------------------------------------------------------------------------------
3,783,767 3,430,113 4,249,846
-------------------------------------------------------------------------------------------------------
Net loss $(3,422,019) $(3,049,504) $(4,023,979)
=======================================================================================================
-------------------------------------------------------------------------------------------------------
Basic and diluted loss per share (note 10) $ (0.15) $ (0.14) $ (0.19)
-------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
19
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Statements of Deficit
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
=======================================================================================================
2002 2001 2000
-------------------------------------------------------------------------------------------------------
Deficit, beginning of year $(23,153,447) $(19,982,999) $(15,605,816)
Net loss (3,422,019) (3,049,504) (4,023,979)
Share issue costs (166,842) (120,944) (353,204)
-------------------------------------------------------------------------------------------------------
Deficit, end of year $(26,742,308) $(23,153,447) $(19,982,999)
=======================================================================================================
See accompanying notes to consolidated financial statements.
20
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Statements of Cash Flows
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
============================================================================================================
2002 2001 2000
------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $(3,422,019) $(3,049,504) $(4,023,979)
Adjustments for:
Depreciation of property and equipment 44,710 54,028 53,256
Amortization of patents and intellectual
property 352,559 327,554 322,554
(Gain) loss on disposal of property
and equipment (32,900) 250 -
Services paid with common shares 32,420 - -
Write-off of note receivable - - 108,280
Write-down of deferred share issuance costs 106,195 87,263 -
Changes in operating assets and liabilities:
Accounts receivable (48,905) (20,942) 16,730
Research tax credits receivable (16,656) (20,052) (7,277)
Inventories (35,641) (13,242) (4,325)
Prepaid expenses and deposits 37,500 12,500 56,000
Accounts payable and accrued liabilities 575,532 (28,381) (380,511)
Deferred revenue 605 55,325 -
------------------------------------------------------------------------------------------------------------
(2,406,600) (2,595,201) (3,859,272)
Cash flows from financing activities:
Proceeds from issuance of share capital 2,995,525 2,554,254 5,010,981
Share issue costs (166,842) (91,890) (380,365)
Proceeds from notes payable 200,000 396,775 201,993
Repayment of notes payable (51,903) - (548,421)
------------------------------------------------------------------------------------------------------------
2,976,780 2,859,139 4,284,188
Cash flows from investing activities:
Additions to property and equipment (12,919) (2,687) (106,497)
Additions to patent costs (418,519) (337,975) (275,071)
Proceeds from disposal of property and equipment 32,900 - -
Proceeds from collection of notes receivable - - 73,000
-----------------------------------------------------------------------------------------------------------
(398,538) (340,662) (308,568)
------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 171,642 (76,724) 116,348
Cash, beginning of year 488,987 565,711 449,363
------------------------------------------------------------------------------------------------------------
Cash, end of year $ 660,629 $ 488,987 $ 565,711
============================================================================================================
Supplemental disclosure to statements of cash flows:
(a) Interest paid $ 46,967 $ 6,455 $ 14,169
(b) Non-cash transactions:
Acquisition of Serex Inc. by issuance
of common shares and other securities - - 1,319,997
Amortization of deferred share
issue costs charged to deficit - 29,054 20,220
Shares issued for services 32,420 - -
Additions to patent costs included in
accounts payable and accrued liabilities
at year-end 174,100 - -
============================================================================================================
See accompanying notes to consolidated financial statements.
21
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
================================================================================
1. Business activities:
Nymox Pharmaceutical Corporation (the "Corporation"), incorporated under
the Canada Business Corporations Act, including its subsidiaries, Nymox
Corporation, a Delaware Corporation, and Serex Inc. of New Jersey, is a
biopharmaceutical corporation which specializes in the research and
development of products for the diagnosis and treatment of Alzheimer's
disease. The Corporation is currently marketing AlzheimAlertTM, a urinary
test that aids physicians in the diagnosis of Alzheimer's disease. The
Corporation also markets NicAlertTM and NicoMeterTM, tests that use urine
or saliva to detect use of tobacco products. The Corporation is also
developing therapeutics for the treatment of Alzheimer's disease, new
treatments for benign prostate hyperplasia, and new anti-bacterial agents
for the treatment of urinary tract and other bacterial infections in
humans, including a treatment for E-coli O157:H7 bacterial contamination in
meat and other food and drink products.
Since 1989, the Corporation's activities and resources have been primarily
focused on developing certain pharmaceutical technologies. The Corporation
is subject to a number of risks, including the successful development and
marketing of its technologies. In order to achieve its business plan and
the realization of its assets and liabilities in the normal course of
operations, the Corporation anticipates the need to raise additional
capital and/or achieve sales and other revenue generating activities.
Management believes that funds from operations as well as existing
financing facilities will be sufficient to meet the Corporation's
requirements for the next year.
The Corporation is listed on the NASDAQ Stock Market.
2. Significant accounting policies:
(a) Consolidation and change in measurement currency:
The consolidated financial statements of the Corporation have been
prepared under Canadian generally accepted accounting principles
("GAAP") and include the accounts of its US subsidiaries, Nymox
Corporation and Serex Inc. Intercompany balances and transactions have
been eliminated on consolidation.
Consolidated financial statements prepared under US GAAP would differ
in some respects from those prepared in Canada. A reconciliation of
earnings and shareholders' equity reported in accordance with Canadian
GAAP and with US GAAP is presented in note 12.
22
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(b) Inventories:
Inventories consist of finished goods and are carried at the lower of
cost and net realizable value. Cost of is determined on the basis of
weighted average cost.
(c) Property and equipment, patents and intellectual property:
Property and equipment, patents and intellectual property are recorded
at cost. Depreciation and amortization are provided using the
straight-line method at the following rates:
----------------------------------------------------------------------
Asset Rate
----------------------------------------------------------------------
Laboratory equipment 20%
Computer equipment 20%
Office equipment and fixtures 20%
Intellectual property rights acquired 10%
----------------------------------------------------------------------
Direct costs incurred in connection with securing the patents are
capitalized. Patents are being amortized using the straight-line
method over the shorter of their economic useful lives or their legal
terms of existence ranging from 17 to 20 years commencing in the year
of commercial production of the developed products.
Management reviews the unamortized balance of property and equipment,
patents and intellectual property whenever events or circumstances
indicate that the carrying amount may not be recoverable. An
impairment loss would be recognized when estimates of non-discounted
future cash flows expected to result from the use of an asset and its
eventual disposition are less than the carrying amount. No impairment
losses were identified by the Corporation for the years ended December
31, 2002, 2001 and 2000.
(d) Revenue recognition:
The Corporation applies guidance from SAB 101 (Staff Accounting
Bulletin 101) issued by the Securities and Exchange Commission in the
recognition of revenue.
Revenue from product sales is recognized when the product or service
has been delivered or obligations as defined in the agreement are
performed. Revenue from research contracts is recognized at the time
research activities are performed under the agreement. Revenue from
license fees, royalties and milestone payments is recognized upon the
fulfillment of all obligations under the terms of the related
agreement. These agreements may include upfront payments to be
received by the Corporation. Upfront payments are recognized as
revenue on a systematic basis over the period that the related
services or obligations as defined in the agreement are performed.
Interest is recognized on an accrual basis.
23
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(d) Revenue recognition (continued):
Deferred revenue represents amounts billed to and received from
customers in advance of revenue recognition.
(e) Research and development expenditures:
Research expenditures, net of research tax credits, are expensed as
incurred. Development expenditures, net of tax credits, are expensed
as incurred, except if they meet the criteria for deferral in
accordance with generally accepted accounting principles.
(f) Foreign currency translation:
The Corporation's measurement currency is the United States dollar.
Monetary assets and liabilities of the Canadian and foreign operations
denominated in currencies other than the United States dollar are
translated at the rates of exchange prevailing at the balance sheet
dates. Other assets and liabilities denominated in currencies other
than the United States dollar are translated at the exchange rates
prevailing when the assets were acquired or the liabilities incurred.
Revenues and expenses denominated in currencies other than the United
States dollar are translated at the average exchange rate prevailing
during the year, except for depreciation and amortization which are
translated at the same rates as those used in the translation of the
corresponding assets. Foreign exchange gains and losses resulting from
the translation are included in the determination of net earnings.
Effective January 1, 2002, the Company adopted the revised
recommendations of the Canadian Institute of Chartered Accountants
("CICA") with respect to foreign currency translation. The new
recommendations eliminate the deferral and amortization of unrealized
foreign currency translation gains and losses on foreign currency
denominated monetary items that have a fixed or ascertainable life
extending beyond the end of the fiscal year following the current
reporting period. The new recommendations also require the disclosure
of foreign exchange gains (losses) included in the consolidated
statements of operations which, for fiscal 2002, amounted to $3,315
(2001 - $15,910; 2000 - $14,776). The change was adopted
retroactively. There was no impact on the Company's consolidated
financial position, results of operations and cash flows as a result
of adopting these recommendations.
24
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(g) Stock-based compensation plan:
Effective January 1, 2002, the Company adopted the new recommendations
of the CICA, Handbook Section 3870, with respect to the accounting for
stock-based compensation and other stock-based payments. The new
recommendations require that all stock-based payments to
non-employees, and employee awards that are direct awards of stock,
call for settlement in cash or other assets, or are stock appreciation
rights that call for settlement by the issuance of equity instruments,
granted on or after January 1, 2002, be accounted for using the fair
value method. For all other stock-based employee compensation awards,
the CICA has not prescribed specific methods, and, therefore, the
Company has chosen to use the settlement method of accounting as
permitted under the new standard. Under this method, no compensation
expense is recognized when stock options are issued to employees. Any
consideration received from the plan participants upon exercise of
stock options is credited to share capital.
The new standard requires that the Company disclose the pro forma
effect of accounting for all stock-based awards granted during the
year ended December 31, 2002 under the fair value-based method (see
note 10). In the first year of application, comparative disclosures
need not be provided for prior years.
(h) Income taxes:
The Corporation accounts for income taxes using the asset and
liability method of accounting for income taxes. Under this method,
future income tax assets and liabilities are determined based on
"temporary differences" (differences between the accounting basis and
the tax basis of the assets and liabilities), and are measured using
the currently enacted, or substantively enacted, tax rates and laws
expected to apply when these differences reverse. A valuation
allowance is recorded against any future income tax asset if it is
more likely than not that the asset will not be realized.
(i) Earnings per share:
Basic earnings per share are determined using the weighted average
number of common shares outstanding during the period. Diluted
earnings per share are computed in a manner consistent with basic
earnings per share except that the weighted average shares outstanding
are increased to include additional shares from the assumed exercise
of options and warrants, if dilutive. The number of additional shares
is calculated by assuming that outstanding options and warrants were
exercised and that the proceeds from such exercises were used to
acquire shares of common stock at the average market price during the
reporting period.
25
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(j) Use of estimates:
The preparation of financial statements in conformity with 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 periods. Actual results could differ
from those estimates. Significant areas requiring the use of
management estimates include estimating the useful lives of long-lived
assets, including property and equipment and intangible assets, as
well as estimating the recoverability of research tax credits
receivable and future tax assets.
3. Property and equipment:
-------------------------------------------------------------------------------------------------------------------
2002
-------------------------------------------------------------------------------------------------------------------
Accumulated
depreciation Net book
Cost and amortization value
-------------------------------------------------------------------------------------------------------------------
Laboratory equipment $ 620,576 $ 471,662 $ 148,914
Computer equipment 73,043 47,807 25,236
Office equipment and fixtures 88,949 77,806 11,143
-------------------------------------------------------------------------------------------------------------------
$ 782,568 $ 597,275 $ 185,293
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
2001
-------------------------------------------------------------------------------------------------------------------
Accumulated
depreciation Net book
Cost and amortization value
-------------------------------------------------------------------------------------------------------------------
Laboratory equipment $ 615,656 $ 444,049 $ 171,607
Computer equipment 73,044 41,497 31,547
Office equipment and fixtures 88,949 75,020 13,929
-------------------------------------------------------------------------------------------------------------------
$ 777,649 $ 560,566 $ 217,083
-------------------------------------------------------------------------------------------------------------------
26
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
4. Patents and intellectual property:
-------------------------------------------------------------------------------------------------------------------
2002
-------------------------------------------------------------------------------------------------------------------
Accumulated Net book
Cost amortization value
-------------------------------------------------------------------------------------------------------------------
Patent costs $ 2,078,996 $ 401,486 $ 1,677,510
Intellectual property rights acquired 2,222,661 676,673 1,545,988
-------------------------------------------------------------------------------------------------------------------
$ 4,301,657 $ 1,078,159 $ 3,223,498
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
2001
-------------------------------------------------------------------------------------------------------------------
Accumulated Net book
Cost amortization value
-------------------------------------------------------------------------------------------------------------------
Patent costs $ 1,660,475 $ 269,781 $ 1,390,694
Intellectual property rights acquired 2,219,564 455,817 1,763,747
-------------------------------------------------------------------------------------------------------------------
$ 3,880,039 $ 725,598 $ 3,154,441
-------------------------------------------------------------------------------------------------------------------
5. Notes payable:
-------------------------------------------------------------------------------------------------------------------
2002 2001
-------------------------------------------------------------------------------------------------------------------
Note payable, bearing interest at the prime rate
plus 2%, due on or before January 1, 2004 $ 44,872 $ 96,775
Note payable, bearing interest at the prime rate
plus 2%, due on or before January 1, 2004 500,000 300,000
-------------------------------------------------------------------------------------------------------------------
$ 544,872 $ 396,775
-------------------------------------------------------------------------------------------------------------------
During the year, the maturity dates of the notes payable outstanding at
December 31, 2001 were extended to the dates referred to above.
27
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
6. Non-controlling interest:
Non-controlling interest includes redeemable, convertible preferred shares
of Serex in the amount of $800,000. Up to 50% of the preferred shares are
redeemable at any time at the option of the preferred shareholders for
their issue price. The preferred shares are also convertible into common
shares of Serex at a price of $3.946 per share.
The long-term receivables are due from the preferred shareholders and will
be settled when the preferred shares are redeemed.
7. Share capital:
-------------------------------------------------------------------------------------------------------------------
2002 2001
-------------------------------------------------------------------------------------------------------------------
Authorized:
An unlimited number of common shares
Issued and outstanding:
23,020,954 common shares (2001 - 22,297,525 shares) $ 28,407,600 $ 25,376,557
-------------------------------------------------------------------------------------------------------------------
(a) Changes in the Corporation's outstanding common shares are presented
below:
-------------------------------------------------------------------------------------------------------------------
Shares Dollars
-------------------------------------------------------------------------------------------------------------------
Issued and outstanding, December 31, 2000 21,377,621 $ 22,822,303
Issue of common shares for cash under private
placements and common stock purchase
agreement (b) (c) 811,904 2,236,199
Issue of common shares pursuant to exercise
of stock options (e) 108,000 318,055
-------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001 22,297,525 25,376,557
Issue of common shares under private
placements (b) 714,574 2,995,525
Issued to acquire additional shares of Serex (b) 932 3,098
Issued in exchange for services (b) 7,923 32,420
-------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2002 23,020,954 $ 28,407,600
-------------------------------------------------------------------------------------------------------------------
28
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
7. Share capital (continued):
(b) Private placements and other:
In 2002, the Corporation completed private placements for 714,574
common shares and received aggregate proceeds of $2,995,525. In 2001,
the Corporation completed private placements for 594,100 common shares
and received aggregate proceeds of $1,799,490. The share issue costs
related to these placements have been charged against the deficit.
The Corporation also issued 932 common shares and 574 Series J
warrants to purchase additional 5,000 shares of Serex, Inc. that it
did not already own. The Corporation now owns approximately 98% of
Serex, Inc. The warrants are exercisable at $3.70 per share and expire
on July 31, 2005. In addition, the Corporation issued 7,923 common
shares for certain services totaling $32,420.
(c) Common Stock Purchase Agreement:
In November 1999, the Corporation and Jaspas Investments Limited
("Jaspas"), a corporation based in the British Virgin Islands, signed
a common stock purchase agreement (the "Agreement") that established
the terms and conditions for the issuance and purchase of the
Corporation's common shares by Jaspas. In general terms, Jaspas was
committed to purchase up to $12 million of the Corporation's common
shares over a thirty-month period.
The Agreement established what was referred to by the parties as an
equity drawdown facility. On a monthly basis, the Corporation
requested, at its discretion, a drawdown on the facility subject to a
formula, based on the average stock price and average trading volume,
that sets the maximum amount for any given draw. At the end of a
22-day trading period following the drawdown request, the amount of
money that Jaspas provided to the Corporation and the number of shares
that the Corporation issued was settled based on the formula using the
average daily share price for each of the 22 trading days. Jaspas
received a 6% discount on the market price determined for the 22-day
trading period, and the Corporation received the settled amount less a
3% placement fee payable to the placement agents.
In 2002, the Corporation did not make any drawdowns under this
facility. In 2001, the Corporation issued 217,804 common shares and
raised $436,709 under this facility.
The gross fees related to this transaction amounted to $242,732. These
costs were initially accounted for as deferred share issuance costs to
be amortized over the thirty-month drawdown period. Amortization was
calculated for each drawdown based on the percentage of the actual
drawdown over the total facility. In 2002, the Corporation amortized
nil (2001 - $29,054) deferred share issuance costs to the deficit
related to drawdowns in the year. In addition, the Corporation wrote
off against earnings deferred share issuance costs in the amount of
$106,195 (2001 - $87,263) for the portion of the facility that was not
utilized by the Corporation. The facility expired in January 2003.
29
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
7. Share capital (continued):
(d) Warrants:
The Corporation has issued the following warrants to purchase common
shares:
-----------------------------------------------------------------------------------------------------------------
Exercise Outstanding at
price per Exercised December 31,
Warrants share Issued to date Expired 2002 Expiry
-----------------------------------------------------------------------------------------------------------------
Series E $ 4.53 200,000 - - 200,000 November 30, 2004
Series F $ 4.06 160,000 - - 160,000 November 30, 2004
Series G $ 3.70 115,662 - - 115,662 January 8, 2005
Series H $ 9.38 66,667 - - 66,667 March 6, 2004
Series I $ 7.81 26,667 - - 26,667 March 6, 2004
Series J $ 3.70 42,864 - - 42,864 July 31, 2005
Series K $ 2.06 100,000 - - 100,000 March 6, 2003
-----------------------------------------------------------------------------------------------------------------
$ 4.47 711,860 - - 711,860
-----------------------------------------------------------------------------------------------------------------
(e) Stock options:
The Corporation has established a stock option plan (the "Plan") for
its key employees, its officers and directors, and certain
consultants. The Plan is administered by the Board of Directors of the
Corporation. The Board may from time to time designate individuals to
whom options to purchase common shares of the Corporation may be
granted, the number of shares to be optioned to each, and the option
price per share. The option price per share cannot involve a discount
to the market price at the time the option is granted. The total
number of shares to be optioned to any one individual cannot exceed 5%
of the total issued and outstanding shares and the maximum number of
shares which may be optioned under the Plan cannot exceed 2,500,000
common shares without shareholder approval.
30
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
7. Share capital (continued):
(e) Stock options (continued):
Changes in outstanding options were as follows for the last two fiscal
periods:
------------------------------------------------------------------------------------------------------------
Weighted average
Number exercise price
------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000 1,639,500 $ 4.54
Granted 413,500 3.78
Exercised (108,000) 2.95
Expired (265,000) 4.04
Cancelled (40,000) 3.70
------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001 1,640,000 4.51
Granted 20,000 4.45
Expired (6,000) 3.30
------------------------------------------------------------------------------------------------------------
Balance, December 31, 2002 1,654,000 $ 4.51
------------------------------------------------------------------------------------------------------------
31
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
7. Share capital (continued):
(e) Stock options (continued):
At December 31, 2002, options outstanding and exercisable were as
follows:
----------------------------------------------------------------------------------------------------------------------
Options outstanding Options exercisable Exercise price per share Expiry date
----------------------------------------------------------------------------------------------------------------------
20,000 20,000 $ 6.93 September 12, 2003
10,000 10,000 2.25 April 13, 2004
5,000 5,000 9.53 April 13, 2004
5,000 5,000 6.79 April 13, 2004
40,000 40,000 6.93 April 13, 2004
5,000 5,000 6.24 April 13, 2004
210,000 210,000 2.25 January 17, 2006
10,000 10,000 9.53 January 17, 2006
10,000 10,000 6.79 January 17, 2006
20,000 20,000 6.93 January 17, 2006
100,000 100,000 7.97 April 30, 2006
10,000 10,000 11.60 August 13, 2006
10,000 10,000 6.24 August 13, 2006
30,000 30,000 6.93 August 13, 2006
5,000 5,000 6.24 October 31, 2007
40,000 40,000 6.93 October 31, 2007
9,000 9,000 6.41 December 19, 2007
100,000 100,000 4.85 November 9, 2008
50,000 50,000 6.93 January 22, 2009
2,000 2,000 6.41 March 23, 2009
67,000 67,000 3.12 May 13, 2009
75,000 75,000 3.12 June 1, 2009
253,500 253,500 3.88 May 1, 2010
50,000 20,000 6.93 May 1, 2010
10,000 10,000 4.70 June 15, 2010
10,000 10,000 3.50 July 13, 2010
2,000 2,000 4.00 July 13, 2010
10,000 10,000 3.20 August 14, 2010
5,000 5,000 3.15 August 16, 2010
50,000 50,000 3.90 August 25, 2010
10,000 10,000 2.21 January 16, 2011
70,500 70,500 1.93 April 23, 2011
2,000 2,000 3.75 October 1, 2011
100,000 40,000 4.00 November 1, 2011
3,000 3,000 4.20 November 9, 2011
225,000 150,000 4.33 November 13, 2011
20,000 20,000 4.45 August 25, 2012
----------------------------------------------------------------------------------------------------------------------
1,654,000 1,489,000 $ 4.51
----------------------------------------------------------------------------------------------------------------------
32
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
8. Commitments and contingencies:
(a) Operating leases:
Minimum lease payments under operating leases for the Corporation's
premises for the next three years are as follows:
------------------------------------------------------------------------------------------------------------
2003 $ 175,000
2004 175,000
2005 69,000
------------------------------------------------------------------------------------------------------------
$ 419,000
------------------------------------------------------------------------------------------------------------
(b) Research funding agreement:
The Corporation is committed to make research grants to an unrelated
medical facility in the U.S. in the aggregate amount of approximately
$479,000 in the next two years as follows:
------------------------------------------------------------------------------------------------------------
2003 $ 249,000
2004 230,000
------------------------------------------------------------------------------------------------------------
$ 479,000
------------------------------------------------------------------------------------------------------------
Under this agreement, the medical facility benefits from research
funding and collaboration from the Corporation and is entitled to
royalties based on a percentage of sales of any commercialized product
derived from this research.
(c) Contingencies:
Litigation:
----------
In December 2000, an investment company served the Corporation with a
Statement of Claim filed with the Ontario Superior Court of Justice
claiming to be entitled to the issuance of 388,797 additional shares
in accordance with repricing provisions contained in a private
placement that was finalized in March 2000 and to damages of $4
million for lost opportunity to sell these shares. The Corporation
believes that the company's interpretation of the repricing provisions
in the March 2000 agreement is incorrect and intends to defend the
action vigorously. Accordingly, no provision related to this matter
has been recorded in these financial statements.
33
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
8. Commitments and contingencies (continued):
(c) Contingencies (continued):
Demand for arbitration:
----------------------
In March 2002, a former employee filed a demand for arbitration with
the American Arbitration Association concerning the termination of her
employment with the Corporation. The employee is claiming damages of
up to $498,000 plus attorney's fees and costs, based upon alleged
violations of New Jersey law and breach of an employment agreement.
Subsequently, in October 2002, the former employee filed a complaint
in the New Jersey Superior Court concerning the termination of her
employment with the Corporation. The complaint claims unspecified
damages. The Corporation believes these claims are without merit and
intends to defend the matter vigorously.
9. Income taxes:
Details of the components of income taxes are as follows:
--------------------------------------------------------------------------------------------------------------
2002 2001 2000
--------------------------------------------------------------------------------------------------------------
Loss before income taxes:
Canadian operations $ (2,660,160) $ (2,257,157) $ (2,558,476)
U.S. operations (761,859) (792,347) (1,465,503)
--------------------------------------------------------------------------------------------------------------
(3,422,019) (3,049,504) (4,023,979)
Basic income tax rate 35% 37% 38%
--------------------------------------------------------------------------------------------------------------
Income tax recovery at statutory rates (1,203,000) (1,128,000) (1,529,000)
Adjustments in income taxes resulting from:
Non-recognition of losses and other
unclaimed deductions 1,203,000 1,128,000 1,529,000
--------------------------------------------------------------------------------------------------------------
Income taxes $ - $ - $ -
--------------------------------------------------------------------------------------------------------------
34
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
9. Income taxes (continued):
The income tax effect of temporary differences that give rise to the net
future tax asset is presented below:
----------------------------------------------------------------------------------------------------------------
2002 2001
----------------------------------------------------------------------------------------------------------------
Future tax assets:
Non-capital losses $ 7,265,000 $ 6,300,000
Scientific research and experimental development
expenditures 675,000 600,000
Investment tax credits, net 290,000 250,000
Property and equipment 113,000 -
Share issue costs 115,000 135,000
----------------------------------------------------------------------------------------------------------------
8,458,000 7,285,000
Less valuation allowance (7,753,000) (6,485,000)
----------------------------------------------------------------------------------------------------------------
705,000 800,000
Future tax liabilities:
Intellectual property rights (485,000) (560,000)
Foreign exchange gains (220,000) (240,000)
----------------------------------------------------------------------------------------------------------------
(705,000) (800,000)
----------------------------------------------------------------------------------------------------------------
Net future tax asset $ - $ -
----------------------------------------------------------------------------------------------------------------
In assessing the realizability of future tax assets, management considers
whether it is more likely than not that some portion or all of the future
tax assets will not be realized. The ultimate realization of future tax
assets is dependent upon the generation of future taxable income and tax
planning strategies. The generation of future taxable income is dependent
on the successful commercialization of its products and technologies.
35
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
9. Income taxes (continued):
The Corporation has non-capital losses carried forward and accumulated
scientific research and development expenditures which are available to
reduce future years' taxable income. These expire as follows:
------------------------------------------------------------------------------------------------------------------
Federal Provincial
------------------------------------------------------------------------------------------------------------------
Non-capital losses:
2003 $ 1,260,000 $ 800,000
2004 1,385,000 685,000
2005 1,960,000 1,965,000
2006 2,232,000 2,232,000
2007 2,648,000 2,648,000
2008 1,925,000 1,925,000
2009 2,363,000 2,342,000
Scientific research and development expenditures:
(Indefinitely) 1,714,000 3,274,000
------------------------------------------------------------------------------------------------------------------
The Corporation also has investment tax credits available in the amount of
approximately $435,000 to reduce future years' federal taxes payable. These
credits expire as follows:
------------------------------------------------------------------------------------------------------------------
2005 $ 25,000
2006 184,000
2007 98,000
2008 3,000
2009 8,000
2010 32,000
2011 50,000
2012 35,000
------------------------------------------------------------------------------------------------------------------
$ 435,000
------------------------------------------------------------------------------------------------------------------
36
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
9. Income taxes (continued):
In addition, the Corporation's US subsidiaries have losses carried forward
of approximately $8,790,000 which expire as follows:
--------------------------------------------------------------------------------------------------------------------
2010 $ 50,000
2011 1,035,000
2012 1,933,000
2018 2,782,000
2019 1,078,000
2020 812,000
2021 664,000
2022 436,000
--------------------------------------------------------------------------------------------------------------------
$ 8,790,000
--------------------------------------------------------------------------------------------------------------------
10. Earnings per share:
(a) Basic and diluted earnings per share:
A reconciliation between basic and diluted earnings per share is as
follows:
----------------------------------------------------------------------------------------------------------------
2002 2001 2000
----------------------------------------------------------------------------------------------------------------
Basic:
Basic weighted average number of
common shares outstanding 22,651,639 21,873,966 20,890,735
----------------------------------------------------------------------------------------------------------------
Basic loss per share $ (0.15) $ (0.14) $ (0.19)
----------------------------------------------------------------------------------------------------------------
Diluted:
Basic weighted average number
of common shares outstanding 22,651,639 21,873,966 20,890,735
Plus impact of stock options and
warrants (1) 314,029 121,728 239,551
----------------------------------------------------------------------------------------------------------------
Diluted common shares 22,965,668 21,995,694 21,130,286
----------------------------------------------------------------------------------------------------------------
Diluted loss per share $ (0.15) $ (0.14) $ (0.19)
----------------------------------------------------------------------------------------------------------------
(1) The impact of these stock options and warrants is anti-dilutive because the
Corporation incurred losses in 2002, 2001 and 2000.
37
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
10. Earnings per share (continued):
(a) Basic and diluted earnings per share (continued):
Excluded from the above calculations are 1,186,500 stock options and
453,334 warrants which were deemed to be anti-dilutive because the
exercise prices were greater than the average market price of the
common shares (2001 - 760,500 options and 293,334 warrants; 2000 -
507,500 options and 135,624 warrants).
(b) Stock-based compensation:
If the fair value-based accounting method under Handbook Section 3870
had been used to account for stock-based compensation costs relating
to exempt options and warrants issued to employees during the year
ended December 31, 2002, the net loss and related loss per share
figures would be as follows:
-----------------------------------------------------------------------------------------------------------
Reported net loss $ (3,422,019)
Pro forma adjustments to compensation expense (53,200)
-----------------------------------------------------------------------------------------------------------
Pro forma net loss $ (3,475,219)
-----------------------------------------------------------------------------------------------------------
Pro forma loss per share:
Basic $ (0.15)
Diluted (0.15)
-----------------------------------------------------------------------------------------------------------
The weighted average fair value of each option granted is estimated on
the date of grant using the Black-Scholes pricing model with the
following weighted average assumptions:
-----------------------------------------------------------------------------------------------------------
Risk free interest rate 4.49%
Expected volatility 54%
Expected life in years 5
Expected dividend yield -
-----------------------------------------------------------------------------------------------------------
38
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
10. Earnings per share (continued):
(b) Stock-based compensation:
The following table summarizes the weighted average grant-date fair
value per share for options granted during the year ended December 31,
2002:
---------------------------------------------------------------------------------------------------------
Weighted
average
grant-date
Number of fair value
options per share
---------------------------------------------------------------------------------------------------------
Exercise price per share equal to market price per share 20,000 $ 4.45
---------------------------------------------------------------------------------------------------------
Dividend yield was excluded from the calculation, since it is the
present policy of the Corporation to retain all earnings to finance
operations. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price
volatility.
11. Financial instruments:
(a) Foreign currency risk management:
Effective January 1, 2000, the Corporation adopted the US dollar as
its measurement currency because a substantial portion of revenues,
expenses, assets and liabilities of its Canadian and US operations are
denominated in US dollars. The Canadian operation also has
transactions denominated in Canadian dollars, principally relating to
salaries and rent. Fluctuations in the currency used for the payment
of the Corporation's expenses denominated in currencies other than the
US dollar could cause unanticipated fluctuations in the Corporation's
operating results. The Corporation does not engage in the use of
derivative financial instruments to manage its currency exposures.
(b) Fair value disclosure:
Fair value estimates are made as of a specific point in time using
available information about the financial instrument. These estimates
are subjective in nature and often cannot be determined with
precision.
The Corporation has determined that the carrying value of its
short-term financial assets and liabilities approximates fair value
due to the immediate or short-term maturity of these financial
instruments. The fair value of the long-term receivables cannot be
determined because settlement is tied to the redemption of the
preferred shares. See note 6.
39
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
11. Financial instruments (continued):
(c) Credit risk:
Credit risk results from the possibility that a loss may occur from
the failure of another party to perform according to the terms of the
contract. Financial instruments that potentially subject the
Corporation to concentrations of credit risk consist primarily of cash
and accounts receivable. Cash is maintained with a high-credit quality
financial institution. For accounts receivable, the Corporation
performs periodic credit evaluations and typically does not require
collateral. Allowances are maintained for potential credit losses
consistent with the credit risk, historical trends, general economic
conditions and other information.
(d) Interest rate risk:
The Company's exposure to interest rate risk is as follows:
-----------------------------------------------------------------------
Cash Fixed interest rate
Notes payable Floating interest rate
-----------------------------------------------------------------------
12. Canadian/U.S. Reporting Differences:
(a) Consolidated statements of earnings:
The reconciliation of earnings reported in accordance with Canadian
GAAP and with U.S. GAAP is as follows:
---------------------------------------------------------------------------------------------------------
2002 2001 2000
---------------------------------------------------------------------------------------------------------
Net loss, Canadian GAAP $ (3,422,019) $ (3,049,504) $ (4,023,979)
Adjustments:
Amortization of patents (i) 9,410 9,411 9,361
Stock-based compensation - options
granted to non-employees (ii) (41,140) (55,040) (257,690)
---------------------------------------------------------------------------------------------------------
Net loss, U.S. GAAP $ (3,453,749) $ (3,095,133) $ (4,272,308)
---------------------------------------------------------------------------------------------------------
Loss per share, U.S. GAAP $ (0.15) $ (0.14) $ (0.20)
---------------------------------------------------------------------------------------------------------
40
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
12. Canadian/U.S. Reporting Differences (continued):
(b) Consolidated shareholders' equity:
The reconciliation of shareholders' equity reported in accordance with
Canadian GAAP and with U.S. GAAP is as follows:
--------------------------------------------------------------------------------------------------------
2002 2001 2000
--------------------------------------------------------------------------------------------------------
Shareholders' equity, Canadian GAAP $ 2,086,930 $ 2,644,748 $ 3,260,942
Adjustments:
Amortization of patents (i) (129,125) (138,535) (147,946)
Stock-based compensation - options
granted to non-employees (ii):
Cumulative compensation expense (1,301,723) (1,260,583) (1,205,543)
Additional paid-in capital 1,354,286 1,313,146 1,258,106
Change in reporting currency (iii) (62,672) (62,672) (62,672)
--------------------------------------------------------------------------------------------------------
(139,234) (148,644) (158,055)
--------------------------------------------------------------------------------------------------------
Shareholders' equity, U.S. GAAP $ 1,947,696 $ 2,496,104 $ 3,102,887
--------------------------------------------------------------------------------------------------------
(i) In accordance with APB Opinion 17, Intangible Assets, the patents are
amortized using the straight-line method over the legal life of the
patents from the date the patent was secured. For Canadian GAAP
purposes, patents are amortized commencing in the year of commercial
production of the developed products.
(ii) In accordance with FAS 123, Accounting for Stock-Based Compensation,
compensation related to the stock options granted to non-employees
prior to January 1, 2002 has been recorded in the accounts based on
the fair value of the stock options at the grant date. The fair value
of the stock options was estimated as described in note 12 (d) (2).
(iii) Change in reporting currency:
The Corporation adopted the US dollar as its reporting currency
effective January 1, 2000. For Canadian GAAP purposes, the financial
information for 1999 has been translated into US dollars at the
December 31, 1999 exchange rate. For United States GAAP reporting
purposes, assets and liabilities for all years presented have been
translated into US dollars at the ending exchange rate for the
respective year and the statement of earnings at the average exchange
rate for the respective year.
41
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
12. Canadian/U.S. Reporting Differences (continued):
(c) Consolidated comprehensive income:
FAS 130, Reporting Comprehensive Income, requires the Corporation to
report and display certain information related to comprehensive income
for the Corporation. There were no adjustments to the net loss, US
GAAP, required to reconcile to the comprehensive loss.
(d) Other disclosures required by United States GAAP:
(1) Development stage company:
The Corporation is in the process of developing unique patented
products which are subject to approval by the regulatory
authorities. It has had limited revenues to date on the sale of
its products under development. Accordingly, the Corporation is a
development stage company as defined in Statement of Financial
Accounting Standards No. 7 and the following additional
disclosures are provided:
---------------------------------------------------------------------------------------------------
Cumulative Cumulative
since the date of since the date of
inception of inception of
the Corporation the Corporation
to December 31, to December 31,
2002 2001
---------------------------------------------------------------------------------------------------
Revenues:
Sales $ 1,024,226 $ 668,064
Interest revenue 507,654 502,068
License revenue 97,403 97,403
Research contract 30,000 30,000
Expenses:
Gross research and development expenditures 12,750,790 11,044,704
Other expenses 15,490,300 13,395,963
Cash inflows (outflows):
Operating activities (24,027,858) (21,588,838)
Investing activities (1,179,834) (778,198)
Financing activities 27,308,740 24,296,442
---------------------------------------------------------------------------------------------------
42
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
12. Canadian/U.S. Reporting Differences (continued):
(d) Other disclosures required by United States GAAP (continued): (1)
Development stage company (continued):
The statement of shareholders' equity since date of inception is
presented below:
-----------------------------------------------------------------------------------------------------------
Additional
-----------------------------------------------------------------------------------------------------------
Number of Consi- paid-in Accumulated
shares deration capital deficit Total
-----------------------------------------------------------------------------------------------------------
Year ended July 31, 1990:
Common shares issued 2,500,000 $ 172,414 $ - $ - $ 172,414
Net loss - - - (109,241) (109,241)
-----------------------------------------------------------------------------------------------------------
Balance, July 31, 1990 2,500,000 172,414 - (109,241) 63,173
Year ended July 31, 1991:
Net loss - - - (21,588) (21,588)
Cumulative translation adjustment - 1,499 - (950) 549
-----------------------------------------------------------------------------------------------------------
Balance, July 31, 1991 2,500,000 173,913 - (131,779) 42,134
Year ended July 31, 1992:
Common shares issued 9,375 31,468 - - 31,468
Net loss - - - (45,555) (45,555)
Cumulative translation adjustment - (6,086) - 5,598 (488)
-----------------------------------------------------------------------------------------------------------
Balance, July 31, 1992 2,509,375 199,295 - (171,736) 27,559
Year ended July 31, 1993:
Common shares issued 201,250 159,944 - - 159,944
Common shares cancelled (500,000) - - - -
Net loss - - - (38,894) (38,894)
Cumulative translation adjustment - (13,994) - 12,830 (1,164)
-----------------------------------------------------------------------------------------------------------
Balance, July 31, 1993 2,210,625 345,245 - (197,800) 147,445
Year ended July 31, 1994:
Common shares issued 2,500 7,233 - - 7,233
Net loss - - - (53,225) (53,225)
Cumulative translation adjustment - (25,173) - 15,808 (9,365)
-----------------------------------------------------------------------------------------------------------
Balance, July 31, 1994 2,213,125 327,305 - (235,217) 92,088
Year ended July 31, 1995:
Common shares issued 78,078 303,380 - - 303,380
Net loss - - - (285,910) (285,910)
Cumulative translation adjustment - 5,196 - (7,221) (2,025)
-----------------------------------------------------------------------------------------------------------
Balance, July 31, 1995 2,291,203 635,881 - (528,348) 107,533
Period ended December 31, 1995:
Adjustment necessary to
increase the number of
common shares 12,708,797 - - - -
-----------------------------------------------------------------------------------------------------------
Adjusted number of
common shares 15,000,000 635,881 - (528,348) 107,533
Common shares issued 2,047,082 2,997,284 - - 2,997,284
Net loss - - - (1,194,226) (1,194,226)
Share issue costs - (153,810) - - (153,810)
Cumulative translation adjustment - 2,858 - (6,328) (3,470)
-----------------------------------------------------------------------------------------------------------
Balance, December 31, 1995
carried forward 17,047,082 3,482,213 - (1,728,902) 1,753,311
43
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
12. Canadian/U.S. Reporting Differences (continued):
(d) Other disclosures required by United States GAAP (continued): (1)
Development stage company (continued):
The statement of shareholders' equity since date of inception is
presented below (continued):
----------------------------------------------------------------------------------------------------------------------------
Additional
----------------------------------------------------------------------------------------------------------------------------
Number of Consi- paid-in Accumulated
shares deration capital deficit Total
----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995
brought forward 17,047,082 $3,482,213 $ - $(1,728,902) $ 1,753,311
Year ended December 31, 1996:
Common shares issued 882,300 3,852,364 - - 3,852,364
Net loss - - - (3,175,587) (3,175,587)
Share issue costs - (170,699) - - (170,699)
Stock-based compensation - - 434,145 - 434,145
Cumulative translation adjustment - (16,769) (2,217) 24,544 5,558
----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 17,929,382 7,147,109 431,928 (4,879,945) 2,699,092
Year ended December 31, 1997:
Common shares issued 703,491 3,180,666 - - 3,180,666
Net loss - - - (3,755,409) (3,755,409)
Share issue costs - (161,482) - - (161,482)
Capital stock subscription - 352,324 - - 352,324
Stock-based compensation - - 108,350 - 108,350
Cumulative translation adjustment - (299,275) (21,578) 325,364 4,511
----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 18,632,873 10,219,342 518,700 (8,309,990) 2,428,052
Year ended December 31, 1998:
Common shares issued 1,095,031 5,644,638 - - 5,644,638
Net loss - - - (4,979,562) (4,979,562)
Share issue costs - (54,131) - - (54,131)
Stock-based compensation - - 274,088 - 274,088
Cumulative translation adjustment - (685,156) (43,750) 720,173 (8,733)
----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 19,727,904 15,124,693 749,038 (12,569,379) 3,304,352
Year ended December 31, 1999:
Common shares issued 275,900 969,253 - - 969,253
Net loss - - - (3,409,166) (3,409,166)
Share issue costs - (35,041) - - (35,041)
Stock-based compensation - - 198,815 - 198,815
Cumulative translation adjustment - 943,133 52,563 (884,178) 111,518
----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 20,003,804 17,002,038 1,000,416 (16,862,723) 1,139,731
Year ended December 31, 2000:
Common shares issued 1,373,817 5,909,340 - - 5,909,340
Warrants and options - 421,638 - - 421,638
Net loss - - - (4,272,308) (4,272,308)
Share issue costs - (353,204) - - (353,204)
Stock-based compensation - - 257,690 - 257,690
----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000
carried forward 21,377,621 22,979,812 1,258,106 (21,135,031) 3,102,887
44
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
12. Canadian/U.S. Reporting Differences (continued):
(d) Other disclosures required by United States GAAP (continued): (1)
Development stage company (continued):
The statement of shareholders' equity since date of inception is
presented below (continued):
----------------------------------------------------------------------------------------------------------------------------
Additional
----------------------------------------------------------------------------------------------------------------------------
Number of Consi- paid-in Accumulated
shares deration capital deficit Total
----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000
brought forward 21,377,621 $22,979,812 $1,258,106 $(21,135,031) $ 3,102,887
Year ended December 31, 2001:
Common shares issued 919,904 2,554,254 - - 2,554,254
Net loss - - - (3,095,133) (3,095,133)
Share issue costs - (120,944) - - (120,944)
Stock-based compensation - - 55,040 - 55,040
----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001 22,297,525 25,413,122 1,313,146 (24,230,164) 2,496,104
Year ended December 31, 2002:
Common shares issued 723,429 3,031,043 - - 3,031,043
Net loss - - - (3,453,749) (3,453,749)
Share issue costs - (166,842) - - (166,842)
Stock-based compensation - - 41,140 - 41,140
----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2002 23,020,954 $28,277,323 $1,354,286 $(27,683,913) $ 1,947,696
----------------------------------------------------------------------------------------------------------------------------
45
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
12. Canadian/U.S. Reporting Differences (continued):
(d) Other disclosures required by United States GAAP (continued):
(2) Stock-based compensation:
For US GAAP purposes, the Corporation applies APB Opinion 25,
Accounting for Stock Issued to Employees, in accounting for its
stock option plan, and, accordingly, no compensation cost has
been recognized for stock options granted to employees in these
financial statements. As explained in note 12 (b), compensation
cost has been recognized for stock options granted to
non-employees. Had compensation cost been determined for stock
options granted to employees based on the fair value at the grant
dates for awards under the plan consistent with the method of
FASB Statement 123, Accounting for Stock-Based Compensation, the
Corporation's net earnings and loss per share would have been
adjusted to the pro-forma amounts indicated below for US GAAP:
--------------------------------------------------------------------------------------------------------------
2002 2001 2000
--------------------------------------------------------------------------------------------------------------
Net loss As reported (US GAAP) $ (3,453,749) $ (3,095,133) $ (4,272,308)
Deduct: stock-based
employee
compensation cost,
net of taxes of nil,
under SFAS 123 (221,500) (251,969) (1,612,611)
--------------------------------------------------------------------------------------------------------------
Pro-forma $ (3,675,249) $ (3,347,102) $ (5,884,919)
--------------------------------------------------------------------------------------------------------------
Loss per share As reported (US GAAP) $ (0.15) $ (0.14) $ (0.20)
Pro-forma (0.16) (0.15) (0.28)
--------------------------------------------------------------------------------------------------------------
The fair value of each option grant was estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted average assumptions: risk-free interest rate
of 4.49% (2001 - 5.49%; 2000 - 5.50%), dividend yield of 0%,
expected volatility of 54% (2001 - 163%; 2000 - 80%), and
expected life of 5 years.
(e) Recent accounting pronouncements:
In August 2001, FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". SFAS No. 143 requires the Corporation to
record the fair value of an asset retirement obligation as a liability
in the period in which it incurs a legal obligation associated with
the retirement of tangible long-lived assets. This statement is
effective for the Corporation's fiscal year beginning January 1, 2003.
The Corporation does not expect SFAS No. 143 to have an impact on its
financial statements.
46
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
12. Canadian/U.S. Reporting Differences (continued):
(e) Recent accounting pronouncements (continued):
In April 2002, FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and
Technical Corrections". In June 2002, FASB issued SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities".
SFAS No. 145 and 146 will be effective for the Corporation's fiscal
year beginning January 1, 2003. The Corporation does not expect SFAS
No. 145 and 146 to have a material impact on its financial statements.
13. Segment disclosures:
The Corporation operates in one reporting segment - the research and
development of products for the treatment of Alzheimer's and other
diseases. Geographic segment information is as follows:
-------------------------------------------------------------------------------------------------------------------------
United
Canada States
-------------------------------------------------------------------------------------------------------------------------
Revenues:
2002 $ 6,327 $ 355,421
2001 145,501 235,108
2000 68,179 157,688
Net loss:
2002 (2,660,160) (761,859)
2001 (2,257,157) (792,347)
2000 (2,558,476) (1,465,503)
Property and equipment, patents and intellectual property:
2002 3,102,806 305,985
2001 3,086,869 284,655
Total assets:
2002 3,791,072 567,585
2001 3,629,455 562,786
-------------------------------------------------------------------------------------------------------------------------
47
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
13. Segment disclosures (continued):
Major customers:
Customers that accounted for greater than 10% of revenues in 2002 and 2001
were as follows:
----------------------------------------------------------------------------
2002 2001
----------------------------------------------------------------------------
Customer A 33% N/A
Customer B 21% N/A
Customer C 11% N/A
Customer D N/A 26%
----------------------------------------------------------------------------
In 2000, no single customer accounted for more than 10% of revenues.
14. Comparative figures:
Certain of the comparative figures have been reclassified to conform to the
presentation adopted in the current year.
15. Subsequent events:
(a) Common Stock Private Purchase Agreement:
In January 2003, the Corporation entered into a Common Stock Private
Purchase Agreement with an investment company (the "Purchaser") that
establishes the terms and conditions for the purchase of common shares
by the Purchaser. In general, the Corporation can, at its discretion,
require the purchaser to purchase up to $5 million of common shares
over a twenty-four-month period based on notices given by the
Corporation.
The number of shares to be issued in connection with each notice shall
be equal to the amount specified in the notice divided by 97% of the
average price of the Corporation's common shares for the five days
preceding the giving of the notice. The maximum amount of each notice
is $500,000 and the minimum amount is $150,000. The Corporation may
terminate the agreement before the 24-month term if it has issued at
least $3 million of common shares under the agreement.
In February 2003, the Corporation issued 107,382 common shares to the
Purchaser for aggregate proceeds of $400,000 under this agreement.
48
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 2002, 2001 and 2000
(in US dollars)
--------------------------------------------------------------------------------
15. Subsequent events (continued):
(b) Exercise of warrants:
In February 2003, the Corporation issued 100,000 common shares
pursuant to the exercise of Series K warrants and received proceeds of
$206,000.
(c) Repayment of notes payable:
In February 2003, the Corporation repaid $200,000 of notes payable.
49
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NYMOX PHARMACEUTICAL CORPORATION
(Registrant)
By: /s/ Paul Averback
Paul Averback
President and Chief Executive Officer
Date: March 31, 2003