AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 8, 2002
REGISTRATION NO. 333-88782
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
MYMETICS CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 2836 25-1741849
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
706 GIDDINGS AVENUE, SUITE 1C
ANNAPOLIS, MARYLAND 21401-1472
(410) 990-9501
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
JOHN M. MUSACCHIO
CHIEF FINANCIAL OFFICER AND CHIEF OPERATING OFFICER
MYMETICS CORPORATION
706 GIDDINGS AVENUE, SUITE 1C
ANNAPOLIS, MARYLAND 21401-1472
(410) 990-9501
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
COPIES TO:
JAMES D. CHIAFULLO, ESQ.
COHEN & GRIGSBY, P.C.
11 STANWIX STREET, 15TH FLOOR
PITTSBURGH, PENNSYLVANIA 15222
(412) 297-4831
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this registration
statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(4) OFFERING PRICE(4) REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
Common stock, $0.01 par value per
share................................. 32,014,005(1) $2.80 $ 89,639,214.00 $ 8,246.81
Common stock, $0.01 par value per
share................................. 16,393,316(2) $2.80 $ 45,901,284.80 $ 4,222.92
Common stock, $0.01 par value per
share................................. 80,166(3) $2.80 $ 224,464.80 $ 20.65
Totals.................................. 48,487,487 $2.80 $135,764,963.60 $12,490.38(5)
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
(1) These shares are currently outstanding and being offered by certain of our
stockholders.
(2) These shares are issuable upon the conversion of 15,372 outstanding shares
of Class B Exchangeable Preferential Non-Voting Stock of our subsidiary,
6543 Luxembourg S.A., which are presently convertible. We are registering
these shares of common stock for resale after the conversion of the Class B
Exchangeable Preferential Non-Voting shares.
(3) These shares are issuable upon the exercise of an outstanding share purchase
warrant, which is exercisable at $1.725 per share and expires on July 31,
2003. We are registering these shares of common stock for resale after the
exercise of the share purchase warrant.
(4) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933, based on the average
of the high ($2.90) and low ($2.70) prices of our common stock on August 5,
2002 as reported on the Nasdaq OTC Bulletin Board.
(5) We previously paid $12,909.04 in connection with the initial filing of this
registration statement on May 22, 2002.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED AUGUST 8, 2002
PROSPECTUS
48,487,487 SHARES
MYMETICS CORPORATION
COMMON STOCK
This prospectus relates to the resale by the selling stockholders
identified in this prospectus of:
- 32,014,005 shares of our currently outstanding common stock;
- 16,393,316 shares of our common stock underlying the conversion of 15,372
outstanding shares of Class B Exchangeable Preferential Non-Voting Stock
of our subsidiary, 6543 Luxembourg S.A.; and
- 80,166 shares of our common stock underlying the exercise of share
purchase warrants.
We will not receive any proceeds from the sale of our common stock by the
selling stockholders.
The selling stockholders identified in this prospectus, or their pledgees,
donees, transferees or other successors-in-interest, may offer the shares from
time to time through public or private transactions at prevailing market prices,
at prices related to prevailing market prices or at privately negotiated prices.
We do not know when or in what amounts a selling stockholder may offer shares
for sale. The selling stockholders may sell some, all or none of the shares
offered by this prospectus.
Our common stock is quoted on the OTC Bulletin Board under the trading
symbol "MYMX." On August 5, 2002, the closing high and low prices for our common
stock were $2.90 and $2.70 per share, respectively.
---------------------
INVESTING IN OUR COMMON STOCK INVOLVES SUBSTANTIAL RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
---------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
---------------------
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT
FROM THAT CONTAINED IN THIS PROSPECTUS. THE SELLING STOCKHOLDERS ARE OFFERING TO
SELL, AND SEEKING OFFERS TO BUY, SHARES OF OUR COMMON STOCK ONLY IN
JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN
THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS
OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF COMMON STOCK.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary.......................................... 1
Risk Factors................................................ 7
Forward-Looking Statements.................................. 14
Use of Proceeds............................................. 14
Dividend Policy............................................. 14
Capitalization.............................................. 15
Selling Stockholders........................................ 16
Selected Consolidated Financial Data........................ 19
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 20
Business.................................................... 23
Management.................................................. 32
Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 38
Certain Relationships and Related Party Transactions........ 38
Description of Capital Stock................................ 40
Principal Stockholders...................................... 43
Plan of Distribution........................................ 44
Shares Eligible for Future Sale............................. 45
United States Tax Consequences to Non-United States
Holders................................................... 46
Legal Matters............................................... 48
Experts..................................................... 48
Where You Can Find More Information......................... 48
Index to Financial Statements............................... F-1
Our principal executive offices are located at 706 Giddings Avenue, Suite
1C, Annapolis, Maryland 21401-1472 and our telephone number is (410) 990-9501.
In this prospectus, unless the context indicates otherwise, the terms
"Mymetics," "we," "us" and "our" refer to Mymetics Corporation and its
subsidiaries.
PROSPECTUS SUMMARY
The following summary highlights information contained elsewhere in this
prospectus. You should read the entire prospectus carefully, including the risk
factors and consolidated financial statements and related notes before deciding
to invest in our common stock.
THE COMPANY
We are a holding company conducting business through our subsidiaries, 6543
Luxembourg S.A., a joint stock company organized in 2001 under the laws of
Luxembourg, and Mymetics S.A. (formerly Hippocampe S.A.), a company organized in
1990 under the laws of France. We were incorporated in July 1994, pursuant to
the laws of the Commonwealth of Pennsylvania. In November 1996, we
reincorporated under the laws of the State of Delaware and changed our name to
"ICHOR Corporation." In July 2001, we changed our name to "Mymetics
Corporation." 6543 Luxembourg S.A. is our majority-owned subsidiary, and
Mymetics S.A. is a wholly-owned subsidiary of 6543 Luxembourg S.A. We acquired
99.9% of the outstanding stock of Mymetics S.A. in March 2001, pursuant to a
share exchange transaction. For more details on this share exchange transaction
see our Information Statement on Schedule 14C filed with the Securities and
Exchange Commission on April 26, 2001. We recently acquired the remaining 0.1%
of the outstanding common stock of Mymetics S.A. pursuant to share exchanges
with the remaining stockholders of Mymetics S.A. The terms of these recent share
exchanges were substantially similar to the terms of the share exchange that
occurred in March 2001.
We currently do not make, market or sell any products or services, and
thus, we have no revenues. We believe that our research and development
activities, and the resulting intellectual property will lead to the creation of
commercially viable products, which can generate revenues for us in the future.
If financially favorable terms are available, we may license our intellectual
property to third parties. If we fail to develop our intellectual property, we
are unlikely to generate significant revenues.
We own all of the outstanding voting stock of 6543 Luxembourg S.A. There
are also 15,372 shares of Class B Exchangeable Preferential Non-Voting Stock, or
Preferential Shares, of 6543 Luxembourg S.A. currently outstanding, which are
convertible into 16,393,316 shares of our common stock. Holders of the
Preferential Shares do not have any voting rights with respect to 6543
Luxembourg S.A. However, pursuant to a Voting and Exchange Trust Agreement dated
March 28, 2001, the holders of the Preferential Shares are entitled to vote on
all matters to be voted on by the holders of our common stock to the same extent
as if they had converted the Preferential Shares into shares of our common
stock. See "Description of Capital Stock - Preferred Stock."
Our operating subsidiary, Mymetics S.A., is a biotechnology research and
development company devoted to fundamental and applied research in the areas of
human and veterinary biology and medicine. Our primary objective is to develop
therapies to treat certain retroviruses (which are described below), including
human immunodeficiency virus, or HIV, the virus that leads to acquired
immunodeficiency syndrome, or AIDS. Additional applications of our research
include potential treatments and/or vaccines for animal AIDS, human and animal
oncoviral leukemias, multiple sclerosis and organ transplantation. To date, we
have conducted our fundamental research in Europe.
Our research strategy is to organize and manage a collection of public and
private best-in-class research teams, each of which has its own unique focus. We
have segmented our primary research into modules, each of which is then
outsourced, under our direct supervision, to high-level, specialized and
complementary public and private research teams. We retain all intellectual
property rights on the joint research and we apply for domestic and
international patents whenever justified. As agreed and coordinated by us, the
joint research teams are authorized to co-publish their results.
SCIENCE OVERVIEW
Virus. A virus is a noncellular organism consisting of deoxyribonucleic
acid, or DNA, or ribonucleic acid, or RNA, and a protein coat. During the free
and infectious stage of their life cycle, viruses do not
1
perform the usual functions of living cells, such as respiration and growth.
Rather, when viruses enter a living plant, animal or bacterial cell, they
utilize the host cell's chemical energy and synthesizing ability to replicate.
After the replication of the viral components by the infected host cell, virus
particles are released and the host cell is often destroyed. The approximately
2,450 viral species identified to date are divided into about 75 groups. One of
these groups consists of retroviruses, to which HIV belongs. Retroviruses
contain a reverse transcriptase that copies viral RNA back into DNA (the reverse
of what usually occurs when DNA is copied into RNA).
HIV. HIV is a type of retrovirus, a virus of the family Retroviridae that
has RNA as its nucleic acid and uses the enzyme reverse transcriptase to copy
its genome into the DNA of the host cell's chromosomes. Once inside the T cell,
HIV uses the cell's machinery to copy its RNA into DNA by means of the reverse
transcriptase. HIV is characterized by an inability to mount a normal immune
response and is the cause of the fatal illness known as AIDS.
Two strains of HIV have been identified, HIV-1 and HIV-2. The genetic
material of these two strains is approximately 60% identical. Each strain
contains a number of subtypes, which are slight genetic variations of the virus.
At least 32 sub types have been identified to date. These variations result from
the high mutation rate of HIV's genetic material. Most variations occur in the
gene encoding the GP120 protein, and these mutations can alter the protein's
structure. HIV-1 or Type 1 classified as a lentivirus is a subgroup of
retroviruses that have been isolated and recognized as the cause of a disease
that induces AIDS. HIV-1, like most viruses and all bacteria, plants and
animals, has genetic codes made up of DNA, which uses RNA to build specific
proteins. HIV's genetic material is the RNA itself. HIV inserts its own RNA into
the host cell's DNA, preventing the host cell from performing its natural
functions and transforming it into an HIV factory.
AIDS. AIDS is a fatal epidemic disease caused by an HIV infection (HIV-1
or HIV-2). In most cases, HIV slowly attacks and destroys the immune system, the
body's defense against disease, leaving the infected individual vulnerable to
malignancies and infections that eventually cause death. Propagation of HIV
results from the invasion of the host cell and its use of the host cell's
protein synthesis capability. The immune system's response (antibodies and
cellular immune response) is usually sufficient to temporarily delay progress of
the infection and reduce levels of the virus in the blood. Virus replication
continues, however, and gradually destroys the immune system by infecting and
destroying critical white blood cells known as CD4 cells.
The main cellular target of HIV is a special class of white blood cells
critical to the immune system, known as helper T lymphocytes, or T4 helper
cells. These cells play a principal role in normal immune responses by
stimulating or activating virtually all of the other cells involved in immune
protection. These cells include B lymphocytes, the cells that produce antibodies
needed to fight infection; cytotoxic T lymphocytes, which destroy cells infected
with a virus; and macrophages and other effector cells, which attack invading
pathogens. Once HIV has entered the helper T cell, it can impair the functioning
of or destroy the cell. A hallmark of the onset of AIDS is a drastic reduction
in the number of helper T cells in the body. HIV also can infect other cells,
including certain monocytes and macrophages, as well as brain cells. Among those
cells are CD4, HIV's preferred target cells due to a docking molecule called
cluster designation 4, or CD4, on their surfaces. Cells with this molecule are
known as CD4-positive, or CD4+, cells. These cells normally orchestrate the
immune response, signaling other cells in the immune system to perform their
special functions. Destruction of CD4+ lymphocytes is the major cause of the
immunodeficiency observed in AIDS, and decreasing CD4+ lymphocyte levels appear
to be the best indicator of morbidity in these patients. As the infection
progresses, the immune system's control of HIV levels weakens, the level of the
virus in the blood rises and the level of critical T cells declines to a
fraction of their normal level.
Viral Envelope of HIV. The viral envelope of HIV is covered with
mushroom-shaped spikes that enable the virus to attach itself to the target
cell. The cap of each "mushroom" is comprised of GP120 molecules and its stem is
comprised of GP41 molecules. GP120 is a glycoprotein that protrudes from the
surface of HIV and binds to the CD4 receptor of the CD4+ T-cells. In a two-step
process that allows HIV to breach the membrane of T-cells, the GP120-CD4 complex
refolds to reveal a second structure that binds to CCR5 or CXCR4, one of several
chemokine co-receptors used by the virus to gain entry into T cells. GP41 is a
2
glycoprotein embedded in the outer envelope of HIV and plays a key role in HIV's
infection of cells by carrying out the fusion of the viral and cell membranes.
Immune System. The immune system functions to protect the body against
infection and foreign substances, including viruses and bacteria. This defensive
function is performed by the body's white blood cells (leukocytes) and by a
number of accessory cells, including B lymphocytes, the cells that produce the
antibodies needed to fight infection, and cytotoxic T lymphocytes, which destroy
cells infected with viruses. When an immunocompetent cell recognizes foreign
material or a biological invader presented by the macrophages, it normally
induces a response. This recognition function relies on the immune system's
ability to recognize specific foreign molecular configurations, generically
referred to as antigens. T4 lymphocytes, as the central cells of the immune
system, specifically recognize foreign invaders presented by macrophages. After
specific recognition of a presented antigen, T4 lymphocytes play a major role in
the immune response, producing interleukine-2, or IL-2, a central interleukine
that activates all of the accessory cells previously described and the overall
immune response.
BUSINESS STRATEGY
We have not yet developed an actual product or generated any revenues. Our
current objective is to develop a platform of both therapeutic compounds and
vaccines that can be commercialized either by our production of these compounds
and vaccines ourselves or by licensing our intellectual property to third
parties on financially favorable terms.
We have made a series of discoveries about how the body's immune system
responds to retroviruses, specifically HIV. The foundation of our platform
technology and potential product pipeline is our discovery of a subtle mimicry
between the virus and the host cells. By understanding the precise dynamics of
the virus's GP41 and the host cell's IL-2, we believe we have the potential to
design and develop specific therapeutic molecules and antibodies to disrupt or
even prevent HIV. In addition to targeting HIV and AIDS, we hope to apply our
findings to the potential treatment or even prevention of a range of additional
diseases, including certain oncoviruses like leukemia.
Some biotechnology firms are focusing on slowing or impeding the progress
of HIV once it has infected the body's host cells. Other biotechnology firms are
attempting to develop therapies that prevent the virus from fusing with host
cells. If the virus cannot fuse, it cannot reproduce, and the body's immune
system then succeeds in arresting the invasion. Our approach is also based on
the concept of preventing viral fusion. Our scientific strategy is unique in
that its design is based on a series of discoveries involving mimicry and, in
particular, on the inter-reaction between the viral envelope glycoprotein GP41
and the host cell's IL-2. We have discovered that a piece of the virus closely
resembles or "mimics" the host cell's IL-2. By exploiting this mimicry, the
virus unlocks the host cell and gains access to the cell's machinery. The body's
immune system responds to the invasion, but fails to differentiate between the
viral GP41 and the host cell's IL-2. As a result, we believe that the immune
system attacks the GP41 and the IL-2 with equal vigor. The unfortunate
consequence is that the body, in turning on itself, undercuts its own defenses.
By better understanding these precise dynamics, we believe we will be able to
design and develop specific therapeutic molecules and antibodies to disrupt the
mimicry, prevent HIV from entering the host cell and enable the body's immune
system to recognize HIV. Our current scientific strategy is to create
therapeutic peptides and antibodies to disrupt the mimicry, block the fusion,
and condition the body's immune system to recognize GP41 as separate and
distinct from IL-2. If this can be accomplished, the body's immune system should
be able to identify and attack the virus, instead of the healthy cells.
THERAPEUTIC AND VACCINAL USE OF THE MIMICRY DISCOVERY
Our current research modules focus on the following four fields:
- Fundamental research. We believe that our analysis of the GP41/IL-2
mimicry will enable us to explain, in large part, the main
AIDS-associated disorders: drop of peripheral IL-2, decrease of non-
infected T helper lymphocytes, lymphoproliferation disorders and a2
microglobulin increase and hypergammaglobulinemia.
3
- Therapeutic molecules. We believe that, based on the host-virus
autoimmune mimicry we are studying, an application involving the
development of particular synthetic peptides and monoclonal antibodies
(some of which have already been developed) would inhibit the fusion
between HIV and its target cell in an infected subject. Well designed
therapeutic molecules would prevent the virus from binding to the target
cell and inhibit its attempts to reproduce. Having demonstrated that the
transmission of HIV depends on the viral load, and that no transmission
has been observed below 1,500 viral copies/ml., treatment with
therapeutic agents may provide a strategy to control AIDS epidemicity.
This application would complement available antiretroviral drugs, or may
even provide a substitute for the available antiretroviral drugs.
- Therapeutic and preventive vaccines. We believe that our discovery of
the host-virus autoimmune mimicy opens the door to novel therapeutic and
preventive vaccine strategies for both humans and animals. We also
believe that specific preventive vaccines we are working to develop would
be universal for both HIV-1 and HIV-2, and would provide an all-strain
prevention.
- AIDS cartridge. We have developed a number of therapeutic
immunocartridges that might help patients infected with AIDS by reducing
the viral load. These immunocartridges have been tested and approved by
the Ethics Committee for the Treatment of Systemic Lupus Erythematosus
and Hemophilia A. Our research has demonstrated that the anti IL-2
antibodies in HIV infected subjects recognize some sites of IL-2 that are
crucial for its bioactivity. Therefore, we believe that the development
of an "AIDS cartridge" could be effective in the restoration of the
immune system (CD4/CD8-viral load) of HIV infected subjects.
We currently have several prototypes potentially capable of
commercialization, including:
- Therapeutic molecules (pharmacological agents) -- administered to
infected subjects to prevent cell infection by HIV.
- Therapeutic vaccines (immunotherapeutic agents) -- administered to
infected subjects to orient the immune system into recognizing the
transmembrane glycoprotein of the virus and not the host's IL-2.
- Preventive vaccines -- administered to healthy subjects to prevent
infection by HIV.
- AIDS cartridge -- administered to infected subjects to selectively remove
the identified immunosuppressive antibodies present in the serum of AIDS
patients.
GENERAL INFORMATION
We are incorporated under the laws of the State of Delaware. We have a
registered office at 1209 Orange Street, Wilmington, Delaware, United States
19801, and a principal executive office located at 706 Giddings Avenue, Suite
1C, Annapolis, Maryland 21401-1472. Our common stock is quoted on the OTC
Bulletin Board operated by the National Association of Securities Dealers, Inc.
We intend to form a new United States subsidiary during the third or fourth
quarter of 2002. This new subsidiary will focus on applying our research and
development to target products and on business development. We believe that this
tiered structure has numerous advantages, including greater access to grants,
subsidies, intellectual property and public and private research teams. To date,
activities such as design of the prototype molecule, synthesis and in-vitro
experiments have been and will continue to be conducted mainly in Europe, while
pre-clinical studies, toxicological trials, regulatory affairs, investigational
new drug applications, or IND applications, Phase I, II, and III clinical
trials, and new drug applications, or NDAs, will, after the creation of the
United States subsidiary, be conducted mainly in North America.
4
SECURITIES REGISTERED
The securities being registered by the registration statement to which this
prospectus relates are as follows:
Securities offered.......................... 48,487,487 shares of our common stock
Percentage of our outstanding shares
represented by offering(1)................ 95.03%
Common stock to be outstanding after the
offering(1)............................... 51,024,620
Use of proceeds............................. We will not receive any proceeds from the
sale of our common stock by selling
stockholders. See "Use of Proceeds."
Risk factors................................ An investment in the shares involves a high
degree of risk. See "Risk Factors."
OTC Bulletin Board trading symbol........... MYMX
---------------
(1) This number assumes the issuance of 16,393,316 shares of our common stock
upon the conversion of 15,372 outstanding Preferential Shares of our
subsidiary, 6543 Luxembourg S.A., and the issuance of 80,166 shares of our
common stock upon the exercise of an equal number of outstanding share
purchase warrants. This number does not include approximately 263,750 shares
of our common stock issuable upon the exercise of certain outstanding and
fully vested stock options.
EXCHANGE RATES
Consistent with the location of our current research activities, beginning
January 1, 1999, we adopted the Euro (E) as our corporate currency. Accordingly,
except where otherwise expressly noted, the financial information contained in
the registration statement of which this prospectus is a part is provided in
Euros (E). See Note 1 "Foreign Currency" to the Consolidated Financial
Statements contained in the registration statement of which this prospectus is a
part for further explanation. As of August 6, 2002, 1 Euro was convertible into
0.964004 United States Dollars. If, as expected, we form a United States
subsidiary, and such subsidiary results in a majority of our expenditures being
stated in U.S. Dollars rather than in Euros, we may change our corporate
currency back to the U.S. Dollar ($).
5
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table reflects summary consolidated financial data for our
fiscal years ended December 31, 2001, 2000, 1999, 1998 and 1997, respectively
and for the three month periods ended March 31, 2002 and 2001 (unaudited),
respectively. The summary consolidated financial data set forth below should be
read along with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the financial statements and notes thereto included
elsewhere in this prospectus.
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2001 2000 1999 1998 1997
------------ ------------ ------------ ------------ ------------
(EUROS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA
Operating revenues..... 26 13 47 42 14
Research & Development
Expenses............. 482 101 94 70 20
General &
Administrative
Expenses............. 1,034 351 37 38 34
Loss from continuing
operations........... (15,701)(2) (1,314) (99) (68) (40)
COMMON SHARE DATA(1)
Loss from continuing
operations per common
share................ (0.37) (0.04) (0.00) (0.00) (0.00)
Weighted average common
shares outstanding
(in thousands)....... 42,460(3) 33,311 33,311 33,311 33,311
BALANCE SHEET DATA
Working capital........ 565 (652) (24) (40) (46)
Total assets........... 1,692 625 146 77 43
Long-term
obligations.......... 242 242 242 138 70
Total stockholders'
equity............... 693 (765) (257) (158) (90)
FOR THE FOR THE
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2002 2001
(UNAUDITED) (UNAUDITED)
------------ ------------
(EUROS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA
Operating revenues..... 5 3
Research & Development
Expenses............. 232 114
General &
Administrative
Expenses............. 250 127
Loss from continuing
operations........... (556) (3,352)(2)
COMMON SHARE DATA(1)
Loss from continuing
operations per common
share................ (0.01) (0.10)
Weighted average common
shares outstanding
(in thousands)....... 49,263(3) 33,586
BALANCE SHEET DATA
Working capital........ (20) 565
Total assets........... 1,315 1,692
Long-term
obligations.......... 242 242
Total stockholders'
equity............... 162 693
---------------
(1) Basic and diluted common share data is the same.
(2) This amount reflects the value of 6,001,693 warrants we issued to MFC
Merchant Bank S.A. in 2001 in connection with a credit facility provided by
MFC Merchant Bank S.A. The intrinsic value of the beneficial conversion
feature of these warrants was calculated to be E14,063 as of March 28, 2001
using the Black-Scholes model. This value is not necessarily indicative of
the value of our common stock, or our business as a whole.
(3) The increase in 2001 reflects the shares and warrants granted as fees in
connection with the share exchange in March 2001, the credit facility
entered into in 2001 and the private placement completed in June 2001.
6
RISK FACTORS
An investment in our common stock involves significant risks. You should
carefully consider the risks described below and the other information in this
prospectus, including our consolidated financial statements and related notes,
before you decide to invest in our common stock. If any of the following risks
actually occur, our business prospects, financial condition or results of
operations could be materially harmed, the trading price of our common stock
could decline and you could lose all or part of your investment. The risks and
uncertainties described below are those that we currently believe may materially
affect our company. Additional risks and uncertainties that we are unaware of or
that we currently deem immaterial also may become important factors that affect
our company.
WE HAVE A HISTORY OF OPERATING LOSSES AND WE EXPECT TO GENERATE OPERATING LOSSES
FOR THE FORESEEABLE FUTURE.
We currently are engaged in research and development activities and do not
have any commercially marketable products. The product research and development
process requires significant capital expenditures, and we have no other sources
of revenue to offset these expenditures. Accordingly, we expect to generate
additional operating losses for the foreseeable future.
WE WILL NEED TO RAISE ADDITIONAL CAPITAL TO FUND OUR RESEARCH EFFORTS AND TO
FULLY DEVELOP AND MARKET COMMERCIALLY VIABLE PRODUCTS. WE CANNOT ASSURE YOU THAT
WE WILL BE ABLE TO OBTAIN ADDITIONAL CAPITAL WHEN NEEDED OR THAT SUCH CAPITAL
WILL BE AVAILABLE ON FAVORABLE TERMS. OUR BUSINESS WILL BE ADVERSELY AFFECTED IF
WE CANNOT RAISE ADDITIONAL CAPITAL WHEN NEEDED.
The costs associated with our future research and the development of our
intellectual property will be substantial. We expect that our existing capital
resources will satisfy our capital requirements through approximately December
2002. However, since we do not have any current sources of revenue, substantial
additional capital will likely be needed to continue the development and
attempted commercialization of our intellectual property. We are unable to
estimate with precision the amount of additional capital we may require. Any
additional equity financing may be dilutive to stockholders, and debt financing,
if available, may include restrictive covenants. Currently, we have no
commitments for any additional financing, and there can be no assurance that
additional financing will be available when needed or, if available, that such
capital will be available on favorable terms.
The availability of, and the need for, future capital will depend on many
factors, including:
- continued scientific progress in our research and development program;
- results of pre-clinical tests and any clinical trials;
- the time and cost involved in obtaining regulatory approvals;
- future collaborative relationships; and
- the cost of manufacturing and marketing.
If adequate funds are not available, we may be required to curtail or cease
operations.
IF WE ARE UNABLE TO SUCCESSFULLY DEVELOP AND COMMERCIALIZE OUR RESEARCH AND
INTELLECTUAL PROPERTY, WE MAY NEVER GENERATE SIGNIFICANT REVENUES OR ACHIEVE
PROFITABILITY.
Our current objective is to develop vaccine and therapeutic compounds and
specific therapies for certain retroviral diseases or diseases with a viral
autoimmune content. All of our potential products and production technologies
are in the research or development stages and no revenues have been generated
from product sales. Our first products and applications will target human and
animal AIDS. We will not become profitable, if ever, unless we develop our
intellectual property to a level where it can be licensed or sold to third
parties on financially favorable terms or applied in the creation and
development of one or more commercial products capable of generating significant
revenues. We may be unable to develop our intellectual property to the necessary
level. Even if we are able to further develop our intellectual property, we may
be unable to
7
license or sell it to third parties on financially favorable terms, if at all,
or we may not be able to develop commercially viable products on our own.
Although our due diligence has indicated that our research and discoveries
regarding "mimicry" may lead to important discoveries in the scientific
community regarding the HIV infection process, other discoveries may be
necessary to develop an effective vaccine. We may never be able to develop our
research and intellectual property into a commercially profitable product.
Our success will depend on our ability to:
- develop intellectual property that will effectively treat or prevent HIV
and/or other diseases;
- effectively commercialize our research through collaborative
relationships;
- prepare acceptable protocols necessary to obtain regulatory approvals;
- effectively conduct and conclude clinical trials;
- effectively establish the commercial viability of one or more products;
and
- effectively establish marketing and manufacturing relationships.
If we are unable to commercialize our current research, we do not have
other products from which to derive revenue. As a result, we may not become
profitable and the value of our stock could decline.
WE MUST OVERCOME SIGNIFICANT OBSTACLES TO SUCCESSFULLY DEVELOP AND MARKET
PRODUCT CANDIDATES.
The development of product candidates is subject to significant risks of
failure, which are inherent in the development of new medical products and
products based on new technologies. These risks include:
- delays in pre-clinical testing, product development, clinical testing or
manufacturing;
- unplanned expenditures for product development, clinical testing or
manufacturing;
- failure of the technologies and products being developed to provide
medical benefits or an acceptable safety profile;
- failure to receive regulatory approvals;
- emergence of equivalent or superior products;
- inability to manufacture (directly or through third parties) product
candidates on a commercial scale;
- inability to market products due to third-party proprietary rights;
- inability to find collaborative partners to pursue product development;
and
- failure of future collaborative partners to successfully develop
products.
If one or more of these risks materializes, our research and development
efforts may not result in any commercially viable products.
COMMERCIALIZATION OF OUR INTELLECTUAL PROPERTY AND CREATION OF VIABLE PRODUCTS
WILL REQUIRE COLLABORATIONS WITH OTHERS. IF WE ARE UNABLE TO FIND COLLABORATORS
IN THE FUTURE, WE MAY NOT BE ABLE TO DEVELOP PROFITABLE PRODUCTS.
Our strategy for the research, development and commercialization of
products requires us to enter into contractual arrangements with corporate
collaborators, licensors, licensees and others. We do not have the resources to
develop products on our own, and intend to depend on collaborators to develop
products on our behalf. If collaborative relationships cannot be secured, we may
not be able to continue our development programs.
Moreover, we could become involved in disputes with collaborative partners,
which could lead to delays or the termination of development programs and
time-consuming, expensive and distracting litigation or arbitration. Even if we
fulfill our obligations under a collaborative agreement, a collaborative partner
may
8
terminate the agreement or fail to fulfill its obligations under the
collaborative agreement. If any collaborative partner were to terminate or
breach an agreement with us, or otherwise fail to complete its obligations in a
timely manner, our ability to successfully commercialize our intellectual
property could be adversely affected.
IF WE ARE UNABLE TO DEMONSTRATE THE RESULTS OF OUR RESEARCH IN CLINICAL TRIALS,
OR IF CLINICAL TRIALS ARE DELAYED, WE MAY NOT BE ABLE TO OBTAIN REGULATORY
CLEARANCE TO MARKET OUR PRODUCTS IN THE UNITED STATES OR IN FOREIGN COUNTRIES ON
A TIMELY BASIS, IF AT ALL.
Assuming we are able to successfully develop our research into potential
products, such products will require regulatory approval. Before obtaining
regulatory approvals for the commercial sale of any of the products under
development, pre-clinical studies and clinical trials must demonstrate that the
product is safe and effective for use in each target indication. If any of the
products fail in clinical trials, the approval of the United States Food and
Drug Administration, or the FDA, and similar agencies operating in foreign
countries, will not be obtained for such products, and we will not be able to
generate revenues from such products.
Clinical testing is a long, expensive and uncertain process. We are
uncertain that the data collected from the clinical trials will be sufficient to
support approval by the FDA or any foreign regulatory authorities, that the
clinical trials will be completed on schedule or, even if the clinical trials
are successfully completed on schedule, that the FDA or any foreign regulatory
authorities will ultimately approve the product for commercial use.
Clinical trials could be delayed for a variety of reasons, including:
- delays in enrolling volunteers;
- lower than anticipated retention rate of volunteers in the trials; and
- serious adverse events related to the products being developed.
Our research is presently focused on developing a vaccine against HIV.
Trials will be conducted on animals prior to humans. Results of animal trials,
even if successful, may not be relevant for determining the protective effect of
any potential vaccine against HIV infection in humans. In addition, results from
early clinical trials are not necessarily indicative of future results. A number
of companies in the biotechnology and pharmaceutical industries have suffered
significant setbacks in late stage clinical trials even after promising results
in early stage development. Furthermore, pre-clinical and clinical data can be
interpreted in different ways, which could delay, limit or prevent regulatory
approvals. Negative or inconclusive results or interpretations could cause the
trials to be unacceptable for submission to regulatory authorities.
POLITICAL OR SOCIAL FACTORS MAY ADVERSELY IMPACT REVENUES BY DELAYING OR
IMPAIRING OUR ABILITY TO MARKET OUR PRODUCTS.
We are focused on developing vaccines and products for the treatment and
prevention of HIV. Products developed to address the HIV/AIDS epidemic have
been, and may continue to be, subject to competing and changing political and
social pressures. The political and social response to the HIV/AIDS epidemic has
been highly charged and unpredictable. Such political and social forces may
serve to delay or prevent introduction of our products into the marketplace or
to place restrictions upon the pricing, availability and marketing of such
products.
IF WE ARE UNABLE TO ATTRACT AND RETAIN KEY EMPLOYEES AND CONSULTANTS, WE MAY BE
UNABLE TO DEVELOP AND COMMERCIALIZE PRODUCTS.
We are dependent on the principal members of our management and scientific
staff. In order to successfully complete our research and development activities
and our commercialization plans, we will need to hire personnel with experience
in clinical testing, governmental regulation, manufacturing, marketing and
finance. We may not be able to attract and retain personnel on acceptable terms
given the intense competition for such personnel among high-technology
enterprises, including biotechnology, pharmaceutical and healthcare companies,
universities and non-profit research institutions. Our failure to successfully
attract and retain such personnel may result in our inability to develop and
commercialize our products.
9
IF WE FAIL TO ENTER INTO SUCCESSFUL MARKETING ARRANGEMENTS WITH THIRD PARTIES,
WE MAY NOT BE ABLE TO COMMERCIALIZE PRODUCTS.
We do not currently have any sales or marketing infrastructure, and we do
not have significant experience in marketing, sales and distribution. Generation
of revenues and future profitability will depend in part on our ability to enter
into successful marketing arrangements with third parties. If we are unable to
enter into third-party marketing and sales arrangements, we may be unable to
commercialize our products. Even if we enter into such arrangements, the
companies who enter into marketing arrangements with us may be unable to market
our products successfully.
IF WE DO NOT SUCCESSFULLY COMPETE IN THE DEVELOPMENT AND COMMERCIALIZATION OF
PRODUCTS AND KEEP PACE WITH RAPID TECHNOLOGICAL CHANGE, WE WILL BE UNABLE TO
CAPTURE AND SUSTAIN A MEANINGFUL MARKET POSITION.
The biotechnology and pharmaceutical industries are highly competitive and
subject to significant and rapid technological change. We are aware of several
companies actively engaged in research and development in areas related to our
research focus. Many of these companies are addressing the same diseases and
disease indications that we are addressing. As a result of this intense
competition, any products that we develop may become obsolete before we are able
to recover the expenses incurred in their development. Moreover, many of these
companies, either alone or together with their collaborative partners, have
substantially greater financial resources and larger research and development
staffs. These competitors, either alone or together with their collaborative
partners, also have significantly greater experience in:
- developing products;
- undertaking pre-clinical testing and human clinical trials;
- obtaining FDA and other regulatory approvals of products; and
- manufacturing and marketing products.
IF OUR INTELLECTUAL PROPERTY DOES NOT ADEQUATELY PROTECT PRODUCT CANDIDATES, WE
MAY ENCOUNTER MORE DIRECT COMPETITION, WHICH COMPETITION COULD ADVERSELY IMPACT
REVENUES.
Our success depends in part on our ability to:
- obtain and maintain patents or rights to patents;
- protect trade secrets;
- operate without infringing upon the proprietary rights of others; and
- prevent others from infringing on our proprietary rights.
We will be able to protect proprietary rights from unauthorized use by
third parties only to the extent that our proprietary rights are covered by
valid and enforceable patents or are effectively maintained as trade secrets.
The patent position of biotechnology companies involves complex legal and
factual questions and, therefore, enforceability cannot be predicted with
certainty. Patents, if issued, may be challenged, invalidated or circumvented.
Thus, any patents that are owned or licensed from third parties may not provide
adequate protection against competitors. Pending patent applications, those
applications that we may file in the future, or those applications that we may
license from third parties, may not result in patents being issued. Also, patent
rights may not provide adequate proprietary protection or competitive advantages
against competitors with similar technologies. The laws of certain foreign
countries do not protect intellectual property rights to the same extent as do
the laws of the United States.
In addition to patents, we rely on trade secrets and proprietary know-how.
Protection of trade secrets and know-how is sought, in part, through
confidentiality and proprietary information agreements and customary principles
of "work-for-hire." These agreements may not provide meaningful protection or
adequate remedies in the event of unauthorized use or disclosure of confidential
and proprietary information. Failure to protect proprietary rights could
seriously impair our competitive position.
10
IF THIRD PARTIES CLAIM WE ARE INFRINGING THEIR INTELLECTUAL PROPERTY RIGHTS, WE
MAY BECOME SUBJECT TO SIGNIFICANT LITIGATION OR LICENSING EXPENSES OR WE MAY BE
PREVENTED FROM MARKETING OUR PRODUCTS.
The areas in which we have focused our research and development have a
number of competitors, and many of these competitors have a number of issued
patents and pending patent applications. In most cases, patent applications in
the United States are maintained in secrecy until the patents issue. The
publication of discoveries in the scientific or patent literature frequently
occurs substantially later than the date on which the underlying discoveries
were made. Commercial success depends significantly on our ability to operate
without infringing the patents and other proprietary rights of third parties. In
the event of such infringement, we may be prevented from pursuing certain
product development or commercialization and may be required to obtain a license
for the use of the proprietary rights or patents. We may also be required to pay
damages for past infringement.
The biotechnology and pharmaceutical industries have been characterized by
extensive litigation regarding patents and other intellectual property rights.
The defense and prosecution of intellectual property lawsuits, U.S. Patent and
Trademark Office interference proceedings and related legal and administrative
proceedings in the United States and in foreign countries involve complex legal
and factual questions. As a result, such proceedings are costly and time
consuming to pursue and their outcome is uncertain.
Litigation may be necessary in the future to:
- enforce patents that we own or license;
- protect trade secrets or know-how that we own or license; or
- determine the enforceability, scope and validity of the proprietary
rights of others.
We believe our technology has been independently developed and does not
infringe upon the proprietary or intellectual property rights of others. We
cannot, however, guarantee that our technology does not, and will not in the
future, infringe upon the rights of third parties. We may become involved in
legal proceedings and disputes relating to the proprietary information of others
from time to time in the ordinary course of our business. If we become involved
in any litigation, interference or other administrative proceedings, we will
incur substantial expense, and the efforts of technical and management personnel
will be significantly diverted. An adverse determination may subject us to loss
of proprietary position or significant liabilities, or require licenses that may
not be available from third parties. As a result, we may be restricted or
prevented from manufacturing and selling one or more products. To the extent
licensing arrangements are even available, costs associated with these
arrangements may be substantial and may include ongoing royalties.
WE CANNOT BE SURE THAT ANY FUTURE OR CURRENTLY PENDING PATENT APPLICATIONS
RELATING TO OUR PRODUCTS WILL ISSUE ON A TIMELY BASIS, IF EVER.
Since patent applications in the United States are generally maintained in
secrecy until the patents issue, and since publication of discoveries in the
scientific or patent literature often lag behind actual discoveries, we cannot
be certain that we were the first to develop the inventions covered by each of
our pending patent applications or that we were the first to file patent
applications for such inventions. Even if patents are issued, the degree of
protection afforded by such patents will depend upon:
- the scope of the patent claims;
- the validity and enforceability of the claims obtained in such patents;
and
- our willingness and financial ability to enforce and/or defend them.
EVEN IF WE OBTAIN REGULATORY APPROVAL TO MARKET AND SELL OUR PRODUCTS, WE WILL
BE SUBJECT TO ONGOING REGULATORY REVIEW, WHICH WILL BE EXPENSIVE AND MAY EFFECT
OUR ABILITY TO SUCCESSFULLY COMMERCIALIZE OUR PRODUCTS.
Even if regulatory approval for a product is secured, such approval may be
subject to limitations on the indicated uses for which the product may be
marketed and sold. Such limitations may restrict the size of the available
market for the product or contain requirements for costly post-marketing
surveillance studies.
11
Manufacturers of medical products are subject to continued review and periodic
inspections by the FDA and other regulatory authorities. The subsequent
discovery of previously unknown problems with the product, clinical trial
subjects, or with the manufacturer or its manufacturing facility may result in
the imposition of restrictions on the product or manufacturer, including
withdrawal of the product from the market. If we or any of our collaborative
partners fail to comply with applicable regulatory requirements, we may be
subject to fines, suspension or withdrawal of regulatory approvals, product
recalls, seizure of products, operating restrictions and criminal prosecution.
IF OUR PRODUCTS ARE NOT ACCEPTED BY THE MARKET, WE ARE NOT LIKELY TO GENERATE
SIGNIFICANT REVENUES OR BECOME PROFITABLE.
Even if we are able to successfully develop a viable product and obtain
regulatory approval of such product, such product may not gain market acceptance
among physicians, patients, healthcare payors and the general medical community.
The degree of market acceptance of any medical product depends on a number of
factors, including:
- demonstration of clinical efficacy and safety;
- cost-effectiveness;
- potential advantages over alternative therapies;
- reimbursement policies of government and third-party payors;
- effectiveness of marketing and distribution capabilities; and
- the success of physician education programs.
Physicians will not recommend therapies using products until clinical data
or other factors demonstrate their safety and efficacy as compared to other
drugs or treatments. Even if the clinical safety and efficacy of therapies using
the products are established, physicians may elect not to recommend the
therapies for other reasons, including whether the mode of administration of
products is effective for certain indications.
IF THE RAW MATERIALS NECESSARY TO CONDUCT OUR RESEARCH AND MANUFACTURE OUR
PRODUCTS ARE NOT AVAILABLE, OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF
OPERATIONS MAY BE ADVERSELY AFFECTED.
We believe we will have access to sufficient quantities of raw materials to
conduct and advance our research. We utilize third-party collaborators,
licensors, licensees and others to conduct research on our behalf, and we rely
on these third parties to provide the necessary materials to conduct such
research. If we or our third-party collaborators are unable to obtain the
necessary materials to conduct such research, our business, financial condition
and results of operations may be adversely affected.
UPON THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS
IS A PART, 32,014,005 SHARES OF OUR COMMON STOCK, WHICH ARE CURRENTLY
OUTSTANDING BUT "RESTRICTED" AS DEFINED IN RULE 144 OF THE SECURITIES ACT OF
1933, WILL NO LONGER BE RESTRICTED, AND WILL BECOME FREELY TRADEABLE IN THE
PUBLIC MARKETS. IN ADDITION, 16,393,316 SHARES OF OUR COMMON STOCK THAT ARE
ISSUABLE UPON THE CONVERSION OF PREFERENTIAL SHARES OF OUR SUBSIDIARY, 6543
LUXEMBOURG S.A., AND 80,166 SHARES OF COMMON STOCK THAT ARE ISSUABLE UPON THE
EXERCISE OF OUTSTANDING SHARE PURCHASE WARRANTS ARE BEING REGISTERED FOR RESALE
PURSUANT TO SUCH REGISTRATION STATEMENT, AND THUS, WILL BE FREELY TRADEABLE UPON
THE EFFECTIVE DATE OF SUCH REGISTRATION STATEMENT. THE INTRODUCTION OF THESE
SHARES INTO THE PUBLIC TRADING MARKET MAY CAUSE OUR STOCK PRICE TO DECLINE.
The shares being registered by the registration statement of which this
prospectus is a part are not currently freely tradeable in the public market.
Upon the effective date of the registration statement, these shares will be
freely tradeable and may be sold in the public market (except that shares held
by any of our affiliates will be subject to the volume, manner of sale and
certain other limitations of Rule 144). The sale of these shares into the public
trading market by the selling stockholders could have an adverse effect on our
stock price, especially if a substantial number of these shares are sold at or
close to the same time. In
12
addition, the sale of these shares could impair our future ability to raise
capital through the issuance of additional equity securities.
WE MAY BECOME SUBJECT TO PRODUCT LIABILITY CLAIMS.
We face an inherent risk of exposure to product liability suits in
connection with vaccines being tested in human clinical trials and products we
may market and sell in the future. We may become subject to product liability
suits, for example, if our products cause injury or if vaccinated individuals
subsequently become infected with the diseases such vaccines were designed to
prevent. Regardless of merit or eventual outcome, product liability claims are
expensive to defend and may result in decreased demand for our products, injury
to our reputation, withdrawal of clinical trial volunteers and loss of revenues.
OUR STOCK PRICE MAY EXPERIENCE SIGNIFICANT VOLATILITY, WHICH COULD ADVERSELY
AFFECT THE VALUE OF YOUR INVESTMENT.
The market price of our common stock, like that of the common stock of many
other development stage biotechnology companies, may be highly volatile. In
addition, the stock market has experienced extreme price and volume
fluctuations. This volatility has significantly affected the market prices of
securities of many biotechnology and pharmaceutical companies for reasons
frequently unrelated to or disproportionate to the operating performance of the
specific companies. These broad market fluctuations may adversely affect the
market price of our common stock.
THE ISSUANCE OF ADDITIONAL EQUITY SECURITIES MAY DILUTE YOUR INVESTMENT.
We currently have outstanding 50,944,454 shares of common stock (assuming
the conversion of all the outstanding Preferential Shares of our subsidiary,
6543 Luxembourg S.A., into 16,393,316 shares of our common stock), 1 share of
Special Voting Preferred Stock, options to purchase an aggregate 263,750 shares
of common stock and warrants to purchase an aggregate 80,166 shares of common
stock. We are authorized to issue up to 80 million shares of common stock and 5
million shares of preferred stock without additional stockholder approval. The
issuance of additional common stock or preferred stock will dilute our
stockholders' percentage ownership, and, depending on the offering price of such
stock, may also serve to dilute the value of such ownership interest.
THE MARKET FOR OUR COMMON STOCK IS VERY LIMITED.
Our common stock is currently traded only on the OTC Bulletin Board
operated by the National Association of Securities Dealers, Inc. Accordingly, we
cannot provide assurances as to the future liquidity of our common stock or the
price at which you would be able to sell your shares in any available market.
WE CURRENTLY DO NOT INTEND TO PAY CASH DIVIDENDS ON OUR SHARES.
We have not declared or paid any dividends on our shares of common stock.
We intend to retain future earnings, if any, that may be generated from our
operations to finance our future operations and expansion and do not plan to pay
dividends to holders of our common stock in the reasonably foreseeable future.
Any decision as to the future payment of dividends will depend on the results of
our operations and financial position and such other factors as our board of
directors, in its discretion, deems relevant. Furthermore, our ability to
declare or pay dividends may be limited in the future by the terms of any
then-existing credit facilities, which may contain covenants that restrict the
payment of cash dividends.
13
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. The forward-looking
statements are contained principally in the sections entitled "Prospectus
Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business." These statements involve known and
unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements to be materially different from any future
results, performances or achievements, expressed or implied, by the
forward-looking statements. Forward-looking statements include, but are not
limited to, statements about:
- marketing and commercialization of our products under development;
- estimates of future revenue and profitability;
- expectations regarding expenses, including research and development
expenses; and
- estimates regarding capital requirements and the need for additional
financing.
In some cases, you can identify forward-looking statements by terms such as
"may," "will," "should," "could," "can," "would," "expect," "plan,"
"anticipate," "believe," "estimate," "intend," "project," "predict," "potential"
and other similar expressions. These statements reflect our current views with
respect to future events and are based on assumptions and are subject to risks
and uncertainties. Given these uncertainties, you should not place undue
reliance on forward-looking statements. We discuss many of these risks in
greater detail under the heading "Risk Factors." Also, these forward-looking
statements represent our estimates and assumptions only as of the date of this
prospectus.
You should read this prospectus and the documents that we reference in this
prospectus completely and with the understanding that our actual future results
may be materially different from what we expect. We qualify all of our
forward-looking statements by these cautionary statements.
USE OF PROCEEDS
We will not receive any proceeds from the sale of our common stock by the
selling stockholders. Any proceeds from the sale of our common stock offered
pursuant to this prospectus will be received by the selling stockholders.
DIVIDEND POLICY
We have not declared or paid any dividends on our shares of common stock.
We intend to retain future earnings, if any, that may be generated from our
operations to finance our future operations and expansion and do not plan for
the reasonably foreseeable future to pay dividends to holders of our common
stock. Any decision as to the future payment of dividends will depend on the
results of our operations and financial position and such other factors as our
board of directors, in its discretion, deems relevant.
14
CAPITALIZATION
The following table sets forth our capitalization at March 31, 2002: (a) on
an actual basis (assuming the conversion of all outstanding Preferential Shares
of 6543 Luxembourg S.A. into 16,393,316 shares of common stock, all of which are
being registered for resale in this offering) and (b) as adjusted to give effect
to the issuance of 1,705,733 shares of common stock upon the exercise of share
purchase warrants which are being registered for resale in this offering. This
table should be read in conjunction with our financial statements and related
notes, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the other financial data appearing elsewhere in this
prospectus.
PRO FORMA AS
ACTUAL ADJUSTED
-------- ------------
(EUROS IN THOUSANDS)
Stockholders' Equity:
Common stock, E0.0114 par value; 80,000,000 shares
authorized; 49,271,962 shares outstanding (actual);
50,977,695 shares outstanding (pro forma as adjusted)..... E 562 E 581
Additional paid-in capital.................................. 17,422 17,971
Deficit accumulated during the development stage............ (17,391) (17,391)
Cumulative translation adjustment........................... 100 100
-------- --------
Total Stockholders' Equity.................................. E 693 E 1,261
======== ========
15
SELLING STOCKHOLDERS
The following table lists each selling stockholder owning shares of our
common stock and:
- The number of shares of our common stock owned by each selling
stockholder prior to this offering;
- The number of shares of our common stock owned by each selling
stockholder and being registered for sale by such selling stockholder in
this offering;
- The number of shares of our common stock owned by each selling
stockholder after this offering, assuming the sale of all shares of our
common stock being registered for sale by such selling stockholder; and
- The percentage of common stock owned by each selling stockholder after
this offering, assuming each selling stockholder sells all of the shares
of our common stock being registered for sale by such selling
stockholder.
COMMON SHARES COMMON SHARES COMMON SHARES PERCENTAGE OF
OWNED PRIOR TO BEING OWNED AFTER COMMON SHARES
SELLING STOCKHOLDERS OFFERING REGISTERED OFFERING AFTER OFFERING(2)
-------------------- -------------- ------------- ------------- ------------------
Martine Reindle.................. 8,222,653 8,222,653 0 0%
Rush & Co........................ 34,000 34,000 0 0%
Yorkton Securities Inc. ITF
Mutual Custodial............... 423,125 423,125 0 0%
The Dividend Trust Committee of
the Board of Directors of MFC
Bancorp Ltd.................... 14,025,193 14,025,193 0 0%
MFC Merchant Bank S.A.(1)........ 277,833 277,833 0 0%
Peter Hediger.................... 30,000 30,000 0 0%
Marco Burri...................... 5,000 5,000 0 0%
Arthur D. Humphreys Jr........... 50 50 0 0%
Gerlach & Co..................... 1,249,871 1,249,871 0 0%
Ernst Lubke...................... 2,829,546 2,829,546 0 0%
Dr. Karen Van Ness............... 777,382 777,382 0 0%
Christian Rochet................. 277,138 277,138 0 0%
Jean-Paul Royet.................. 259,989 259,989 0 0%
Alain Chevalier.................. 155,890 155,890 0 0%
Jean-Daniel Noir................. 118,749 118,749 0 0%
Ms. Catherine Brentini........... 17,981 17,981 0 0%
Dominique Palacios............... 10,019 10,019 0 0%
Ms. Malin Noren.................. 9,221 9,221 0 0%
Gwennael Gentric................. 3,041 3,041 0 0%
Aralis Participations S.A........ 297,221 297,221 0 0%
Dr. Takashi Onouchi.............. 333,583 333,583 0 0%
Masayoshi Watanabe............... 83,396 83,396 0 0%
Hiroshi Kamano................... 10,019 10,019 0 0%
Leonardo Castellana.............. 10,019 10,019 0 0%
Christian Rochet................. 1,249,871 1,249,871 0 0%
Marcuard Cook & Cie S.A.......... 1,002,456 1,002,456 0 0%
Pear Tree Investments Ltd........ 133,000 133,000 0 0%
Jean Paul Abgottspon............. 10,000 10,000 0 0%
16
COMMON SHARES COMMON SHARES COMMON SHARES PERCENTAGE OF
OWNED PRIOR TO BEING OWNED AFTER COMMON SHARES
SELLING STOCKHOLDERS OFFERING REGISTERED OFFERING AFTER OFFERING(2)
-------------------- -------------- ------------- ------------- ------------------
Themel Sylvestre................. 5,000 5,000 0 0%
Felix Knecht..................... 5,000 5,000 0 0%
Bruno Busch...................... 5,500 5,500 0 0%
Dr. Pierre-Francois Serres....... 5,000 5,000 0 0%
Howald United.................... 40,000 40,000 0 0%
Michel Schmid.................... 5,000 5,000 0 0%
Arsene Charles Ernest Wagner..... 20,000 20,000 0 0%
Kwan-Hyun Han.................... 16,667 16,667 0 0%
Alain Gremeaux................... 8,667 8,667 0 0%
Gilles Rossi..................... 21,329 21,329 0 0%
Marianne Rossi................... 8,532 8,532 0 0%
Jean-Loup Rossi.................. 8,532 8,532 0 0%
Marianne and Jean-Loup Rossi
(jointly)...................... 4,266 4,266 0 0%
Alessandro Zuccato............... 4,266 4,266 0 0%
---------------
(1) These shares are held of record by MFC Merchant Bank S.A. for the benefit of
clients of MFC Merchant Bank S.A.
(2) This assumes the issuance of 16,393,316 shares of our common stock upon the
conversion of 15,372 outstanding Preferential Shares and the issuance of
80,166 shares of our common stock upon the exercise of an equal number of
outstanding share purchase warrants.
We are also registering for sale by the selling stockholders the shares of
common stock issuable upon the conversion of all outstanding Preferential Shares
of 6543 Luxembourg S.A. The following table lists each selling stockholder
owning all outstanding Preferential Shares and:
- The number of all outstanding Preferential Shares owned by each selling
stockholder prior to this offering;
- The number of shares of our common stock into which the all outstanding
Preferential Shares held by each selling stockholder are convertible,
which shares of common stock are being registered for sale by such
selling stockholder in this offering;
- The number of shares of common stock owned by each selling stockholder
after this offering, assuming the conversion of all outstanding
Preferential Shares and the sale of all shares of common stock being
registered for sale by such selling stockholder; and
- The percentage of common stock owned by each selling stockholder after
this offering, assuming each selling stockholder sells all of the shares
of common stock being registered for sale by such selling stockholder.
PREFERENTIAL COMMON
SHARES OWNED SHARES OF COMMON STOCK SHARES OWNED PERCENTAGE OF
PRIOR TO UNDERLYING PREFERENTIAL SHARES AFTER COMMON SHARES
SELLING STOCKHOLDERS OFFERING AND BEING REGISTERED OFFERING AFTER OFFERING
-------------------- -------------- ------------------------------ ------------ ----------------
Dr. Pierre-Francois
Serres.................. 10,436 11,129,367 0 0%
Patrice Pactol............ 2,004 2,137,146 0 0%
Bertrand Favreau.......... 2,004 2,137,146 0 0%
Bernadette Daout.......... 120 127,973 0 0%
Yves Bush................. 400 426,576 0 0%
Doria Troiani............. 408 435,108 0 0%
17
We are also registering for sale 80,166 shares of common stock issuable
upon the exercise of share purchase warrants owned by MFC Merchant Bank S.A. The
following table lists the share purchase warrants owned by MFC Merchant Bank
S.A. and:
- The number of shares of common stock underlying the share purchase
warrants, which shares of common stock are being registered for sale by
MFC Merchant Bank S.A. in this offering;
- The number of shares of common stock owned by MFC Merchant Bank S.A.
after the offering, assuming the sale of all shares of common stock being
registered for sale by MFC Merchant Bank S.A.; and
- The percentage of common stock owned by MFC Merchant Bank S.A. after this
offering, assuming MFC Merchant Bank S.A. sells all of the shares of
common stock being registered for sale by MFC Merchant Bank S.A.
COMMON SHARES COMMON SHARES PERCENTAGE OF
UNDERLYING SHARE STOCK OWNED COMMON SHARES
SELLING STOCKHOLDER PURCHASE WARRANTS AFTER OFFERING AFTER OFFERING
------------------- ----------------- ----------------- --------------------
MFC Merchant Bank S.A............. 80,166 0 0%
The following selling stockholders have had the following relationships
with us over the past three years:
- Martine Reindle beneficially owns 16.72% of our common stock.
- MFC Bancorp Ltd. has in the past been one of our significant
stockholders.
- MFC Merchant Bank S.A. either directly or through its affiliates, has
provided us with financing from time to time over the past three years.
We presently have a credit facility with MFC Merchant Bank S.A. See
"Certain Relationships and Related Party Transactions." MFC Merchant Bank
S.A. also has in the past been one of our significant stockholders. We
entered into a Services Agreement with MFC Merchant Bank S.A. on May 31,
2001. See "Certain Relationships and Related Party Transactions."
- Dr. Pierre-Francois Serres is a member of our board of directors, our
Chief Scientific Officer, and beneficially owns 21.88% of our common
stock. Dr. Serres was a founder of our subsidiary, Mymetics S.A., and has
previously served as our Chief Executive Officer and President.
- Patrice Pactol is a member of our board of directors and beneficially
owns 4.21% of our common stock.
- Peter Hediger and Felix Knecht are employees of MFC Merchant Bank S.A.
- Marco Burri, Jean Paul Abgottspon and Michel Schmid were previously
employees of MFC Merchant Bank S.A.
18
SELECTED CONSOLIDATED FINANCIAL DATA
The following table reflects selected consolidated financial data for our
fiscal years ended December 31, 2001, 2000, 1999, 1998 and 1997, respectively,
and for the three month periods ended March 31, 2002 and 2001 (unaudited),
respectively. The selected consolidated financial data set forth below should be
read along with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the financial statements and notes thereto included
elsewhere in this prospectus.
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2001 2000 1999 1998 1997
------------ ------------ ------------ ------------ ------------
(EUROS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA
Operating revenues.................. 26 13 47 42 14
Research & Development Expenses..... 482 101 94 70 20
General & Administrative Expenses... 1,034 351 37 38 34
Loss from continuing operations..... (15,701)(2) (1,314) (99) (68) (40)
COMMON SHARE DATA(1)
Loss from continuing operations per
common share...................... (0.37) (0.04) (0.00) (0.00) (0.00)
Weighted average common shares
outstanding (in thousands)........ 42,460(3) 33,311 33,311 33,311 33,311
BALANCE SHEET DATA
Working capital..................... 565 (652) (24) (40) (46)
Total assets........................ 1,692 625 146 77 43
Long-term obligations............... 242 242 242 138 70
Total stockholders' equity.......... 693 (765) (257) (158) (90)
FOR THE THREE FOR THE THREE
MONTHS MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2002 2001
------------- -------------
(EUROS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
(UNAUDITED) (UNAUDITED)
OPERATING DATA
Operating revenues.......................................... 5 3
Research & Development Expenses............................. 232 114
General & Administrative Expenses........................... 250 127
Loss from continuing operations............................. (556) (3,352)(2)
COMMON SHARE DATA(1)
Loss from continuing operations per common share............ (0.01) (0.10)
Weighted average common shares outstanding (in thousands)... 49,263(3) 33,586
BALANCE SHEET DATA
Working capital............................................. (20) 565
Total assets................................................ 1,315 1,692
Long-term obligations....................................... 242 242
Total stockholders' equity.................................. 162 693
---------------
(1) Basic and diluted common share data is the same.
(2) This amount reflects the value of 6,001,693 warrants we issued to MFC
Merchant Bank S.A. in 2001 in connection with a credit facility provided by
MFC Merchant Bank S.A. The intrinsic value of the beneficial conversion
feature of these warrants was calculated on March 28, 2001, to be E14,063
using the Black-Scholes model. This value is not necessarily indicative of
the value of our common stock, or our business as a whole.
(3) The increase in 2001 reflects the shares and warrants granted as fees in
connection with the share exchange in March 2001, the credit facility
entered into in 2001 and a private placement completed in June 2001.
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and
results of operations for the three months ended March 31, 2002 and 2001, and
for the years ended December 31, 2001, 2000 and 1999, respectively, should be
read in conjunction with our audited consolidated financial statements and
related notes included elsewhere herein. References to a year are to our fiscal
years ended December 31 of each such calendar year. Our actual results may
differ materially from those anticipated in any forward-looking statements
included in this discussion as a result of various factors, including those set
forth under "Risk Factors."
RESULTS OF OPERATIONS -- THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE
MONTHS ENDED MARCH 31, 2001
Revenues for the three months ended March 31, 2002 were E5,000 compared to
E3,000 for the three months ended March 31, 2001.
Expenses decreased to E561,000 for the three months ended March 31, 2002
from E3,355,000 for the three months ended March 31, 2001. Research and
development expenses increased to E232,000 in the three months ended March 31,
2002 from E114,000 in the comparative period of 2001 as a result of an increase
in research activities. General and administrative expenses increased to
E250,000 in the three months ended March 31, 2002 from E127,000 in the
comparative period of 2001 primarily as a result of expansion of our management
team to include a Chief Executive Officer, a Chief Scientific Officer and a
Vice-President of Development, and the additional use of consultants. Bank fees
were nil for the three months ended March 31, 2002 compared to E3,054,000 over
the comparative period in 2001, primarily as a result of a reverse purchase
transaction that occurred last year.
We reported a net loss of E556,000, or E0.01 per share, for the three
months ended March 31, 2002, compared to E3,352,000, or E0.10, for the three
months ended March 31, 2001.
RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED
DECEMBER 31, 2000
Revenues for the year ended December 31, 2001 were E26,000 compared to
E13,000 for the year ended December 31, 2000. This increase resulted primarily
from an increase in interest income from nil for the year ended December 31,
2000 to E26,000 for the year ended December 31, 2001. This was offset by a
decrease in sales for the year ended December 31, 2001, which were nil compared
to E13,000 for the year ended December 31, 2000, primarily as a result of
decreased contract research activity.
Costs and expenses increased to E15,727,000 for the year ended December 31,
2001, compared to E1,326,000 for the year ended December 31, 2000. Most of this
increase was due to an increase in bank fees, which increased to E14,063,000 for
the year ended December 31, 2001 from E806,000 for the year ended December 31,
2000. Research and development expenses increased to E482,000 for the year ended
December 31, 2001 from E101,000 for the year ended December 31, 2000 as a result
of an increase in research activities. General and administrative expenses
increased to E1,034,000 for the year ended December 31, 2001 from E351,000 for
the year ended December 31, 2000, primarily as a result of the expenses related
to the reverse purchase transaction that occurred in March 2001, the private
placement that closed in June 2001 and expenses associated with our
repositioning as a biotech company, including adding additional members to our
board of directors, engaging a public relations and investor relations firm and
obtaining the services of new management.
We reported a net loss of E15,701,000, or E0.37 per share, for the year
ended December 31, 2001, compared to a net loss of E1,314,000, or E0.04 per
share, for the year ended December 31, 2000.
20
RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED
DECEMBER 31, 1999
Revenues for the year ended December 31, 2000 decreased to E13,000 from
E47,000 for the year ended December 31, 1999, primarily as a result of a
decrease in sales revenue due to decreased contract research activity.
Costs and expenses increased to E1,326,000 for the year ended December 31,
2000 from E143,000 for the year ended December 31, 1999. This increase was
primarily the result of an increase in bank fees from nil for the year ended
December 31, 1999 to E806,000 for the year ended December 31, 2000. In addition,
research and development expenses increased to E101,000 for the year ended
December 31, 2000 from E94,000 for the year ended December 31, 1999 as a result
of an increase in research activities, and general and administrative expenses
increased to E351,000 for the year ended December 31, 2000, from E37,000 for the
year ended December 31, 1999, primarily as a result of higher administrative
expenses relating to an increase in research activities and fees and expenses
associated with our credit facilities.
We reported a net loss of E1,314,000, or E0.04 per share, for the year
ended December 31, 2000, compared to a net loss of E99,000, or E0.00 per share,
for the year ended December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
We had cash of E674,000 as of March 31, 2000, compared to cash of E888,000
as of December 31, 2001.
Net cash used by operating activities was E466,000 for the three months
ended March 31, 2002, compared to E117,000 for the three months ended March 31,
2001. An increase in accounts payable provided cash of E152,000 for the three
months ended March 31, 2002 compared to E153,000 for the three months ended
March 31, 2001. Net cash used by operating activities was E2,000,000 for the
year ended December 31, 2001, compared to cash provided of E145,000 for the year
ended December 31, 2000. A decrease in accounts payable used cash of E508,000
for the year ended December 31, 2001 compared to an increase of accounts payable
providing cash of E546,000 for the year ended December 31, 2000.
Investing activities provided cash of E223,000 for the three months ended
March 31, 2002 compared to using cash of E103,000 for the same period last year.
Short term investment provided cash of E278,000 for the three months ended March
31, 2002 compared to using cash of E82,000 for the three months ended March 31,
2001. Investing activities used cash of E237,000 for the year ended December 31,
2001, compared to E250,000 for the year ended December 31, 2000. Short term
investment used cash of E205,000 for the year ended December 31, 2001, compared
to E122,000 for the year ended December 31, 2000.
Financing activities provided cash of E12,000 for the three months ended
March 31, 2002 compared to E200,000 in the same period last year. The revolving
term facility is in the principal amount of up to E1.3 million and matures on
August 31, 2002. At March 31, 2002, we had borrowed an aggregate of E232,000
pursuant to this revolving term facility. Financing activities provided cash of
E2,840,000 for the year ended December 31, 2001, compared to E254,000 for the
year ended December 31, 2000. Proceeds from issuance of common stock provided
cash of E2,724,000 for the year ended December 31, 2001. Increases in borrowing
pursuant to a revolving term facility and other short term advances provided
cash of E116,000 for the year ended December 31, 2001, compared to E384,000 for
the year ended December 31, 2000. The revolving term facility is in the
principal amount of up to E1.3 million and matures on August 31, 2002. As of
December 31, 2001, we had borrowed an aggregate of E228,000 pursuant to this
revolving term facility.
We expect that we will require substantial additional capital in order to
continue our research and development, and later to conduct clinical studies and
regulatory activities necessary to bring our potential products to market and to
establish production, marketing and sales capabilities. We anticipate that our
operations will require approximately E5.5 million in the year ending December
31, 2002. We will seek to raise the required capital from lenders and/or equity
or debt issuances. However, there can be no assurance that we will be able to
raise additional capital to finance our operations on satisfactory terms, or at
all. In the event that we are not able to obtain such additional capital, we
would be required to restrict or even halt our operations.
21
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As at December 31, 2001, we were exposed to market risk from changes in
interest rates which could affect our financial condition and results of
operations. We have not entered into derivative contracts for our own account to
hedge against such risk.
Interest Rate Risk. Fluctuations in interest rates may affect the fair
value of financial instruments sensitive to interest rates. An increase in
interest rates may decrease the fair value and a decrease in interest rates may
increase the fair value of such financial instruments. We have debt obligations
which are sensitive to interest rate fluctuations. The following tables provide
information about our exposure to interest rate fluctuations for the carrying
amount of such debt obligations as of March 31, 2002, December 31, 2001 and
December 31, 2000 and expected cash flows from these debt obligations.
EXPECTED FUTURE CASH FLOW
THREE MONTH PERIOD ENDED MARCH 31, 2002
CARRYING FAIR
VALUE VALUE 2002 2003 2004 2005 2006 THEREAFTER
-------- ----- ---- ---- ---- ---- ---- ----------
(IN THOUSANDS)
Debt obligations(1)............... E232 E232 E232 E-- E-- E-- E-- E--
EXPECTED FUTURE CASH FLOW
YEAR ENDED DECEMBER 31, 2001
CARRYING FAIR
VALUE VALUE 2002 2003 2004 2005 2006 THEREAFTER
-------- ----- ---- ---- ---- ---- ---- ----------
(IN THOUSANDS)
Debt obligations(1)............... E228 E228 E228 E-- E-- E-- E-- E--
EXPECTED FUTURE CASH FLOW
YEAR ENDED DECEMBER 31, 2000
CARRYING FAIR
VALUE VALUE 2002 2003 2004 2005 2006 THEREAFTER
-------- ----- ---- ---- ---- ---- ---- ----------
(IN THOUSANDS)
Debt obligations(1)............... E384 E384 E384 E-- E-- E-- E-- E--
---------------
(1) Debt obligations consist of obligations we assumed (as successor to Mymetics
S.A.) with respect to notes payable.
22
BUSINESS
THE COMPANY
We are a holding company conducting business through our subsidiaries 6543
Luxembourg S.A., a joint stock company organized in 2001 under the laws of
Luxembourg, and Mymetics S.A. (formerly Hippocampe S.A.), a company organized in
1990 under the laws of France. We were incorporated in July 1994 pursuant to the
laws of the Commonwealth of Pennsylvania. In November 1996, we reincorporated
under the laws of the State of Delaware and changed our name to "ICHOR
Corporation." In July 2001, we changed our name to "Mymetics Corporation." 6543
Luxembourg S.A. is our majority-owned subsidiary, and Mymetics S.A. is a
wholly-owned subsidiary of 6543 Luxembourg S.A. We acquired 99.9% of the
outstanding stock of Mymetics S.A. in March 2001, pursuant to a share exchange
transaction. For more details on this share exchange transaction, see our
Information Statement on Schedule 14C filed with the Securities and Exchange
Commission on April 26, 2001. We recently acquired the remaining 0.1% of the
outstanding common stock of Mymetics S.A. pursuant to share exchanges with the
remaining stockholders of Mymetics S.A. The terms of these recent share
exchanges were substantially similar to the terms of the share exchange that
occurred in March 2001.
We currently do not make, market or sell any products or services, and
thus, we have no revenues. We believe that our research and development
activities and the resulting intellectual property will lead to the creation of
commercially viable products, which can generate revenues for us in the future.
If financially favorable terms are available, we may license our intellectual
property to third parties. If we fail to develop our intellectual property, we
are unlikely to generate significant revenues.
DEVELOPMENT OF THE COMPANY
From our inception in 1994 to December 1997, we operated in the
environmental services industry, focusing on thermal treatment (in Florida),
remediation services (in Florida and Pennsylvania) and waste oil recycling (in
Illinois). In February 1995, we completed an initial public offering. In 1998
and 1999, after disposing of our thermal treatment, remediation services and
waste oil recycling businesses, we provided consulting services to an industrial
customer in Europe. In June 1999, we acquired a majority interest in Nazca
Holdings Ltd., whose business involved the exploration for, and development of,
groundwater resources in Chile. Following the disposal of our interest in Nazca
in July 2000, we did not have an operating business.
In March 2001, we acquired substantially all of the shares of Mymetics S.A.
in consideration for shares of our common stock and Preferential Shares of our
subsidiary, 6543 Luxembourg S.A, which are convertible into shares of our common
stock. Mymetics S.A. was, and continues to be, a biotechnology research and
development company.
We own all the outstanding voting stock of 6543 Luxembourg S.A. There are
also 15,372 Preferential Shares of 6543 Luxembourg S.A. currently outstanding,
which are convertible into 16,393,316 shares of our common stock. Holders of the
Preferential Shares do not have any voting rights with respect to 6543
Luxembourg S.A. However, pursuant to a Voting and Exchange Trust Agreement dated
March 28, 2001, the holders of the Preferential Shares are entitled to vote on
all matters to be voted on by the holders of our common stock to the same extent
as if they had converted the Preferential Shares into shares of our common
stock. See "Description of Capital Stock -- Preferred Stock."
MYMETICS S.A.
Our operating subsidiary, Mymetics S.A., is a biotechnology research and
development company devoted to fundamental and applied research in the areas of
human and veterinary biology and medicine. Our primary objective is to develop
therapies to treat certain retroviruses (which are described below) including
HIV, the virus that leads to AIDS. Additional applications of our research
include potential treatments and/or vaccines for animal AIDS, human and animal
oncoviral leukemias, multiple sclerosis and organ transplantation. To date, we
have conducted our fundamental research in Europe.
We intend to form a new United States subsidiary during the third or fourth
quarter of 2002. This new subsidiary will focus on applying our research and
development to target products and on business
23
development. We believe that this tiered structure has numerous advantages,
including greater access to grants, subsidies, intellectual property and public
and private research teams. To date, activities such as design of the prototype
molecule, synthesis and in-vitro experiments have been and will continue to be
conducted mainly in Europe, while pre-clinical studies, toxicological trials,
regulatory affairs, IND applications, Phase I, II, and III clinical trials, and
NDAs will, after the creation of the United States subsidiary, be conducted
mainly in North America.
Our research strategy is to organize and manage a collection of public and
private best-in-class research teams, each of which has its own unique focus. We
have segmented our primary research into modules, each of which is then
outsourced, under our direct supervision, to high-level, specialized and
complementary public and private research teams. We retain all intellectual
property rights on the joint research and we apply for domestic and
international patents whenever justified. As agreed and coordinated by us, the
joint research teams are authorized to co-publish their results.
SCIENCE OVERVIEW
Virus. A virus is a noncellular organism consisting of DNA or RNA and a
protein coat. During the free and infectious stage of their life cycle, viruses
do not perform the usual functions of living cells, such as respiration and
growth. Rather, when viruses enter a living plant, animal or bacterial cell,
they utilize the host cell's chemical energy and synthesizing ability to
replicate. After the replication of the viral components by the infected host
cell, virus particles are released and the host cell is often destroyed. The
approximately 2,450 viral species identified to date are divided into about 75
groups. One of these groups consists of retroviruses, to which HIV belongs.
Retroviruses contain a reverse transcriptase that copies viral RNA back into DNA
(the reverse of what usually occurs when DNA is copied into RNA). Retroviruses
include spumaviruses, oncoviruses (causing cancers) and lentiviruses (viruses
with a slow pathogenic action, e.g. AIDS-associated lentiviruses).
HIV. HIV is a type of retrovirus, a virus of the family Retroviridae, that
has RNA as its nucleic acid and uses the enzyme reverse transcriptase to copy
its genome into the DNA of the host cell's chromosomes. Once inside the T cell,
HIV uses the cell's machinery to copy its RNA into DNA by means of the reverse
transcriptase. HIV is characterized by an inability to mount a normal immune
response and is the cause of the fatal illness known as AIDS.
Two strains of HIV have been identified, HIV-1 and HIV-2. The genetic
material of these two strains is approximately 60% identical. Each strain
contains a number of subtypes, which are slight genetic variations of the virus.
At least 32 subtypes have been identified to date. These variations result from
the high mutation rate of HIV's genetic material. Most variations occur in the
gene encoding the GP120 protein, and these mutations can alter the protein's
structure. HIV-1 or Type 1 classified as a lentivirus is a subgroup of
retroviruses that have been isolated and recognized as the cause of a disease
that induces AIDS. HIV-1, like most viruses and all bacteria, plants and
animals, has genetic codes made up of DNA, which uses RNA to build specific
proteins. HIV's genetic material is the RNA itself. HIV inserts its own RNA into
the host cell's DNA, preventing the host cell from performing its natural
functions and transforming it into an HIV factory.
AIDS. AIDS is a fatal epidemic disease caused by an HIV infection (HIV-1
or HIV-2). In most cases, HIV slowly attacks and destroys the immune system, the
body's defense against disease, leaving the infected individual vulnerable to
malignancies and infections that eventually cause death. Propagation of the HIV
results from the invasion of the host cell and HIV's use of the host cell's
protein synthesis capability. The immune system's response (antibodies and
cellular immune response) is usually sufficient to temporarily arrest progress
of the infection and reduce levels of the virus in the blood. Virus replication
continues, however, and gradually destroys the immune system by infecting and
destroying critical white blood cells known as CD4 cells.
The main cellular target of HIV is a special class of white blood cells
critical to the immune system, known as helper T lymphocytes, or T4 helper
cells. These cells play a principal role in normal immune responses by
stimulating or activating virtually all of the other cells involved in immune
protection. These cells include B lymphocytes, the cells that produce antibodies
needed to fight infection; cytotoxic T lymphocytes, which destroy cells infected
with virus; and macrophages and other effector cells, which
24
attack invading pathogens. Once HIV has entered the helper T cell, it can impair
the functioning of or destroy the cell. A hallmark of the onset of AIDS is a
drastic reduction in the number of helper T cells in the body. HIV also can
infect other cells, including certain monocytes and macrophages, as well as
brain cells. Among those cells are CD4, HIV's preferred target cells due to a
docking molecule called CD4 on their surfaces. Cells with this molecule are
known as CD4+ cells. These cells normally orchestrate the immune response,
signaling other cells in the immune system to perform their special functions.
Destruction of CD4+ lymphocytes is the major cause of the immunodeficiency
observed in AIDS, and decreasing CD4+ lymphocyte levels appear to be the best
indicator of morbidity in these patients. As the infection progresses, the
immune system's control of HIV levels weakens, the level of the virus in the
blood rises and the level of critical T cells declines to a fraction of their
normal level.
Viral Envelope of HIV. The viral envelope of HIV is covered with
mushroom-shaped spikes that enable the virus to attach itself to the target
cell. The cap of each "mushroom" is comprised of GP120 molecules and its stem is
comprised of GP41 molecules. GP120 is a glycoprotein that protrudes from the
surface of HIV and binds to the CD4 receptor of the CD4+ T-cells. In a two-step
process that allows HIV to breach the membrane of T-cells, the GP120-CD4 complex
refolds to reveal a second structure that binds to CCR5 or CXCR4, one of several
chemokine co-receptors used by the virus to gain entry into T cells. GP41 is a
glycoprotein embedded in the outer envelope of HIV and plays a key role in HIV's
infection of cells by carrying out the fusion of the viral and cell membranes.
GP160 is a glycoprotein, which is the precursor of HIV envelope proteins GP120
and GP41.
Immune System. The immune system functions to protect the body against
infection and foreign substances, including viruses and bacteria. This defensive
function is performed by the body's white blood cells (leukocytes) and by a
number of accessory cells, including B lymphocytes, the cells that produce the
antibodies needed to fight infection, and cytotoxic T lymphocytes, which destroy
cells infected with viruses. When an immunocompetent cell recognizes foreign
material or a biological invader presented by the macrophages, it normally
induces a response. This recognition function relies on the immune system's
ability to recognize specific foreign molecular configurations, generically
referred to as antigens. T4 lymphocytes, as the central cells of the immune
system, specifically recognize foreign invaders presented by macrophages. After
specific recognition of a presented antigen, T4 lymphocytes play a major role in
the immune response, producing IL-2, a central interleukine that activates all
of the accessory cells previously described and the overall immune response.
BUSINESS STRATEGY
Our current objective is to develop a platform of both therapeutic
compounds and vaccines. We have made a series of discoveries about how the
body's immune system responds to retroviruses, specifically HIV. The foundation
of our platform technology and product pipeline is our discovery of a subtle
mimicry between the virus and the host cells. By understanding the precise
dynamics of the virus's GP41 and the host cell's IL-2, we believe we have the
potential to design and develop specific therapeutic molecules and antibodies to
disrupt or even prevent the disease. In addition to targeting HIV and AIDS, we
hope to apply our findings to the potential treatment or even prevention of a
range of additional diseases, including certain oncoviruses like leukemia.
Some biotechnology companies are focusing on slowing or impeding the
progress of the virus once it has infected the body's host cells. Other
biotechnology firms are attempting to develop therapies that prevent the virus
from fusing with host cells. If the virus cannot fuse, it cannot reproduce, and
the body's immune system then succeeds in arresting the invasion. Our approach
is also based on the concept of preventing viral fusion. Our scientific strategy
is unique in that its design is based on a series of discoveries involving
mimicry and, in particular, on the inter-reaction between the viral envelope
glycoprotein GP41 and the host cell's IL-2. We have discovered that a piece of
the virus closely resembles or "mimics" the host cell's IL-2. By exploiting this
mimicry, the virus unlocks the host cell and gains access to the cell's
machinery. The body's immune system responds to the invasion, but fails to
differentiate between the viral GP41 and the host cell's IL-2. As a result, we
believe that the immune system attacks both of them with equal vigor. The
unfortunate consequence is that the body, in turning on itself, undercuts its
own defenses. By better
25
understanding these precise dynamics, we believe we will be able to design and
develop specific therapeutic molecules and antibodies to disrupt the mimicry,
prevent HIV from entering the host cell and enable the body's immune system to
recognize HIV. Our current scientific strategy is to create therapeutic peptides
and antibodies to disrupt the mimicry, block the fusion, and condition the
body's immune system to recognize GP41 as separate and distinct from IL-2. If
this can be accomplished, the body's immune system should be able to identify
and attack the virus, instead of the healthy cells.
The Discovered Molecular Mimicry Between Trimeric GP41 AND IL-2. We have
discovered a molecular mimicry between the trimeric ectodomain of the
transmembrane protein of immunosuppressive lentiviruses (HIV-SIV-FIV) and IL-2.
Our initial results were published with the French Academy of Sciences in
November 2000.
Autoimmune Consequences For HIV Infected Patients. We have found some of
the expected autoimmune consequences of the described virus-host molecular
mimicry in HIV infected subjects. As expected, HIV positive sera recognize human
IL-2, and cross-reactivity was found between the structurally and physically
antigenic analogous sites of GP41 (HIV-1) and human IL-2. The tests included
2,352 HIV+ and HIV-sera, and the results demonstrated that 100% of HIV+ patients
(stages II, III and IV) were positive for the anti IL-2 response. The first
results were presented in the Journal of Autoimmunity in 2001 and were also
presented in a poster session at the Cold Springs Harbor, New York meeting on
infectious disease in December 2001.
THERAPEUTIC AND VACCINAL USE OF THE MIMICRY DISCOVERY
Our current research modules focus on the following four fields:
- Fundamental research. We believe that our analysis of the GP41/IL-2
mimicry may enable us to explain, in large part, the main AIDS-associated
disorders: drop of peripheral IL-2, decrease of non-infected T helper
lymphocytes, lymphoproliferation disorders and a2 microglobulin increase
and hypergammaglobulinemia. Some of the possible effects of the
tridimensional GP41 (HIV-1)/human IL-2 molecular mimicry on the
AIDS-associated disorders are being evaluated by our research teams.
- Therapeutic molecules. We believe that, based on the mimicry, an
application involving the development of particular synthetic peptides
and monoclonal antibodies (some of which have already been developed)
would inhibit the fusion between HIV and its target cell in an infected
subject. Well-designed therapeutic molecules would prevent the virus from
binding to the target cell, inhibiting its attempts to reproduce. Having
demonstrated that the transmission of HIV depends on the viral load, and
that no transmission has been observed below 1,500 viral copies/ml.,
treatment with therapeutic agents may provide a strategy to control AIDS
epidemicity. This application would complement available antiretroviral
drugs, or may even provide a substitute for the available antiretroviral
drugs.
- Therapeutic and preventive vaccines. We believe that our discovery of
the host-virus autoimmune mimicy opens the door to novel therapeutic and
preventive vaccine strategies for both humans and animals. We believe
that our specific preventive vaccine would be universal for both HIV-1
and HIV-2, and would provide an all-strain prevention.
- AIDS cartridge. We have developed a number of therapeutic
immunocartridges that would help patients infected with AIDS by reducing
the viral load. These immunocartridges have been tested and approved by
the Ethics Committee for the Treatment of Systemic Lupus Erythematosus
and Hemophilia A. Our research has demonstrated that the anti IL-2
antibodies in HIV infected subjects recognize some sites of IL-2 that are
crucial for its bioactivity. Therefore, we believe that the development
of an "AIDS cartridge" could be effective in the restoration of the
immune system (CD4/CD8-viral load) of HIV infected subjects.
We currently have several prototypes potentially capable of
commercialization, including:
- Therapeutic molecules (pharmacological agents) -- administered to
infected subjects to prevent cell infection by HIV.
26
- Therapeutic vaccines (immunotherapeutic agents) -- administered to
infected subjects to orient the immune system into recognizing the
transmembrane glycoprotein of the virus and not the host cell's IL-2.
- Preventive vaccines -- administered to healthy subjects to prevent
infection by HIV.
- AIDS cartridge -- administered to infected subjects to selectively remove
the identified immunosuppressive antibodies present in the serum of AIDS
patients, using some peptides that have been tested for activity.
KEY STAFF
Peter P. McCann, Ph.D., a senior corporate executive and research scientist
with 25 years of experience in the pharmaceutical and biotech industry, was
named our President and Chief Executive Officer and appointed to our board of
directors in February 2002. Dr. McCann was previously employed by Marion Merrell
Dow Inc., where he served in a number of senior executive capacities. He then
served as President of British Biotech Inc., the North American operating unit
of British Biotech Pharmaceuticals (the largest biotech company in Europe) from
1993-1998. In this capacity, he established British Biotech Inc. in Annapolis,
Maryland, where he directed the company's Phase II and Phase III clinical trials
of two major cancer drugs at more than 200 medical centers in the United States
and Canada. Dr. McCann served as Interim President of the University of Maryland
Biotechnology Institute, one of the 13 operating units of the University System
of Maryland, from 1998-1999. From 1999-2001, Dr. McCann served as President and
Chief Executive Officer of Oncostasis, Inc., a genomics-based cancer
therapeutics company created to identify and develop new therapies. We entered
into an employment agreement with Dr. McCann on March 18, 2002.
Joseph D. Mosca, Ph.D., an experienced research and development scientist
in the field of immunology and AIDS virology, was named our Vice President of
Development in March 2002. Dr. Mosca joined the faculty of the Johns Hopkins
University in 1982 and, subsequently, the staff of the Henry M. Jackson
Foundation in Rockville, Maryland in 1989. From 1996 to 2000, Dr. Mosca held a
number of management positions at Osiris Therapeutics in Baltimore, Maryland,
the last of which was Director of Gene Delivery. Most recently, he served as
Executive Director of Research at Stemron Corporation in Gaithersburg, Maryland.
We entered into an employment agreement with Dr. Mosca on March 18, 2002.
Dr. Pierre-Francois Serres is an experienced research and development
scientist in the field of immunology and AIDS. Dr. Serres became our Chief
Scientific Officer on February 7, 2002, and has been a member of our board of
directors since March 28, 2001. Dr. Serres previously served as our Chief
Executive Officer and President, and was the founder, Chief Executive Officer
and President of our subsidiary, Mymetics S.A. Dr. Serres began his career as a
professor and researcher at the medical faculty of the University of Lyon in
France. From 1975 and prior to founding Mymetics S.A., he held various teaching
and research positions at French medical universities and biomedical institutes,
among them the Institut Pasteur in Lyon, France. We entered into an employment
agreement with Dr. Serres on May 3, 2001.
RESEARCH AND DEVELOPMENT EXPENSES
For the year ended December 31, 2001, we were focused on research and
development and, as a result, did not generate any revenues or engage in any
marketing activities. We spent E232,000 on research and development expenses for
the three months ended March 31, 2002 and E482,000 for the year ended December
31, 2001.
INTELLECTUAL PROPERTY
We are the exclusive owner of intellectual property relating to our core
research, which is focused on the development of novel HIV therapeutics.
Particularly, we own one issued European patent and corresponding granted
patents in Austria, Belgium, Denmark, Germany, France, Italy, Luxembourg, the
Netherlands, Sweden, Switzerland, and the United Kingdom. We own six pending
French patent applications. We also filed two Patent Cooperation Treaty, or PCT,
applications, which claim priority to two of our six pending French
applications, and two national phase United States patent applications based on
the PCT applications.
27
Recently, one of our United States applications was allowed by the United States
Patent and Trademark Office. We have two pending United States provisional
applications, and a continuation application which we recently filed based on
our allowed United States application. Additionally, we filed regional national
applications based on one of our PCT applications in the European, Eurasian,
OAPI, and ARIPO regional systems and in Canada and South Africa.
We rely primarily on a combination of patent, copyright, trademark and
trade secret laws, as well as contractual restrictions, to protect our
intellectual property. These legal protections afford limited protection. We
generally require employees, strategic research partners and consultants with
access to our intellectual property to execute confidentiality agreements.
Despite our efforts to protect our intellectual property, unauthorized parties
may attempt to copy the research and research methods that form the basis of our
intellectual property. The laws of many countries do not afford the same level
of protection as those provided by United States intellectual property laws.
Litigation may be necessary to protect and enforce our rights in our
intellectual property.
COMPETITION
We have not yet developed an actual product or generated any revenues. Our
future competitive position depends on our ability to successfully develop our
intellectual property, and either to use our intellectual property to produce
one or more products capable of generating significant revenues or to license or
sell our intellectual property to third parties on financially favorable terms.
Although we believe the results of our research and development activities to
date have been favorable, there are numerous entities and individuals conducting
research and development activities in the area of human and veterinary biology
and medicine. All of these persons and entities are potential competitors. While
many of these individuals and entities have greater financial, manufacturing,
technical, human resource, marketing and distribution capabilities, and greater
experience in conducting pre-clinical and clinical trials and in obtaining
regulatory and FDA approvals, we believe that our technologies nonetheless
provide us with a competitive advantage.
Further, we may face significant competition in the design and development
of some of our therapeutic compounds and preventive vaccines.
Therapeutic Molecules (pharmacological agents). The biopharmaceutical
industry is intensely competitive, especially in the field of HIV. If we are
successful in developing and proving our therapeutic agents, we will compete
with existing developed and approved therapies. The FDA has approved sixteen
antiviral drugs to treat HIV and AIDS, which fall into two categories depending
on whether they target one or two viral enzymes: either HIV protease or reverse
transcriptase, or RT. RT drugs aim to block reverse transcriptases and prevent
transcription of the virus's generic material from RNA to DNA. There are two
classes of RT drugs: nucleoside analogues inhibitors and non-nucleoside
inhibitors. The approved nucleoside analogues inhibitors include drugs such as
Retrovir (ziduvodine; AZT), Videx (didanosine; ddl), Hivid (zalcitabine; ddc),
Zerit (stavudine; d4T), Epivir (larnivudine; 3TC), Combivir (ziduvodine +
lamivudine), Ziagen (abacavir; ABC). These drugs are manufactured by companies
such as Glaxo Wellcome Plc, Bristol-Myers Squibb Company, Roche Holding AG and
BioChem Pharma Inc. The approved non-nucleoside inhibitors include drugs such as
Viramuno (nevlrapine), Rescriptor (delavirdine), Sustiva (efavirenz; EFV) which
are produced by Boehringer Ingelhelm GmbH, Pharmacia & Upjohn Inc. and E. I. Du
Pont de Nemours and Company. The objective of approved protease inhibitor drugs
is to prevent the assembly of new virus particles. The approved protease
inhibitors include drugs such as Invirase (saquinavir), Fortovase (saquinavir),
Norvir (ritonavir), Crixivan (indinavir), Viracept (nellinavir) and Agenerase
(amprenavir), which are manufactured by companies including Roche Holding AG,
Abbot Laboratories, Merck & Co. Inc., Agouron Pharmaceuticals Inc., Vertex
Pharmaceuticals Incorporated and Glaxo Wellcome Plc.
Both HIV protease and RT drugs have demonstrated their efficacy in terms of
HIV blood concentration and HIV-positive period and are used to slow the
progression of the disease. Furthermore, efficacy has been higher with drug
combinations. None of these drugs are, however, a cure, and mutations of HIV's
envelope produce viral strains resistant to both classes of drugs. These drugs
also produce toxic side effects on the
28
peripheral nervous system and gastrointestinal tract. Non-compliance on
combination therapies and interruptions in dosing could have an effect on and
trigger accelerated viral replication.
If successful in developing and validating our therapeutic molecules, we
believe there are significant existing and future markets for the treatment of
HIV and AIDS. There can be no assurance that currently approved drugs or
products developed in the future for the treatment of HIV/AIDS by our
competitors (which may include Roche Holding AG, Abbot Laboratories, Merck & Co.
Inc., Agouron Pharmaceuticals Inc., Vertex Pharmaceuticals Incorporated, Glaxo
Wellcome Plc, Bristol-Myers Squibb Company, Trimeris, Inc., Progenics, Inc., and
BioChem Pharma Inc.) will not be effectively marketed and sold. We believe,
however, that our unique approach and fundamental understanding of molecular
mimicry will provide an advantage over existing and future competitors.
Therapeutic Molecules (immunotherapeutic agent). We believe that our
targeted immunotherapeutic vaccines may be innovative within the field of
therapeutic research related to AIDS.
Preventive Vaccines. We are conducting research aimed at developing a
universal preventive vaccine for the HIV-1 and HIV-2 viruses, which vaccine will
provide protection against all viral strains.
The worldwide vaccine market is dominated by four large multinational
companies: Merck & Co., SmithKline Beecham Plc, Wyeth Lederle Vaccines &
Pediatrics (a division of American Home Products Corporation), and Aventis S.A.
Pasteur. Companies such as The Immune Response Corporation, VaxGen Inc.,
Trimeris, Inc., and Progenics Pharmaceuticals, Inc. also are developing
preventive vaccines.
We believe that while these companies have greater financial,
manufacturing, technical, human resource, marketing and distribution
capabilities, and greater experience in conducting pre-clinical and clinical
trials and in obtaining regulatory and FDA approvals, our technologies
nonetheless provide us with a competitive advantage. Our innovative approach to
vaccine development is based on the observed immunological cross-reactivity (or
mimicry) between the well-preserved, antigenic and immunodominant domain of GP41
and IL-2, and relies on the observation of expected autoimmune consequences in
HIV infected subjects.
We believe our approach is most promising in comparison with the approaches
that have been pursued so far, including:
- Sub-unit vaccine: a technology addressing a piece of the outer surface of
HIV, such as GP160 or GP120, produced by genetic engineering.
- Live vector vaccine: a live bacterium or virus such as vaccinia (used in
the smallpox vaccine) modified so it cannot cause disease, but can
transport into the body one or more genes that makes one or more HIV
proteins.
- Vaccine combination: an example includes a "prime-boost strategy," use of
a recombinant vector vaccine to induce cellular immune responses followed
by booster shots of a sub-unit vaccine to stimulate antibody production.
- Peptide vaccine: chemically synthesized pieces of HIV proteins (peptides)
known to stimulate HIV-specific immunity.
- Virus-like particle vaccine (pseudovirion vaccine): a non-infectious HIV
look-alike that has one or more, but not all, HIV proteins.
- DNA vaccine: direct injection of genes coding for HIV proteins.
- Whole-killed virus vaccine: HIV that has been inactivated by chemicals,
irradiation or other means rendering it non-infectious.
- Live-attenuated virus vaccine: live HIV from which one or more apparent
disease-promoting genes of the virus have been deleted.
Cartridge. We believe our cartridge or therapeutic plasmapheresis is
significantly different from the cartridges being developed and provided by
competitors. The more specific technique for antibody removal is
29
known as immunoadsorption, yet all existing systems are non-specific in removal
of antibodies, which limits their effectiveness and may have serious side
effects. Current immunoadsorption systems selectively remove antibodies by the
interposition of affinity columns in the devices. These cartridges are
expensive, large, require trained technicians and are not protein specific. In
addition, the cartridge is based on a biocompatible membrane based on a
discovery of antibody binding, which perform a highly specific extra-corporeal
immunoadsorption. When specific (as compared with selective) there is the
definitive advantage of removing only the targeted pathogenic antibodies while
leaving the other antibodies essential to the patients normal immune systems,
and defense against infection. Our main competitor with respect to cartridges
appears to be Aethlon Medical with its HIV Hemopurifier.
GOVERNMENT REGULATION
We contract with third parties to perform research projects related to our
business. These third parties are located in various countries and are subject
to the applicable laws and regulations of their respective countries.
Accordingly, regulation by government authorities in the United States and
foreign countries is a significant factor in the development, manufacture and
marketing of our proposed products and in our ongoing research and product
development activities. Any products that we develop will require regulatory
approval by government agencies prior to commercialization. In particular, human
therapeutic products are subject to rigorous preclinical studies and clinical
trials and other approval procedures of the United States Food and Drug
Administration, or FDA, and similar regulatory authorities in foreign countries.
In addition, various federal and state statutes and regulations will also govern
or influence testing, manufacturing, safety, labeling, storage and
record-keeping related to such products and their marketing. The process of
obtaining these approvals and the subsequent substantial compliance with
appropriate federal and state statutes and regulations require the expenditure
of substantial time and financial resources. The success of our business will
depend on our ability to obtain and maintain the necessary regulatory approvals.
Preclinical studies generally are conducted on laboratory animals to
evaluate the potential safety and the efficacy of a product. In the United
States, we must submit the results of preclinical studies to the FDA as a part
of an IND, which application must become effective before we can begin clinical
trials in the United States. An IND becomes effective 30 days after receipt by
the FDA unless the FDA objects to it. Typically, clinical evaluation involves a
time-consuming and costly three-phase process.
Phase I. Refers typically to closely monitored clinical trials and
includes the initial introduction of an investigational new drug into human
patients or normal volunteer subjects. Phase I clinical trials are designed to
determine the metabolism and pharmacologic actions of a drug in humans, the side
effects associated with increasing drug doses and, if possible, to gain early
evidence on effectiveness. Phase I trials also include the study of
structure-activity relationships and mechanism of action in humans, as well as
studies in which investigational drugs are used as research tools to explore
biological phenomena or disease processes. During Phase I clinical trials,
sufficient information about a drug's pharmacokinetics and pharmacological
effects should be obtained to permit the design of well-controlled,
scientifically valid, Phase II studies. The total number of subjects and
patients included in Phase I clinical trials varies, but is generally in the
range of 20 to 80 people.
Phase II. Refers to controlled clinical trials conducted to evaluate the
effectiveness of a drug for a particular indication or indications in patients
with a disease or condition under study and to determine the common short-term
side effects and risks associated with the drug. These clinical trials are
typically well-controlled, closely monitored and conducted in a relatively small
number of patients, usually involving no more than several hundred subjects.
Phase III. Refers to expanded controlled clinical trials, which many times
are designated as "pivotal trials" designed to reach end points that the FDA has
agreed in advance, if met, would allow approval for marketing. These clinical
trials are performed after preliminary evidence suggesting effectiveness of a
drug has been obtained. They are intended to gather additional information about
the effectiveness and safety that is needed to evaluate the overall benefit-risk
relationship of the drug and to provide an adequate basis for
30
physician labeling. Phase III trials can include from several hundred to several
thousand subjects depending on the specific indication being treated.
The FDA closely monitors the progress of each of the three phases of
clinical trials that are conducted in the United States and may, at its
discretion, reevaluate, alter, suspend or terminate the testing based upon the
data accumulated to that point and the FDA's assessment of the risk/benefit
ratio to the patient. We have not yet conducted any clinical trials and are
currently focused on research.
Once Phase III trials are completed, drug developers submit the results of
preclinical studies and clinical trials to the FDA, in the form of an NDA, for
approval to commence commercial sales. In response, the FDA may grant marketing
approval, request additional information or deny the application if the FDA
determines that the application does not meet the predetermined study end points
and other regulatory approval criteria. Furthermore, the FDA may prevent a drug
developer from marketing a product under a label for its desired indications,
which may impair commercialization of the product.
If the FDA approves the new drug application, the drug becomes available
for physicians to prescribe in the United States. After approval, the drug
developer must submit periodic reports to the FDA, including descriptions of any
adverse reactions reported. The FDA may request additional studies, known as
Phase IV trials, to evaluate long-term effects. We will be required to comply
with similar regulatory procedures in countries other than the United States.
In addition to studies requested by the FDA after approval, a drug
developer may conduct other trials and studies to explore use of the approved
compound for treatment of new indications. The purpose of these trials and
studies and related publications is to broaden the application and use of the
drug and its acceptance in the medical community.
We will have to complete an approval process, similar to the one required
in the United States, in virtually every foreign target market in order to
commercialize our product candidates in those countries. The approval procedure
and the time required for approval vary from country to country and may involve
additional testing. Approvals (both foreign and in the United States) may not be
granted on a timely basis, or at all. In addition, regulatory approval of prices
is required in most countries other than the United States. We face the risk
that the resulting prices would be insufficient to generate an acceptable return
to us or our collaborators. A failure to obtain or maintain the necessary
regulatory approvals will have an materially adverse effect on our business.
EMPLOYEES
As of August 8, 2002, we had a total of eight full-time employees, five of
which work for our subsidiary, Mymetics S.A. There are no collective bargaining
agreements in effect. We believe that relations with our employees are good.
PROPERTIES
Mymetics Corporation currently leases approximately 120 square feet of
office space in Annapolis, Maryland, in which our North American administrative
activities are conducted. The current rent is approximately $1,000 per month,
and the lease expires on April 14, 2003, unless earlier terminated by either
party on 90 days' prior notice. Mymetics S.A. currently leases approximately 170
square meters of office space in Saint-Genis Laval, France, in which our
European administrative activities are conducted. The current rent is
approximately E1,641 per month, and the lease expires on January 31, 2006. Apart
from those two leases, we do not own or lease any real property. All of our
research activities are conducted at the properties of third parties with whom
we contract to perform research projects.
LEGAL PROCEEDINGS
We are subject to routine litigation incidental to our business. We do not
believe that the outcome of any such litigation will have a material adverse
effect on our business or financial condition.
31
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table shows specific information about our executive officers
and directors as of August 8, 2002.
NAME AGE CURRENT POSITION WITH THE COMPANY
---- --- ---------------------------------
Dr. Peter P. McCann.................. 58 Chief Executive Officer, President and Director
John M. Musacchio.................... 55 Chief Operating Officer, Chief Financial
Officer, Secretary and Director
Dr. Pierre-Francois Serres........... 52 Chief Scientific Officer and Director
Dr. Joseph D. Mosca.................. 48 Vice President of Development
Patrice Pactol....................... 41 Director
Robert Demers........................ 64 Director
Michael K. Allio..................... 38 Director
Dr. Peter P. McCann became our Chief Executive Officer, President and a
member of our board of directors on February 7, 2002. Dr. McCann previously was
employed with Marion Merrell Dow Inc., where he served in a number of senior
executive capacities. From 1993 to 1998, Dr. McCann served as President of
British Biotech Inc., the North American operating unit of British Biotech
Pharmaceuticals (the largest biotech company in Europe). In this capacity, he
established British Biotech Inc. in Annapolis, Maryland, where he directed the
company's Phase II and Phase III clinical trials of two major cancer drugs at
more than 200 medical centers in the United States and Canada. Dr. McCann served
as Interim President of the University of Maryland Biotechnology Institute, one
of the 13 operating units of the University System of Maryland, from 1998-1999.
From 1999-2001, Dr. McCann served as President and Chief Executive Officer of
Oncostasis, Inc., a genomics-based cancer therapeutics company created to
identify and develop new therapies.
John M. Musacchio has been our Chief Operating Officer, Chief Financial
Officer and a member of our board of directors since May 16, 2001, and our
Secretary since May 26, 2001. Mr. Musacchio is currently a Vice President of MFC
Bancorp Ltd., an independent financial services group which has in the past been
one of our significant stockholders. He has held this position with MFC Bancorp
Ltd. since 1998. Prior to joining MFC Bancorp Ltd., Mr. Musacchio held senior
executive positions with PDG Environmental, Inc. and its successors. He has 25
years of industrial and professional service business operating experience on an
international scale, having held positions as principal, director and officer in
both private and publicly traded companies. His management experience includes
the segments of operations, marketing, corporate development and planning.
Dr. Pierre-Francois Serres became our Chief Scientific Officer on February
7, 2002 and has been a member of our board of directors since March 28, 2001.
Dr. Serres previously served as our Chief Executive Officer and President. From
1990 until March 2001, Dr. Serres was the founder, Chief Executive Officer and
President of our subsidiary, Mymetics S.A. He is also the founder and co-manager
of Scericia S.C.E.R, which performs studies and research in clinical immunology.
Prior to that he worked as a scientific manager at Indicia Diagnostics S.A.
Joseph D. Mosca, Ph.D., became our Vice President of Development on March
18, 2002. Dr. Mosca is an experienced research and development scientist in the
field of immunology and AIDS virology. Dr. Mosca joined the faculty of the Johns
Hopkins University in 1982, and, subsequently, the staff of the Henry M. Jackson
Foundation in Rockville, Maryland in 1989. From 1996 to 2000, Dr. Mosca held a
number of management positions at Osiris Therapeutics in Baltimore, Maryland,
the last of which was Director of Gene Delivery. Most recently, he served as
Executive Director of Research at Stemron Corporation in Gaithersburg, Maryland.
32
Patrice Pactol became a member of our board of directors on March 28, 2001.
From 1995 until becoming a member of our board of directors, Mr. Pactol was a
director and the coordinator for bioinformatics and computing of our subsidiary,
Mymetics S.A. Prior to that he was a consultant in veterinary and human biology
and a sales executive for a pharmaceutical company.
Robert Demers became a member of our board of directors on July 19, 2001.
Since 1992, Mr. Demers founded and served as the Chief Executive Officer of
Demers Conseil Inc., a member of the Montreal Exchange, the Toronto Stock
Exchange and the Investment Dealer Association of Canada. Prior to that, he
served as the President of Maison Placements Canada Inc., an institutional
research firm. He has served as the Chairman of the Quebec Securities Commission
and as President and Governor of the Montreal Stock Exchange. He has served as a
director of numerous public and private companies, as well as several non-
profit organizations.
Michael K. Allio became a member of our board of directors on July 19,
2001. Mr. Allio is an independent business consultant concentrating on advising
his clients on strategic, business development and process improvement projects.
From 1995 to 2000, Mr. Allio was the Vice President and Principal of TracRac
Incorporated, a design and fabrication company. Prior to his tenure at TracRac
Incorporated, he was the Vice President and Senior Consultant of Robert J. Allio
& Associates, Inc., a management consulting firm, and Manager of Creative
Promotions for Revlon Incorporated.
DIRECTOR COMPENSATION
Employee directors are not compensated for their role as directors. Our
outside directors receive an annual fee of $7,500, a fee of $750 for each
meeting they attend, and a fee of $250 for each committee meeting they attend.
All directors receive reimbursement for their actual expenses incurred in
attending such meetings.
In addition, pursuant to our 2001 Stock Option Plan, all directors are
entitled to receive stock options pursuant to the terms and provisions of such
plan. Upon election as director, each director receives an option to purchase
10,000 shares of our common stock. For each subsequent year of service after the
initial year, each director receives an option to purchase an additional 1,250
shares of our common stock. During the fiscal year ended December 31, 2001,
100,000 stock options were granted to directors under our 2001 Stock Option
Plan. Of these 100,000 stock options, 50,000 were granted to Michael Allio
pursuant to a consulting arrangement described below.
BOARD OF DIRECTORS COMMITTEES AND OTHER INFORMATION
Our board of directors is divided into three classes, with the members of
each class serving for a staggered three-year term. Our board of directors
currently consists of two Class I directors, two Class II directors and two
Class III directors. At each annual meeting of stockholders, a class of
directors is elected for a three-year term to succeed the directors of the same
class whose terms are then expiring. The term of our Class I directors (Messrs.
Allio and Demers) expires at the annual meeting of stockholders to be held in
2004. The term of our Class II directors (Messrs. Musacchio and Pactol) expires
at the annual meeting of stockholders to be held in 2005. The term of our Class
III directors (Messrs. McCann and Serres) expires at the annual meeting of
stockholders to be held in 2003. This classification of our board of directors
may delay or prevent a change in control of our company or our management. See
"Description of Capital Stock -- Delaware Anti-Takeover Law and Provisions of
Our Certificate of Incorporation and Bylaws."
Our board of directors currently has two committees: an audit committee and
a nominating committee.
The audit committee of our board of directors currently consists of Patrice
Pactol, Michael K. Allio and Robert Demers, who is the chairman of the
committee. The audit committee, among other responsibilities, reviews our
internal accounting procedures and external reporting process, and consults with
and reviews the services provided by Peterson Sullivan, PLLC, our independent
public accountants.
The nominating committee of our board of directors currently consists of
John M. Musacchio, Dr. Pierre-Francois Serres and Michael K. Allio. The
nominating committee, among other responsibilities,
33
confers, advises and makes recommendations to our board of directors with
respect to (a) nominations to fill vacancies on our board of directors, (b)
director compensation and (c) charters for, and appointments to, committees of
our board of directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2001, we did not have a compensation committee nor any other
committee performing similar functions. Dr. Serre's employment agreement and
compensation package for fiscal year 2001 were negotiated by Mr. Musacchio on
behalf of our board of directors. After our annual stockholder meeting in July
2001, our board of directors reviewed the compensation terms for Dr. Serres and
did not recommend any changes to the employment agreement. None of our executive
officers serves as a member of our board of directors or compensation committee
of any entity that has one or more executive officers serving on our board of
directors.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth information for the last three fiscal years
regarding the annual compensation earned by Jim Soo Choi, who served as our
President until March 28, 2001, and Dr. Pierre-Francois Serres, who became our
President and Chief Executive Officer on March 28, 2001. No executive officer,
other than Dr. Serres, received aggregate annual consideration (salary and
bonus) from us in excess of $100,000 (E102,690 based on the exchange rate on
August 6, 2002) during the fiscal year ended December 31, 2001.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------- -----------------------------
AWARDS PAYOUTS
------------ ------------
SECURITIES ALL
UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS COMPENSATION
--------------------------- ---- ------- ----- ------------ ------------
Dr. Pierre-Francois Serres(1)...... 2001 E86,181 -- 10,000 E1,630(3)
2000 E73,176(2) -- -- --
1999 E35,817(2) -- -- --
Jim Soo Choi(1).................... 2001 -- -- -- --
2000 -- -- -- --
1999 -- -- -- --
---------------
(1) Mr. Choi was our President from December 1999 to March 28, 2001 and was
replaced by Dr. Pierre-Francois Serres, who became our President and Chief
Executive Officer on March 28, 2001.
(2) This represents amounts paid to Dr. Serres by our subsidiary, Mymetics S.A.,
prior to our acquisition of Mymetics S.A.
(3) Dr. Serres received E1,630 for his participation on the board of directors
of our subsidiary, Mymetics S.A., prior to our acquisition of Mymetics S.A.
OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes the stock options granted to Dr.
Pierre-Francois Serres during the fiscal year ended December 31, 2001, including
the potential realizable value over the 10 1/2-year term of the options, based
on assumed rates of stock appreciation of 5% and 10%, compounded annually. The
potential realized value at assumed annual rates of stock price appreciation for
the option term represents hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The 5% and 10%
assumed annual rates of stock price appreciation are required by the rules of
the Securities and Exchange Commission and do not represent our estimate or
projection of our future common stock prices. Potential realizable value is
based upon a fair market value of $3.15 for our common stock on the grant date
34
of the options, which fair market value is equal to the closing price of our
common stock on the date of grant. Actual gains, if any, on stock option
exercises are dependent on the future performance of our common stock and
overall stock market conditions. The actual value realized may be greater or
less than the potential realizable value set forth in the table. Mr. Choi, who
served as our President until March 28, 2001, did not receive any options to
purchase our common stock during the fiscal year ended on December 31, 2001.
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------- ANNUAL RATES OF STOCK
PERCENT OF TOTAL PRICE APPRECIATION FOR
NUMBER OF SECURITIES OPTIONS GRANTED TO OPTION TERM
UNDERLYING OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR 2001 PRICE DATE 5% ($) 10% ($)
---- -------------------- ------------------ -------- ---------- ---------- ----------
Dr. Pierre-Francois
Serres............. 10,000 10% $3.15 1/19/12 $21,077 $54,190
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
OPTION VALUES AT DECEMBER 31, 2001
Dr. Pierre-Francois Serres, our only named executive officer who holds any
stock options, did not exercise any options during 2001. The following table
provides information concerning the number and value of unexercised options held
by Dr. Serres at December 31, 2001.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 2001 DECEMBER 31, 2001(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
Dr. Pierre-Francois
Serres................... -- -- 10,000(1) -- --(3) --(3)
---------------
(1) These options are fully vested and currently exercisable at $3.15 per share.
(2) The value of unexercised in-the-money options held at December 31, 2001
represents the total gain which an option holder would realize if he or she
exercised all of the in-the-money options held at December 31, 2001, and is
determined by multiplying the number of shares of common stock underlying
the options by the difference between an assumed fair market value per share
and the per share option exercise price. An option is in-the-money if the
exercise price per share of the option is below the assumed fair market
value per share.
(3) The fair market value of the stock underlying Dr. Serres's options was $2.26
per share on December 31, 2001, based on the closing market price of our
common stock on such date. The exercise price of Dr. Serres's options is
$3.15 per share. Accordingly, none of Dr. Serres options were in-the-money
on December 31, 2001.
2001 STOCK OPTION PLAN
In June 2001, our board of directors and stockholders adopted our 2001
Stock Option Plan, which authorizes aggregate grants of up to 5,000,000 shares
of common stock to our officers, directors, employees and consultants. Awards
under the plan may be in the form of options which qualify as "incentive stock
options" under the meaning of Section 422 of the Internal Revenue Code and
options which do not so qualify. The purpose of the plan is to promote our
interests and those of our stockholders by (a) attracting and retaining
employees, officers, directors and consultants and advisors of outstanding
ability, (b) motivating such persons, by means of performance-related
incentives, to achieve longer-range performance goals, and (c) enabling such
persons to participate in our long-term growth and financial success. The plan
is administered by an administrator consisting of at least three members of our
board of directors, two of whom must be non-employees. Subject to the provisions
of the plan, the administrator is responsible for awarding stock grants to
selected participants and determining the amount, type, exercise price and
vesting period of options comprising such grants. The exercise price of the
option shares must be paid in full at the time of exercise, and is payable in
cash and/or shares of our common stock. Incentive stock options granted under
the
35
plan must be exercised within 10 years after the date of grant while
non-qualified stock options must be exercised within 10 1/2 years after the date
of grant. As of March 31, 2002, we had granted options to purchase 100,000
shares of common stock under the 2001 Stock Option Plan, all of which are
currently exercisable.
1995 QUALIFIED INCENTIVE STOCK OPTION PLAN
In August 1996, we adopted our 1995 Qualified Incentive Stock Option Plan,
which plan authorized aggregate grants of up to 150,000 shares of common stock
to key managerial employees. The plan was terminated in March 2001. Accordingly,
while no additional options may be granted under such plan, all issued and
outstanding options remain exercisable. The plan provided for awards of
"incentive stock options." The purpose of the plan was to promote our interests
and those of our stockholders by (a) attracting and retaining key managerial
employees of outstanding ability, (b) motivating such persons, by means of
performance-related incentives, to achieve longer-range performance goals, and
(c) enabling such persons to participate in our long-term growth and financial
success. The plan was administered by the compensation committee appointed by
our board of directors, which committee consisted of a minimum of two and a
maximum of three members of our board of directors, each of whom was
disinterested as defined in Rule 16b-3 under the Securities Exchange Act of
1934. Subject to the provisions of the plan, our compensation committee was
responsible for awarding stock grants to selected participants and determining
the amount, type, exercise price and vesting period of options comprising such
grants. The exercise price of the option shares must be paid in full at the time
of exercise, and is payable in cash and/or shares of our common stock. All
options must be exercised within 10 years after the date of grant. As of March
31, 2002, there were 100,000 shares of common stock outstanding under our 1995
Qualified Incentive Stock Option Plan, all of which are currently exercisable.
1994 AMENDED STOCK OPTION PLAN
In November 1996, we adopted our 1994 Amended Stock Option Plan, which plan
authorized aggregate grants of up to 350,000 shares of common stock to eligible
employees, consultants and directors. Our 1994 Amended Stock Option Plan was
terminated in March 2001. Accordingly, while no additional options may be
granted under the plan, all issued and outstanding options remain exercisable.
The plan provided for the issuance of non-qualified stock options. The purpose
of the plan was to promote our interests and those of our stockholders by (a)
attracting and retaining key managerial employees of outstanding ability, (b)
motivating such persons, by means of performance-related incentives, to achieve
longer-range performance goals, and (c) enabling such persons to participate in
our long-term growth and financial success. The plan was administered by the
compensation committee appointed by our board of directors which consisted of a
minimum of two directors. Subject to the provisions of the plan, our
compensation committee was responsible for awarding stock grants to selected
participants and determining the amount, type, exercise price and vesting period
of options comprising such grants. The exercise price of the option shares must
be paid in full at the time of exercise, and is payable in cash and/or shares of
common stock. All options must be exercised within 10 years after the date of
grant. As of March 31, 2002, there were 63,750 options outstanding under our
1994 Amended Stock Option Plan, all of which are currently exercisable.
EMPLOYMENT AGREEMENTS
On May 3, 2001, we entered into an employment agreement with Dr. Serres,
pursuant to which he receives a monthly salary of E7,622 and customary benefits.
In addition, Dr. Serres may participate in our 2001 Stock Option Plan, as well
as receive discretionary bonuses as approved by our board of directors. The term
of the employment agreement continues until terminated by either party upon
three months' prior notice. If we terminate Dr. Serres without "cause" (as
defined in the agreement) or if Dr. Serres dies or resigns as a result of a
change in control, the employment agreement, which is governed by French law,
provides for continuation payments to Dr. Serres equal to his monthly base
salary for a period of 24 months. In addition, Dr. Serres will also have certain
rights under the National Collective Bargaining Agreement for the Pharmaceutical
Industry (Convention Collective Nationale de l'Industrie Pharmaceutique).
36
On March 18, 2002, we entered into an employment agreement with our Chief
Executive Officer, Dr. McCann, pursuant to which he receives an annual salary of
$170,000 and customary benefits. In addition, Dr. McCann may participate in our
2001 Stock Option Plan, as well as receive discretionary bonuses as approved by
our board of directors. The employment agreement provides for an initial term of
one year, with automatic one-year renewal periods unless either we or Dr. McCann
elect to terminate the agreement by providing 60 days' prior notice. If we
terminate Dr. McCann during the initial one-year term without "cause" (as
defined in the agreement), the employment agreement, which is governed by
Delaware law, requires us to continue to pay Dr. McCann's base salary for the
greater of the remainder of the initial one-year term or six months. If we
terminate Dr. McCann without cause during a renewal period, we must continue to
pay Dr. McCann his base salary for a period of 24 months from the date of such
termination. In addition, if Dr. McCann resigns due to a substantial change in
ownership or in the membership of our board of directors, we must continue to
pay Dr. McCann his base salary for a period of one year following the date of
such resignation.
On March 18, 2002, we entered into an employment agreement with our Vice
President of Development, Dr. Joseph D. Mosca, pursuant to which Dr. Mosca
receives an annual salary of $125,000 and customary benefits. In addition, Dr.
Mosca may participate in our 2001 Stock Option Plan, as well as receive
discretionary bonuses as approved by our board of directors. The employment
agreement provides for an initial term of one year, with automatic one-year
renewal periods unless either we or Dr. Mosca elect to terminate the agreement
by providing 60 days' prior notice. If we terminate Dr. Mosca during the initial
one-year term without "cause" (as defined in the agreement), the employment
agreement, which is governed by Delaware law, requires us to continue to pay Dr.
Mosca his base salary for the greater of the remainder of the initial one-year
term or six months. If we terminate Dr. Mosca without cause during a renewal
period, we must continue to pay Dr. Mosca his base salary for a period of 12
months from the date of such termination.
CONSULTING AGREEMENT WITH MICHAEL K. ALLIO
In August 2001, we entered into a consulting agreement with Michael K.
Allio, one of our directors. Pursuant to this agreement, Mr. Allio agreed to
provide us with strategic management consulting services. Mr. Allio's engagement
under this agreement includes, without limitation, developing the scope of the
business, establishing a European-North American operations team, directing and
coordinating initial corporate identity and branding efforts, and crafting a
coherent business plan. Furthermore, Mr. Allio's services include assisting us
in establishing a viable United States identity and entity and exploring
strategic partnerships in the United States, Europe and possibly elsewhere. In
consideration for those services, Mr. Allio receives $12,000 per month, plus
reimbursement for reasonable business expenses. Pursuant to the consulting
agreement, Mr. Allio was also granted options to purchase 50,000 shares of our
common stock at an exercise price of $2.50 per share, all of which are currently
vested. The consulting agreement may be terminated by either party on 15 days'
prior written notice. In addition, in the event that shares of our common stock
are listed in the future on the Nasdaq National Market, we have agreed to grant
Mr. Allio options to purchase 100,000 shares of common stock (at an exercise
price equal to the fair market value of such shares at the time of any such
grant), which options will be fully vested upon issuance.
SERVICES AGREEMENT WITH MFC MERCHANT BANK S.A.
In May 2001, we entered into a services agreement with MFC Merchant Bank
S.A. pursuant to which MFC Merchant Bank S.A. agreed to provide us with the
services of Mr. Musacchio, our Chief Operating Officer, Chief Financial Officer
and Secretary. In consideration for such services, we agreed to pay MFC Merchant
Bank S.A. E5,000 per month.
37
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Our common stock is quoted on the OTC Bulletin Board under the trading
symbol "MYMX." We changed our trading symbol from ICHR to MYMX in July 2001
following the corporate name change from ICHOR Corporation to Mymetics
Corporation. The following table sets forth the quarterly high and low sale
price per share of our common stock for the periods indicated. The prices
represent inter-dealer quotations, which do not include retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
FISCAL QUARTER ENDED HIGH LOW
-------------------- ----- -----
2000:
March 31.................................................... $3.25 $1.50
June 30..................................................... 2.00 0.50
September 30................................................ 0.59 0.49
December 31................................................. 3.44 0.38
2001:
March 31.................................................... $3.25 $1.88
June 30..................................................... 3.50 2.35
September 30................................................ 4.10 2.50
December 31................................................. 3.95 2.00
2002:
March 31.................................................... $3.85 $2.15
June 30..................................................... $3.70 $2.70
The closing price of our common stock on August 5, 2002 was $2.70 per share.
STOCKHOLDERS
At August 8, 2002, we had approximately 52 holders of record of our common
stock, some of which are securities clearing agencies and intermediaries.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
During 2001, there were no transactions (or series of similar
transactions), and there are currently no proposed transactions (or series of
similar transactions), to which we were, are or will be a party in which the
amount involved exceeds $60,000 and in which any of our directors, executive
officers or holders of more than 5% of our common stock, or an immediate family
member of any of the foregoing, had or will have a direct or indirect interest,
other than the transactions described below.
We believe that we have executed all of the transactions set forth below on
terms no less favorable to us than we could have obtained from unaffiliated
third parties. It is our intention to ensure that all future transactions,
including loans, between us and our officers, directors and principal
stockholders and their affiliates are on terms no less favorable to us than
those that we could obtain from unaffiliated third parties.
CREDIT FACILITY WITH MFC MERCHANT BANK S.A.
MFC Merchant Bank S.A. has in the past been one of our significant
stockholders. MFC Merchant Bank S.A. is a wholly-owned subsidiary of MFC Bancorp
Ltd. Mr. Musacchio, our Chief Operating Officer, Chief Financial Officer,
Secretary and a member of our board of directors, is currently a Vice President
with MFC Bancorp Ltd.
38
In December 2000, we assumed the rights and obligations of a credit
facility which our subsidiary, Mymetics S.A., previously entered into with MFC
Merchant Bank S.A. The credit facility is a revolving term facility which allows
us to borrow a principal amount of up to E1,300,000, of which E228,000 is
currently outstanding, at an interest rate of LIBOR plus 4%. The credit facility
requires all funds borrowed to be used for working capital and general corporate
activities and for paying the fees and expenses associated with registering and
maintaining our patents. The credit facility matures on August 31, 2002. The
credit facility is secured by a blanket lien on all of our property, assets and
undertakings, including, all of our existing and future pecuniary claims and all
of our current and future patents covering technology used, or to be used, in
the field of human and animal AIDS. Additionally, we are prohibited from
creating any additional liens on our property or assets so long as the credit
facility is in effect. As partial consideration of the credit facility, we
granted MFC Merchant Bank S.A. warrants to purchase 6,828,468 shares of our
common stock for E.23 per share. The warrants provided that MFC Merchant Bank
S.A. was entitled to convert the warrants into shares of our common stock in an
amount equal to the maximum allowable principal balance under the credit
facility including unpaid interest plus the arrangement and retainer fees. The
warrants are exercisable during a three-year period beginning in August 2000 at
approximately E.23 per common share. During 2001, MFC Merchant Bank S.A.
exercised warrants to acquire 1,176,294 common shares in exchange for the
arrangement fee and the retainer fee plus E52 in accrued interest. MFC Merchant
Bank S.A. also exercised warrants to acquire 3,250,000 common shares for cash in
December 2001. In July, 2002, MFC Merchant Bank S.A. exercised warrants to
purchase 1,625,567 shares of our common stock.
SHARE EXCHANGE WITH THE STOCKHOLDERS OF MYMETICS S.A.
In March 2001, we entered into a share exchange with the former
stockholders of our subsidiary, Mymetics S.A., whereby we issued shares of our
common stock and Preferential Shares of our subsidiary, 6543 Luxembourg S.A., to
the former stockholders of Mymetics S.A. in exchange for 99.9% of the
outstanding shares of Mymetics S.A. We recently acquired the remaining 0.1% of
the outstanding common stock of Mymetics S.A. See "Business -- The Company."
Some of the former stockholders of Mymetics S.A., rather than receiving shares
of our common stock directly, opted to receive Preferential Shares of our
subsidiary, 6543 Luxembourg S.A., which are convertible into shares of our
common stock. Pursuant to the share exchange:
- Ms. Martine Reindle, who beneficially owns more than 5% of our common
stock, received 4,291,365 shares of our common stock;
- Mr. Ernst Lubke, who beneficially owns more than 5% of our common stock,
received 1,249,871 shares of our common stock;
- Dr. Pierre-Francois Serres, our Chief Scientific Officer and a member of
our board of directors, received 10,436 Preferential Shares of our
subsidiary, 6543 Luxembourg S.A., which are convertible into 11,129,368
shares of our common stock; and
- Mr. Patrice Pactol, a member of our board of directors, received 2,004
Preferential Shares of our subsidiary, 6543 Luxembourg S.A., which are
convertible into 2,137,146 shares of our common stock.
MFC Merchant Bank S.A. acted as an advisor in connection with the share
exchange and, in consideration thereof, was issued 2,025,144 shares of our
common stock. In addition, in connection with the share exchange, we entered
into a Voting and Exchange Trust Agreement dated March 28, 2001 with our
subsidiary, 6543 Luxembourg S.A. and MFC Merchant Bank S.A. MFC Merchant Bank
S.A. serves as the trustee under the Voting and Exchange Trust Agreement and is
paid customary fees and expenses in relation thereto. The terms of this Voting
and Exchange Trust Agreement are described in more detail under "Business -- The
Company."
COMPENSATION AND SERVICES AGREEMENTS
In May 2001, we entered into a services agreement with MFC Merchant Bank
S.A. pursuant to which MFC Merchant Bank S.A. agreed to provide us with the
services of Mr. Musacchio, our Chief Operating Officer, Chief Financial Officer,
Secretary and a member of our board of directors. The terms of this services
39
agreement are described in more detail under "Management -- Services Agreement
with MFC Merchant Bank S.A."
We have entered into compensation arrangements with certain of our
directors. The terms of these arrangements are described in more detail under
"Management -- Employment Agreements."
In August 2001, we entered into a Consulting Agreement with Mr. Allio, a
member of our board of directors. The terms of this consulting arrangement are
described in more detail under "Management -- Consulting Agreement with Michael
K. Allio."
PRIVATE PLACEMENT
In June 2001, we sold 1,333,333 shares of our common stock in a private
placement exempt from the registration requirements of the Securities Act of
1933 under Regulation S promulgated thereunder. MFC Merchant Bank S.A. acted as
a placement agent in connection with the placement of the shares and received
warrants to purchase 103,559 shares of common stock at $1.725 per share. As of
the date of this prospectus, 23,393 of these warrants have been exercised.
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our Certificate of Incorporation, as amended, authorizes us to issue of up
to 80 million shares of common stock, par value $0.01 per share, and up to 5
million shares of preferred stock, par value $0.01 per share. As of August 8,
2002, 50,944,454 shares of our common stock were outstanding and held of record
by approximately 52 stockholders (assuming the conversion of 15,372 Preferential
Shares into 16,393,316 shares of common stock), and one share of Special
Preferred Voting Stock was outstanding. In addition, as of August 8, 2002, there
were 263,750 shares of common stock subject to outstanding options and 80,166
shares of common stock subject to outstanding warrants.
Our subsidiary, 6543 Luxembourg S.A., has 15,372 Preferential Shares
outstanding, which are convertible into 16,393,316 shares of our common stock.
As described below, the holders of the Preferential Shares are entitled to vote
on all matters to be voted on by our stockholders to the same extent as if they
had converted the Preferential Shares into shares of our common stock pursuant
to a Voting and Exchange Trust Agreement dated March 28, 2001.
The following description of our capital stock does not purport to be
complete and is subject to, and qualified in its entirety by, our Certificate of
Incorporation and Bylaws, copies of which have been incorporated by reference as
exhibits to the registration statement of which this prospectus is a part, and
by the provisions of applicable Delaware law.
COMMON STOCK
The holders of our common stock are entitled to one vote per share. Except
as otherwise provided in the Delaware General Corporation Law or our Certificate
of Incorporation or Bylaws, any corporate action that is to be taken by a vote
of the stockholders shall be authorized upon receiving the affirmative vote of a
majority of the votes cast by all stockholders entitled to vote thereon.
Currently, our Certificate of Incorporation and Bylaws contain no supermajority
voting requirements. However, pursuant to the provisions of the Delaware General
Corporation Law, our board of directors may, without a vote of the stockholders
and at any time, amend our Bylaws to, among other things, provide for a
supermajority voting requirement. Our board of directors has no present intent
to do so. The Certificate of Incorporation does not provide for cumulative
voting with respect to the election of directors. Any action which may be
approved by a stockholder vote may also be accomplished by partial written
consent.
The holders of our common stock are entitled to receive dividends, whether
in cash, stock or other property, declared and paid from time to time by our
board of directors, subject only to any preference of any preferred
stockholders. Our board of directors is not required at any time to declare and
pay any dividends. In
40
the event of our liquidation, the holders of common stock will share pro rata in
any distributions subject only to the rights of our creditors and the rights of
any preferred stockholders.
The common stock has no conversion provisions, no sinking fund provisions
and no redemption provisions. The holders of the common stock have no preemptive
or conversion rights. Once issued and fully paid, the common stock will not be
subject to any assessment.
PREFERRED STOCK
Under our Certificate of Incorporation, 5,000,000 shares of undesignated
preferred stock are authorized for issuance. Of the shares of preferred stock
authorized, one share of Special Voting Preferred Stock is currently
outstanding. This share of Special Voting Preferred Stock was issued in
connection with the 2001 share exchange transaction among us, 6543 Luxembourg
S.A. and former stockholders of Mymetics S.A. As described in our Certificate of
Incorporation, the holder of the Special Voting Preferred Stock is entitled to
vote on all matters that the holders of our common stock are entitled to vote on
to the same extent as if the holder of the Special Voting Preferred Stock held a
number of shares of our common stock equal to the number of shares of common
stock into which all outstanding Preferential Shares of 6543 Luxembourg S.A. are
then convertible. Presently, all of the outstanding Preferential Shares of 6543
Luxembourg S.A. are convertible into 16,393,316 shares of our common stock, and
thus, the holder of the Special Voting Preferred Stock is entitled to 16,393,316
votes on all matters voted on by our common stockholders.
The Special Voting Preferred Stock was created in order to provide the
former stockholders of Mymetics S.A. who opted to receive Preferential Shares of
6543 Luxembourg S.A. to vote on matters to the same extent as if they converted
their Preferential Shares into shares of our common stock. In furtherance of
this purpose, we entered into a Voting and Exchange Trust Agreement with 6543
Luxembourg S.A., MFC Merchant Bank S.A and the former stockholders of Mymetics
S.A. who hold Preferential Shares of 6543 Luxembourg S.A. Under the Voting and
Exchange Trust Agreement, MFC Merchant Bank S.A. was appointed trustee and was
issued the single share of Special Voting Preferred Stock. MFC Merchant Bank, as
the holder of the Special Voting Preferred Stock, is entitled to vote on each
matter that our holders of common stock are entitled to vote on to the same
extent as if it held shares of common stock equal to the number of shares of
common stock into which all outstanding Preferential Shares of 6543 Luxembourg
S.A. are then convertible. The Voting and Exchange Trust Agreement provides a
mechanism under which the holders of Preferential Shares may instruct MFC
Merchant Bank (as Trustee) how to vote the particular votes conferred by the
Special Voting Preferred Stock. The Voting and Exchange Trust Agreement further
contains certain "insolvency put rights" whereby each Preferential Share is
automatically exchanged for an amount equal to the then current market price of
1,066.44 (or the then current conversion multiplier) shares of our common stock
if we suffer certain types of insolvency or liquidation events.
In order to further implement the 2001 share exchange and the voting
arrangement described above, we entered into a Shareholder Agreement with the
holders of Preferential Shares of 6543 Luxembourg S.A., pursuant to which the
holders of the Preferential Shares were granted the right, at any time and at
their option, to require 6543 Luxembourg S.A. to exchange the Preferential
Shares for shares of our common stock at an initial exchange ratio of
1,066.44-for-one, so that each Preferential Share is exchangeable for 1,066.44
shares of our common stock. The exchange ratio is adjusted upward in the event
that we undertake a stock split or consolidation, issue stock dividends or
otherwise change our share capital. The holders of Preferential Shares also were
granted the right to receive dividends, if and when declared, equivalent to
dividends paid on the number of our shares of common stock into which they are
convertible.
Finally, also in connection with the 2001 share exchange transaction, we
entered into a Support Agreement imposing certain limitations on our ability to
declare or pay dividends or restructure our capital stock and obligating us to
issue shares of our common stock to 6543 Luxembourg S.A. and the holders of
Preferential Shares. For more detailed information on the share exchange and
these related documents, see our Information Statement on Schedule 14C filed
with the Securities and Exchange Commission on April 26, 2001.
Our board of directors has the authority to issue additional preferred
stock in one or more series and to establish the rights and restrictions granted
to or imposed on any unissued shares of preferred stock and to fix the number of
shares constituting any series without any further vote or action by the
stockholders. Our board
41
of directors has the authority, without approval of the stockholders, to issue
preferred stock that has voting and conversion rights superior to the common
stock, which could have the effect of delaying or preventing a change in
control. We currently have no plans to issue any shares of preferred stock.
WARRANTS
In connection with the 2001 share exchange transaction among us, the former
stockholders of Mymetics S.A. and 6543 Luxembourg S.A., we issued warrants to
MFC Merchant Bank S.A., as partial payment of underwriting fees. Those warrants
grant MFC Merchant Bank S.A. the right to purchase up to 6,828,468 shares of our
common stock at an exercise price of E0.23 per share. In addition, MFC Merchant
Bank S.A. acted as a placement agent in connection with a private placement we
completed in June 2001. In consideration of its placement agent services, we
granted MFC Merchant Bank S.A. a warrant to purchase 103,559 shares of our
common stock at $1.725 per share. As of August 8, 2002, there were warrants to
purchase 80,166 shares of common stock outstanding. All of these share purchase
warrants expire on July 31, 2003.
DELAWARE ANTI-TAKEOVER LAW AND PROVISIONS OF OUR CERTIFICATE OF INCORPORATION
AND BYLAWS
Provisions of Delaware law and our Certificate of Incorporation and Bylaws
could make it more difficult for a third party to acquire us or to remove our
incumbent officers and directors. These provisions, summarized below, are
expected to discourage coercive takeover practices and inadequate takeover bids
and to encourage persons seeking to acquire control of us to first negotiate
with us. We believe that the benefits of increased protection of our ability to
negotiate with the proponent of an unfriendly or unsolicited acquisition
proposal outweigh the disadvantages of discouraging such proposals because,
among other things, negotiation could result in an improvement of the terms of
any such acquisition.
We are not subject to Section 203 of the Delaware General Corporation Law,
which regulates corporate acquisitions. In general, Section 203 prohibits a
publicly held Delaware corporation from engaging in a business combination with
an interested stockholder for a period of three years following the date the
person becomes an interested stockholder, unless the business transaction or
combination in which the person became an interested stockholder is approved in
a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale, or other transaction resulting in a financial benefit to
the interested stockholder. In general, an interested stockholder is a person
who, together with affiliates and associates, owns, or within three years prior
to the determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock.
Our Bylaws provide that stockholder action can be taken at an annual or
special meeting of stockholders or by written consent. Our Bylaws provide that
special meetings of stockholders can be called only by the board of directors.
Our board of directors is classified into three classes of directors serving
staggered three-year terms. In accordance with the Delaware General Corporation
Law, directors serving on classified boards of directors may only be removed
from office for cause. These provisions may have the effect of delaying,
deferring, or preventing a change in control.
As permitted by the Delaware General Corporation Law, we have included a
provision in our Certificate of Incorporation and Bylaws to eliminate the
personal liability of our officers and directors for monetary damages for breach
or alleged breach of their fiduciary duties as officers or directors, other than
in cases of fraud or other willful misconduct. In addition, our bylaws provide
that we are required to advance expenses to our officers and directors as
incurred in connection with proceedings against them for which they may be
indemnified.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is CIBC Mellon Trust
Company. The transfer agent's address is 2100 University Street, Suite 1600,
Montreal, Quebec H3A 2A6.
42
PRINCIPAL STOCKHOLDERS
The following table sets forth information about the beneficial ownership
of our common stock as of August 8, 2002, by: (a) each of our named executive
officers; (b) each of our directors; (c) each person known to us to be the
beneficial owner of more than 5% of our outstanding voting securities (assuming
the conversion of 15,372 Preferential Shares of 6543 Luxembourg S.A. into
16,393,316 shares of our common stock); and (d) all of our executive officers
and directors as a group. The following is based solely on statements and
reports filed with the Securities and Exchange Commission or other information
we believe to be reliable.
There were 50,944,454 shares of our common stock outstanding on August 8,
2002. This assumes the conversion of all 15,372 outstanding Preferential Shares
of 6543 Luxembourg S.A. into 16,393,316 shares of our common stock, since,
pursuant to a voting trust and exchange agreement dated March 28, 2001, the
holders of the Preferential Shares are currently entitled to vote on matters
before our stockholders as if they held the shares of common stock issuable upon
the conversion of the Preferential Shares. We have determined beneficial
ownership in accordance with the rules of the Securities and Exchange
Commission. Except as indicated by the footnotes below, we believe, based on the
information furnished to us, that the persons and entities named in the tables
below have sole voting and investment power with respect to all common shares
that they beneficially own, subject to applicable community property laws.
In computing the number of shares of common stock beneficially owned by a
person and the percentage ownership of that person, shares of common stock
subject to options or warrants held by that person that are currently
exercisable or exercisable within 60 days of August 8, 2002, are deemed
outstanding. These shares, however, are not deemed outstanding for the purposes
of computing the percentage ownership of any other person.
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER TITLE OF CLASS BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------- -------------- -------------------- ----------------
Martine Reindle........................... Common Shares 8,519,874(1) 16.72%
CP 18-1295 Mies, Switzerland
Ernst Lubke............................... Common Shares 4,376,638(1) 8.59%
Route du Muids
CH-1273 Arzier, Switzerland
Peter P. McCann(2)........................ Common Shares -- *
Chief Executive Officer, President and
Director
Dr. Pierre-Francois Serres(2)............. Common Shares 11,144,367(3) 21.88%
Chief Scientific Officer and Director
John M. Musacchio(2)...................... Common Shares 130,050(4) *
Chief Operating Officer, Chief Financial
Officer, Secretary and Director
Patrice Pactol(2)......................... Common Shares 2,147,146(5) 4.21%
Director
Robert Demers(2).......................... Common Shares 10,000(6) *
Director
Michael K. Allio(2)....................... Common Shares 60,000(7) *
Director
All executive officers and directors as a
group (6 persons)....................... Common Shares 13,491,563 25.86%
---------------
* Denotes less than one percent.
(1) Includes 297,221 shares of common stock owned by Aralis Participations S.A.
Martine Reindle is the Chairperson, a substantial equityholder and a member
of the board of directors of Aralis Participations S.A. Ernest Lubke is an
officer, a substantial equityholder and a member of the board of directors
of
43
Aralis Participations S.A. Accordingly, Ms. Reindle and Mr. Lubke may be
deemed to have or share voting and/or investment power over the shares of
common stock owned by Aralis Participations S.A.
(2) Address is c/o Mymetics Corporation, 706 Giddings Avenue, Suite 1C,
Annapolis, Maryland 21401-1472.
(3) Includes 10,000 shares of common stock which Dr. Serres presently has the
right to acquire pursuant to vested stock options granted under our 2001
Stock Option Plan, and 11,129,367 shares of our common stock issuable upon
the conversion of 10,436 Preferential Shares of 6543 Luxembourg S.A.
presently held by Dr. Serres.
(4) Includes 20,000 shares of common stock which Mr. Musacchio presently has the
right to acquire pursuant to vested stock options granted under our 1994
Stock Option Plan, 100,000 shares of common stock which Mr. Musacchio
presently has the right to acquire pursuant to vested stock options granted
under our 1995 Stock Option Plan and 10,000 shares of common stock which Mr.
Musacchio presently has the right to acquire pursuant to vested stock
options granted under our 2001 Stock Option Plan.
(5) Includes 10,000 shares of common stock which Mr. Pactol presently has the
right to acquire pursuant to vested stock options granted under our 2001
Stock Option Plan, and 2,137,146 shares of our common stock issuable upon
the conversion of 2,004 Preferential Shares of 6543 Luxembourg S.A.
presently held by Mr. Pactol.
(6) Represents 10,000 shares of common stock which Mr. Demers presently has the
right to acquire pursuant to vested stock options granted under our 2001
Stock Option Plan.
(7) Represents 60,000 shares of common stock which Mr. Allio presently has the
right to acquire pursuant to vested stock options granted under our 2001
Stock Option Plan.
PLAN OF DISTRIBUTION
The shares of common stock may be sold from time to time by the selling
stockholders after the date of this prospectus. The shares may be sold from time
to time:
- directly by any selling stockholder to one or more purchasers;
- to or through underwriters, brokers or dealers;
- through agents on a best-efforts basis or otherwise; or
- through a combination of such methods of sale.
The selling stockholders may offer the shares at various times in one or
more of the following transactions:
- in the over-the-counter market;
- in transactions other than market transactions;
- in connection with short sales of shares of our common stock;
- by pledge to secure debts or other obligations;
- in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions in
standardized or over-the-counter options;
- purchases by a broker-dealer as principal and resale by the broker-dealer
for its account; or
- in a combination of any of the above.
The selling stockholders may sell shares at market prices then prevailing,
at prices related to prevailing market prices, at negotiated prices or at fixed
prices.
The selling stockholders may use broker-dealers to sell shares. If this
happens, broker-dealers will either receive discounts or commissions from the
selling stockholder, or receive commissions from purchasers of shares for whom
they have acted as agents. Selling stockholders may be deemed to be underwriters
with
44
respect to the shares sold by them. Broker-dealers who act in connection with
the sale of these shares of common stock also may be deemed to be underwriters.
Profits on any resale of the common stock as a principal by these
broker-dealers, and any commissions received by the broker-dealers, may be
deemed underwriting discounts and commissions under the Securities Act of 1933.
No underwriting commissions or finder's fees have been or will be paid to
us. The selling stockholders will pay all broker-dealer commissions and related
selling expenses associated with the sale of the common stock.
SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this prospectus, we had 34,551,136 shares of common stock
outstanding, of which 32,014,005 were "restricted securities" under and as
defined in Rule 144 under the Securities Act of 1933. All of these restricted
securities are being registered for sale pursuant to the registration statement
of which this prospectus is a part. As a result, upon the effectiveness of this
registration statement, all of our outstanding shares will be freely tradable,
except that sales of shares held by any of our affiliates other than by means of
an effective registration statement will be subject to the volume, manner of
sale and certain other limitations of Rule 144 described below. In general,
affiliates include officers, directors and 10% stockholders.
As of the date of this prospectus, there are 16,393,316 shares of our
common stock issuable upon the conversion of 15,372 outstanding Preferential
Shares of our subsidiary, 6543 Luxembourg S.A. These shares of common stock are
being registered for resale by the registration statement of which this
prospectus is a part. As a result, upon the effectiveness of this registration
statement and conversion of the Preferential Shares, all of these shares of
common stock will be freely tradeable, except that sales of shares held by any
of our affiliates other than by means of an effective registration statement
will be subject to the volume, manner of sale and certain other limitations of
Rule 144.
As of the date of this prospectus, there were outstanding warrants to
purchase a total of 80,166 shares of our common stock, all of which are being
registered for sale pursuant to this prospectus. As a result, upon the
effectiveness of this registration statement, all of the 80,166 shares of common
stock issuable upon exercise of these warrants will be freely tradable, except
that sales of shares held by any of our affiliates other than by means of an
effective registration statement will be subject to volume, manner of sale and
certain other limitations of Rule 144.
RULE 144
Restricted securities may be sold in the public market only if registered
or if they qualify for an exemption from registration under Rule 144 promulgated
under the Securities Act of 1933. Sales of the restricted securities in the
public market, or the availability of such shares for sale, could adversely
affect the market price of the common stock. In general, under Rule 144, as in
effect on the date of this prospectus, any person, including any of our
affiliates, who has beneficially owned restricted securities for at least one
year would be entitled to sell within any three month period a number of shares
that, together with sales of any securities with which such person's sales must
be aggregated, does not exceed the greater of:
- one percent of the number of shares of common stock then outstanding; or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the date on which the notice of the sale on Form
144 is filed with the Securities and Exchange Commission.
Sales of restricted securities under Rule 144 are also subject to certain
requirements with respect to manner of sale, notice and the availability of
current public information about us.
Under Rule 144(k), a person who is not deemed to have been our affiliate at
anytime during the three months preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, including the holding
period of any prior owner that was not an affiliate, is entitled to sell shares
without complying with the manner of sale, public information, volume limitation
or notice provisions of Rule 144.
45
STOCK OPTIONS
We expect to file a registration statement under the Securities Act
covering approximately 5,000,000 shares of common stock reserved for issuance
under our 2001 Stock Option Plan in the future. Once this registration statement
is filed and becomes effective, any shares acquired upon the exercise of options
granted under these plans also will be freely tradable in the public market.
However, such shares held by affiliates still will be subject to the volume
limitation, manner of sale, notice and public information requirements of Rule
144.
UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain material United States
federal income tax consequences to a non-United States holder of the ownership
and disposition of our common stock. As used in this prospectus, the term
non-United States holder is a person other than:
- a citizen or individual resident of the United States for United States
federal income tax purposes;
- a corporation or other entity taxable as a corporation created or
organized in or under the laws of the United States or any political
subdivision of the United States;
- an estate whose income is included in gross income for United States
federal income tax purposes regardless of its source; or
- a trust, in general, if it is subject to the primary supervision of a
court within the United States and which has one or more United States
persons who have the authority to control all substantial decisions of
the trust.
This discussion does not address all aspects of United States federal
income taxation that may be relevant in light of a non-United States holder's
particular facts and circumstances, such as being a United States expatriate,
and does not address any tax consequences arising under the laws of any state,
local or non-United States taxing jurisdiction. Furthermore, the following
discussion is based on current provisions of the Internal Revenue Code of 1986,
as amended, and administrative and judicial interpretations thereof, all as in
effect on the date hereof, and all of which are subject to change, possibly with
retroactive effect. Accordingly, each non-United States holder should consult a
tax advisor regarding the United States federal, state, local and non-United
States income and other tax consequences of acquiring, holding and disposing of
shares of our common stock.
DIVIDENDS
We have never paid dividends on our capital stock and do not anticipate
paying any cash dividends in the foreseeable future. In the event, however, that
we do pay dividends on our common stock, any dividend paid to a non-United
States holder of common stock generally will be subject to United States
withholding tax either at a rate of 30% of the gross amount of the dividend or
such lower rate as may be specified by an applicable tax treaty. To claim the
benefit of a lower rate under an income tax treaty, a non-United States holder
must properly file an Internal Revenue Service Form W-8BEN, or successor form,
claiming an exemption from, or reduction in, withholding under the applicable
income tax treaty.
Dividends received by a non-United States holder that are effectively
connected with a United States trade or business conducted by the non-United
States holder are exempt from such withholding tax, provided that such
non-United States holder files an Internal Revenue Service Form W-8ECI, or
successor form. However, those effectively connected dividends, net of certain
deductions and credits, are taxed at the same graduated rates applicable to
United States persons.
In addition to the graduated tax described above, dividends received by a
corporate non-United States holder that are effectively connected with a United
States trade or business of the corporate non-United States holder may also be
subject to a branch profits tax at a rate of 30% or such lower rate as may be
specified by an applicable tax treaty.
46
A non-United States holder of common stock that is eligible for a reduced
rate of withholding tax pursuant to a tax treaty may obtain a refund of any
excess amounts currently withheld by filing an appropriate claim for refund with
the Internal Revenue Service.
GAIN ON DISPOSITION OF COMMON STOCK
A non-United States holder generally will not be subject to United States
federal income tax on any gain realized upon the sale or other disposition of
our common stock unless:
- the gain is effectively connected with a United States trade or business
of the non-United States holder (which gain, in the case of a corporate
non-United States holder, must also be taken into account for branch
profits tax purposes);
- the non-United States holder is an individual who holds his or her common
stock as a capital asset (generally, an asset held for investment
purposes) and who is present in the United States for a period or periods
aggregating 183 days or more during the calendar year in which the sale
or disposition occurs and certain other conditions are met; or
- we are or have been a "United States real property holding corporation"
for United States federal income tax purposes at any time within the
shorter of the five-year period preceding the disposition or the holder's
holding period for our common stock. We have determined that we are not
and do not believe that we will become a "United States real property
holding corporation" for United States federal income tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Dividends paid to you may be subject to information reporting and United
States backup withholding tax. If you are a non-U.S. holder, you will be exempt
from such backup withholding tax if you provide a Form W-8BEN or otherwise meet
documentary evidence requirements for establishing that you are a non-U.S.
holder or otherwise establish an exemption. If you are a U.S. Holder, you will
be exempt from back up withholding if you provide a completed and executed form
W-9 and the IRS has not advised us that you are subject to back up withholding,
or you meet certain other exemptions from back up withholding.
The gross proceeds from the disposition of our common stock may be subject
to information reporting and backup withholding tax. If you sell your common
stock outside the United States through a non-U.S. office of a non-U.S. broker
and the sales proceeds are paid to you outside the United States, then the
United States backup withholding and information reporting requirements
generally will not apply to that payment. However, U.S. information reporting,
but not backup withholding, will apply to a payment of sales proceeds, even if
that payment is made outside the United States, if you sell your common stock
through a non-U.S. office of a broker that:
- is a United States person;
- derives 50% or more of its gross income in specific periods from the
conduct of a trade or business in the United States;
- is a "controlled foreign corporation" for United States federal income
tax purposes; or
- is a foreign partnership, if at any time during its tax year:
- one or more of its partners are United States persons who in the
aggregate hold more than 50% of the income or capital interests in the
partnership; or
- the foreign partnership is engaged in a United States trade or
business, unless the broker has documentary evidence in its files that
you are a non-U.S. person and certain other conditions are met or you
otherwise establish an exemption.
If you receive payments of the proceeds of a sale of our common stock to or
through a United States office of a broker, the payment is subject to both
United States backup withholding and information reporting unless you are a
non-U.S. person and provide a Form W-8BEN certifying that you are a non-U.S.
person or
47
you are a U.S. person and you provide a complete and executed Form W-9, and the
IRS has not advised us that you are subject to back up withholding, or you
otherwise establish an exemption.
You generally may obtain a refund of any amounts withheld under the backup
withholding rules that exceed your income tax liability by filing a refund claim
with the U.S. Internal Revenue Service.
LEGAL MATTERS
Cohen & Grigsby, P.C., Pittsburgh, Pennsylvania, will pass on the validity
of the common stock offered in this offering.
EXPERTS
The consolidated financial statements included in this prospectus, except
as they pertain to periods unaudited, have been audited by Peterson Sullivan,
PLLC, Seattle, Washington, independent certified public accountants, and are
included in the prospectus in reliance on the report given on the authority of
such firm, as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the SEC for the
common stock we are offering by this prospectus. This prospectus does not
include all of the information contained in the registration statement. You
should refer to the registration statement and its exhibits for additional
information. Whenever we make reference in this prospectus to any of our
contracts, agreements or other documents, the references are not necessarily
complete and you should refer to the exhibits attached to the registration
statement for copies of the actual contract, agreement or other document. We are
also required to file annual, quarterly and special reports, proxy statements
and other information with the SEC.
You can read our SEC filings, including the registration statement, over
the Internet at the SEC's web site at www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference facilities at 450
Fifth Street N.W., Washington, D.C. 20549; and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. You may also obtain copies of
the documents at prescribed rates by writing to the Public Reference Section of
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC
at 1-800-SEC-0330 for further information on the operation of the public
reference facilities. You may also obtain copies of these reports directly from
us by sending a written request to us at our principal offices located at 706
Giddings Avenue, Suite 1C, Annapolis, Maryland 21401-1472.
48
MYMETICS CORPORATION
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets, December 31, 2001 and 2000 and
March 31, 2002............................................ F-3
Consolidated Statements of Operations and Comprehensive Loss
for the Years Ended December 31, 2001, 2000 and 1999, and
the Period from May 2, 1990 (Inception) to December 31,
2001...................................................... F-4
Consolidated Statements of Operations and Comprehensive Loss
for the Three Months Ended March 31, 2002, and 2001, and
the Period from May 2, 1990 (Inception) to March 31,
2002...................................................... F-5
Consolidated Statement of Changes in Shareholders' Equity
for the Period from May 2, 1990 (Inception) to December
31, 2001 and for the Three Months Ended March 31, 2002.... F-6
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2001, 2000 and 1999, and the Period from May
2, 1990 (Inception) to December 31, 2001.................. F-7
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2002 and 2001 and the Period from May 2,
1990 (Inception) to March 31, 2002........................ F-8
Supplemental Financial Information for the Three Months
Ended March 31, 2000, June 30, 2000, September 30, 2000,
December 31, 2000, March 31, 2001, June 30, 2001,
September 30, 2001, December 31, 2001 and March 31,
2002...................................................... F-9
Notes to Consolidated Financial Statements.................. F-10
F-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Mymetics Corporation and Subsidiary
We have audited the accompanying consolidated balance sheets of Mymetics
Corporation (a development stage company; formerly Ichor Corporation) and
Subsidiary as of December 31, 2001 and 2000, and the related consolidated
statements of operations and comprehensive loss, changes in shareholders'
equity, and cash flows for the years ended December 31, 2001, 2000 and 1999, and
for the period from May 2, 1990 (inception) to December 31, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Mymetics
Corporation (a development stage company; formerly Ichor Corporation) and
Subsidiary as of December 31, 2001 and 2000, and the results of their operations
and their cash flows for the years ended December 31, 2001, 2000 and 1999, and
for the period from May 2, 1990 (inception) to December 31, 2001, in conformity
with accounting principles generally accepted in the United States.
/s/ PETERSON SULLIVAN PLLC
--------------------------------------
Peterson Sullivan PLLC
Seattle, Washington
March 8, 2002
F-2
MYMETICS CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
AND THREE MONTHS ENDED MARCH 31, 2002 (UNAUDITED)
(IN THOUSANDS OF EUROS)
THREE MONTHS U.S. DOLLARS
ENDED (IN THOUSANDS;
MARCH 31, INFORMATION ONLY) YEAR ENDED YEAR ENDED
2002 DECEMBER 31, DECEMBER 31, DECEMBER 31,
(UNAUDITED) 2001 2001 2000
------------ ----------------- ------------ ------------
ASSETS
Current Assets
Cash................................. E 674 $ 791 E 888 E 185
Short-term investments............... 76 315 354 149
Receivables.......................... 89 44 49 64
Loan fees............................ -- -- -- 87
Prepaid expenses..................... 52 28 31 11
-------- -------- -------- -------
Total current assets.............. 891 1,178 1,322 496
Patents and Other...................... 215 143 161 129
Goodwill, net.......................... 209 187 209 --
-------- -------- -------- -------
E 1,315 $ 1,508 E 1,692 E 625
======== ======== ======== =======
LIABILITIES
Current Liabilities
Accounts payable..................... E 588 $ 388 E 436 E 646
Taxes and social costs payable....... 85 74 83 109
Note payable......................... 232 203 228 384
Other................................ 6 9 10 9
-------- -------- -------- -------
Total current liabilities......... 911 674 757 1,148
Payable to Shareholders................ 242 216 242 242
Shareholders' Equity
Common stock, E.0114 par value;
80,000,000 shares authorized;
issued and outstanding 49,271,962
at March 31, 2002, 49,261,962 at
December 31, 2001, and 33,311,361
at December 31, 2000.............. 562 501 562 119
Additional paid-in capital........... 17,430 15,528 17,422 806
Deficit accumulated during the
development stage................. (17,947) (15,500) (17,391) (1,690)
Accumulated other comprehensive
income............................ 117 89 100 --
-------- -------- -------- -------
162 618 693 (765)
-------- -------- -------- -------
E 1,315 $ 1,508 E 1,692 E 625
======== ======== ======== =======
The accompanying notes are an integral part of these financial statements.
F-3
MYMETICS CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999,
AND THE PERIOD FROM MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 2001
(IN THOUSANDS OF EUROS, EXCEPT FOR PER SHARE AMOUNTS)
TOTAL
ACCUMULATED
DURING
U.S. DOLLARS DEVELOPMENT STAGE
(IN THOUSANDS; (MAY 2, 1990 TO
INFORMATION ONLY) DECEMBER 31,
2001 2001 2000 1999 2001)
----------------- -------- ------- ----- -----------------
Revenues
Sales............................ $ -- E -- E 13 E 47 E 224
Interest......................... 23 26 -- -- 26
-------- -------- ------- ----- --------
23 26 13 47 250
Expenses
Research and development......... 429 482 101 94 844
General and administrative....... 922 1,034 351 37 1,615
Bank fee......................... 12,525 14,063 806 -- 14,869
Interest......................... 70 79 16 -- 95
Amortization..................... 45 51 52 12 194
Other............................ 16 18 -- -- 18
-------- -------- ------- ----- --------
14,007 15,727 1,326 143 17,635
Loss before income tax provision... (13,984) (15,701) (1,313) (96) (17,385)
Income tax provision............... -- -- 1 3 6
-------- -------- ------- ----- --------
Net loss........................... (13,984) (15,701) (1,314) (99) (17,391)
Other comprehensive income
Foreign currency translation
adjustment....................... 89 100 -- -- 100
-------- -------- ------- ----- --------
Comprehensive loss................. $(13,895) E(15,601) E(1,314) E (99) E(17,291)
======== ======== ======= ===== ========
Basic and diluted loss per share... $ (.33) E (.37) E (.04) E(.00) E (.51)
======== ======== ======= ===== ========
The accompanying notes are an integral part of these financial statements.
F-4
MYMETICS CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
AND THE PERIOD FROM MAY 2, 1990 (INCEPTION) TO MARCH 31, 2002 (UNAUDITED)
(IN THOUSANDS OF EUROS, EXCEPT FOR PER SHARE AMOUNTS)
TOTAL
ACCUMULATED
DURING
THREE MONTHS THREE MONTHS DEVELOPMENT STAGE
ENDED ENDED (MAY 2, 1990 TO
MARCH 31, MARCH 31, MARCH 31,
2002 2001 2002)
(UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ -------------- -----------------
Revenues
Sales........................................... E -- E -- E 224
Interest........................................ 5 3 31
----- ------- --------
5 3 255
Expenses
Research and development........................ 232 114 1,076
General and administrative...................... 250 127 1,865
Bank fee........................................ -- 3,054 14,869
Interest........................................ 9 19 104
Amortization.................................... 1 41 195
Other........................................... 69 -- 87
----- ------- --------
561 3,355 18,196
Loss before income tax provision.................. (556) (3,352) (17,941)
Income tax provision.............................. -- -- 6
----- ------- --------
Net loss.......................................... (556) (3,352) (17,947)
Other comprehensive income
Foreign currency translation adjustment........... 17 -- 117
----- ------- --------
Comprehensive loss................................ E(539) E(3,352) E(17,830)
===== ======= ========
Basic and diluted loss per share.................. E(.01) E (.10) E (.52)
===== ======= ========
The accompanying notes are an integral part of these financial statements.
F-5
MYMETICS CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 2001
AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 (UNAUDITED)
(IN THOUSANDS OF EUROS)
ADDITIONAL
DATE OF NUMBER OF PAID-IN
TRANSACTION SHARES PAR VALUE CAPITAL
----------- ---------- --------- ----------
Balance at May 2, 1990............................... E -- E --
Shares issued for cash............................. June 1990 33,311,361 119 --
Net losses to December 31, 1998.................... -- -- --
---------- ---- -------
Balance at December 31, 1998......................... 33,311,361 119 --
Net loss for the year.............................. -- -- --
---------- ---- -------
Balance at December 31, 1999......................... 33,311,361 119 --
Bank fee........................................... -- -- 806
Net loss for the year.............................. -- -- --
---------- ---- -------
Balance at December 31, 2000......................... 33,311,361 119 806
Effect on capital structure resulting from reverse
purchase......................................... March 2001 8,165,830 354 (354)
Issuance of stock purchase warrants for bank fee... March 2001 -- -- 14,063
Issuance of shares for bank fee.................... March 2001 1,800,000 21 (21)
Issuance of shares for bank fee.................... June 2001 225,144 3 (3)
Issuance of shares for cash........................ June 2001 1,333,333 15 2,109
Exercise of stock purchase warrants in repayment of
debt............................................. June 2001 1,176,294 13 259
Exercise of stock purchase warrants for cash....... December 2001 3,250,000 37 563
Net loss for the year.............................. -- -- --
Translation adjustment............................. -- -- --
---------- ---- -------
Balance at December 31, 2001......................... 49,261,962 562 17,422
Issuance of shares for cash (unaudited)............ March 2002 10,000 -- 8
Net loss for the period (unaudited)................ -- -- --
Translation adjustment (unaudited)................. -- -- --
Balance at March 31, 2002 (unaudited)................ 49,271,962 E562 E17,430
========== ==== =======
DEFICIT ACCUMULATED
ACCUMULATED OTHER
DURING THE COMPREHENSIVE
DEVELOPMENT STAGE INCOME TOTAL
----------------- ------------- --------
Balance at May 2, 1990...................................... E -- E -- E --
Shares issued for cash.................................... -- -- 119
Net losses to December 31, 1998........................... (277) -- (277)
-------- ---- --------
Balance at December 31, 1998................................ (277) -- (158)
Net loss for the year..................................... (99) -- (99)
-------- ---- --------
Balance at December 31, 1999................................ (376) -- (257)
Bank fee.................................................. -- -- 806
Net loss for the year..................................... (1,314) -- (1,314)
-------- ---- --------
Balance at December 31, 2000................................ (1,690) -- (765)
Effect on capital structure resulting from reverse
purchase................................................ -- -- --
Issuance of stock purchase warrants for bank fee.......... -- -- 14,063
Issuance of shares for bank fee........................... -- -- --
Issuance of shares for bank fee........................... -- -- --
Issuance of shares for cash............................... -- -- 2,124
Exercise of stock purchase warrants in repayment of
debt.................................................... -- -- 272
Exercise of stock purchase warrants for cash.............. -- -- 600
Net loss for the year..................................... (15,701) -- (15,701)
Translation adjustment.................................... -- 100 100
-------- ---- --------
Balance at December 31, 2001................................ (17,391) 100 693
Issuance of shares for cash (unaudited)................... -- -- 8
Net loss for the period (unaudited)....................... (556) -- (556)
Translation adjustment (unaudited)........................ -- 17 17
Balance at March 31, 2002 (unaudited)....................... E(17,947) E117 E 162
======== ==== ========
The accompanying notes are an integral part of these financial statements.
F-6
MYMETICS CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999,
AND THE PERIOD FROM MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 2001
(IN THOUSANDS OF EUROS)
TOTAL
ACCUMULATED
DURING
DEVELOPMENT STAGE
(MAY 2, 1990 TO
DECEMBER 31,
2001 2000 1999 2001)
-------- ------- ---- -----------------
Cash Flows From Operating Activities
Net loss......................................... E(15,701) E(1,314) E(99) E(17,391)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Amortization.................................. 51 52 12 194
Fees paid in warrants......................... 14,063 -- -- 14,063
Fee paid in common stock...................... -- 806 -- 806
Changes in current assets and liabilities, net
of effects from reverse purchase
Receivables................................... 53 7 (47) (11)
Accounts payable.............................. (508) 546 38 138
Taxes and social costs payable................ (26) 55 26 83
Other....................................... 68 (7) (1) 27
-------- ------- ---- --------
Net cash provided by (used in) operating
activities............................... (2,000) 145 (71) (2,091)
Cash Flows From Investing Activities
Patents and other................................ (45) (128) -- (235)
Short-term investments........................... (205) (122) (27) (354)
Cash acquired in reverse purchase................ 13 -- -- 13
-------- ------- ---- --------
Net cash used in investing activities....... (237) (250) (27) (576)
Cash Flows From Financing Activities
Proceeds from the issuance of common stock....... 2,724 -- -- 2,843
Borrowings from shareholders..................... -- -- 104 242
Increase in note payable and other short-term
advances...................................... 116 384 -- 500
Loan fees........................................ -- (130) -- (130)
-------- ------- ---- --------
Net cash provided by financing activities... 2,840 254 104 3,455
Effect of exchange rate changes on cash............ 100 -- -- 100
-------- ------- ---- --------
Net increase in cash........................ 703 149 6 888
Cash, beginning of period.......................... 185 36 30 --
-------- ------- ---- --------
Cash, end of period................................ E 888 E 185 E 36 E 888
======== ======= ==== ========
The accompanying notes are an integral part of these financial statements.
F-7
MYMETICS CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
AND THE PERIOD FROM MAY 2, 1990 (INCEPTION) TO MARCH 31, 2002 (UNAUDITED)
(IN THOUSANDS OF EUROS)
TOTAL
ACCUMULATED
DURING
THREE MONTHS THREE MONTHS DEVELOPMENT STAGE
ENDED ENDED (MAY 2, 1990 TO
MARCH 31, MARCH 31, MARCH 31,
2002 2001 2002)
(UNAUDITED) (UNAUDITED) (UNAUDITED)
---------------- ---------------- -----------------
Cash Flows From Operating Activities
Net loss..................................... E(556) E(3,352) E(17,947)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Amortization.............................. 1 41 195
Fees paid in warrants..................... -- 3,054 14,063
Fee paid in common stock.................. -- -- 806
Changes in current assets and liabilities,
net of effects from reverse purchase
Decrease (increase) in receivables........ (40) 12 (51)
Increase (decrease) in accounts payable... 152 153 290
Increase (decrease) in taxes and social
costs payable........................... 2 (24) 85
Other................................... (25) (1) 2
----- ------- --------
Net cash provided by (used in) operating
activities........................... (466) (117) (2,557)
Cash Flows From Investing Activities
Patents and other............................ (55) (34) (290)
Short-term investments....................... 278 (82) (76)
Cash acquired in reverse purchase............ -- 13 13
----- ------- --------
Net cash used in investing activities... (223) (103) (353)
Cash Flows From Financing Activities
Proceeds from the issuance of common stock... 8 -- 2,851
Borrowings from shareholders................. -- -- 242
Increase in note payable and other short-term
advances.................................. 4 200 504
Loan fees.................................... -- -- (130)
----- ------- --------
Net cash provided by financing
activities........................... 12 200 3,467
Effect of exchange rate changes on cash........ 17 -- 117
----- ------- --------
Net increase in cash.................... (214) (20) 674
Cash, beginning of period...................... 888 185 --
----- ------- --------
Cash, end of period............................ E 674 E 165 E 674
===== ======= ========
The accompanying notes are an integral part of these financial statements.
F-8
MYMETICS CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION (UNAUDITED)
QUARTERLY FINANCIAL DATA
(THOUSANDS OF EUROS, EXCEPT PER SHARE AMOUNTS)
QUARTER ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
2002
Net sales......................................... 0
Gross Profit...................................... 0
Income (loss) before extraordinary items and
cumulative effect of a change in accounting..... (556)
Income (loss) before extraordinary items and
cumulative effect of a change in accounting, per
share........................................... (0.01)
Earnings (loss) per share......................... (0.01)
2001
Net sales......................................... 0 0 0 0
Gross profit...................................... 0 0 0 0
Income (loss) before extraordinary items and
cumulative effect of a change in accounting..... (3,352) (9,975) (3,828) 1,454
Income (loss) before extraordinary items and
cumulative effect of a change in accounting, per
share........................................... (0.10) (0.23) (0.08) 0.03
Earnings (loss) per share......................... (0.10) (0.23) (0.08) 0.03
2000
Net sales......................................... 0 0 8 5
Gross profit...................................... 0 0 8 5
Income (loss) before extraordinary items and
cumulative effect of a change in accounting..... (33) (21) (166) (1,094)
Income (loss) before extraordinary items and
cumulative effect of a change in accounting, per
share........................................... 0.00 0.00 0.00 (0.04)
Earnings (loss) per share......................... 0.00 0.00 0.00 (0.04)
F-9
MYMETICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL EURO AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying interim financial statements of Mymetics Corporation (the
"Company") and the related notes as of March 31, 2002 and for the three months
ended March 31, 2002 and 2001 are unaudited. The unaudited interim financial
statements have been prepared on the same basis as the annual audited financial
statements and, in the opinion of the Company, contain all adjustments necessary
to present a fair statement of the results of the interim periods presented. All
adjustments made during the three month period ended March 31, 2002, were of a
normal, recurring nature. The amounts presented for the three month period ended
March 31, 2002, are not necessarily indicative of the results of operations for
a full year.
REVERSE PURCHASE TRANSACTION
The Company exchanged approximately 33 million of its common shares for
99.9% of the outstanding shares of Hippocampe SA ("Hippocampe") on March 28,
2001. This transaction has been accounted for as a reverse purchase with
Hippocampe as the continuing entity. The Company changed its name from Ichor
Corporation in 2001. Ichor Corporation, a United States entity, had no
significant operations and its net shareholders' deficiency of E247 consisted of
current monetary assets and liabilities amounting to E50 and E297, respectively,
at the purchase date. As part of the reverse purchase transaction, E247 was
recorded as goodwill. The Company's results of operations have been consolidated
beginning April 1, 2001.
The goodwill was amortized over a five-year life using the straight-line
method. However, in accordance with Statement of Financial Accounting Standards
No. 142, the Company will no longer amortize goodwill after December 31, 2001.
Amortization of this goodwill amounted to E38 in 2001. Beginning in 2002,
goodwill will be tested for potential impairment at least annually.
The following unaudited pro forma information presents the results of
operations of the Company as if this transaction had taken place on January 1,
2000. The pro forma information is not necessarily indicative of the results
that would have occurred had the transaction taken place at the beginning of the
periods presented. Further, the pro forma information is not necessarily
indicative of future results.
DECEMBER 31
------------------
2001 2000
-------- -------
Revenues.................................................... E 29 E 64
Net loss.................................................... E(16,019) E(2,058)
Basic loss per share........................................ E (.38) E (.05)
DEVELOPMENT STAGE COMPANY
Hippocampe was created in 1990 as a French company for the purpose of
engaging in research and development of human health products. All of
Hippocampe's activities have been conducted in France. Its main research efforts
have been concentrated in the prevention and treatment of the AIDS virus.
Hippocampe has established a network over the past eleven years enabling it to
work with education centers, research centers, pharmaceutical laboratories and
biotechnology companies.
These financial statements have been prepared treating the Company as a
development stage company. As of December 31, 2001, the Company had not
performed any clinical testing and a commercially viable product is not expected
for several more years. As such, the Company has not generated significant
revenues. Revenues reported by the Company consist of incidental serum
by-products of the Company's research and
F-10
MYMETICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
development activities and interest income. For the purpose of these financial
statements, the development stage started May 2, 1990, which is the date when
Hippocampe was originally organized in France.
FOREIGN CURRENCY
Consistent with the location of its present activities, beginning January
1, 1999, the Company adopted the Euro as its corporate currency. Accordingly,
the Company prepared its 2001, 2000 and 1999 financial statements in Euros. The
financial statements for prior years were prepared using French francs as the
reporting currency and were restated in Euros for each period presented using
the Official Fixed Conversion Rate of E1 = FRF 6.55957. Therefore, the financial
statements for prior years depict the same trends that would have been presented
had they been presented in French francs. However, because they were originally
prepared using French francs, they are not necessarily comparable to financial
statements of a company which originally prepared its financial statements in a
European currency other than the French francs and restated them in Euros. All
assets, liabilities, revenues and expenses have been reported using the above
exchange rate, and no foreign exchange gains or losses have been recorded in
relation to exchanging French francs.
As a result of the reverse purchase, the 2001 financial statements include
the U.S. operations of the Company which were translated from U.S. dollars to
Euros. As a result of this translation, E100 exchange gain has been included as
part of comprehensive loss. No income tax has been provided on this gain because
of available U.S. income tax losses.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiary. Significant intercompany accounts and transactions have been
eliminated.
CASH
Cash balances are occasionally in excess of insured amounts. Interest paid
was E42 in 2001 and none in either 2000 or 1999. Income tax paid in 2001, 2000
and 1999 was nil.
SHORT-TERM INVESTMENTS
Short-term investments consist of certificates of deposit stated at cost.
The fair value approximates cost based on the length to maturity and interest
rate.
REVENUE RECOGNITION
The Company records the sale of products when the products are delivered
and the Company has only a security interest in the products should a customer
default on payment.
PATENTS
Patents represent fees paid to the French patent office. These fees are
stated at historical cost and are amortized over five years.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
TAXES ON INCOME
The Company accounts for income taxes under an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for
expected future tax consequences of events that have been
F-11
MYMETICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recognized in the Company's financial statements or tax returns. In estimating
future tax consequences, the Company generally considers all expected future
events other than enactments of changes in the tax laws or rates.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding in the
period. The weighted average number of shares was 42,459,784 for the year ended
December 31, 2001, and 33,311,361 for both 2000 and 1999, 49,262,518 for the
three months ended March 31, 2002 and 33,585,685 for the three months ended
March 31, 2001. The weighted average number of shares for the period May 2, 1990
through December 31, 2001, was 34,095,573 and 34,409,516 for the period May 2,
1990 through March 31, 2002. Diluted earnings per share takes into consideration
common shares outstanding (computed under basic earnings per share) and
potentially dilutive securities. Warrants and options were not included in the
computation of diluted earnings per share because their effect would be
anti-dilutive.
STOCK-BASED COMPENSATION
Compensation expense for stock options is measured as the excess, if any,
of the quoted market price of the Company's stock at the date of the grant over
the amount an employee is required to pay for the stock. There is no stock-based
compensation included in these consolidated financial statements.
ESTIMATES
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets," is to be applied starting with years beginning after
December 15, 2001. This standard addresses how intangible assets, other than
those acquired in a business combination, should be accounted for. Goodwill and
intangible assets that have indefinite useful lives will no longer be amortized
but will be tested annually for impairment.
Statement of Financial Accounting Standards No. 143, "Accounting for Asset
Retirement Obligations," is effective for years beginning after June 15, 2002.
This standard addresses accounting and reporting for obligations associated with
the retirement of tangible long-lived assets and associated retirement costs.
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," is effective for years beginning
after December 15, 2001. This standard supersedes the previous standard on this
issue as well as others which dealt with accounting for discontinued operations
and the elimination of an exception to consolidation.
Management has not determined the effect, if any, these standards may have
on the Company's consolidated financial statements.
F-12
MYMETICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. RECEIVABLES
2001 2000
---- ----
Trade receivables........................................... E 37 E 37
Refunds due from suppliers.................................. 6 6
Value added tax............................................. 31 55
Other....................................................... 9 --
---- ----
83 98
Allowance for doubtful accounts............................. (34) (34)
---- ----
E 49 E 64
==== ====
No collateral was required for the above receivables and they are expected
to be collected in the normal course.
NOTE 3. TAXES AND SOCIAL COSTS PAYABLE
2001 2000
---- ----
Social security and other social benefits................... E75 E 97
Income tax.................................................. -- 2
Value added tax............................................. 3 8
Other....................................................... 5 2
--- ----
Social security and other social benefits................... E83 E109
=== ====
NOTE 4. TRANSACTIONS WITH AFFILIATES
During 2000, Hippocampe agreed to pay a fee in common stock of the Company
to MFC Merchant Bank SA ("MFC Bank") for locating Ichor and assisting with the
reverse purchase discussed in Note 1. The parent of MFC Bank was an Ichor
shareholder. The common shares were not issued in 2000. According to the
agreement, MFC Bank was to receive 4% of Ichor's issued and outstanding common
shares on a fully diluted basis which was calculated in 2000 to be 50,625,590
shares. The fair value of the shares at the measurement date, amounting to E806
(which may not be indicative of the value of the Company as a whole), was
included in additional paid-in capital at December 31, 2000. In 2001, a total of
2,025,144 common shares were issued to MFC Bank which resulted in E24 being
reclassified to common stock based on the par value of the shares.
In July 2000, Hippocampe entered into a revolving term credit facility with
MFC Bank which was assumed by the Company. The facility allowed the Company to
borrow up to E1,300 at LIBOR plus 4% (approximately 7.35% at December 31, 2001)
repayable on August 2002, as extended, and is collateralized by all of the
Company's assets plus any future patents. The Company borrowed E228 and E384
under this facility as of December 31, 2001 and 2000, respectively. The fair
value of this note approximates carrying value because the note is short-term
and has a market rate of interest. MFC Bank had also advanced E400 to the
Company in 2000 under an open account which was paid in 2001.
In connection with the term credit facility, the Company agreed to pay MFC
Bank an arrangement fee of E130 and E10 per month for nine months as a retainer
fee. The arrangement fee was amortized over the original term of the loan and
the retainer fee was expensed monthly beginning August 2000.
In March 2001, the Company granted warrants under the agreements with MFC
Bank which entitle MFC Bank to purchase 6,001,693 of the Company's common
shares. The warrants allow MFC Bank to convert to
F-13
MYMETICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shares an amount equal to the maximum of the credit facility including unpaid
interest plus the arrangement and retainer fees. The warrants are exercisable
within a three-year period beginning August 2000 at approximately E.2319 per
common share. The intrinsic value of the beneficial conversion feature amounting
to E14,063 (which may not be indicative of the value of the Company as a whole)
was calculated on March 28, 2001, the grant date, using the Black-Scholes model.
This amount was recorded as paid-in capital of E14,063 and allocated to bank fee
expense in 2001. During 2001, MFC Bank exercised warrants to acquire 1,176,294
common shares in exchange for the arrangement fee and the retainer fee plus E52
in accrued interest. MFC also exercised warrants to acquire 3,250,000 common
shares for cash in 2001.
In June 2001, the Company issued additional warrants to MFC Bank to
purchase 103,559 common shares at U.S. $1.725 per share exercisable during a
three-year period. These warrants were issued in connection with MFC Bank's
placement of 1,333,333 of the Company's common shares. The warrants were valued
at E118 based on the fair value of the placement fees rendered and was a cost of
the placement. None of these warrants have been exercised.
Sales to a shareholder were none in 2001, E9 in 2000 and E29 in 1999. Trade
receivables include E23 from this shareholder at both December 31, 2001 and
2000.
The amounts payable to shareholders bear no interest, have no collateral,
and are repayable upon the Company becoming profitable. Since the timing of the
Company becoming profitable cannot be determined, the fair value of the amounts
payable to shareholders cannot be determined. The Company is not expected to
become profitable in the near-term, therefore, the amounts payable to
shareholders have been classified as long-term.
During 2001, the Company incurred fees to its Chairman of E82 for director
fees and for consulting from a company owned by him, and E27 from a company
owned by the former CFO of the Company. Accounts payable at December 31, 2001,
includes E14 of these fees.
NOTE 5. INCOME TAXES
The reconciliation of income tax on income computed at the federal
statutory rates to income tax expense is as follows:
2001 2000 1999
------- ----- ----
U.S. Federal statutory rates on loss from operations........ E(5,338) E(446) E(21)
Tax differential on foreign loss............................ -- -- (12)
Nondeductible fee paid in warrants.......................... 4,781 -- --
Effect of U.S. tax on French losses......................... 550 -- --
Nondeductible fee paid in common stock...................... -- 275 --
Change in valuation allowance............................... (6) 172 36
Other....................................................... 13 -- --
------- ----- ----
Income tax expense.......................................... E -- E 1 E 3
======= ===== ====
F-14
MYMETICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax asset is composed of the following:
DECEMBER 31, DECEMBER 31,
2001 2000
------------ ------------
Difference in book and tax basis of amounts payable to
shareholder and payable to MFC Bank....................... E 82 E 218
Legal and similar fees deducted for French tax purposes in
2001...................................................... -- 43
Net operating loss carryforward............................. 173 --
----- -----
255 261
Less valuation allowance for deferred tax asset............. (255) (261)
----- -----
Net deferred tax asset...................................... E -- E --
===== =====
The Company's provision for income taxes was derived from U.S. and French
operations. The Company had no net operating loss carryforwards as of December
31, 2001, in France and E509 in the United States which expire in year 2021.
NOTE 6. STOCK OPTION PLANS
1994 AMENDED STOCK OPTION PLAN
The Company's 1994 stock option plan provides for the issuance of up to
350,000 shares of the Company's common stock to employees and non-employee
directors. The following table summarizes information with respect to this plan:
WEIGHTED
AVERAGE
NUMBER EXERCISE
SHARES PRICE
-------- ---------
Outstanding at December 31, 1999............................ 193,750 U.S.$1.55
Canceled -- Reusable........................................ (120,000) 2.00
-------- ---------
Outstanding and exercisable at December 31, 2001 and 2000... 73,750 U.S.$ .82
======== =========
Reserved for future grants at December 31, 2001............. 265,000
========
1995 QUALIFIED INCENTIVE STOCK OPTION PLAN
The Company's board of directors approved a stock option plan on August 15,
1996 which provides for the issuance of up to 150,000 shares of the Company's
common stock to key employees. The following table summarizes information with
respect to this plan:
WEIGHTED
AVERAGE
NUMBER EXERCISE
SHARES PRICE
------- --------
Outstanding and exercisable at December 31, 2001, 2000 and
1999...................................................... 100,000 U.S.$.75
======= ========
Reserved for future grants at December 31, 2001............. 50,000
=======
2001 QUALIFIED INCENTIVE STOCK OPTION PLAN
The Company's board of directors approved a stock option plan on June 15,
2001, which provides for the issuance of up to 5,000,000 shares of the Company's
common stock to employees and non-employee
F-15
MYMETICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
directors. The weighted average fair value of these options at the grant date
was E2.24 per option. The following table summarizes information with respect to
this plan.
WEIGHTED
AVERAGE
NUMBER EXERCISE
SHARES PRICE
--------- ---------
Granted..................................................... 100,000 U.S.$2.86
---------
Outstanding and exercisable at December 31, 2001............ 100,000 U.S.$2.86
========= =========
Reserved for future grants at December 31, 2001............. 4,900,000
=========
Almost all options have an expiration date ten years after issuance.
PROFORMA INFORMATION
Had compensation expense been recognized on the basis of fair value of the
options granted under the plans, proforma net income and per share data would
have been as follows compared to the amounts reported:
TOTAL ACCUMULATED
DURING DEVELOPMENT
STAGE (MAY 2, 1990
TO DECEMBER 31,
NET LOSS 2001 2001)
-------- -------- ------------------
As reported............................................ E(15,701) E(17,391)
Proforma............................................... E(15,922) E(17,612)
Loss per share -- as reported
Basic and fully diluted................................ E (.37) E (.51)
Loss per share -- proforma
Basic and fully diluted................................ E (.38) E (.52)
The fair value of each option granted was estimated for proforma purposes
on the grant date using the Black-Scholes Model (use of this Model for proforma
purposes is not intended to indicate the value of the Company as a whole). The
assumptions used in calculating fair value are as follows:
2001
--------------
Risk-free interest rate..................................... 4.5%
Expected life of the options................................ 8 years
Expected volatility......................................... 63.91%-160.97%
Expected dividend yield..................................... 0%
There is no proforma effect for 2000 and 1999.
F-16
MYMETICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Company leases property under noncancelable operating leases through
January 2006. Future minimum lease payments under noncancelable operating leases
are as follows:
2002........................................................ E 7
2003........................................................ 7
2004........................................................ 7
2005........................................................ 7
2006........................................................ 1
Total rent expense per year was E7 for 2001, 2000 and 1999.
The Company is involved in various matters of litigation arising in the
ordinary course of business. In the opinion of management, the estimated outcome
of such issues will not have a material effect on the Company's financial
statements.
F-17
MYMETICS CORPORATION
---------------------------------------------------
PROSPECTUS
---------------------------------------------------
Up to 48,487,487 Shares
of
Common Stock
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the issuance and distribution of the
securities being registered are being paid by MFC Bancorp Ltd. on behalf of the
selling stockholders. All amounts are estimates except the Securities and
Exchange Commission registration fee.
Securities and Exchange Commission registration fee......... $ 12,490.38
Printing and engraving expenses............................. $ 75,000.00
Legal fees and expenses..................................... $125,000.00
Accounting fees and expenses................................ $ 2,500.00
Transfer Agent and Registrar fees........................... $ 10,000.00
Miscellaneous fees and expenses............................. $ 22,500.00
-----------
Total..................................................... $247,490.38
===========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation,
under specified circumstances, to indemnify its directors, officers, employees
or agents against expenses (including attorney's fees), judgments, fines and
amounts paid in settlements actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by third parties by
reason of the fact that they were or are directors, officers, employees or
agents of the corporation, if such directors, officers, employees or agents
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses actually or
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to be indemnified for such expenses despite such
adjudication of liability.
Article 6 of our Certificate of Incorporation (as amended) and our bylaws
provide us with the power to indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative by
reason of the fact that he or she is or was our director, officer, employee or
agent or is or was serving at our request as a director, officer, employee or
agent of another domestic or foreign corporation, partnership, joint venture
trust or other enterprise. We will indemnify our directors, officers, employees
and agents against expenses (including attorneys' fees and disbursements),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, if they acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, our best interests and, with
respect to any criminal proceeding, had no reasonable cause to believe their
conduct was unlawful. The termination of any action or proceeding by judgment,
order, settlement or conviction or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that the person did not act
in good faith and in a manner that they reasonably believed to be in, or not
opposed to, our best interests and, with respect to any criminal proceeding, had
reasonable cause to believe that their conduct was unlawful.
A similar standard of care is applicable in the case of a derivative
action, except that indemnification only extends to expenses (including
attorneys' fees) incurred in connection with the defense or settlement of
II-1
such an action and court approval is required before there can be any
indemnification where the person seeking indemnification has been found to be
liable to us.
Our Certificate of Incorporation provides for indemnification only as
authorized in a specific case upon a determination that the person seeking
indemnity has met the applicable standard of conduct. Said determination can be
made by the majority vote of disinterested members of the board of directors, by
independent legal counsel or by the stockholders.
We will pay the litigation expenses of a director, officer, employee or
agent as they are incurred. We may pay any expenses incurred in defending any
action or proceeding in advance of the final disposition of the action or
proceeding upon our receipt of an undertaking by or on behalf of any director,
officer, employee or agent to repay the amount if it is ultimately determined
that they are not entitled to be indemnified by us.
Section 102(b)(7) of the Delaware General Corporation Law provides that a
certificate of incorporation may contain a provision eliminating or limiting the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
Article 7 of our Certificate of Incorporation (as amended) provides that
our directors will not have personal liability for monetary damages for any
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to us or our stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, which makes directors liable for unlawful dividends or
unlawful stock repurchases or redemptions, or (iv) for any transaction from
which the director derived an improper personal benefit.
We do not currently maintain directors and officers insurance. The
indemnification requirement might have a significant adverse effect on us and
our stockholders in the event of a substantial judgment or settlement with
respect to a director, officer, employee or agent entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information regarding our sales of unregistered
securities since January 1, 1999. These issuances were made in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as transactions by an issuer not involving any public offering.
- On December 7, 1999, we issued 97,206 shares of our preferred stock to
Drummond Financial Corporation in consideration of loans made to us by
Drummond Financial Corporation. These shares were valued at approximately
$10 per share.
- In December 2000, we issued 3,247,060 shares of common stock in
connection with the conversion of 324,706 shares of our preferred stock.
The remaining 240,000 outstanding shares of our preferred stock were
redeemed for an aggregate consideration of $2.2 million.
- In March 2001, we entered into a share exchange with the former
stockholders of our subsidiary, Mymetics S.A. We agreed to issue
33,311,361 shares of common stock to the former stockholders of Mymetics
S.A. in exchange for 99.9% of the outstanding shares of Mymetics S.A.
Some of the former stockholders of Mymetics S.A., rather than receiving
shares of our common stock directly, opted to receive Preferential Shares
of our subsidiary, 6543 Luxembourg S.A., which are convertible into
shares of our common stock. Accordingly, of the 33,311,361 shares
mentioned above, 16,393,316 shares
II-2
represent the number of our shares of common stock into which the
Preferential Shares of 6543 Luxembourg S.A. that are held by former
Mymetics S.A. stockholders are convertible. MFC Merchant Bank S.A. acted
as an advisor in connection with the share exchange and, in consideration
thereof, received 2,025,144 shares of common stock and warrants to
purchase 6,828,468 shares of common stock.
- In June 2001, we sold 1,333,333 shares of common stock at E1.77 per share
for aggregate consideration of E2,360,000. These shares were sold to
various investors residing outside of the United States. MFC Merchant
Bank S.A. purchased 411,166 of these shares (for their own account and on
behalf of their clients), and acted as placement agent in connection with
this private placement. In consideration of its services as placement
agent, MFC Merchant Bank S.A. received warrants to purchase 103,559
shares of our common stock at an exercise price of $1.725 per share.
- In July 2001, we granted each of John M. Musacchio, Robert Demers, Dr.
Pierre-Francois Serres, Patrice Pactol and Michael K. Allio options to
purchase 10,000 shares of common stock at $3.15 per share. These options
were granted under our 2001 Stock Option Plan.
- On August 31, 2001, we granted Michael K. Allio options to purchase
50,000 shares of our common stock at $2.50 per share in connection with a
Consulting Agreement we entered into with Mr. Allio.
- In December 2001, we issued 3,250,000 shares of common stock to MFC
Merchant Bank S.A. at E0.23 per share for aggregate consideration of
E942,500 in connection with the exercise of warrants by MFC Merchant Bank
S.A.
- In July 2002, we issued (i) 1,602,174 shares of common stock to MFC
Merchant Bank S.A. at E0.23 per share for aggregate consideration of
E368,500 and (ii) 23,393 shares of common stock to MFC Merchant Bank S.A.
at $1.725 per share for an aggregate consideration of $40,353, all in
connection with the exercise of warrants by MFC Merchant Bank S.A.
- In August 2002, we issued 46,925 shares of our common stock to former
stockholders of Mymetics S.A. (f/k/a/ Hippocampe S.A.) in connection with
the acquisition of 11 shares of stock of Mymetics S.A. from such
stockholders.
- At various times during the last three fiscal years we have granted stock
options to our directors, officers and employees. The exercise price for
each of these options is equal to the fair market value of our common
stock on the date of grant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 Share Exchange Agreement dated December 13, 2001, between
Mymetics Corporation and the stockholders of Mymetics S.A.
listed on the signature page thereto (incorporated by
reference to the Information Statement on Schedule 14C filed
with the Securities and Exchange Commission on April 26,
2001).
2.2 Share Exchange Agreement dated December 13, 2001, between
Mymetics Corporation and the stockholders of Mymetics S.A.
listed on the signature page thereto (incorporated by
reference to the Information Statement on Schedule 14C filed
with the Securities and Exchange Commission on April 26,
2001).
2.3 Revised Purchase Agreement dated July 28, 1999, between
Mymetics Corporation and the majority stockholders of Nazca
Holdings Ltd. (incorporated by reference to the report on
Form 8K/A filed with the Securities and Exchange Commission
on August 13, 1999).
II-3
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.4 Purchase Agreement dated October 17, 1998, between Mymetics
Corporation and the majority stockholders of Nazca Holdings
Ltd. (incorporated by reference to the report on Form 8-K
filed with the Securities and Exchange Commission on October
22, 1998).
2.5 Amendment to the Agreement dated October 17, 1998, between
Mymetics Corporation and the majority stockholders of Nazca
Holdings Ltd. (incorporated by reference to the report on
Form 8K/A filed with the Securities and Exchange Commission
on April 15, 1999).
3(i) Articles of Incorporation (as amended through May 10, 2002)
(incorporated by reference to the report on Form 10-Q for
the quarter ended March 31, 2002, filed with the Securities
and Exchange Commission on May 15, 2002).
3(ii) By laws (incorporated by reference to the report on Form
10-Q for the quarter ended June 30, 2001, filed with the
Securities and Exchange Commission on August 14, 2001).
4+ Form of specimen stock certificate.
5 Opinion of Cohen & Grigsby, P.C. as to the legality of the
securities being registered.
9+ Voting and Exchange Trust Agreement dated March 28, 2001,
among Mymetics Corporation, 6543 Luxembourg S.A. and MFC
Merchant Bank S.A.
10.1 Share Exchange Agreement dated July 30, 2002, among Mymetics
Corporation and the stockholders listed on the signature
page thereto.
10.2 Employment Agreement dated March 18, 2002, between Mymetics
Corporation and Dr. Joseph D. Mosca (incorporated by
reference to the report on Form on 10-Q for the quarter
ended March 31, 2002, filed with the Securities and Exchange
Commission on May 15, 2002).
10.3 Employment Agreement dated March 18, 2002, between Mymetics
Corporation and Peter McCann (incorporated by reference to
the report on Form 10-K for the fiscal year ended December
31, 2001, filed with the Securities and Exchange Commission
on March 29, 2002).
10.4 Mymetics Corporation 2001 Stock Option Plan (incorporated by
reference to the report on Form 10-K for the fiscal year
ended December 31, 2001, filed with the Securities and
Exchange Commission on March 29, 2002).
10.5+ Consulting Agreement dated August 31, 2001, between Mymetics
Corporation and Michael Allio.
10.6+ Director and Non-Employee Stock Option Agreement dated July
19, 2001, between Mymetics Corporation and Robert Demers.
10.7+ Director and Non-Employee Stock Option Agreement dated July
19, 2001, between Mymetics Corporation and Michael K. Allio.
10.8+ Director and Non-Employee Stock Option Agreement dated July
19, 2001, between Mymetics Corporation and John M.
Musacchio.
10.9+ Director and Non-Employee Stock Option Agreement dated July
19, 2001, between Mymetics Corporation and Patrice Pactol.
10.10+ Director and Non-Employee Stock Option Agreement dated July
19, 2001, between Mymetics Corporation and Dr.
Pierre-Francois Serres.
10.11 Services Agreement dated May 31, 2001, between Mymetics
Corporation and MFC Merchant Bank S.A. (incorporated by
reference to the report on Form 10-Q for the quarter ended
June 30, 2001, filed with the Securities and Exchange
Commission on August 14, 2001).
10.12 Employment Agreement dated May 3, 2001, between Mymetics
Corporation and Dr. Pierre-Francois Serres (incorporated by
reference to the report on Form 10-Q for the quarter ended
June 30, 2001, filed with the Securities and Exchange
Commission on August 14, 2001).
10.13 Indemnification Agreement dated March 28, 2001, between
Mymetics Corporation and MFC Bancorp Ltd. (incorporated by
reference to the report on Form 10-Q for the quarter ended
June 30, 2001, filed with the Securities and Exchange
Commission on August 14, 2001).
II-4
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.14+ Shareholder Agreement dated March 28, 2001, among Mymetics
Corporation, the Holders of Class B Exchangeable
Preferential Non-Voting Shares of 6543 Luxembourg S.A.
signatory thereto and 6543 Luxembourg S.A.
10.15+ Support Agreement dated March 28, 2001, between Mymetics
Corporation and 6543 Luxembourg S.A.
10.16 Assignment Agreement dated December 29, 2000, among Mymetics
Corporation, Mymetics S.A. and MFC Merchant Bank S.A.
(incorporated by reference to the Information Statement on
Schedule 14C filed with the Securities and Exchange
Commission on April 26, 2001).
10.17 Preferred Stock Conversion Agreement dated December 21,
2000, between Mymetics Corporation and Dresden Papier GmbH
(incorporated by reference to the report on Form 10-K for
the fiscal year ended December 31, 2000, filed with the
Securities and Exchange Commission on March 14, 2001).
10.18 Preferred Stock Conversion Agreement dated for reference
December 21, 2000, between Mymetics Corporation and Med Net
International Ltd. (incorporated by reference to the report
on Form 10-K for the fiscal year ended December 31, 2000,
filed with the Securities and Exchange Commission on March
14, 2001).
10.19 Preferred Stock Redemption and Conversion Agreement dated
for reference December 21, 2000, between Mymetics
Corporation and Sutton Park International Ltd. (incorporated
by reference to a Schedule 13D/A filed by MFC Bancorp Ltd.
with the Securities and Exchange Commission on January 2,
2001).
10.20 Credit Facility Agreement dated July 27, 2000, between
Mymetics Corporation and MFC Merchant Bank S.A.
(incorporated by reference to the Information Statement on
Schedule 14C filed with the Securities and Exchange
Commission on April 26, 2001).
10.21 Agreement dated for reference May 15, 2000, between Mymetics
Corporation and Maarten Reidel (incorporated by reference to
the report on Form 8-K/A filed with the Securities and
Exchange Commission on August 9, 2000).
10.22 1995 Qualified Incentive Stock Option Plan (incorporated by
reference to the Registration Statement filed on Form S-8
with the Securities and Exchange Commission on November 8,
1996).
10.23 Amended 1994 Stock Option Plan (incorporated by Reference to
the Registration Statement filed on Form S-8 on November 8,
1996).
11+ Statement Regarding Calculation of Per Share Earnings.
21 Subsidiaries of the Registrant (incorporated by reference to
the report on Form 10-K for the fiscal year ended December
31, 2001, filed with the Securities and Exchange Commission
on March 29, 2002).
23.1 Consent of Peterson Sullivan, PLLC, Independent Accountants.
23.2 Consent of Cohen & Grigsby, P.C. (included in Exhibit 5).
24 Power of attorney (included on signature page of this
registration statement).
---------------
+ Previously filed.
(b) Financial Statement Schedule
All information for which provision is made in the applicable accounting
regulations of the SEC is either included in our financial statements or is not
required under the related instructions or are inapplicable, and therefore have
been omitted.
II-5
ITEM 17. UNDERTAKINGS
Item 512(a) of Regulation S-K. The undersigned Registrant hereby
undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Item 512(b) of Regulation S-K. The undersigned Registrant hereby undertakes
that, for purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Item 512(h) of Regulation S-K. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the indemnification provisions
described herein, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Item 512(i) of Regulation S-K. The undersigned Registrant hereby undertakes
that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
II-6
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Mymetics
Corporation has duly caused this registration statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Pittsburgh, Pennsylvania, on August 8, 2002.
MYMETICS CORPORATION
By: /s/ JOHN M. MUSACCHIO
------------------------------------
John M. Musacchio
Chief Operating Officer, Chief
Financial Officer, Secretary and
Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
--------- -------- ----
* President, Chief Executive Officer August 8, 2002
------------------------------------------------ and Director (Principal Executive
Peter P. McCann Officer)
/s/ JOHN M. MUSACCHIO Chief Operating Officer, Chief August 8, 2002
------------------------------------------------ Financial Officer, Secretary and
John M. Musacchio Director (Principal Financial and
Accounting Officer)
* Chief Scientific Officer and August 8, 2002
------------------------------------------------ Director
Dr. Pierre-Francois Serres
* Director August 8, 2002
------------------------------------------------
Patrice Pactol
* Director August 8, 2002
------------------------------------------------
Robert Demers
* Director August 8, 2002
------------------------------------------------
Michael K. Allio
*By: /s/ JOHN M. MUSACCHIO
------------------------------------------
John M. Musacchio
(attorney-in-fact)
II-8