<PAGE>
PRE-EFFECTIVE AMENDMENT NO. 4
to
FORM 20-F
[X] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
OR
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended
-------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number
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NYMOX PHARMACEUTICAL CORPORATION
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(Exact name of Registrant as specified in its charter)
Not Applicable
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(Translation of Registrant's name into English)
Canada
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(Jurisdiction of incorporation or organization)
175 Bouchard
Suite 100
Dorval, Quebec
H9S 1B1
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(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class Name of each exchange
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on which registered
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None Not Applicable
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Securities registered or to be registered pursuant to Section 12(g) of the Act.
Common Stock
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(Title of Class)
Securities registered or to be registered pursuant to Section 15(d) of the Act.
None
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(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the annual
report: 17,934,382 shares as of March 11, 1997.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s)), and (2) has been subject to
such filing requirements for the past 90 days.
Yes No X
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Indicate by check mark which financial statement item the registrant has
elected to follow.
Item 17 Item 18 X
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PART I
Item 1. Description of Business
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Introduction
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NYMOX Pharmaceutical Corporation ("NYMOX" or the "Company," which terms
include the Company's subsidiaries) is a development stage biomedical
company, based in Dorval, Quebec, which specializes in the research and
development of neurological diagnostics and pharmaceuticals for the aging
population with emphasis on Alzheimer's disease. NYMOX is in the process
of developing products which, subject to approval of regulatory
authorities, will be targeted for the global market. NYMOX has completed
the research and discovery phase of its Alzheimer's diagnostic AD7C test
and anticipates that it will be seeking regulatory approval in 1997 to
permit the Company to sell the AD7C test kit to laboratories. Pending
regulatory approval, the Company is marketing the AD7C test through a
reference laboratory service. (See "Diagnostic Products" below.)
NYMOX was incorporated in May 1995 for the purpose of acquiring all of the
common shares of DMS Pharmaceuticals Inc. ("DMS"), a private company which
has been carrying on research and development since 1989 on neurological
diagnostics and pharmaceuticals for the aging population with emphasis on
Alzheimer's disease. This acquisition was completed in September 1995 for
a consideration of 15,000,000 common shares of NYMOX. Immediately
following the acquisition of DMS, NYMOX acquired for cash a controlling
interest in Monterey Capital Inc. ("Monterey"), an unaffiliated public
company listed on the Montreal Stock Exchange. Monterey was then merged
with a newly organized subsidiary of NYMOX and 468,447 common shares of
NYMOX were issued to the minority shareholders of Monterey in the merger.
Simultaneously, NYMOX completed a private placement of 1,578,635 common
shares at a price of CAN$2.00 per share for net proceeds of CAN$2,947,474
to finance its activities. In September 1995, all of the stock of Monterey
(which was then a wholly-owned subsidiary of NYMOX) was sold to a person
unrelated to NYMOX for the same amount as paid by NYMOX in the transaction
in which NYMOX acquired a controlling interest in Monterey. The shares of
NYMOX were listed on the Montreal Stock Exchange on December 18, 1995. In
April 1996, NYMOX completed private placements totaling 877,300 common
shares at a per share price of CAN$6.00 for aggregate net proceeds of
CAN$5,029,840. The net proceeds of these placements were added to the
Company's working capital and are being used in part to accelerate the
commercialization of NYMOX's AD7C test in North America and Europe.
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As used herein, the terms "NYMOX" and the "Company" refer to NYMOX
Pharmaceutical Corporation and DMS, the predecessor of NYMOX Pharmaceutical
Corporation.
Plan of Operation
-----------------
During calendar year 1997, the Company intends to focus on submitting its
AD7C Test for FDA approval and to proceed with marketing the test in both
North America and Europe. Marketing and sales in Europe will be
accomplished through the Company's European licensee, Laboratoires J.
Simon. Until FDA approval is obtained, marketing efforts in the United
States will be restricted to situations where the Company makes the test
available to doctors and serves as a reference laboratory. At such time,
if any, that FDA approval is obtained for the AD7C test, the Company will
begin marketing and commercial distribution to United States laboratories.
(See "Diagnostic Products" and "Governmental Regulation.") To that effect,
the Company has hired fourteen sales representatives for the United States
market. The sales representatives will be paid on a commission basis with
base salaries totalling approximately CAN$80,000 per month in the
aggregate.
The Company does not anticipate any material acquisitions of plant or
equipment during the remainder of the Company's current fiscal year.
Research and development expenses should remain at approximately
CAN$220,000 per month, which number includes approximately CAN$123,000 in
salaries of research and development personnel. Salaries for non-R & D
personnel are expected to be approximately CAN$100,000 per month, which
number includes the minimum commission payments to the Company's United
States sales force. The Company anticipates that its total operating
expenses will remain relatively stable for the remainder of the current
fiscal year at the rate of CAN$380,000 per month. Operating expenses may
be increased in fiscal 1997 if the Company raises additional capital.
The Company is a party to a research and license agreement with
Massachusetts General Hospital ("MGH"). Under the agreement, the Company
is obligated to make certain regularly scheduled payments to MGH as
research grants in exchange for royalties from any sales of resulting
products. (See "Patents and Proprietary Information.") 1997 research
grants will total US$397,000. The Company also will pay MGH $US94,176 for
patent costs incurred by MGH in 1996, which amount the Company and MGH have
agreed will be paid no later than May 15, 1997. For 1998 through the year
2002, subject to some early termination rights of the Company, NYMOX is
obligated to pay MGH $US172,000 per year, which amount is payable in
quarterly installments of US$43,000.
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Effective August 1, 1995, the Company changed its fiscal year from a July
31 year end to a December 31 year end. Company-sponsored research and
development expenditures amounted to CAN$2,356,000 for the year ended
December 31, 1996; CAN$571,215 for the five month period ended December 31,
1995; and CAN$371,939 and CAN$55,325 for the fiscal years ended July 31,
1995 and 1994, respectively. (See Item 9, "Management's Discussion and
Analysis of Financial Condition and Results of Operations.")
Although the Company believes that its present cash and short-term
investments together with anticipated revenues from operations will be
sufficient to meet anticipated costs of operations through fiscal 1997,
additional capital will be sought in order to expand marketing efforts, to
accelerate product development and to cover upfront costs in connection
with seeking and obtaining regulatory approvals. The Company intends to
raise such capital through private placements to non-United States
investors. The Company anticipates some revenues from sales of its AD7C
Test by the Company's European licensee, Laboratoires J. Simon. There can
be no assurance, however, that any revenues will be realized from this
license arrangement in the Company's current fiscal year or at any time in
the future. (See "Marketing.")
Products in Development
-----------------------
The Company's primary purposes are (i) to develop certain products based
upon molecular systems incorporating extensive proprietary technologies
discovered, researched, and developed by the Company's scientists and their
collaborators over the past several years, and (ii) to commercialize such
products for use in the diagnosis, prevention, and treatment of Alzheimer's
disease. Such commercialization efforts currently are being conducted with
respect to the AD7C test through reference laboratory services and
licensing arrangements. Following receipt of regulatory approvals, the
Company intends to engage in direct sales and marketing. None of the
Company's products are commercially available at the present time, although
the AD7C test is available in the U.S. and Canada through the Company's
reference laboratory service.
NYMOX research and development is categorized into four areas including
characterization of biochemical markers of Alzheimer's disease from brain
tissue, cerebrospinal fluid, and blood; development of commercially
significant immunoassays based on the aforementioned characterizations;
screening and clinical testing of new compounds for the treatment of
Alzheimer's disease; and general research utilizing proprietary
opportunities in parallel technologies such as the commercial applications
of technologies developed in the previous categories (e.g., application of
methods initially formulated in Alzheimer's disease diagnostics or
therapeutics research applied to other uses and markets, such as other
diseases).
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NYMOX holds exclusive patent rights to several biochemical markers from the
brain and also has extensive know-how in the development of these and other
markers. In addition to AD7C, NYMOX has several other assays at other
stages of research.
NYMOX is currently developing new compounds for the possible treatment of
Alzheimer's disease. This research is at the preclinical stage. Based on
animal studies to date, the Company plans in the near term to seek
regulatory authority to begin human (clinical) studies. (See "Development
of Therapeutic Products.")
Diagnostic Products
-------------------
Alzheimer's disease ("AD") is the most important cause of dementia in
persons 60 years of age and older. Despite the obvious need for an
accurate clinical test, the definitive diagnosis of AD is currently
possible only by pathologic examination of postmortem brain tissue.
Medical literature addressing AD routinely emphasizes the current lack of a
reliable antemortem diagnostic method, due to the lack of biochemical
markers confirming the disease. At present, antemortem diagnosis is
imperfect and is at best a process of exclusion of other diagnoses.
Following extensive research with potential biochemical markers, NYMOX has
developed a test known as AD7C which the Company believes reliably
distinguishes Alzheimer's disease from normal individuals. In company-
funded trials to date, which have involved over 500 clinical samples, the
test has been positive in approximately 80% to 90% of verified Alzheimer
patients with a low positive rate in normal controls (i.e., low false
positives). These trials have been confirmed by postmortem brain
verification and, therefore, NYMOX believes its AD7C test has the accuracy
that is necessary for a test to be useful. The trials are, however, not
complete and there can be no assurance that the level of success
experienced to date will be repeated with the remaining study participants.
In addition, there can be no assurances that regulatory authorities will
accept NYMOX's test methodology or results in support of product
applications. (See "Government Regulation.")
A screening test offering a low false positive rate in normal patients
would be a very useful aid to clinicians investigating patients with subtle
or marginal symptoms: mental, emotional, cognitive, or behavioral. If the
doctor can rule out Alzheimer's with more assurance, a great deal of
patient and family anguish and anxiety will be avoided. A low test score
will help the doctor be more certain that Alzheimer's disease is not the
cause of the patient's symptoms. The Company is not aware of any other
biochemical test with a false positive rate as low as that of the AD7C
test.
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Assuming that future trials show a false positive rate consistent with that
achieved by the AD7C test to date, the Company believes the test will have
substantial appeal to the medical community. A reliable AD diagnostic test
would significantly streamline both the diagnostic work-up and follow-up
management when used in conjunction with sound clinical judgment by a
qualified physician. The AD7C test does not replace the doctor's
diagnosis, which is a responsible medical decision based on patient
history, physical examination and other relevant medical data. The test
should be considered an integral and important component to the diagnosis.
Regulatory approval is necessary before a test kit can be marketed for
commercial distribution to other laboratories and the Company is in the
process of applying for such approval. (See "Government Regulation"). It
is, however, possible under FDA procedures for the AD7C test to be made
available by NYMOX prior to FDA approval on the basis that samples are
taken by doctors and sent to NYMOX for processing in its reference
laboratories, which are currently in Dorval, Quebec and Rockville,
Maryland. The test will be performed by NYMOX technical staff on patient
samples sent by doctors and the results will be reported to the doctor
submitting the sample.
Development of Therapeutic Products
-----------------------------------
NYMOX currently is developing ten new compounds for the possible treatment
of Alzheimer's disease. All of the compounds are at the stage of pre-
clinical toxicity testing. Any such compounds determined to be non-toxic
will proceed to the clinical testing stage of development as described
below. The Company intends to complete toxicity testing on one compound,
NX D2858, in the near term and, depending on the results of such testing,
seek regulatory approval for clinical testing of NX D2858.
The only FDA-approved drug treatment for Alzheimer's disease in use today
is tacrine (brand-name Cognex). However, tacrine is effective only in
managing the symptoms of AD, it does not arrest the underlying disease
process. In contrast, NYMOX's research is aimed at compounds that could
arrest the progression of Alzheimer's disease and hence are targeted for
long-term use. Such compounds are not expected to show dramatic immediate
effects, however, because they would not provide improvement per se on
their own. Furthermore, adequate demonstration of arrest of progression
sufficient to satisfy regulatory authorities may prove to be a difficult
and comparatively long-term task. On the other hand, these "arrest of
progression" compounds could be combined with shorter acting treatments,
and, because there will be curtailed persistence of injury, the latter
drugs could be active longer.
Once a product receives regulatory approval to begin clinical testing, four
distinct development stages are followed:
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i) Product Evaluation. The objective of product evaluation is to conduct
preliminary studies of potential screening candidates based on in vitro
screening methods to determine the feasibility of such products for further
testing, development and marketing.
ii) Optimization of Product Formulation. The activities in this stage of
development involve the Company in consultations with investigators and
scientific personnel. Preliminary selection of screening candidates to
become product candidates for further development and further evaluation of
drug efficacy is based on a panel of research based biochemical
measurements. Extensive formulation work and in vitro testing are
conducted for each of various selected screening candidates and/or product
candidates.
iii) Clinical Screening and Evaluation. During this phase of development,
portions of which may overlap with product evaluation and optimization of
product formulation, initial clinical screening on product candidates is
undertaken and full scale clinical trials commence.
iv) Final Product Development. The activities to be undertaken in final
product development include making final clinical evaluations, performing
large-scale experiments to confirm the reproducibility of clinical
responses, fabricating clinical lots for any additional extensive clinical
testing that may be required, conducting any further safety studies
required by the FDA, performing process development work to allow pilot
scale production of the product, completing production demonstration runs
for each potential product, filing new drug applications ("NDAs"), product
license applications ("PLAs"), investigational device exemptions ("IDEs")
(and required supplements or amendments thereto) and undergoing
comprehensive regulatory approval programs and processes.
There can be no assurance that NYMOX will be able to complete successful
development and commercialization of any therapeutic products.
Governmental Regulation
-----------------------
The design, development, testing, manufacturing and marketing of
pharmaceutical compounds are regulated by governmental regulatory agencies.
In the United States, the Federal Food, Drug and Cosmetic Act, the
Controlled Substances Act and other United States federal statutes and
regulations impose requirements on the testing, manufacture and approval of
the Company's products marketed in the United States. Non-compliance with
applicable requirements can result in fines and other judicially imposed
sanctions, including the initiation of product seizures, injunction actions
and criminal prosecutions based on products or manufacturing practices that
violate statutory requirements. In addition, informal administrative
remedies can involve voluntary recall of products, as well as the refusal
of the government to enter into supply contracts or to approve NDAs.
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The FDA also has the authority to withdraw approval of drugs in accordance
with statutory due process procedures. Similar consumer protection
regulation in other countries exists, and approval will need to be acquired
in each relevant market. Laboratoires J. Simon is required by the terms of
its license agreement with the Company to assist the Company in obtaining
the necessary government approvals for the Company's marketing effort in
Europe.
In the United States, the FDA approval procedure is a two-step process.
During the initial product development stage, an investigational new drug
application (an "IND") for each product is filed with the FDA. A 30-day
waiting period after the filing of each IND is required by the FDA prior to
the commencement of initial (Phase I) clinical testing in healthy subjects.
If the FDA has not commented on or questioned the IND within such 30-day
period, initial clinical studies may begin. If, however, the FDA has
comments or questions, the questions must be answered to the satisfaction
of the FDA before initial clinical testing can begin. In some instances,
this process could result in substantial delay and expense. Phase I studies
are intended to demonstrate the functional characteristics and safety of a
product.
After Phase I testing, extensive efficacy and safety studies in patients
must be conducted. After completion of the required clinical testing, an
NDA is filed, and its approval, which is required for marketing in the
United States, involves an extensive review process by the FDA. The
Company expects that most of its new drug formulations will require NDA
filings. There can be no marketing in the United States of any product for
which an NDA is required until the NDA has been approved by the FDA. The
NDA itself is a complicated and detailed document and must include the
results of extensive clinical and other testing, the cost of which is
substantial. The FDA is required to review applications within 180 days of
their filing. However, in the process of reviewing applications, the FDA
frequently requests that additional information be submitted and starts the
180-day regulatory review period anew when the requested additional
information is submitted. The effect of such request and subsequent
submission can significantly extend the time for the NDA review process.
Until an NDA is actually approved, there can be no assurance that the
information requested and submitted will be considered adequate by the FDA
to justify approval. The packaging and labelling of products are also
subject to FDA regulation. It is impossible to anticipate the amount of
time that is required until the NDA has been approved by the FDA.
Whether or not FDA approval has been obtained, approval of a pharmaceutical
product by comparable regulatory authorities must be obtained in any
foreign country prior to the commencement of marketing of the product in
that country. The approval procedure varies from country to country and
can involve additional testing, and the time required may differ from that
required for FDA approval. Although there are some procedures
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for unified filings for certain European countries, in general each country
has its own procedures and requirements, many of which are time-consuming
and expensive. Thus, there can be substantial delays in obtaining required
approvals from both the FDA and foreign regulatory authorities after the
relevant applications are filed. After such approvals are obtained,
further delays may be encountered before the products become commercially
available. If, subsequent to approval, new information becomes available
concerning the safety or effectiveness of any approved product, labelling
for the affected product may need to be revised, or approval of that
product may be withdrawn.
All facilities and manufacturing techniques used for the manufacturing of
products for clinical use or for sale in the United States must be operated
in conformity with good manufacturing practice ("GMP") regulations, the FDA
regulations governing the production of pharmaceutical products.
In vitro diagnostic products, medical nutrition devices and certain
delivery systems are regulated or potentially regulated under the Federal
Food, Drug and Cosmetic Act as medical devices. As medical devices, these
products would be subject to premarketing and postmarketing requirements
applicable to such devices, including those governing:
i) clinical testing;
ii) prior FDA approval in the form of
(a) an FDA determination through the 510(k) process of substantial
equivalence to a marketed device or
(b) an approved premarket approval application ("PMA");
iii) postmarketing record and reporting obligations; and
iv) GMP obligations.
The failure to adhere to these requirements can result in a refusal of
permission to market, a withdrawal of permission to market and the
imposition of sanctions, including seizure, recall, notification,
injunction, and civil and criminal penalties. Additionally, as a condition
to marketing or continued marketing, the FDA may impose certain postmarket
surveillance and/or tracing requirements that may significantly increase
the regulatory costs associated with a product. The PMA approval
requirements are generally analogous to the NDA approval requirements. The
510(k) process, while generally less burdensome than the PMA requirements,
requires affirmative FDA approval and may be dependent upon the generation
of safety and effectiveness data, as
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well as manufacturing and quality assurance data and information. The
Company believes it has assembled all the necessary information regarding
the AD7C test in order to apply for PMA approval, and expects to file that
application with the FDA within the next three to six months. The PMA
requires documentation of four categories of information required by the
approval application, specifically indications for use, a description of
device characteristics and manufacturing methods, facilities and controls,
a discussion of alternative practices and procedures already available to
the market, and summaries of safety reports and both clinical and non-
clinical studies. There can be no assurance that the AD7C test or any other
medical device that may be developed by the Company in the future will
obtain the necessary approvals or that any approval will be obtained within
a specified time framework.
Under the Federal Food, Drug and Cosmetic Act, it is possible for a given
product to be regulated both as a drug and a medical device subject to the
corresponding requirements applicable to the respective categories.
The diagnostic and pharmaceutical products and services of the Company
will, to a significant degree, address conditions often experienced by the
elderly. Thus, in the United States, the Medicare program, which funds
health insurance for the aged and disabled, is likely to be a source of
reimbursement for these products and services. Further, because a
significant percentage of the elderly are financially needy, the Medicaid
program may also provide a source of reimbursement for the Company's
products and services.
In general, any restriction on reimbursement, coverage or eligibility under
either program could adversely affect reimbursement to the Company for
products and services provided to beneficiaries of the Medicare and/or
Medicaid programs. In response to rising health care costs, several
legislative proposals have been put forward in recent years that would have
substantially reduced overall federal Medicare and Medicaid funding. Such
proposals have included, for example, provisions to reduce payment amounts
for clinical diagnostic laboratory tests under the Medicare program.
Additionally, various proposals would grant states substantially increased
flexibility in managing their Medicaid programs, subject to a cap on
federal spending. In response to such legislation, states may reduce
payments under their Medicaid programs by imposing additional limits on
coverage, eligibility and/or payments. Any legislative action to reduce
federal spending under either program could adversely affect the amount of
the Company's reimbursement under the programs and/or the Company's ability
to participate in the program as a provider or supplier of services or
products.
Moreover, the Company may be required to provide certain of its products or
services through reference laboratories. Such laboratories are regulated
under the Clinical
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Laboratories Improvement Act of 1988 ("CLIA"). CLIA imposes requirements
for certification, licensure and maintenance of medical records regarding
the accuracy of the tests performed. Medicare and Medicaid reimbursement
may be conditioned upon compliance with the requirement of CLIA.
Additionally, the laboratories may be required to meet applicable state law
requirements for diagnostic facilities. Any changes in CLIA or state law
requirements in this regard could have an impact on the Company's ability
to obtain reimbursement from the Medicare and Medicaid programs.
The Company's ability to obtain payment under the Medicare and Medicaid
programs may also be affected by regulatory action at the federal or state
level. For example, new products and services developed by the Company will
be subject to coverage determinations under both programs. Medicare
prohibits payment for any expenses incurred for items or services that are
not reasonable and necessary for the diagnosis or treatment of illness or
injury or to improve the functioning of a malformed body member.
Historically, HCFA interpreted this section of the Act to exclude from
Medicare coverage those medical and health care services that are not
demonstrated to be safe and effective by acceptable clinical evidence. In
1989, HCFA proposed a change to its criteria for coverage of new
technologies. The three-part test for coverage would require that the
product or service be medically effective, appropriately furnished, and
cost effective as compared to an equivalent service already covered by the
program. The final rule is expected in the near future. It is unknown what
criteria the final rule will adopt or whether the Company's products and
services will meet the new requirements.
Patents and Proprietary Information
-----------------------------------
NYMOX pursues a policy of seeking patent protection for valuable patentable
subject matter of its proprietary technology, and requires all employees,
consultants and other persons who may have access to its proprietary
technology to sign confidentiality agreements. NYMOX believes that patent
and trade secret protection is important in its business, and that its
success will depend, in part, on its ability to obtain strong patents, to
maintain trade secret protection and to operate without infringing the
proprietary rights of others. The Company has certain patents issued and a
number of applications pending in the areas of therapeutics and diagnostics
in the United States. The Company possesses rights to a diagnostic patent
for the AD7C test, which patent expires in the year 2013. The Company
possesses several patents for screening technologies used for finding
therapeutic drugs for Alzheimer's disease. These screening technologies
consist of biological systems and defined conditions used to determine if a
drug possesses a useful action that can predict its potential for use in
humans or animals. For example, the Company has patented screening methods
that show whether a potential drug can inhibit or reverse some of the
pathological changes of Alzheimer's disease. As a second example, the
Company has patented screening methods that show whether a potential
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drug can modify in a useful way the amounts of chemical markers of
Alzheimer's disease in a subject. While no proven therapeutic drugs for AD
have yet been found using these screening technologies, they are a useful
component to the Company's therapeutic product development. (See
"Development of Therapeutic Products.") The Company also possesses patents
for unique proteins which are related to Alzheimer's disease and which may,
after further research and clinical trials, prove useful in either
diagnostic or therapeutic applications. The Company has filed patent
applications for other technologies in the fields of diagnosis and
therapeutics similar to those described above. Similar patent applications
have also been filed in most European countries, Canada, Japan and selected
countries worldwide depending on the patent application in question.
NYMOX currently has eight issued patents and patent applications in the
United States claiming brain markers and screening and diagnostic
technologies. NYMOX also has an exclusive license to patents from the
Massachusetts General Hospital covering rights to the AD7C diagnostic and
related therapeutic products. Under this license, the Massachusetts General
Hospital ("MGH") benefits from research funding and collaboration from
NYMOX and is entitled to royalties of 4% from worldwide sales of the AD7C
test. NYMOX also has patent applications pending covering therapeutics and
diagnostics in Alzheimer's disease and related conditions. NYMOX also has
other patents in a number of countries and has applications on file in
numerous other countries.
The commercial success of products incorporating the technologies may
depend, in part, upon NYMOX's ability to obtain strong patent protection.
Although NYMOX patents, pending patent applications, and patents obtained
in the future covering the NYMOX technologies may be of importance to
future operations, there can be no assurance that any additional patents
will be issued or that any patents, now or hereafter issued, will be of
commercial benefit.
Numerous other companies are believed to be working in the fields of
diagnostics and therapeutics for Alzheimer's disease and related
conditions. These companies have obtained patents covering various
technologies. The Company believes that the patents issued to date will not
preclude the Company from developing and marketing its technologies;
however, it is impossible to predict at this time the extent to which
licenses from third parties will be necessary. If licenses were to be
needed from third parties there can be no assurance that such license could
be obtained or could be obtained on commercially reasonable terms.
There has been, and the Company believes that there may be in the future,
significant litigation in the industry regarding patent and other
intellectual property rights and that, if the Company becomes involved in
such litigation, it could consume substantial resources. Significant legal
issues remain as to the extent to which patent protection may
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be afforded in the field of biotechnology in the United States, Canada and
other countries, and the scope of any such protection has not yet been
broadly tested. The Company, therefore, also relies upon trade secrets,
know-how, and continuing technological advancement to develop and maintain
its competitive position. Disclosure and use of the Company's know-how is
generally controlled under agreements with the parties involved. In
addition, the Company has confidentiality agreements with its key
employees, consultants, officers and directors. There can be no assurance,
however, that all confidentiality agreements will be honored, that others
will not independently develop equivalent technology, that disputes will
not arise as to the ownership of intellectual property, or that disclosure
of the Company's trade secrets will not occur. Furthermore, there can be no
assurance that others have not obtained or will not obtain patent
protection that will exclude the Company from using its trade secrets and
confidential information. To the extent that consultants or research
collaborators use intellectual property owned by others in their work with
the Company, disputes may also arise as to the rights to related or
resulting know-how or inventions.
Competition
-----------
The pharmaceutical and biotechnology industries are characterized by
rapidly evolving technology and intense competition. The Company's
competitors include major pharmaceutical, diagnostic, chemical and
biotechnology companies, many of which have financial, technical and
marketing resources significantly greater than those of the Company. In
addition, many biotechnology companies have formed collaborations with
large, established pharmaceutical companies to support research,
development and commercialization of products that may be competitive with
those of the Company. Academic institutions, government agencies and other
public and private research organizations are also conducting research
activities and seeking patent protection and may commercialize products on
their own or through joint ventures. The Company is aware of certain
products manufactured or under development by competitors that are used for
the prevention, treatment or detection of AD. The existence of these
products, or other products or treatments of which the Company is not
aware, or products or treatments that may be developed in the future, may
adversely affect the marketability of products developed by the Company.
For certain of the Company's potential products, an important factor in
competition may be the timing of market introduction of the Company's or
competitors' products. The Company's competition will be determined in part
by the potential indications for which the Company's products are developed
and ultimately approved by regulatory authorities. The development by
competitors of new treatment methods for those indications for which the
Company is developing products could render the Company's products non-
competitive or obsolete. The Company expects that competition among
products
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approved for sale will be based, among other things, on product efficacy,
safety, reliability, availability, price and intellectual property
protection.
In the field of AD diagnostics, the competition consists of other proposed
biochemical markers being tested and hypothesized to be of use in either
diagnosing or ruling out the diagnosis of Alzheimer's. This distinction is
highly relevant because the Company believes data which refer only to AD
cases is misleading. In reality, the diagnosis is unknown prior to testing
(hence the need for testing in the first place), and therefore data on
accuracy must reflect positives and negatives. In other words, a test which
diagnoses a certain percentage of only the positives, and is uncertain or
non-contributory on the negatives will in fact have accuracy inversely
proportional to the number of normals. Therefore, in the usual clinical
setting where the vast majority of lab tests are normal (i.e., negative),
the accuracy of any test which only diagnoses a proportion of the positives
will turn out to be very small and therefore not useful.
Marketing
---------
NYMOX's commercial activities with respect to any product are subject to
regulatory approval in each national market. (See "Government Regulation.")
The Company has not yet begun to commercially market or distribute any
products although it is in the process of implementing a reference
laboratory service with respect to the AD7C test. (See "Diagnostic
Products.") Assuming regulatory approval, the Company will employ a variety
of marketing approaches depending on the product and the market.
With respect to the AD7C test, the Company intends to retain primary
responsibility for all commercial activities conducted in North America.
The Company currently has established a AD7C Clinical Reference Laboratory
service at facilities in Rockville, Maryland (U.S.) and Dorval, Quebec
(Canada). Both laboratories are fully operational and the U.S. laboratory
has been CLIA certified, which is a level of certification necessary in the
United States medical market. The Company intends to establish additional
laboratory facilities in other countries, although at present the company
is focussing its efforts on finding suitable overseas licensees who have
both the economic and scientific resources to effect a more rapid
penetration of the AD7C test in their home markets. The Company has signed
a non-exclusive license agreement with Laboratoires J. Simon of Belgium to
perform and market the AD7C test in Europe. Laboratoires J. Simon is a
leading supplier of laboratory services in Europe, and is part of the SGS
Group (Societe Generale de Surveillance), the world's largest control and
inspection organization, based in Geneva, Switzerland. Additional license
relationships may be arranged in the future, although there can be no
assurance that the Company will be able to enter into agreements with other
licensees on terms acceptable to the Company or that
<PAGE>
-16-
any license revenues will be derived from either Laboratoires J. Simon or
any other licensee.
NYMOX plans to market and sell certain of its therapeutic products, if
successfully developed and approved, directly or through co-promotion
arrangements or other licensing arrangements with third parties. In cases
where NYMOX has sole or shared marketing rights, it plans to build a small,
focused sales force if and when such products approach marketing approval
in some markets, including Europe. Implementation of this strategy will
depend on many factors, including the market potential of any products the
Company develops as well as on the Company's financial resources. To the
extent the Company will enter into co-promotion or other licensing
arrangements, any revenues received by the Company will be dependent on the
efforts of third parties.
Item 2. Description of Property
-----------------------
a) NYMOX laboratories in Dorval, Quebec, Canada comprise 15,000 square
feet of leased space. The lease agreement expires in August 1997.
The Company owns a full complement of equipment used in all aspects
of its R&D and its reference laboratories. The current US facility
in Rockville, Maryland comprises 2,000 square feet of leased space.
The Company presently is negotiating a new lease for its US
facility. The proposed lease property also is located in Rockville,
Maryland and comprises 5.504 square feet of space, at a per square
foot rental rate comparable to that of the current leased premises.
As proposed, the lease would have an initial term of three years. If
these lease negotiations are terminated, or if any of the current
leases are not renewed, the Company believes that equivalent space
may be leased on commercially reasonable terms.
b) Not applicable.
Item 3. Legal Proceedings
-----------------
There are no material legal proceedings involving NYMOX or any of its
assets.
Item 4. Control of Registrant
---------------------
a), b) The following table sets forth information as of March 11, 1997
regarding ownership of the common shares by Dr. Paul Averback (see
Item 10), who is the only person known to the Company to own more
than 10% of the common shares, and by all directors and officers as
a group.
Name No. Shares Percent of Class
---- ---------- ----------------
<PAGE>
-17-
<TABLE>
<CAPTION>
<S> <C> <C>
Dr. Paul Averback 12,643,895 70.5
All directors and officers as a group 12,707,470 70.9
</TABLE>
In addition, as of such date Dr. Averback's wife owned 1,190,297 common
shares (6.6%) and 9022-1433 Canada Inc., a company owned by Dr. Averback
and his wife, owns 500,000 common shares (2.8%).
Pursuant to an escrow agreement (the "Escrow Agreement") dated December 18,
1995 an aggregate of 11,522,331 common shares of the Company owned by Dr.
Paul Averback and his wife were placed in escrow by the Montreal Trust
Company of Canada, of which 7,681,554 shares (the "Escrowed Shares")
presently remain in escrow. The Escrowed Shares generally may not be sold,
assigned, hypothecated, pledged, charged, alienated, released from escrow,
transferred within escrow or otherwise in any manner dealt with without the
express consent, order, direction in writing of the Montreal Exchange. The
escrow arrangement provides for automatic release upon the following terms:
<TABLE>
<CAPTION>
Release Date Number of Shares
------------ ----------------
<S> <C>
December 18, 1996 3,840,777
(Released As Scheduled)
December 18, 1997 3,840,777
December 18, 1998 3,840,777
</TABLE>
To the knowledge of the Company, no other shareholder beneficially owns
more than 10% of the shares of the Company.
c) Not applicable.
<PAGE>
-18-
Item 5. Nature of Trading Market
------------------------
The Common Shares of NYMOX have been listed and posted for trading on the
Montreal Exchange since December 18, 1995. The following table sets out the
high and low reported trading prices of the common shares during the
periods indicated.
<TABLE>
<CAPTION>
High (CDN$) Low (CDN$) Volume (Shares)
----------- ---------- ---------------
<S> <C> <C> <C> <C>
1995 December
(from December 18) $ 4.25 $ 2.30 662,261
1996 1st quarter 9.50 2.80 2,179,929
2nd quarter 19.40 8.00 1,758,384
3rd quarter 20.00 14.75 1,164,185
4th quarter 17.75 10.00 543,799
1997 1st quarter (to March 14) 14.90 12.50 288,562
</TABLE>
According to information furnished to the Company by the transfer agent for
the common shares, as of February 17, 1997, there were approximately 61
holders of record of the common shares with addresses in the United States
and such holders owned an aggregate of 225,336 shares.
Item 6. Exchange Controls and Other Limitations Affecting Security Holders
------------------------------------------------------------------
a) Canada has no system of exchange controls. There are no exchange
restrictions on borrowing from foreign countries nor on the remittance
of dividends, interest, royalties and similar payments, management fees,
loan repayments, settlement of trade debts or the repatriation of
capital.
b) There are no limitations on the rights of non-Canadians to exercise
voting rights on their shares of NYMOX.
<PAGE>
-19-
Item 7. Taxation
--------
Canadian Federal Income Taxation
--------------------------------
The following discussion is a fair summary of the principal Canadian
federal income tax considerations generally applicable to purchasers of the
Company's Common Stock pursuant to this prospectus who, for purposes of the
Income Tax Act (Canada) (the "Canadian Act"), deal at arm's length with the
Company, hold shares of Common Stock as capital property, are not residents
of Canada at any time when holding Common Stock and do not use or hold and
are not deemed to use or hold Common Stock in or in the course of carrying
on business in Canada and, in the case of insurers who carry on an
insurance business in Canada and elsewhere, do not hold Common Stock that
is effectively connected with an insurance business carried on in Canada.
This summary is based on the current provision of the Canadian Act, the
regulations thereunder, the Canada-United States Income Tax Convention
(1980) (the "Treaty"), and the third protocol signed August 31, 1994 (the
"Protocol"), as amended. This summary takes into account specific proposals
to amend the Canadian Act and the regulations thereunder publicly announced
by the Minister of Finance prior to the date hereof and on counsel's
understanding of the current published administrative and assessing
practices of Revenue Canada, Taxation. This summary does not take into
account Canadian provincial income tax laws or the income tax laws of any
country other than Canada.
A shareholder of the Company will generally not be subject to tax pursuant
to the Canadian Act on a capital gain realized on a disposition of Common
Stock unless the Common Stock is "taxable Canadian property" to the
shareholder for purposes of the Canadian Act and the shareholder is not
eligible for relief pursuant to an applicable bilateral tax treaty. The
Common Stock will not be taxable Canadian property to a shareholder
provided that the Company is a "public corporation" within the meaning of
the Canadian Act and provided that such shareholder, or persons with whom
such shareholder did not deal at arm's length (within the meaning of the
Canadian Act), or any combination thereof, did not own 25% or more of the
issued shares of any class or series of the Company at any time within five
years preceding the date of disposition. The Company has qualified and
elected to be a "public corporation" within the meaning of the Canadian
Act. In addition, the Treaty will generally exempt a shareholder who is a
resident of the United States for purposes of the Treaty from tax in
respect of a disposition of Common Stock provided that the value of the
shares of the Company is not derived principally from real property
(including resource property) situated in Canada.
Any dividend, including stock dividends, paid or credited, or deemed to be
paid or credited, by the Company to a shareholder will be subject to
Canadian withholding tax
<PAGE>
-20-
at the rate of 25% on the gross amount of the dividend, subject to the
provisions of any applicable income tax convention. Pursuant to the Treaty,
the rate of withholding tax generally will be reduced to 15% in respect of
dividends paid to a shareholder who is a resident of the United States for
purposes of the Treaty and further reduced to 10% if the beneficial owner
of the shares is a corporation owning at least 10% of the voting shares of
the Company. Pursuant to the Protocol, the rate of withholding tax will
generally be reduced to 5% by the year 1997, if the beneficial owner of the
shares is a corporation owning at least 10% of the voting shares of the
Company.
United States Federal Income Taxation
-------------------------------------
The following discussion of U.S. tax laws summarizes U.S. federal income
tax laws only and does not address state or local taxes. For U.S. federal
income tax purposes, an individual who is a citizen or resident of the
United States or a domestic corporation ("U.S. Taxpayer") will recognize
gain or loss on the sale of the Company's Common Stock equal to the
difference between the proceeds from such sale and the adjusted cost basis
in the Common Stock. The gain or loss will be a capital gain or capital
loss if the Company's Common Stock is a capital asset in the hands of the
U.S. Taxpayer.
For federal income tax purposes, a U.S. Taxpayer will be required to
include in his gross income, dividends received on the Company's Common
Stock. A U.S. Taxpayer who pays Canadian tax on a dividend on the Common
Stock will be entitled, subject to certain limitations, to a credit (or
alternatively, a deduction) against his federal income tax liability. A
domestic corporation that owns at least 10% of the voting stock of the
Company should consult its tax advisor as to applicability of the dividends
received deduction or deemed paid foreign tax credit with respect to
dividends paid on the Company's Common Stock.
For any taxable year of the Company, if at least 75% of the Company's gross
income is "passive income" (as defined in the Internal Revenue Code of
1986, as amended (the "Code")), or if at least 50% of the Company's assets,
by average fair market value, are assets that produce or are held for the
production of passive income, the Company will be a Passive Foreign
Investment Company, as defined in Section 1296 of the Code ("PFIC"). While
the Company does not believe that it is likely to be a PFIC in its current
or future taxable years, there can be no assurance that the Company will
not be a PFIC for such years because this depends, among other things, on
the amount and type of gross income that the Company will earn in the
future and the characterization of certain assets such as goodwill.
If the Company is a PFIC for any taxable year during which a U.S. Taxpayer
owns any Common Stock, the U.S. Taxpayer will be subject to special U.S.
federal income tax
<PAGE>
-21-
rules, set forth in Sections 1291 to 1297 of the Code, with respect to all
of such U.S. Taxpayer's Common Stock. For example, gifts, exchanges
pursuant to corporate reorganizations and use of the Common Stock as
security for a loan may be treated as a taxable disposition, and a stepped-
up basis upon the death of such a U.S. Taxpayer may not be available.
Furthermore, in the absence of an election by such U.S. Taxpayer to treat
the Company as a "qualified electing fund" (the "QEF election"), as
discussed below, the U.S. Taxpayer would be required to report any gain on
disposition of any Common Stock as ordinary income rather than capital gain
and to compute the tax liability on such gain and on certain distributions
as if the items had been earned pro rata over the U.S. Taxpayer's holding
period (or a certain portion thereof) for the Common Stock and would be
subject to the highest ordinary income tax rate for each taxable year of
the U.S. Taxpayer in which the items were treated as having been earned.
Such U.S. Taxpayer would also be liable for interest (which may be non-
deductible by certain U.S. Taxpayers) on the foregoing tax liability as if
such liability had been due with respect to each such prior year.
If the Company is a PFIC for any taxable year during which a U.S. Taxpayer
owns any Common Stock, the adverse taxation of disposition gains and
certain distributions may be avoided by any U.S. Taxpayer who makes a QEF
election on or before the due date (including extensions) for filing such
U.S. Taxpayer's tax return for the first taxable year in which the Company
is a PFIC and in which the U.S. Taxpayer owns any capital stock. Such a
U.S. Taxpayer would be taxed on dividends and capital gains as if the
Company had never been a PFIC, with certain adjustments to avoid double
taxation of any amounts taxed as described in the following sentence.
Although such a U.S. Taxpayer is taxed on its pro-rata share of the
Company's earnings and profits for the Company's taxable year in which the
Company was (or was treated as) a PFIC and which ends with or within such
U.S. Taxpayer's taxable year, regardless of whether such amounts are
actually distributed by the Company, the Company believes that it is not
likely to have any earnings and profits for any taxable year in the near
future in which it might be a PFIC. Therefore, although there can be no
assurance concerning such future earnings and profits, the Company believes
that any U.S. Taxpayer who has made a timely QEF Election would not have
any income in such a year by reason of the QEF election. Should such an
election be made (and if the Company is a PFIC, U.S. Taxpayers are strongly
urged to consider this special election), there are a number of specific
rules and requirements applicable thereto, and such an electing U.S.
Taxpayer is strongly urged to consult his own tax advisor in that regard.
The foregoing discussion is limited to Canadian federal taxation and United
States federal taxation and does not deal with provincial, or state or
local taxes. It is of a general and summary nature only and is not intended
to be, nor should it be considered to be, legal or tax advice to any
particular shareholder. Accordingly, prospective investors should
<PAGE>
-22-
consult their own tax advisors as to the tax consequences of receiving
dividends from the Company or disposing of their common stock.
Item 8. Selected Financial Data
-----------------------
The following table sets forth selected financial data for the Company
(which data are comprised of the data of DMS prior to its September 1995
acquisition by the Company), for the periods indicated, derived from
financial statements prepared in accordance with Canadian Generally
Accepted Accounting Principles that have been audited by KPMG, Montreal,
Canada in the case of the year ended December 31, 1996, by Deloitte &
Touche, Montreal, Canada, in the case of the periods ended July 31, 1995
and December 31, 1995, and by Bergeron & Senecal, Brossard, Canada, in the
case of the periods ended July 31, 1993 and 1994. The selected financial
data for the periods ended July 31, 1991 and 1992 is unaudited. The data
set forth below should be read in conjunction with the Company's financial
statements and notes thereto and "Management's Discussion and Analysis of
Financial Conditions and Results of Operations" included elsewhere herein.
<PAGE>
-23-
NYMOX PHARMACEUTICAL CORPORATION
Selected Financial Data
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
For the years ended July 31,
---------------------------------------
December 31, December 31,
------------- -------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
(5 months) (12 months)
Canadian GAAP
- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current Assets -0- -0- -0- -0- 11,963 2,268,097 2,896,234
Capital Assets 12,576 12,576 12,576 12,576 338,953 366,155 1,317,973
Total Assets 239,403 239,403 251,352 239,403 350,916 2,634,252 4,214,207
Liabilities 161,263 167,532 9,000 45,376 121,589 151,297 384,226
Shareholders' Equity 72,140 71,871 242,352 194,027 229,327 2,482,955 3,829,981
Revenues -0- -0- -0- -0- -0- -0- 226,940
Research & Development 8,484 36,769 32,519 55,325 371,939 571,215 2,116,000
Expenditures (note 1)
Net Loss 8,484 37,769 34,519 58,325 377,570 693,846 3,699,064
Loss Per Share (note 2) -0- -0- -0- -0- 0.03 0.04 0.21
US GAAP (note 3)
- -------------------
Net Loss 21,827 51,112 47,862 71,668 393,841 1,639,194 3,738,230
Loss per share (note 2) -0- -0- -0- -0- 0.03 0.11 0.21
Shareholders' equity 45,454 31,842 188,980 127,312 146,341 2,391,515 3,699,375
</TABLE>
Notes:
1) Amounts shown are net of investment tax credits.
2) For periods prior to the reverse acquisition of NYMOX by DMS,
the number of shares outstanding is assumed to be 15,000,000
representing the number of shares issued by NYMOX to DMS in
September 1995. The Company has never paid dividends on its
common stock.
3) Reference is made to Note 8 of the Company's audited financial
statements as at and for the year ended December 31, 1996 and
to Notes 10 and 11 of the Company's audited financial
statements as of and for the five month period ended December
31, 1995 for a reconciliation of differences between Canadian
and US GAAP.
<PAGE>
-24-
<TABLE>
<CAPTION>
The following table sets forth certain information regarding exchange rates for
the periods set forth below.
At or for the Period Ended
July 31, December 31, December 31,
(12 months) (5 months) (12 months)
------------------------------------------- ------------ ------------
CAN$ to US $1 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Period end $1.1917 $1.2817 $1.3825 $1.3609 $1.3695 $1.3618
Average During Period $1.1659 $1.2563 $1.3465 $1.3775 $1.3548 $1.3636
High $1.2062 $1.2945 $1.3990 $1.4267 $1.3820 $1.3747
Low $1.1189 $1.1813 $1.2839 $1.3395 $1.3271 $1.3383
</TABLE>
Item 9. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
General
-------
The Company was formed for the purpose of acquiring all of the common
shares of DMS Pharmaceutical Inc. (DMS), a private company carrying on
research and development in the field of neurological diagnostics and
pharmaceuticals for the aging population. This acquisition was completed
during September 1995 for a consideration of 15,000,000 common shares of
the Company, resulting in the shareholders of DMS owning substantially all
the shares of the Company. This transaction was accounted for under the
purchase method of accounting with DMS as the acquiror.
Immediately following the acquisition, the Company acquired a controlling
interest in Monterey Capital Inc. ("Monterey"), an unaffiliated public
company engaged in the real estate business, for cash of CAN$383,000. The
purpose of the transaction was to cause NYMOX to take over Monterey's
public company status. The purchase price was determined through arm's-
length negotiations between the parties. Monterey was then merged with a
wholly-owned subsidiary of the Company with the result that the non-
controlling shareholders of Monterey received 468,447 common shares of the
Company. The transaction was accounted for as a share issuance of the
Company for nominal consideration of CAN$1. It was not considered to be
part of the acquisition and sale of Monterey, as that transaction was an
intermediary step in meeting the objective of rendering the Company a
public company. Concurrently, the shares of the surviving
<PAGE>
-25-
company carrying on the business of Monterey were sold to one of the former
Monterey shareholders for cash of CAN$383,000. The sale of the surviving
company did not give rise to a gain or loss, since the sale price was equal
to its carrying value.
Results of Operations
---------------------
The Company is a development stage company, which has not, during the
periods presented in the Summary Financial Information above, realized any
revenues from operations. Revenues during the year ended December 31, 1996
have been derived from interest earned on the cash and short-term
investments received from the private placements referred to above. The
Company's overall loss for the year ended December 31, 1996 amounted to
CAN$3,699,064, or $0.21/share, compared to CAN$693,846, or $0.04/share for
the five-month period ended December 31, 1995.
The Company intends to seek regulatory approval in 1997 to permit it to
commercially market the AD7C test.
Costs and Expenses
------------------
For Periods Prior to December 31, 1995:
Research and development expenditures averaged less than CAN$50,000/year
from the inception of the Company's operations to the end of the 1994
fiscal year. For the year ended July 31, 1995 research and development
expenditures amounted to CAN$371,939, a 572% increase from fiscal 1993. The
increase was largely attributable to investments in personnel and supplies
made by the Company in a laboratory located in Tennessee and operated by
the Company from March 1995 to July 1995. This laboratory was closed in
August 1995 and the personnel and supplies transferred to the Company's
Montreal facility. The Company continued to expand its research and
development program in the five-month period ended December 31, 1995 (the
Company's new fiscal year-end). Research and development expenditures
amounted to CAN$571,215 in this period compared to CAN$371,939 for the year
ended July 31, 1995. The increased expenses are entirely attributable to
the payment of the first of three installments due to MGH for research
funding. The first payment amounted to CAN$ 234,675.
General and administrative expenses were minimal from inception of the
Company to July 31, 1995, averaging less than CAN$5,000/year. In the short
fiscal period ended December 31, 1995, general and administrative expenses
amounted to CAN$134,631. The increase from prior levels was due principally
to the Company's move to new premises during this period, which included
costs related to rent (CAN$55,000), moving expenses (CAN$20,000) and sundry
office expenses (CAN$41,000). The Company also
<PAGE>
-26-
hired its Chief Financial Officer during this period which accounted for
approximately CAN$14,000 of the increase in the period ended December 1,
1995.
Before the Company became a public corporation, investments in capital
resources were mostly limited to costs to secure patents. Since NYMOX
became public in December 1995, the Company has made a significant
investment in staffing and equipment. Additional costs are being financed
through proceeds of private placements completed in December 1995 (net
proceeds of CAN$2,947,474) and April 1996 (net proceeds of CAN$5,029,840).
For Year Ended December 31, 1996:
Research and development expenditures represent the Company's most
significant expenditure and amounted to CAN$2,356,000 for the year ended
December 31, 1996, compared with CAN$571,215 for the five-month period
ended December 31, 1995 and CAN$371,939 for the year ended July 31, 1995.
The increased expenses are largely attributable to the hiring of additional
personnel in Canada (CAN$709,000) and the opening of the Rockville,
Maryland laboratory during the year (CAN$448,000), as well as increased
expenditures related to laboratory expenses (CAN$588,000). The Company also
paid its second installment under its research agreement with MGH, in the
amount of CAN$274,675, which was CAN$40,000 higher than the 1995 payment.
Gross research and development expenditures were partially offset by
research tax credits available to the Company in Quebec. Total current
operating expenses are approximately CAN$380,000 per month. Of that amount,
the Company is currently spending approximately CAN$220,000 per month on
research and development. This number is expected to remain steady in 1997,
although if the Company raises additional capital it will devote a portion
of that capital to further expansion of research and development efforts.
In such event, research and development expenditures will increase.
General and administrative expenses amounted to CAN$1,751,073 for the year
ended December 31, 1996 compared with CAN$130,688 in the five-month period
ended December 31, 1995. The increase is attributable to the hiring of
additional non-research personnel, which amounted to approximately
CAN$125,000 and to costs incurred in the Company's Rockville, Maryland
laboratory which amounted to approximately CAN$70,000. This facility
operates as a wholly-owned subsidiary of the Company. The increase in
expenses is also attributable in part to costs related to shareholder
relations and other expenses associated with being a public corporation
that were not incurred in fiscal 1995 (CAN$257,000) and publicity-related
costs (CAN$746,000) in connection with the pre-marketing of AD7C. The
remaining increase relates to sundry office expenses.
<PAGE>
-27-
Liquidity and Capital Resources
-------------------------------
The Company has made some significant capital asset investments in fiscal
1996. The Company invested over CAN$1,000,000 in additional capital assets
in the year ended December 31, 1996, consisting of investments in
laboratory equipment (CAN$704,000), computer software and hardware
(CAN$44,000), and furniture and fixtures (CAN$19,000). The balance of
capital expenditures consisted of patent costs. Of the total capital
expenditures, approximately CAN$142,000 related to investments at the U.S.
laboratory in Maryland. As a result, the corresponding depreciation of such
assets rose approximately CAN$79,000 compared to the five month period
ended December 31, 1995. The Company presently does not intend to make
additional significant capital asset investments in fiscal 1997 unless the
Company raises additional capital.
At December 31, 1996, the Company's cash and cash equivalents were
CAN$2,506,927. The net proceeds from the two private placements should, in
management's estimation, be sufficient to meet the Company's financial
needs to at least the end of 1997, although the Company plans to seek
additional private placement capital in order to accelerate product
development and marketing and to meet certain costs in connection with
seeking and obtaining regulatory approvals. NYMOX has no financial
obligations of significance as at March 11, 1997 other than long-term lease
commitments for its premises in Canada and the United States of CAN$26,889
per month and ongoing research funding payments due to MGH. 1997 research
grants will total US$397,000. The Company also will pay MGH $US94,176 for
patent costs incurred by MGH in 1996, which amount the Company and MGH have
agreed will be paid no later than May 15, 1997. For 1998 through the year
2002, subject to some early termination rights of the Company, NYMOX is
obligated to pay MGH $US172,000 per year, which amount is payable in
quarterly installments of US$43,000.
The Company does not believe that inflation has had a significant impact on
its results of operations.
Item 11. Directors and Officers
----------------------
a) The directors and executive officers of NYMOX are:
Dr. Paul Averback, M.D., D.A.B.P., President and Director (since
September 1995) of the Company, is the founder of the Company and the
inventor of much of its initial technology. Prior to founding the
Company, Dr. Averback served as President of the Company's
predecessor, DMS. He received his M.D. in 1975 and taught pathology at
universities, including Cambridge University, England
<PAGE>
-28-
(1977-1980), during which time he initiated his research on
Alzheimer's disease. He has practiced medicine in numerous Canadian
institutions and from 1991 to 1995 was also Medical Director of the
Urgence Lachine medical center. Dr. Averback has published extensively
in the scientific and medical literature.
Dr. Hossein A. Ghanbari, Ph. D., Vice President and Director (since
September 1995) of the Company, holds a Ph. D. in biochemistry from
Pennsylvania State University. From 1982 to 1992, he was employed with
Abbott Laboratories, where he was responsible for the first marketed
diagnostic test for Alzheimer's disease (on brain tissue). From 1992
to 1994, he was Senior Vice-President, Research and Planning, of
Molecular Geriatrics Corporation, a biopharmaceutical company
specialized in diseases associated with aging. Dr. Ghanbari is the
author of numerous specialized publications and is a member of many
international professional associations.
Mr. Roy M. Wolvin, Secretary-Treasurer and Director (since September
1995) of the Company. Prior to September 1995, Mr. Wolvin was Account
Manager, private business, for a Canadian chartered bank. Mr. Wolvin
holds a degree in Economics from the University of Western Ontario.
Mr. John L. Melikoff, Director (since September 1995) of the Company,
is portfolio manager for Interinvest Consulting Corporation, an
international private company specialized in fund management. He was,
from 1990 to 1991, a registered representative with McNeil Mantha and
from 1984 to 1989, with Prudential Bache Securities.
Dr. Colin B. Bier, Ph.D., Director (since December 1995) of the
Company, is a leading authority on toxicology and pharmaceutical and
biotechnological regulatory affairs and has extensive management
experience in the biomedical sector. Dr. Bier was formerly Vice-
President and Director of Toxicology at Bio-Research Laboratories,
President and Chief Executive Officer of ITR Laboratories and has
consulted, managed and been affiliated with numerous biochemical
enterprises .
Dr. J. Kenneth Harrington, Ph.D., Vice President and Director (since
January 1996) and Vice President, Global Business Development (since
June 1996) of the Company, has over 30 years of experience with 3M's
Life Sciences businesses, including the positions of Vice-President of
Riker Pharmaceuticals and Group Director of 3M's European
pharmaceutical divisions. Dr. Harrington is a named inventor on 42 US
patents, and has been involved in over 100 successful FDA filings.
<PAGE>
-29-
Dr. Iraj Beheshti, Ph.D., M.B.A., Vice President and Director of
Clinical Reference Laboratories. Dr. Beheshti was Co-Founder and
Director of Research and Development (1985-1988) and President and CEO
of London Diagnostics (1988-1993). Prior to that he was Senior
Scientist with Abbott Laboratories. Before joining NYMOX, Dr. Beheshti
was Director of Operations of Acute Care and Outpatient Laboratories
at the University of Minnesota Medical School. Dr. Beheshti is an
authority in the medical diagnostics field and in affairs dealing with
the U.S. Food and Drug Administration. He has been involved in the
successful development and commercialization of numerous products,
including 14 FDA approved diagnostic kits.
Directors are elected at each annual meeting for a term of office
until the next annual meeting. Executive officers are appointed by the
Board of Directors and serve at the pleasure of the Board. Other than
Dr. Averback, no other officer or director previously was affiliated
with DMS.
b) There are no family relationships between any director or executive
officer and any other director or executive officer.
<PAGE>
-30-
Item 12. Compensation of Officers and Directors
--------------------------------------
a) The table below provides compensation information for the fiscal year
ended December 31, 1996 for each executive officer of the Company and
for the directors and executive officers as a group.
SUMMARY COMPENSATION TABLE
(in Canadian dollars)
<TABLE>
<CAPTION>
Fiscal Year ended Fiscal Year ended
12/31/95 12/31/96
---------------------- -----------------------------
Name and Other Cash Other Cash
Principal Position Salary Compensation Salary Compensation
- ------------------ -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Dr. Paul Averback, $ 50,000 -- $100,000/(1)/ --
President and Director
Dr. Hossein A. Ghanbari, $ 90,000 -- $110,000/(2)/ --
Vice President and Director
Mr. Roy Wolvin, $ 14,700 -- $ 70,200 --
Secretary-Treasury and
Director
Dr. Iraj Beheshti, -- -- $122,000 --
Vice President, Director of
Clinical Reference
Laboratories
All directors and executive $154,700 -- $402,200 --
officers as a group
- ---------------------------------------
</TABLE>
(1) Dr. Averback's current annual salary is $150,000.
(2) Dr. Ghanbari's current annual salary is $144,000.
No stock options were granted by NYMOX in 1995. See "Options to
Purchase Securities" in Item 12 for stock options granted thereafter.
The Company does not currently have written employment contracts with
the above-named executive officers.
Directors of the Company are not paid any fee for board meeting
attendance but are reimbursed for expenses incurred in connection with
their office.
<PAGE>
-31-
(b) The Company does not have any pension plans or other type of plans
providing retirement or similar benefits for directors or executive
officers.
Item 13. Options to Purchase Securities from Registrant or Subsidiaries
--------------------------------------------------------------
There are no rights, warrants or options presently outstanding pursuant to
which additional common shares could be issued, with the exception of
options enabling certain directors, employees and consultants of NYMOX to
acquire common shares under the Company's stock option plan.
The Company has created a stock option plan (the "Plan") for its key
employees, its officers and directors and certain consultants. The Plan is
administered by the Board of Directors of the Company (the "Board"). The
Board may from time to time designate individuals to whom options to
purchase common shares of the Company be granted and the number of shares
to be optioned to each. The total number of common shares to be optioned
to any one individual cannot exceed 5% of the total issued and outstanding
shares and the maximum number of common shares which may be optioned under
the Plan cannot exceed 2,000,000 shares without shareholder approval.
The option price per share for common shares which are the subject of any
option shall be fixed by the Board when such option is granted and cannot
involve a discount to the market price at the time the option is granted.
The period during which an option is exercisable shall not exceed 10 years
from the date the option is granted. The options may not be assigned,
transferred or pledged and expire within three months of the termination
of employment and six months of the death of an individual.
Options to purchase up to 1,415,000 common shares were granted under the
Plan by the Board of Directors on January 17, 1996 ( the "Granting Date").
Of these, options to purchase 1,130,000 common shares were granted to
directors and officers of the Company and options to purchase 285,000
shares were granted to non-executive employees and consultants of the
Company. Specifically:
i) Options to purchase 645,000 common shares of the Company at a price of
CAN$3.25 per share were granted for a period of 10 years to a total of 11
beneficiaries, of which options to purchase a total of 10,000 common shares
have been exercised to date.
ii) One senior executive of the Company holds additional options to acquire
200,000 common shares of the Company at a price of CAN$3.25 per share
effective as of January 17, 1997, 1998 and 1999 (for a total of 600,000
additional shares), provided he still be associated with the Company.
<PAGE>
-32-
iii) Two directors of the Company were granted additional options to acquire
5,000 common shares of the Company, effective as of each of the first five
anniversary dates of the Granting Date (for a total of 25,000 additional
shares each), at the closing price of the common shares of the Company on
the Montreal Exchange on the trading day immediately preceding such
anniversary date, or at such other minimum price allowed by the regulatory
authorities having jurisdiction, provided they still be associated with the
Company. The first tranche of such options vested January 17, 1997,
entitling the option holders to purchase a total of 10,000 shares at a
price of CAN$13.75 per share.
iv) One director of the Company was granted additional options to acquire
20,000 common shares of the Company, effective as of each of the first four
anniversary dates of the Granting Date (for a total of 80,000 additional
shares), at the closing price of the common shares of the Company on the
Montreal Exchange on the trading day immediately preceding such anniversary
date, or at such other minimum price allowed by the regulatory authorities
having jurisdiction. The first tranche of this option vested on January
17, 1997, entitling the holder to purchase 20,000 shares at a price of
CAN$13.75 per share.
v) One senior executive of the Company was granted additional options to
acquire 10,000 common shares of the Company, effective as of each of the
first four anniversary dates of the Granting Date (for a total of 40,000
additional shares), at the closing price of the common shares of the
Company on the Montreal Exchange on the trading day immediately preceding
such anniversary date, or at such other minimum price allowed by the
regulatory authorities having jurisdiction.
All of the above options are effective for a period of 10 years from the
Granting Date. The options described in paragraphs ii) to v) are subject
to the approval of the Montreal Exchange.
In addition, on April 30, 1996, (A) options to purchase 115,000 common
shares of the Company at a price of CAN$11.50 per share were granted for a
period of 10 years to a total of 5 beneficiaries; (B) options to purchase
25,000 common shares of the Company at a price of CAN$15.50 per share were
granted on June 7, 1996 for a period of 10 years to one beneficiary. On
August 13, 1996, one consultant of the Company was granted options to
acquire 50,000 common shares of the Company for a period of ten years.
Those options presently are exercisable to the extent of 10,000 shares at a
price of CAN$16.75 per share. The options will become exercisable to the
extent of an additional 10,000 shares on each of the first four anniversary
dates of the granting date, provided the consultant remains active with the
Company on each such vesting date. The exercise price is determined as to
each block at the vesting date and equals the closing price of the common
shares of the Company on the Montreal Stock Exchange on the
<PAGE>
-33-
trading day immediately preceding such vesting date, or at such other
minimum price allowed by the regulatory authorities having jurisdiction.
Item 14. Interest of Management in Certain Transactions
----------------------------------------------
a) Dr. Paul Averback was the controlling shareholder of DMS. NYMOX
acquired all of the shares of DMS in September 1995 for a
consideration of 15,000,000 common shares of NYMOX, of which
13,093,559 were issued to Dr. Averback.
From time to time, Dr. Averback has advanced funds to NYMOX on an
interest free basis and without any specified date of repayment.
There have been no advances outstanding since CAN$43,658 was repaid to
Dr. Averback during the quarter ended March 31, 1996. During the last
three fiscal years, the highest aggregate advance outstanding from Dr.
Averback was CAN$43,658.
b) Dr. Hossein Ghanbari, a director and senior officer of the Company has
received a loan of CAN$56,000 from NYMOX to assist him in the purchase
of a home following his move from the United States to assume his
duties with the Company. This loan is interest free and has no fixed
terms of repayment.
PART II
Item 15. Description of Securities to be Registered
------------------------------------------
a) NYMOX's authorized capital is comprised of an unlimited number of
common shares of which 17,934,382 common shares are currently issued
and outstanding and 1,605,000 are reserved for issuance under NYMOX's
stock option plan. (See Item 12 "Options to Purchase Securities from
Registrant or Subsidiaries.")
Holders of common shares are entitled to receive notice of, and to
attend and vote at, all meetings of the shareholders of the Company.
Each share carries one vote at any meeting. Hence, holders of a
majority of common shares can elect all directors of the Company and
other shareholders would not be able to elect any other director.
Holders of common shares are entitled to dividends as and when
declared by the directors and, upon liquidation, to receive such
assets of the Company as may be distributable to such holders. The
common shares have no preemptive rights and are not convertible into
any other security. There is no sinking fund applicable to the common
shares and the holders are not subject to assessment by NYMOX.
<PAGE>
-34-
The registrar and transfer agents of NYMOX are Montreal Trust Company
of Canada at their Montreal office.
b) Not applicable.
c) Not applicable.
PART III
Item 15. Defaults upon Senior Securities
Not applicable.
Item 16. Changes in Securities and Changes in Security for Registered
Securities
Not applicable.
PART IV
Item 17. Financial Statements
Not applicable.
Item 18. Financial Statements
The financial statements listed in Item 19 are incorporated by reference in
this Item.
Item 19. Financial Statements and Exhibits
a) Financial statements (which appear after the signature page hereto):
At and For the year ended December 31, 1996:
Consolidated Balance Sheet -- December 31, 1996
Consolidated Statement of Earnings and Deficit
Consolidated Statements of Changes in Financial Position
Notes
At and For the Periods Ended July 31, 1995 and December 31, 1995:
<PAGE>
-35-
Auditors' Reports
Consolidated Balance Sheets -- July 31, 1995 and December 31, 1995
Consolidated Statements of Loss and Deficit for Five Months ended
December 31, 1995 and Twelve Months ended July 31, 1995
Consolidated Statements of Changes in Financial Position for
Five Months ended December 31, 1995 and Twelve Months
ended July 31, 1995
Notes to Consolidated Financial Statements
At and For the Periods Ended July 31, 1993 and 1994:
Auditors' Reports
Balance Sheets -- July 31, 1993 and 1994
Statements of Loss and Deficit for the years ended
July 31, 1993 and 1994
Statements of Changes in Financial Position for the years ended
July 31, 1993 and 1994
Notes
b) The list of exhibits contained in the Exhibit Index is incorporated by
reference and the exhibits listed therein are filed herewith.
<PAGE>
-36-
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
NYMOX PHARMACEUTICAL CORPORATION
(Registrant)
/s/ PAUL AVERBACK
------------------------------------------------
Title: President
Date: March 20, 1997
--------------
<PAGE>
Consolidated Financial Statements of
NYMOX PHARMACEUTICAL
CORPORATION
Periods ended December 31, 1996 and 1995
F-1
<PAGE>
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheet of Nymox Pharmaceutical
Corporation as at December 31, 1996 and the consolidated statements of earnings,
deficit and changes in financial position for the year then ended. These
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Corporation as at December 31,
1996 and the results of its operations and the changes in its financial position
for the year then ended in accordance with generally accepted accounting
principles.
The consolidated financial statements as at December 31, 1995 and for the five-
month period then ended were audited by other auditors who expressed an opinion
without reservation on these statements in their report dated January 22, 1996.
/s/KPMG
Chartered Accountants
Saint-Laurent, Canada
March 7, 1997
F-2
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Financial Statements
Periods ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Financial Statements
<S> <C>
Consolidated Balance Sheets............................... 1
Consolidated Statements of Earnings....................... 2
Consolidated Statements of Deficit........................ 3
Consolidated Statements of Changes in Financial Position.. 4
Notes to Consolidated Financial Statements................ 5
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Balance Sheets
December 31, 1996 and 1995
================================================================================
1996 1995
- --------------------------------------------------------------------------------
Assets
<S> <C> <C>
Current assets:
Cash $ 75,303 $ 284,920
Short-term investments 2,431,624 1,882,654
Accrued interest 76,293 --
Research tax credits receivable 240,000 --
Income taxes receivable 17,014 12,000
Prepaid expenses -- 44,523
Advance to director (note 2) 56,000 56,000
- --------------------------------------------------------------------------------
2,896,234 2,280,097
Capital assets (note 3) 1,317,973 366,155
- --------------------------------------------------------------------------------
$ 4,214,207 $ 2,646,252
================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 384,226 $ 119,639
Advance from a director -- 43,658
- --------------------------------------------------------------------------------
384,226 163,297
Shareholders' equity:
Capital stock (note 4) 9,302,691 4,022,641
Deficit (5,472,710) (1,539,686)
- --------------------------------------------------------------------------------
3,829,981 2,482,955
Commitments (note 5)
- --------------------------------------------------------------------------------
$ 4,214,207 $ 2,646,252
================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
On behalf of the Board:
/s/ Paul Averback
- ---------------------- Director
/s/ Roy Wolvin
- ---------------------- Director
F-4
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Statements of Earnings
Periods ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
=========================================================================================
1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
(12 months) (5 months)
Revenue:
Interest $ 226,940 $ --
Expenses:
Research and development 2,356,000 571,215
Less investment tax credits (240,000) --
---------------------------------------------------------------------------------------
2,116,000 571,215
General and administrative 1,751,073 130,688
Depreciation and amortization 78,906 1,400
Interest and bank charges 8,025 2,543
---------------------------------------------------------------------------------------
3,954,004 705,846
- -----------------------------------------------------------------------------------------
Loss before income taxes (3,727,064) (705,846)
Income taxes (note 6) 28,000 12,000
- -----------------------------------------------------------------------------------------
Net loss $(3,699,064) $ (693,846)
=========================================================================================
- -----------------------------------------------------------------------------------------
Loss per share $ (0.21) $ (0.04)
=========================================================================================
- -----------------------------------------------------------------------------------------
Weighted average number of common shares outstanding 17,654,862 16,432,958
=========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Statements of Deficit
Periods ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
=========================================================================================
1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
(12 months) (5 months)
Deficit, beginning of period $(1,539,686) $ (636,043)
Net loss (3,699,064) (693,846)
Share issue costs (233,960) (209,797)
- -----------------------------------------------------------------------------------------
Deficit, end of period $(5,472,710) $(1,539,686)
=========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Statements of Changes in Financial Position
Periods ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
=========================================================================================
1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
(12 months) (5 months)
Cash provided by (used in):
Operations:
Net loss $(3,699,064) $ (693,846)
Item not involving cash:
Depreciation and amortization 78,906 1,400
Net change in non-cash operating working capital items (55,855) (70,815)
---------------------------------------------------------------------------------------
(3,676,013) (763,261)
Financing:
Issuance of capital stock 5,280,050 3,157,271
Share issue costs (233,960) (209,797)
---------------------------------------------------------------------------------------
5,046,090 2,947,474
Investment:
Additions to capital assets (1,030,724) (28,602)
- -----------------------------------------------------------------------------------------
Increase in cash and short-term investments 339,353 2,155,611
Cash and short-term investments, beginning of period 2,167,574 11,963
- -----------------------------------------------------------------------------------------
Cash and short-term investments, end of period $ 2,506,927 $ 2,167,574
=========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Periods ended December 31, 1996 and 1995
================================================================================
Nymox Pharmaceutical Corporation (the "Corporation"), incorporated under the
Canada Business Corporations Act, is a development stage biomedical
corporation which specializes in the research and development of neurological
diagnostics and pharmaceuticals for the aging population, with an emphasis on
Alzheimer's disease.
The Corporation was listed on the Montreal Exchange on December 18, 1995, and
has recently filed a registration statement with the Securities and Exchange
Commission to list its shares on a US Exchange.
1. Significant accounting policies:
(a) Consolidation:
The consolidated financial statements of the Corporation have been
prepared under Canadian generally accepted accounting principles and
include the accounts of its wholly-owned US subsidiary. Significant
intercompany balances and transactions have been eliminated on
consolidation.
(b) Short-term investments:
The Corporation's portfolio of short-term investments does not include
equity securities and consists principally of government securities and
commercial paper with original maturities of less than three months,
and are recorded at the lower of cost or market value.
(c) Capital assets:
Capital assets are recorded at cost, net of related investment tax
credits. Depreciation and amortization are provided using the following
methods and annual rates:
<TABLE>
<CAPTION>
=======================================================================
Asset Method Rate
-----------------------------------------------------------------------
<S> <C> <C>
Computer software and equipment Straight-line 20%
Laboratory equipment Straight-line 20%
Office equipment and fixtures Straight-line 20%
=======================================================================
</TABLE>
The capitalized amount with respect to patents relates to direct costs
incurred in connection with securing the patents. The cost of the
patents does not necessarily reflect their present or future value and
the amount ultimately recoverable is dependent upon the successful
commercialization of the related products. Accordingly, patents will be
amortized using the straight-line method commencing in the year of
commercial production of the developed products. The capitalized amount
will be amortized over the remaining years of the initial 17-year life
of the patent.
F-8
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Periods ended December 31, 1996 and 1995
===============================================================================
1. Significant accounting policies:
(d) Research and development expenditures:
Research and development expenditures, net of research and investment
tax credits, are expensed as incurred.
(e) Foreign exchange:
The Corporation's foreign subsidiary is considered to be an integrated
foreign operation. Foreign denominated monetary assets and liabilities
of the Canadian and foreign operations are translated at the rates of
exchange prevailing at the balance sheet dates. Other assets and
liabilities denominated in foreign currencies are translated at the
exchange rates prevailing when the assets were acquired or the
liabilities incurred. Sales and expenses are translated at the average
exchange rate prevailing during the year, except for depreciation and
amortization which are translated at the same rates as those used in the
translation of the corresponding assets. Foreign exchange gains and
losses are included in the determination of net earnings.
(f) Loss per share:
The loss per share amounts have been calculated using the weighted
average number of common shares outstanding during the year.
(g) Comparative figures:
Certain of the 1995 figures have been reclassified to conform to the
presentation adopted in the current year.
2. Advance to director:
Advance to director is non-interest bearing and has no specified terms of
repayment.
F-9
<PAGE>
<TABLE>
<CAPTION>
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Periods ended December 31, 1996 and 1995
===================================================================================================
3. Capital assets:
===============================================================================================
1996
-----------------------------------------------------------------------------------------------
Accumulated Net book
Cost depreciation value
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computer software and
equipment $ 43,502 $ 5,202 $ 38,300
Laboratory equipment 704,129 73,221 630,908
Office equipment and
fixtures 18,810 1,882 16,928
Patents 631,836 -- 631,836
Intellectual property rights 1 -- 1
-----------------------------------------------------------------------------------------------
$1,398,278 $ 80,305 $1,317,973
===============================================================================================
1995
-----------------------------------------------------------------------------------------------
Accumulated Net book
Cost depreciation value
-----------------------------------------------------------------------------------------------
Computer software and
equipment $ 8,533 $ -- $ 8,533
Laboratory equipment 14,080 1,400 12,680
Patents 344,941 -- 344,941
Intellectual property rights 1 -- 1
-----------------------------------------------------------------------------------------------
$ 367,555 $ 1,400 $ 366,155
===============================================================================================
4. Capital stock:
Authorized:
An unlimited number of common shares
===============================================================================================
1996 1995
-----------------------------------------------------------------------------------------------
Issued and outstanding:
17,929,382 common shares (1995 - 17,047,082) $9,302,691 $4,022,641
===============================================================================================
</TABLE>
F-10
<PAGE>
<TABLE>
<CAPTION>
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Periods ended December 31, 1996 and 1995
==========================================================================================================
4. Capital stock (continued):
(a) Changes in the Corporation's capital stock for the last two fiscal periods are presented below:
=================================================================================================
Shares Dollars
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Issued and outstanding, August 1, 1995 15,000,000 $ 865,370
Issue of common shares in connection with the
Monterey transaction (b) 468,447 1
Issue of common shares for cash (c) 1,578,635 3,157,270
-------------------------------------------------------------------------------------------------
Balance, December 31, 1995 17,047,082 4,022,641
Issue of common shares for cash (c) 877,300 5,263,800
Issue of common shares pursuant to exercise of
stock options 5,000 16,250
-------------------------------------------------------------------------------------------------
Balance, December 31, 1996 17,929,382 $9,302,691
=================================================================================================
</TABLE>
(b) During fiscal 1995, the Corporation acquired a controlling interest in
Monterey Capital Inc. ("Monterey"), an unaffiliated public company
listed on the Montreal Stock Exchange for a cash consideration of
$383,000. Monterey was then amalgamated with a newly-organized wholly-
owned subsidiary of the Corporation and 468,447 common shares of the
Corporation were issued to the minority shareholders of Monterey for a
nominal consideration of $1. Concurrently, the shares of the
amalgamated company carrying on the business of Monterey were sold to
an unrelated person for the same amount as paid by the Corporation. The
sale of the amalgamated company did not give rise to a gain or loss
since the sale price was equal to the carrying value of the investment.
The 1995 consolidated financial statements do not include any results
of the operations of the Monterey business.
(c) Private placements:
The Corporation completed a private placement of 877,300 shares at a
price of $6.00/share in 1996 for aggregate gross proceeds of
$5,263,800. A private placement of 1,578,635 shares at a price of
$2.00/share was completed in 1995. The share issue costs related to
these private placements have been charged against the deficit.
F-11
<PAGE>
<TABLE>
<CAPTION>
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Periods ended December 31, 1996 and 1995
================================================================================
4. Capital stock (continued):
(d) Stock options:
The Corporation has established a stock option plan (the "Plan") for
its key employees, its officers and directors, and certain consultants.
The Plan is administered by the Board of Directors of the Corporation.
The Board may from time to time designate individuals to whom options
to purchase common shares of the Corporation may be granted, the number
of shares to be optioned to each, and the option price per share. The
option price per share cannot involve a discount to the market price at
the time the option is granted. The total number of shares to be
optioned to any one individual cannot exceed 5% of the total issued and
outstanding shares and the maximum number of shares which may be
optioned under the Plan cannot exceed 2,000,000 common shares without
shareholder approval.
Changes in outstanding options were as follows for the last two fiscal
periods:
======================================================================
Stock options
----------------------------------------------------------------------
<S> <C>
Balance, August 1, 1995 and December 31, 1995 --
Granted 1,605,000
Exercised (5,000)
Cancelled (25,000)
----------------------------------------------------------------------
Balance, December 31, 1996 1,575,000
======================================================================
Subsequent to year end, an additional 5,000 stock options were
exercised at a price of $3.25.
</TABLE>
F-12
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Periods ended December 31, 1996 and 1995
================================================================================
4. Capital stock (continued):
(d) Stock options (continued):
At December 31, 1996, options outstanding were as follows:
<TABLE>
<CAPTION>
========================================================================
Options outstanding Exercise price per share Expiry date
------------------------------------------------------------------------
<S> <C> <C>
115,000 $11.50 2006
1,240,000 $3.25 (i) 2006 - 2009
10,000 $16.75 2006
210,000 Fair value at anniversary date (ii) 2007 - 2011
------------------------------------------------------------------------
1,575,000
========================================================================
</TABLE>
(i) These options are effective and exercisable as follows:
========================================================================
<TABLE>
<CAPTION>
<S> <C>
Currently 640,000
1997 200,000
1998 200,000
1999 200,000
--------------------------------------------------------------------
1,240,000
====================================================================
</TABLE>
(ii) These options become vested at various dates over the next five
years at prices equal to the closing price on the trading date
immediately preceding the vesting date. The options vest as follows:
====================================================================
<TABLE>
<CAPTION>
<S> <C>
1997 50,000
1998 50,000
1999 50,000
2000 50,000
2001 10,000
--------------------------------------------------------------------
210,000
====================================================================
</TABLE>
On January 17, 1997, 40,000 options became vested at an exercise
price of $13.75 per share.
F-13
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Periods ended December 31, 1996 and 1995
===============================================================================
5. Commitments:
(a) Operating leases:
The Corporation is committed under operating leases expiring in 1997 for
office space in the amount of approximately $187,000.
(b) Research funding:
The Corporation is committed to make research grants to an unrelated
medical facility in the U.S. in the aggregate amount of approximately
$1,476,000 (US$1,085,000) in each of the next five years and thereafter,
as follows:
========================================================================
<TABLE>
<CAPTION>
<S> <C>
1997 $ 482,000
1998 234,000
1999 234,000
2000 234,000
2001 234,000
Thereafter 58,000
=========================================================================
$ 1,476,000
=========================================================================
</TABLE>
The Corporation has an exclusive license to patents from this facility
covering rights to AD7C diagnostics and therapeutics. Under this license,
the medical facility benefits from research funding and collaboration
from the Corporation and is entitled to royalties of 4% on worldwide
sales of the AD7C Test.
During the period ended December 31, 1996, an amount of approximately
US$200,000 (1995 - US$175,000) was paid and expensed in connection with
the research grant described above.
(c) License agreement:
The Corporation has signed a non-exclusive license agreement with a
European company to sell and perform the AD7C Test in Europe. The
agreement entitles the Corporation to a 7% royalty on European sales of
the AD7C Test as well as a minimum of US$750 for each test performed and
billed to a client. The initial term of the agreement extends to December
31, 1998, and is subject to renewal thereafter based on certain terms and
conditions.
F-14
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Periods ended December 31, 1996 and 1995
================================================================================
6. Income taxes:
Details of the components of income taxes are as follows:
<TABLE>
<CAPTION>
=============================================================================
1996 1995
-----------------------------------------------------------------------------
<S> <C> <C>
Loss before income taxes $(3,727,064) $(705,846)
Basic income tax rate 38.0% 38.0%
------------------------------------------------------------------------------
Income tax recovery at statutory rates 1,416,000 268,000
Adjustments in income taxes resulting from:
Non-recognition of losses (1,091,000) (201,000)
Non-recognition of other unclaimed deductions (325,000) (67,000)
Credit for losses 28,000 12,000
------------------------------------------------------------------------------
Income taxes $ 28,000 $ 12,000
==============================================================================
</TABLE>
The Corporation has losses carried forward and accumulated scientific research
and development expenditures which are available to reduce future years'
taxable income. The related income tax benefit of these items will be recorded
in earnings when realized. These expire as follows:
<TABLE>
<CAPTION>
==============================================================================
Federal Provincial
------------------------------------------------------------------------------
<S> <C> <C>
Losses:
1997 $ 11,000 $ 11,000
1998 40,000 40,000
1999 36,000 36,000
2000 59,000 59,000
2001 377,000 --
2002 531,000 --
2003 1,321,000 --
Scientific research and development expenditures:
Indefinitely 2,126,000 2,627,000
==============================================================================
</TABLE>
In addition, the Corporation's US subsidiary has losses carried forward of
approximately US$450,000 which expire in 2011.
F-15
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Periods ended December 31, 1996 and 1995
================================================================================
6. Income taxes (continued):
The Corporation also has investment tax credits available in the amount of
approximately $467,000 available to reduce future years' federal taxes
payable. The benefit of these credits will be recorded when realized. These
credits will expire as follows:
================================================================================
2007 $425,000
2006 42,000
================================================================================
7. Fair values:
The Corporation has determined that the carrying value of its short-term
financial assets and liabilities, including cash and short-term investments,
accrued interest, other receivables, advance to director and accounts
payable and accrued liabilities, approximate fair value due to the immediate
or short-term maturity of these financial instruments.
8. Canadian/U.S. Reporting Differences:
(a) Consolidated statements of earnings:
The reconciliation of earnings reported in accordance with Canadian GAAP
with U.S. GAAP is as follows:
<TABLE>
<CAPTION>
===========================================================================
1996 1995
---------------------------------------------------------------------------
<S> <C> <C>
Net loss, Canadian GAAP $(3,699,064) $ (693,846)
Adjustments:
Realized loss on sale of Monterey (i) -- (936,894)
Amortization of patents (ii) (39,166) (8,454)
---------------------------------------------------------------------------
Net loss, U.S. GAAP $(3,738,230) $(1,639,194)
===========================================================================
---------------------------------------------------------------------------
Loss per share, U.S. GAAP $ (0.21) $ (0.11)
===========================================================================
</TABLE>
F-16
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Periods ended December 31, 1996 and 1995
================================================================================
8. Canadian/U.S. Reporting Differences (continued):
(b) Consolidated shareholders' equity:
The reconciliation of shareholders' equity reported in accordance with
Canadian GAAP with U.S. GAAP is as follows:
<TABLE>
<CAPTION>
==================================================================================
1996 1995
----------------------------------------------------------------------------------
<S> <C> <C>
Shareholders' equity, Canadian GAAP $3,829,981 $ 2,482,955
Adjustments:
Realized loss on sale of Monterey (i) -- (936,894)
Amortization of patents (ii):
Cumulative effect to beginning of the period (91,440) (82,986)
Current period (39,166) (8,454)
--------------------------------------------------------------------------------
Increase in deficit (130,606) (1,028,334)
Fair value of shares issued to minority shareholders -
increase in capital stock (i) -- 936,894
----------------------------------------------------------------------------------
Shareholders' equity, U.S. GAAP $3,699,375 $ 2,391,515
==================================================================================
</TABLE>
(i) Under U.S. GAAP, the Monterey transaction referred to in note 4 (b)
would be accounted for as an acquisition of Monterey for
consideration comprising cash of $383,000 and common shares of the
Corporation having a fair value of $936,894. Accordingly, the
subsequent sale of Monterey for cash of $383,000 results in a
realized loss of $936,894 under U.S. GAAP.
(ii) In accordance with APB Opinion 17, Intangible Assets, the patents
are amortized using the straight-line method over 17 years, the
legal life of the patent, from the date the patent was secured.
F-17
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Periods ended December 31, 1996 and 1995
================================================================================
8. Canadian/U.S. Reporting Differences (continued):
(c) Other disclosures required by United States GAAP:
(1) Development stage company:
The Corporation is in the process of developing unique patented
products which are subject to approval of regulatory authorities.
The Corporation has completed the research and discovery phase of
its Alzheimer's diagnostic AD7C Test and anticipates that it will be
seeking regulatory approval in 1997 to permit the Company to sell an
AD7C test kit to laboratories. It has not had any revenues to date
on the sale of any of its products under development. Accordingly,
the Corporation is a development stage company as defined in
Statement of Financial Accounting Standards No. 7 and the following
disclosures are required:
<TABLE>
<CAPTION>
====================================================================================
Cumulative Cumulative
since the date of since the date of
inception of inception of
the Corporation the Corporation
to December 31, to December 31,
1996 1995
------------------------------------------------------------------------------------
<S> <C> <C>
Interest revenue $ 226,940 $ -
Gross research and development expenditures 3,545,627 1,189,627
Other expenses 2,963,291 1,180,596
Income taxes recovered (40,000) (12,000)
Cash inflow (outflow):
Operating activities (5,890,622) (2,214,609)
Investing activities (1,398,279) (367,555)
Financing activities 9,795,828 4,749,738
====================================================================================
</TABLE>
F-18
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Periods ended December 31, 1996 and 1995
- --------------------------------------------------------------------------------
8. Canadian/U.S. Reporting Differences (continued):
(c) Other disclosures required by United States GAAP (continued):
(1) Development stage company (continued):
The statement of shareholders' equity since date of inception is
presented below.
<TABLE>
<CAPTION>
========================================================================================================
Consideration
----------------------- Accumulated
Shares Cash Other Deficit Total
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended July 31, 1990:
Common shares issued 2,500,000 $ 200,000 $ -- $ -- $ 200,000
Net loss -- -- -- (126,719) (126,719)
------------------------------------------------------------------------------------------------------
Balance, July 31, 1990 2,500,000 200,000 -- (126,719) 73,281
Year ended July 31, 1991:
Net loss -- -- -- (24,827) (24,827)
------------------------------------------------------------------------------------------------------
Balance, July 31, 1991 2,500,000 200,000 -- (151,546) 48,454
Year ended July 31, 1992:
Common shares issued 9,375 37,500 -- -- 37,500
Net loss -- -- -- (53,112) (53,112)
------------------------------------------------------------------------------------------------------
Balance, July 31, 1992 2,509,375 237,500 -- (204,658) 32,842
Year ended July 31, 1993:
Common shares issued 201,250 205,000 -- -- 205,000
Common shares cancelled (500,000) -- -- -- --
Net loss -- -- -- (48,862) (48,862)
------------------------------------------------------------------------------------------------------
Balance, July 31, 1993 2,210,625 442,500 -- (253,520) 188,980
Year ended July 31, 1994:
Common shares issued 2,500 10,000 -- -- 10,000
Net loss -- -- -- (71,668) (71,668)
------------------------------------------------------------------------------------------------------
Balance, July 31, 1994 2,213,125 452,500 -- (325,188) (127,312)
Year ended July 31, 1995:
Common shares issued 78,078 412,870 -- -- 412,870
Net loss -- -- -- (393,841) (393,841)
------------------------------------------------------------------------------------------------------
Balance, July 31, 1995 2,291,203 865,370 -- (719,029) (146,341)
Period ended December 31, 1995:
Adjustment necessary to
increase the number of
common shares 12,708,797 -- -- -- --
------------------------------------------------------------------------------------------------------
Adjusted number of
common shares 15,000,000 865,370 -- (719,029) 146,341
Common shares issued 2,047,082 3,157,271 936,894 -- 4,094,165
Net loss -- -- -- (1,639,194) (1,639,194)
Share issue costs -- -- -- (209,797) (209,797)
------------------------------------------------------------------------------------------------------
Balance,
December 31, 1995 17,047,082 4,022,641 936,894 (2,568,020) 2,391,515
Year ended December 31, 1996:
Common shares issued 882,300 5,280,050 -- -- 5,280,050
Net loss -- -- -- (3,738,230) (3,738,230)
Share issue costs -- -- -- (233,960) (233,960)
-------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 17,929,382 $9,302,691 $936,894 $ (6,540,210) $(3,699,375)
=======================================================================================================
</TABLE>
F-19
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
===============================================================================
Periods ended December 31, 1996 and 1995
8. Canadian/U.S. Reporting Differences (continued):
(c) Other disclosures required by United States GAAP (continued):
(2) Income taxes:
In accordance with Statement of Financial Accounting Standards No.
109, the income tax effect of temporary differences that give rise
to the net deferred tax asset are presented below:
<TABLE>
<CAPTION>
=============================================================================================
1996 1995
---------------------------------------------------------------------------------------------
<S> <C> <C>
Scientific research and experimental development $ 853,000 $ --
Non-capital losses 704,000 508,000
Share issue costs 89,000 --
Less valuation allowance (1,646,000) (508,000)
---------------------------------------------------------------------------------------------
Net deferred tax asset $ -- $ --
=============================================================================================
</TABLE>
There are no material deferred tax liabilities.
(3) Stock-based compensation:
The Corporation applies APB Opinion 25, Accounting for Stock Issued
to Employees, in accounting for its stock option plan, and
accordingly, no compensation cost has been recognized for its stock
options in the financial statements. Had compensation cost for the
Corporation's stock option plan been determined based on the fair
value at the grant dates for awards under the plan consistent with
the method of FASB Statement 123, Accounting for Stock-Based
Compensation, the Corporation's net earnings and loss per share
would have been adjusted to the pro forma amounts indicated below
for US GAAP:
<TABLE>
<CAPTION>
=============================================================================================
1996
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net loss As reported (US GAAP) $(3,738,230)
Pro Forma (5,833,896)
Loss per share As reported (US GAAP) $ (0.21)
Pro Forma (0.32)
=============================================================================================
</TABLE>
F-20
<PAGE>
Auditors' report
To the Directors of
Nymox Pharmaceutical Corporation
We have audited the consolidated balance sheet of Nymox Pharmaceutical
Corporation as at December 31, and July 31, 1995 and the consolidated statements
of loss and deficit and of changes in financial position for the five-month
period ended December 31, 1995 and the twelve-month period ended July 31, 1995.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Corporation as at December 31,
and July 31, 1995 and the results of its operations and the changes in its
financial position for the five-month period ended December 31, 1995 and the
twelve-month period ended July 31, 1995 in accordance with Canadian generally
accepted accounting principles (which differ in certain material respects from
accounting principles generally accepted in the U.S. (Notes 10 and 11)).
/s/DELOITTE & TOUCHE
Chartered Accountants
Montreal, Quebec, Canada
January 22, 1996
F-21
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Consolidated statement of loss and deficit
five-month period ended December 31, 1995
(in Canadian dollars)
================================================================================
December 31 July 31
1 9 9 5 1 9 9 5
- --------------------------------------------------------------------------------
(5 months) (12 months)
<TABLE>
<CAPTION>
<S> <C> <C>
Expenses
Research and development $ 571,215 $ 371,939
General and administrative 134,631 5,631
------------ -----------
Loss before income taxes 705,846 377,570
Income taxes currently recoverable (Note 5) (12,000) -
------------ -----------
Net loss 693,846 377,570
Deficit, beginning of period 636,043 258,473
Share issue costs 209,797 -
------------ -----------
Deficit accumulated during the development
stage, end of period $ 1,539,686 $ 636,043
============ ===========
Loss per share $ 0.04 $ 0.03
============ ===========
</TABLE>
F-22
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Consolidated balance sheet
as at December 31, 1995
(in Canadian dollars)
================================================================================
December 31 July 31
1 9 9 5 1 9 9 5
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 2,167,574 $ 11,963
Advance to a director 56,000 -
Prepaid expenses and deposits 44,523 -
------------ -----------
2,268,097 11,963
Capital assets (Note 4) 366,155 338,953
------------ -----------
$ 2,634,252 $ 350,916
============ ===========
Current liabilities
Accounts payable and accrued liabilities $ 107,639 $ 77,931
Advance from a director 43,658 43,658
------------ -----------
151,297 121,589
------------ -----------
Shareholders' equity
Capital stock (Note 6) 4,022,641 865,370
Deficit accumulated during the
development stage (1,539,686) (636,043)
------------ -----------
2,482,955 229,327
------------ -----------
$ 2,634,252 $ 350,916
============ ===========
</TABLE>
F-23
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Consolidated statement of changes in financial position
five-month period ended December 31, 1995
(in Canadian dollars)
================================================================================
December 31 July 31
1 9 9 5 1 9 9 5
- --------------------------------------------------------------------------------
(5 months) (12 months)
<TABLE>
<CAPTION>
<S> <C> <C>
Operating Activities
Net loss $ (693,846) $ (377,570)
Item not affecting cash
Amortization 1,400 -
Changes in non-cash working capital items (70,815) 76,213
------------ -----------
(763,261) (301,357)
------------ -----------
Investing activities
Acquisition of capital assets (28,602) (99,550)
------------ -----------
Financing activities
Issue of shares 3,157,271 412,870
Share issue costs (209,797) -
------------ -----------
2,947,474 412,870
------------ -----------
Net cash inflow 2,155,611 11,963
Cash, beginning of period 11,963 -
------------ -----------
Cash, end of period $ 2,167,574 $ 11,963
============ ===========
</TABLE>
F-24
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to the consolidated financial statements
five-month period ended December 31, 1995
(in Canadian dollars)
================================================================================
1. Status and nature of activities
Nymox Pharmaceutical Corporation (the "Corporation") was incorporated under
the Canada Business Corporations Act on May 30, 1995 and became a public
company under applicable security laws in December 1995. The Corporation had
no operations from its date of incorporation through to the acquisition as
described below. The year-end of the Corporation has been changed from July
31 to December 31.
The Corporation was formed for the purpose of acquiring all of the common
shares of DMS Pharmaceutical Inc. (DMS), a private company carrying on
research and development in the field of neurological diagnostics and
pharmaceuticals for the aging population. This acquisition was completed
during September 1995 for a consideration of 15,000,000 common shares of the
Corporation, resulting in the shareholders of DMS owning substantially all
the shares of the Corporation. This transaction was accounted for under the
purchase method with DMS as the accounting acquirer.
Immediately following the acquisition, the Corporation acquired from two
shareholders, who are unrelated to the Corporation, a controlling interest
in Monterey Capital Inc. ("Monterey"), a public company, for cash of
$383,000. The purchase price was determined through negotiations between the
parties. Monterey was then amalgamated with a wholly-owned subsidiary of the
Corporation with the result that the non-controlling shareholders of
Monterey received 468,447 common shares of the Corporation. The transaction
was accounted for as a share issuance of the Corporation for nominal
consideration of $1. It was not considered to be part of the acquisition and
sale of Monterey, as that transaction was an intermediary step in meeting
the objective of rendering the Corporation a public company. Concurrently,
the shares of the amalgamated company carrying on the business of Monterey
were sold to one of the shareholders from which the Corporation acquired the
controlling interest for cash of $383,000. The sale of the amalgamated
company did not give rise to a gain or loss, since the sale price was equal
to its carrying value.
The consolidated financial statements do not include any results of
operations of the Monterey business.
F-25
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to the consolidated financial statements
five-month period ended December 31, 1995
(in Canadian dollars)
================================================================================
2. Basis of presentation
The accompanying consolidated financial statements have been prepared under
Canadian generally accepted accounting principles and present the historical
financial information of the business of DMS described above as though it
had been carried on by the Corporation as a legal entity since August 1,
1989.
3. Significant accounting policies
Consolidation
The consolidated financial statements have been prepared in accordance with
Canadian generally accepted accounting principles and include the accounts
of the Corporation and its wholly-owned subsidiary. Significant intercompany
balances and transactions have been eliminated on consolidation.
Research and development
The Corporation incurs costs which relate to the research and development of
neurological diagnostics and pharmaceuticals for the aging population. Such
costs, net of any government grants and investment tax credits where
applicable, are expensed as incurred. The Corporation has not received any
grants or investment tax credits in the periods ended July 31, and December
31, 1995.
Cash and cash equivalents
Cash and cash equivalents represent unrestricted cash and highly liquid
investments with a maturity of three months or less.
F-26
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to the consolidated financial statements
five-month period ended December 31, 1995
(in Canadian dollars)
================================================================================
3. Significant accounting policies (continued)
Capital assets
Capital assets are recorded at cost. Amortization, which is applied to cost
less residual value, is computed using the following methods and rates:
<TABLE>
<CAPTION>
<S> <S> <C>
Computer software and equipment Straight-line 20%
Equipment Straight line 20%
Patents Over the years remaining
of the initial 17-year
life of the patent,
beginning in the year of
commercial production of
the developed products
</TABLE>
The capitalized amounts with respect to patents relate to direct costs
incurred in connection with securing patents.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
4. Capital assets
December 31 July 31
1 9 9 5 1 9 9 5
Accumulated
Cost amortization Net book value
---------- ------------ -------------------------
Computer software
and equipment $ 8,533 $ - $ 8,533 $ -
Equipment 14,080 1,400 12,680 12,576
Patents 344,941 - 344,941 326,376
Intellectual
property rights 1 - 1 1
---------- ---------- ---------- ----------
$ 367,555 $ 1,400 $ 366,155 $ 338,953
========== ========== ========== ==========
</TABLE>
F-27
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to the consolidated financial statements
five-month period ended December 31, 1995
(in Canadian dollars)
================================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
5. Income taxes
December 31 July 31
1 9 9 5 1 9 9 5
(5 months) (12 months)
Income tax recovery at
statutory rates $ (269,615) $ (143,477)
Non-recognition of losses 257,615 143,477
----------- -----------
Income taxes currently
recoverable $ (12,000) $ -
=========== ===========
</TABLE>
The Corporation and its subsidiary have losses carried forward totalling
approximately $1,338,000, which are available to reduce future years'
taxable income. The benefits of the losses carried forward have not been
reflected in these financial statements. These losses expire as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 113,000
1997 11,000
1998 40,000
1999 36,000
2000 59,000
2001 377,000
2002 702,000
</TABLE>
The Corporation has investment tax credits available, which expire in the
year 2005, in the amount of approximately $40,000, the benefits of which
have not been recorded in these financial statements. If recognized in the
future, the benefit of the investment tax credits will be recorded as a
reduction of the related expense or asset, as appropriate.
<TABLE>
<CAPTION>
6. Capital stock
All share information has been presented as if the acquisition of DMS (see
Note 1) took place August 1, 1989.
Authorized
An unlimited number of common shares
<S> <C> <C>
December 31 July 31
1 9 9 5 1 9 9 5
Issued and outstanding
17,047,082 common shares
(July 31, 1995 - 15,000,000) $ 4,022,641 $ 865,370
=========== ===========
</TABLE>
F-28
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to the consolidated financial statements
five-month period ended December 31, 1995
(in Canadian dollars)
================================================================================
6. Capital stock (continued)
The events more fully described in Note 1 to these financial statements were
completed with the following share transactions:
A total of 15,000,000 common shares were issued in exchange for all of the
issued and outstanding shares of DMS. Such shares were recorded in these
financial statements at $865,370, which is an amount equal to the book
value of the DMS shares.
A total of 468,447 common shares were issued in connection with the
Monterey transactions. The shares were recorded at $1.
During September 1995, the Corporation issued 1,578,635 common shares for
cash consideration of $3,157,270.
Loss per share
The weighted average number of common shares outstanding during the five-
month period ended December 31, 1995 and the twelve-month period ended July
31, 1995 used to calculate the loss per share was 16,432,958 and 15,000,000,
respectively.
Options
During the period ended December 31, 1995, the Corporation adopted a plan to
grant options to acquire common shares to its employees, consultants,
officers and directors at prices and expiry dates to be determined by the
board of directors. The maximum number of shares issuable in respect of the
options is 2,000,000 common shares. No options were granted prior to
December 31, 1995.
7. Subsequent event
On January 17, 1996, the Corporation granted options to acquire 1,245,000
common shares at a price of $3.25 per share and exercisable to 2006.
In addition, the Board of Directors has granted options to acquire a total
of 170,000 common shares, which become vested at various dates over the next
five years at prices equal to the closing price of the common shares on the
Montreal Exchange at the date of vesting and are exercisable to 2006.
F-29
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to the consolidated financial statements
five-month period ended December 31, 1995
(in Canadian dollars)
================================================================================
8. Commitments
(i) Leased premises
The Corporation leases its Canadian premises under an operating lease
which expires on August 31, 1996 and which is renewable for a period
of one year under the same terms and conditions.
Future lease payments will aggregate $176,000 including the following
amounts over the next two years, as follows:
1996 $106,000
1997 70,000
The rent expense incurred in the period ended December 31, 1995 was
$44,165 and nil for the year ended July 31, 1995.
(ii) Research funding
The Corporation is committed to make annual research grants to an
unrelated medical facility in the US in the amounts of US$200,000 and
US$225,000 in 1996 and 1997, respectively. The Corporation has an
exclusive license to patents from this facility covering rights to
AD7C diagnostics. Under this license, the medical facility benefits
from research funding and collaboration from the Corporation and is
entitled to royalties of 4% on worldwide sales of the AD7C test.
During the period ended December 31, 1995, an amount of approximately
US$175,000 was paid and expensed in connection with the research grant
described above.
9. Comparative figures
Certain comparative figures have been reclassified to conform with the
presentation adopted in the current period.
F-30
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to the consolidated financial statements
five-month period ended December 31, 1995
(in Canadian dollars)
================================================================================
10. Canadian GAAP reconciliations with US GAAP
<TABLE>
<CAPTION>
(a) Reconciliation of earnings reported in accordance with Canadian GAAP
with United States GAAP.
<S> <C> <C>
December 31 July 31
1 9 9 5 1 9 9 5
(5 months) (12 months)
Net loss - Canadian GAAP $ 693,846 $ 377,570
Realized loss on sale of
Monterey (i) 936,894 -
Amortization of patents 8,454 16,271
--------- --------
Net loss - US GAAP $ 1,639,194 $ 393,841
========= ========
Loss per share - US GAAP (iii) $ 0.11 $ 0.03
========= ========
</TABLE>
(b) Reconciliation of shareholders' equity reported in accordance with
Canadian GAAP with US GAAP.
<TABLE>
<CAPTION>
<S> <C> <C>
December 31 July 31
1 9 9 5 1 9 9 5
(5 months) (12 months)
Shareholders' equity - Canadian GAAP $ 2,482,955 $ 229,327
---------- --------
Realized loss on sale of
Monterey (i) (936,894) -
Amortization of Patents (ii)
Cumulative effect to beginning of
the period (82,986) (66,715)
Current period (8,454) (16,271)
---------- --------
Increase in deficit (1,028,334) (82,986)
---------- --------
Fair value of shares issued to
minority shareholders - increase
in capital stock value (i) 936,894 -
---------- --------
Shareholders' equity - US GAAP $ 2,391,515 $ 146,341
========== ========
</TABLE>
F-31
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to the consolidated financial statements
five-month period ended December 31, 1995
(in Canadian dollars)
================================================================================
10. Canadian GAAP reconciliations with US GAAP (continued)
(i) In accordance with US GAAP, the Monterey transactions described in
note 1 would be accounted for, under the purchase method, as an
acquisition of 100% of Monterey for consideration comprising cash
of $383,000 and common shares of the company having a fair value of
$936,894. The sale of Monterey for cash of $383,000 results in a
realized loss of $936,894.
(ii) In accordance with APB 17, Intangible Assets, the Patents are
amortized on the straight-line basis over 17 years, the legal life
of the patent, from the date the patent was secured.
11. Other disclosures required under US GAAP
(a) Development stage company
The Corporation specializes in the research and development of
neurological diagnostics and pharmaceuticals for the aging population
with emphasis on Alzheimer's disease. The Corporation is in the process
of developing unique patented products which are subject to approval of
regulatory authorities. The Corporation has completed the research and
discovery phase of its Alzheimer's diagnostic AD7C test and anticipates
that it will be seeking regulatory approval in 1997 to permit the
Company to sell an AD7C test kit to laboratories. It has not had any
revenues to date on the sale of any of its products under development.
Accordingly, the Corporation is a development stage company as defined
in Statement of Financial Accounting Standards No. 7 and, the following
disclosures are required:
<TABLE>
<CAPTION>
Cumulative
since the Cumulative
date of since
inception of date of the
the Corporation Corporation
to December 31, to July 31,
1995 1995
--------------- -----------
(unaudited) (unaudited)
<S> <C> <C>
Research and development $ 1,189,627 $ 618,412
General and administrative 1,180,596 100,617
Income taxes currently recoverable (12,000) -
Cash inflow (outflow)
Operating activities (2,214,639) (514,454)
Investing activities (367,555) (338,953)
Financing activities 4,749,738 865,370
</TABLE>
F-32
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to the consolidated financial statements
five-month period ended December 31, 1995
(in Canadian dollars)
- -------------------------------------------------------------------------------
11. Other disclosures required under US GAAP (continued)
Statement of Shareholders' equity cumulative since the date of inception of
the Corporation (see footnote 1).
<TABLE>
<CAPTION>
Consideration Accumulated
-------------------------
Shares Cash Other Deficit Total
----------- ----------- ----------- ------------ ------------
(1)
<S> <C> <C> <C> <C> <C>
Common shares issued
during year ended
July 31, 1990 2,500,000 $ 200,000 $ - $ - $ 200,000
Net loss for the year ended
July 31, 1990 - - - (126,719) (126,719)
----------- ----------- ----------- ------------ ------------
Balance at July 31, 1990 2,500,000 200,000 - (126,719) 73,281
Common shares issued during
year ended July 31, 1991 - - - - -
Net loss for the year ended
July 31, 1991 - - - (24,827) (24,827)
----------- ----------- ----------- ------------ ------------
Balance at July 31, 1991 2,500,000 200,000 - (151,546) 48,454
Common shares issued during
year ended July 31, 1992 9,375 37,500 - - 37,500
Net loss for the year ended
July 31, 1992 - - - (53,112) (53,112)
----------- ----------- ----------- ------------ ------------
Balance at July 31, 1992 2,509,375 237,500 - (204,658) 32,842
Common shares issued during
year ended July 31, 1993 201,250 205,000 - - 205,000
Common shares cancelled
during year ended July 31,
1993 (500,000) - - - -
Net loss for the year ended
July 31, 1993 - - - (48,862) (48,862)
----------- ----------- ----------- ------------ ------------
Balance at July 31, 1993 2,210,625 442,500 - (253,520) 188,980
Common shares issued during
year ended July 31, 1994 2,500 10,000 - - 10,000
Net loss for the year ended
July 31, 1994 - - - (71,668) (71,668)
----------- ----------- ----------- ------------ ------------
Balance at July 31, 1994 2,213,125 452,500 - (325,188) 127,312
Common shares issued during
year ended July 31, 1995 78,078 412,870 - - 412,871
Net loss for the year ended
July 31, 1995 - - - (393,841) (393,841)
----------- ----------- ----------- ------------ ------------
Balance at July 31, 1995 2,291,203 865,370 - (719,029) 146,342
</TABLE>
F-33
<PAGE>
<TABLE>
<CAPTION>
NYMOX PHARMACEUTICAL CORPORATION
Notes to the consolidated financial statements
five-month period ended December 31, 1995
(in Canadian dollars)
====================================================================================================
11. Other disclosures required under US GAAP (continued)
Consideration
--------------------- Accumulated
Shares Cash Other Deficit Total
---------- ---------- ---------- ----------- --------
(1)
<S> <C> <C> <C> <C> <C>
Adjustment necessary to
increase the number of
common shares 12,708,797 - - - -
---------- ---------- ---------- --------- --------
Adjusted number of common
shares of the Corporation
to reflect the legal
acquisition by the
Corporation of DMS 15,000,000 865,371 - (719,029) 146,342
Common shares issued during
period ended December 31,
1995 2,047,082 3,157,270 936,894(2) - 4,094,164
Net loss for the period ended
December 31, 1995 - - - (1,639,194) (1,639,194)
Share issue costs - - - (209,797) (209,797)
---------- ---------- ---------- --------- ---------
Balance at December 31, 1995 17,047,082 $4,022,641 $ 936,894 $(2,568,020) $2,391,515
========== ========== ========== =========== ==========
$4,959,535
==========
</TABLE>
F-34
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to the consolidated financial statements
five-month period ended December 31, 1995
(in Canadian dollars)
================================================================================
11. Other disclosures required under US GAAP (continued)
(1) The shareholders' equity between August 1, 1989 and July 31, 1995
presented is that of DMS. The shareholders' equity presented after July
31, 1995, is that of the Corporation after the acquisition described in
Note 1.
(2) See Note 10(i)
b) Income taxes
In accordance with statement of Financial Accounting Standards No. 109,
the income tax effect of temporary differences that gave rise to the net
deferred tax asset is presented below.
<TABLE>
<CAPTION>
Deferred tax asset
<S> <C> <C>
December 31 July 31
1 9 9 5 1 9 9 5
(5 months) (12 months)
Non-capital losses $ 508,000 $ 242,000
Less: Valuation allowance 508,000 242,000
---------- ----------
Net deferred tax asset $ - $ -
========== ==========
</TABLE>
As at December 31, 1995, the Corporation has $1,338,000 of non-capital
losses available to offset future years' taxable income. The income tax
benefit of the non-capital losses has not been recognized in the
financial statements since the Corporation has had a history of
cumulative losses in recent years. The ultimate realization of these
losses depends on the successful commercialization of the Corporation's
research.
There are no material deferred tax liabilities.
c) Financial instrument
Concentration of credit risk
The financial instrument that potentially subjects the Corporation to
significant credit risk consists of cash and cash equivalents invested
with various financial institutions.
The Corporation considers its exposure is limited due the nature of the
cash equivalents and the credit ratings of the financial institutions
with which the cash equivalents are invested.
F-35
<PAGE>
NYMOX PHARMACEUTICAL CORPORATION
Notes to the consolidated financial statements
five-month period ended December 31, 1995
(in Canadian dollars)
================================================================================
11. Other disclosures required under US GAAP (continued)
d) Stock-based compensation
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-Based Compensation," which will be effective for the
Corporation beginning January 1, 1996. SFAS No. 123 required expanded
disclosures of stock-based compensation arrangements with employees and
encourages (but does not require) compensation cost to be measured based
on the fair value of the equity instrument awarded. Companies are
permitted, however, to continue to apply APB Opinion No. 25, which
recognized compensation cost based on the intrinsic value of the equity
instrument awarded. The Corporation will continue to apply APB Opinion
No. 25 to its stock-based compensation awards to employees and will
disclose the required pro forma effect on net income and earnings per
share.
The 1,245,000 options referred to in Note 7 are exercisable at $3.25 per
share, which represents the fair market value at the date of grant.
Accordingly, the Corporation has not recognized any compensation costs
related to the options issued.
e) Impairment of long-lived assets and long-lived assets to be disposed of
In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to
be Disposed of." ("FAS No. 121") was issued, effective January 1, 1996.
FAS No. 121 requires that in the event certain facts and circumstances
indicate an asset may be impaired, an evaluation of recoverability must
be performed to determine whether or not the carrying amount of the
asset is required to be written down. The Corporation does not expect
the adoption of this statement to have a material effect on its
financial condition and results of operations.
F-36
<PAGE>
AUDITOR'S REPORT
To the shareholders of
DMS PHARMACEUTICAL INC.
We have audited the balance sheet of DMS PHARMACEUTICAL INC. as at July 31,
1994 and the statements of loss and deficit and changes in financial position
for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at July 31, 1994 and the
results of its operations for the year then ended in accordance with generally
accepted accounting principles.
BERGERON & SENECAL
Chartered Accountants.
Brossard, Quebec, Canada
July 8, 1995.
F-37
<PAGE>
AUDITOR'S REPORT
To the shareholders of
DMS PHARMACEUTICAL INC.
We have audited the balance sheet of DMS PHARMACEUTICAL INC. as at July 31,
1993 and the statements of loss and deficit and changes in financial position
for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at July 31, 1993 and the
results of its operations for the year then ended in accordance with generally
accepted accounting principles.
BERGERON & SENECAL
Chartered Accountants.
Brossard, Quebec, Canada
July 8, 1995.
F-38
<PAGE>
DMS PHARMACEUTICAL INC.
BALANCE SHEET
As at July 31, 1994 and 1993
(in Canadian dollars)
<TABLE>
<CAPTION>
1994 1993
$ $
- -----------------------------------------------------------------------------
ASSETS
<S> <C> <C>
FIXED ASSETS (Note 3) 12 576 12 576
------------------
OTHER ASSETS
Subscription receivable -0- 11 949
Patents 226 826 226 826
Intellectual property rights 1 1
------------------
226 827 238 776
------------------
239 403 251 352
------------------
</TABLE>
F-39
<PAGE>
DMS PHARMACEUTICAL INC.
BALANCE SHEET
As at July 31, 1994 and 1993
(in Canadian dollars)
<TABLE>
<CAPTION>
1994 1993
$ $
- --------------------------------------------------------------------------------
LIABILITIES
CURRENT
<S> <C> <C>
Accounts payable and accrued charges 12 000 9 000
ADVANCES FROM DIRECTORS, without specified terms
of repayment and interest rate 33 376 -0-
-------------------
45 376 9 000
-------------------
SHAREHOLDER'S EQUITY
CAPITAL STOCK (Note 4)
Authorized:
Unlimited number of common shares with
no par value,
Issued and fully paid:
2 213 125 common shares 452 500 442 500
DEFICIT (258 473) (200 148)
194 027 242 352
-------------------
239 403 251 352
-------------------
</TABLE>
See accompanying notes to financial statements.
F-40
<PAGE>
DMS PHARMACEUTICAL INC.
STATEMENT OF LOSS AND DEFICIT
For the year ended July 31, 1994 and 1993
(in Canadian dollars)
<TABLE>
<CAPTION>
1994 1993
$ $
- --------------------------------------------------------------------------------
<S> <C> <C>
REVENUES - -
-------------------
EXPENSES
Research and development costs 55 325 32 519
Professional fees 500 500
Capital taxes 2 500 1 500
-------------------
58 325 34 519
-------------------
NET LOSS FOR THE YEAR (58 325) (34 519)
DEFICIT at beginning of year (200 148) (165 629)
-------------------
DEFICIT at end of year (258 473) (200 148)
-------------------
</TABLE>
See accompanying notes to financial statements.
F-41
<PAGE>
DMS PHARMACEUTICAL INC.
STATEMENT OF CHANGES IN FINANCIAL POSITION
For the year ended July 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
$ $
- ----------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss for the year (58 325) (34 519)
Increase in non cash working capital balances 3 000 2 000
-------------------
Liquidities used for operating activities (55 325) (32 519)
-------------------
FINANCING ACTIVITIES
Increase (decrease) of advances from directors 33 376 (160 532)
Common shares issued 10 000 205 000
-------------------
Liquidities provided by financing activities 43 376 44 468
-------------------
INVESTMENT ACTIVITIES
Increase (decrease) of subscription receivable and liquidities
provided by (used for) investment activities 11 949 (11 949)
-------------------
INCREASE IN CASH POSITION - -
CASH POSITION, at beginning of year - -
-------------------
CASH POSITION, at end of year - -
-------------------
</TABLE>
See accompanying notes to financial statements.
F-42
<PAGE>
DMS PHARMACEUTICAL INC.
NOTES TO FINANCIAL STATEMENTS
As at July 31, 1994 and 1993
(in Canadian dollars)
1. STATUS AND NATURE OF BUSINESS
The company was incorporated under Part 1A of the Quebec Corporations' Act.
It is involved in research and development in Alzheimer disease.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Fixed assets:
Fixed assets are recorded at cost.
b) Patents:
Patents are recorded at cost. Amortization is provided by the straight line
method over a period of 17 years from the date of the marketing of
developed products.
<TABLE>
<CAPTION>
3. FIXED ASSETS 1994 1993
$ $
----------------
<S> <C> <C>
Scientific equipment 11 445 11 445
Office equipment 1 131 1 131
----------------
12 576 12 576
----------------
</TABLE>
4. CAPITAL STOCK
During the year, the company issued 2 500 common shares for a cash
consideration of $10 000.
F-43
<PAGE>
5. INCOME TAXES
The income tax provision differs from the amount computed by applying the
expected Canadian federal and provincial rate to the net loss for the year.
The reasons for the difference and the related tax effect are as follows:
1994 1993
---- ----
Income tax recovery $(22,164) $(13,117)
at statutory rates
Non-recognition of 22,164 13,117
losses -------- --------
TOTAL -0- -0-
The Company has losses carried forward totalling approximately $259,000, which
are available to reduce future years' taxable income. The benefit of the losses
carried forward have not been reflected in these financial statements and
expire as follows:
1996 $113,000
1997 11,000
1998 40,000
1999 36,000
2000 59,000
--------
$259,000
========
6. CANADIAN/U.S. GAAP DIFFERENCES
(a) Reconciliation of Earning Reported in accordance with Canadian GAAP with
United States GAAP:
1994 1993
---- ----
Net loss- Canadian GAAP $(58,325) $(34,519)
Amortization of patents (i)
(13,343) (13,343)
-------- --------
Net loss- U.S. GAAP $(71,668) $(47,862)
======== ========
F-44
<PAGE>
(b) Reconciliation of Shareholder's equity reported in accordance with Canadian
GAAP with United States GAAP:
1994 1993
---- ----
Shareholder's equity - Canadian GAAP $194,027 $242,352
Amortization of patents (i):
Cumulative effect to beginning of the (53,372) (40,029)
period
Current year effect (13,343) (13,343)
------ ------
(66,715) (53,372)
Shareholder's equity - US GAAP $127,312 $188,980
======= =======
(i) In accordance with APB 17, Intangible Assets, the patents are
amortized on a straight-line basis over 17 years, the legal life
of the patents, from the date the patent was secured.
(c) Other disclosures required under U.S. GAAP.
(i) Development Stage Company
The Company is a development stage company as defined in Statement of
Financial Accounting Standards No. 7. The following additional
disclosure is required under this pronouncement:
Cumulative since date of
incorporation to July 31,
-------------------------
1994 1993
---- ----
Revenues $ --- $ ---
Research and 246,473 191,148
development
expenditures
General and 78,715 62,372
administrative
expenses
Cash inflows
(outflows)
Operating activities $(213,098) $(203,098)
Investing activities (239,402) (239,402)
Financing activities 452,500 442,500
F-45
<PAGE>
(ii) Income taxes
In accordance with Statement of Financial Accounting Standards No. 109,
the following table summarizes the income tax effect that gives rise to
the deferred tax asset:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Deferred tax asset:
Non-capital losses $ 98,000 $ 76,000
Less: valuation allowance (98,000) (76,000)
-------- --------
Net deferred tax asset $ --- $ ---
======== ========
</TABLE>
As of July 31, 1994, the Company has $259,000 of non-capital losses available
to offset future years' taxable income. The income tax benefit of the non-
capital losses has not been recognized in these financial statements since the
Company has had a history of cumulative losses in recent years. The ultimate
realization of these losses depends on the successful commercialization of the
Company's research.
There are no material deferred tax liabilities.
F-46
<PAGE>
EXHIBIT INDEX
NYMOX PHARMACEUTICAL CORPORATION
Form 20-F Registration Statement
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------------ ---------------------------------------------------------------------------
Form 20-F Edgar
- ----------- -----
<C> <C> <S>
1.1 3.1 Articles of Incorporation, as amended, of the Registrant (filed previously)
1.2 3.2 Bylaws of the Registrant (filed previously)
3.1 10.1 Memorandum of Agreement between Paul Averback and the Registrant
(filed previously)
3.2 10.2 Share Option Plan of the Registrant (filed previously)
3.3 10.3 Research and License Agreement between the General Hospital
Corporation and the Registrant (filed previously)
3.4 10.4 Sole Non-Exclusive License and Supply Agreement for the NYMOX
AD7C/TM/ Diagnostic Test for Alzheimer's Disease between Laboratories J.
Simon and the Registrant (filed previously)
3.5 10.5 Research and License Amendment between The General Hospital
Corporation and the Registrant, dated February 14, 1997 (filed
previously)
</TABLE>
