-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SgNOQdSzQY0UJIc7pOVofqJGmHpwtKw8qZwT2ssQtNk9bl+RWfiCgM16487iT8UV fWsZ6IhmuuUbEi9/OhmoyA== 0000950123-99-004650.txt : 19990517 0000950123-99-004650.hdr.sgml : 19990517 ACCESSION NUMBER: 0000950123-99-004650 CONFORMED SUBMISSION TYPE: 20-F PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NYMOX PHARMACEUTICAL CORP CENTRAL INDEX KEY: 0001018735 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 20-F SEC ACT: SEC FILE NUMBER: 001-12033 FILM NUMBER: 99621399 BUSINESS ADDRESS: STREET 1: 175 BOUCHARD, STE 100 STREET 2: DORVAL, QUEBEC CITY: CANADA H9S 1B1 STATE: A8 BUSINESS PHONE: 5146363122 MAIL ADDRESS: STREET 1: 175 BOUCHARD, STE 100 STREET 2: DORVAL, QUEBEC CITY: CANADA, H9S 1B1 STATE: A8 20-F 1 NYMOX PHARMACEUTICAL CORPORATION 1 Form 20 - F [ ] Registration statement pursuant to section 12(b) or (g) of the Securities Exchange Act of 1934 [Fee required] or [X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee required] For the fiscal year ended December 31, 1998 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 Commission file number(s): SEC Filer, 72731,356 Registrant: File Number: 001-12033 CIK: 0001018735 NYMOX PHARMACEUTICAL CORPORATION (Exact name of registrant as specified in its charter) CANADA (Jurisdiction of incorporation or organization) 9900 Cavendish Blvd. Suite 306 St. Laurent, Quebec H4M 2V2 Securities registered or to be registered pursuant to section 12(b) of the Act. TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED None Not Applicable Securities registered or to be registered pursuant to section 12(g) of the Act COMMON STOCK (Title of Class) 1 2 Securities registered or to be registered pursuant to section 15(d) of the Act NONE (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: 19,727,904 shares as of December 31, 1998. 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 [X] No ___ Indicate by check mark which financial statement item the registrant has elected to follow. Item 17 Item 18 [X] PART I ITEM 1. DESCRIPTION OF BUSINESS INTRODUCTION NYMOX Pharmaceutical Corporation ("NYMOX" or the "Company", which terms include the Company's subsidiary) is a development stage biopharmaceutical company, based in Kensington, Maryland and Saint Laurent, Quebec, Canada with several major pharmaceutical projects in development in addition to expertise in diagnostic technology. The company specializes in the research and development of therapeutics and diagnostics 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 development phase of its first Alzheimer's diagnostic aid, the AD7C(TM) test, and is currently marketing the test through its reference laboratory in Kensington, Maryland, and is also launching AD7C(TM) through a licensing and marketing agreement with Specialty Laboratories of Santa Monica, California. (See "Diagnostic Products" below.) Nymox's AD7C(TM) test assists physicians in the diagnosis of Alzheimer's disease ("AD"), a terminal illness of the elderly that afflicts an estimated four million people in the United 2 3 States alone, and perhaps 15-20 million people worldwide. The test measures the level of a brain protein which is elevated early in both the urine and cerebrospinal fluid of patients with Alzheimer's disease. The test is accurate and specific to Alzheimer's disease and enables physicians, patients and their families to make informed social, legal and medical decisions early on about treatment and care. Early diagnosis of Alzheimer's disease has become increasingly important with new improvements in drug treatment and care. Even a modest delay in institutionalization can mean huge social and financial savings. Conversely, any testing procedure that could help rule out AD would eliminate the tremendous uncertainty and anxiety patients and their families otherwise face and would allow physicians to focus on the other, often reversible, causes of cognitive changes. For the health care system, early diagnosis with the aid of the AD7C(TM) test represents a potentially large cost-savings in terms of repeated office visits, lab tests, scans and other procedures required by the traditional methods of diagnosis. 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 had been carrying on research and development since 1989 on neurological diagnostics and pharmaceuticals for the aging population with emphasis on Alzheimer's disease. As used herein, the terms "NYMOX" and the "Company" refer to NYMOX Pharmaceutical Corporation and DMS, the predecessor of NYMOX Pharmaceutical Corporation and its wholly owned subsidiary Nymox Corporation. 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(TM) test through reference laboratory services and licensing arrangements. NYMOX research and development is categorized into four areas including characterization of biochemical markers of Alzheimer's disease from brain tissue, cerebrospinal fluid, urine 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). 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 3 4 to AD7C(TM), NYMOX has several other markers 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 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(TM) 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(TM) test has the accuracy that is necessary for a test to be useful. There can be no assurance that the level of success experienced to date will be repeated in other studies. 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 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. Assuming that future trials show a false positive rate consistent with that achieved by the AD7C(TM) 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(TM) 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. 4 5 To date, several studies published in peer-reviewed publications have confirmed the accuracy of the AD7C(TM) test: see the Journal of Clinical Investigation (1997; vol.100; pages 3093-3104), the Journal of Contemporary Neurology (1998; art. 4a) and two publications in the Journal of Clinical Laboratory Analysis (1998; vol.12:285-288) and (1998; vol.12:223-226). In addition, other peer- reviewed studies are in press. Regulatory approval is necessary before a test kit can be marketed for commercial distribution to other laboratories. (See "Government Regulation"). It is, however, possible under FDA procedures for the AD7C(TM) 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 laboratory in Kensington, Maryland. The test is performed by NYMOX technical staff on patient samples sent by doctors and the results are reported to the doctor submitting the sample. NYMOX has designed both a cerebrospinal fluid test and a urine test for Alzheimer's disease. These tests have been developed from NYMOX's NTP (neuronal thread protein) based technologies. Another new NYMOX assay system for Alzheimer's disease which recognizes a distinctive brain antigen referred to as 35i9 is also in development. Previously published research from Harvard (Developmental patterns of neuronal thread protein gene expression in Down Syndrome, de la Monte, SM, Xu, YY, Hutchins, GM, Wands, JR, Journal of Neurological Sciences, February 1996: Vol.135. pages 118-125) has shown that AD7C-NTP was increased in Down syndrome brain. New clinical testing data now suggests that the published research may be reflected in a clinically significant way in patients with Down syndrome, and that AD7C testing may prove to have importance for these patients. DEVELOPMENT OF THERAPEUTIC PRODUCTS In the field of neurodegenerative disease, including Alzheimer's disease, NYMOX has developed two distinct new entities, NXD-3109 and NXD-1191, in addition to the lead drug candidate NXD-2858. These entities are neurodegeneration inhibitors which have been designed and tested in NYMOX proprietary screening systems. To date, there has been no significant toxicity demonstrated and animal testing results have been positive. In a separate area of NYMOX R&D, the Company announced work on `spherons' which Nymox researchers believe satisfy 20 important criteria of validity implicating them in AD. Several experimental studies on its drug candidate for AD yielded promising results. The lead compound NXD-2858 was designed by Nymox to inhibit the formation of Alzheimer plaques from spherons, and therefore potentially slow down or arrest the progression of the disease. The new studies demonstrated that the drug is orally bioavailable, has good blood-brain barrier penetration, and continued to show thus far no significant evidence of toxicity or significant potential side effects. Studies have shown that spherons are unique protein balls found in every person's brain, which correlate with amyloid plaques found in AD brains (Journal of Alzheimer's Disease 1, 1-34, 1998, IOS Press and Drug News & 5 6 Perspectives; vol.11,no.8,1998). NYMOX has also used the AD7C-NTP gene in tissue culture for identifying other potential drug candidates for AD. Nymox's AD7C drug screening system is being used to extend the pipeline of candidate drugs for neurodegenerative diseases such as AD. The drug screening model is based on human neuronal cells which have the AD7C-NTP gene inserted into them and where this gene has become an integral part of the cell. The cells produce AD7C-NTP, subsequently start the process of neuronal sprouting, going through a degenerative process, and then finally die prematurely, compared to normal control cells. Compounds are then screened for their ability to impede this premature cell death in this unique system. The sequence of cellular events in this culture system correlates with the loss of degenerating neurons in the AD brain, and therefore drug compounds that block or inhibit this premature cell death in this system may be useful drug candidates for AD. The technology underlying this NYMOX screening system was licensed in 1997 from the MGH in a sponsored research and licensing agreement. The only FDA-approved drug treatments for Alzheimer's disease in use today are tacrine (brand- name Cognex) and donezepil (brand name Aricept). However, these compounds are effective only in managing the symptoms of AD, and do 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: 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 consultations between the Company and 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 6 7 screening of 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 ("NAS"), 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. ANTI-INFECTIVES In the field of infectious disease treatments, NYMOX has developed three new entities. The first is NXB-4221, an antibacterial designed for the treatment of difficult chronic and persistent urinary tract infections. The second is NXB-5886, for the treatment of streptococcal infection. The third is NXT-1021, for potential use against staphylococcus. NXB-4221, NXB-5886, and NXT-1021 have all shown bactericidal effects in culture and have thus far been non-toxic. Nymox has also developed a potent new antibacterial, NXC-4720, which has been shown to be highly active against all known substrains of E. Coli 0157, the bacteria implicated in what is often referred to as "Hamburger Disease". NXC-4720 so far has been shown to destroy 0157 strains, including H7, efficiently, rapidly and at a very low dose. 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 NAS. 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. 7 8 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 labeling 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 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, labeling 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 8 9 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 well as manufacturing and quality assurance data and information. 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 nonclinical studies. There can be no assurance that the AD7C(TM) 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 9 10 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, the U.S. Congress implemented sweeping changes to the U.S. Medicare and Medicaid systems in the Balanced Budget Act of 1997 and is currently considering a number of other proposals that could significantly impact on the level of funding for Medicare and Medicaid programs. Under the new Part C: Medicare + Choice programs, beneficiaries can now opt for a variety of health delivery models, including coordinated care plans, HMOs, preferred provider organizations (PPOs) and provider sponsored organizations (PSOs), private fee-for-service plans and medical savings account plans. In addition, states now have the option to require Medicaid recipients to enroll with managed health care plans without first obtaining a waiver, making it substantially easier for the states to meet their Medicaid obligations through private managed care organizations. All these health care delivery systems, including the original Medicare and Medicaid systems, are subject to funding formulas and spending caps and may compensate for these restrictions by limiting coverage, eligibility and/or payments. The long-term impact of these legislative changes in terms of their efficiency, effectiveness and financial viability in delivering health care services to an aging population is uncertain at present. Any legislative or regulatory actions to reduce or contain federal spending under either the Medicare or Medicaid programs could adversely affect the Company's ability to participate in either program as a provider or supplier of services or products and the amount of reimbursement under these programs potentially available to the Company. Moreover, the Company currently provides its AD7C(TM) test through reference laboratories and may provide certain of its other products or services through such laboratories in the future. The Health Care Financing Administration (HCFA) regulates clinical reference laboratories under the Clinical Laboratories Improvement Act of 1988 (CLIA), which imposes requirements for certification, licensure and maintenance of medical records about the accuracy of the tests performed. The HCFA also establishes Conditions of Participation for reference laboratories. Medicare and Medicaid reimbursement may be conditioned upon compliance with these HCFA requirements. In addition, individual states may have their own requirements for reference laboratories which offer diagnostic services. Finally, the FDA has its own regulations governing in vitro diagnostic products, including analyte-specific reagents used in clinical reference laboratories. Any changes in HCFA or state law requirements or in the FDA regulations could have an impact on the Company's ability to offer or market any reference laboratory services and/or on its ability to obtain reimbursement from the Medicare and Medicaid programs and providers. Federal and state regulations and law and internal coverage policies of managed care organizations may affect the Company's ability to obtain payments under the various Medicare and Medicaid programs for its products and services. For example, new 10 11 products and services developed by the Company will be subject to coverage determinations. The Medicare legislation prohibits payment under the original Medicare program 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 provision in order to exclude from Medicare coverage those medical and health care services that are not demonstrated to be safe and effective by acceptable clinical evidence. HCFA is currently reviewing both its national coverage policies and procedures in general and specifically its coverage of diagnostic laboratory tests. HCFA is in the process of constituting a Medicare Coverage Advisory Committee to provide advice on the effectiveness and appropriateness of medical items and services that are eligible for coverage under Medicare. A regulation governing specific aspects of national coverage and administrative policies for clinical diagnostic laboratory tests is expected in the late spring or summer of 1999. It is unknown what effect these changes will have on the Company's ability to obtain Medicare coverage for its products and services. Even if Medicare determines that coverage of one of the Company's products or services is appropriate, there remains the issue as to the actual amount of reimbursement that Medicare or a managed care organization will pay for the product or service. There is no guarantee that the level of reimbursement will be close to the retail price for the product or service that the Company is charging or wishes to charge or commensurate with the costs of developing and marketing the product or service. 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(TM) 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 arrest some of the pathological changes of Alzheimer's disease. As a second example, the Company has patented screening methods that show whether a potential 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 11 12 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 numerous patent applications in the United States claiming brain markers and screening and diagnostic technologies. NYMOX also has patent applications pending covering therapeutics and diagnostics in Alzheimer's disease and related conditions. NYMOX has eight issued patents. NYMOX also has other patents in a number of countries and has applications on file in numerous other countries. NYMOX also has an exclusive license to patents from the Massachusetts General Hospital covering rights to the AD7C(TM) diagnostic and related therapeutic products. Under this license, the Massachusetts General Hospital ("MGH") is entitled to royalties of 4% from worldwide sales of the AD7C(TM) test. 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 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 12 13 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 noncompetitive or obsolete. The Company expects that competition among products 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 that refers 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 13 14 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 currently offers a reference laboratory service with respect to the AD7C(TM) test. (See "Diagnostic Products.") Assuming regulatory approval, the Company will employ a variety of marketing approaches depending on the product and the market. The Company currently has established an AD7C(TM) Clinical Reference Laboratory service in Kensington, Maryland (U.S.). The laboratory is fully operational and 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 focusing its efforts on finding suitable overseas licensees who have both the economic and scientific resources to effect a more rapid penetration of the AD7C(TM) test in their home markets. The Company has signed a non-exclusive licensing agreement with Specialty Laboratories of Santa Monica California ("Specialty") to perform and market the AD7C(TM) test in the United States. 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 any license revenues will be derived from either Specialty Laboratories or any other licensee. The company has elected, for now, not to renew the license agreement with SGS Lab Simon for the cerebrospinal fluid test in light of the development of the Company's urinary assay. If successfully developed and approved, NYMOX plans to market and sell certain of its therapeutic products 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 Kensington, Maryland comprise 8,649 square feet of leased space. The lease agreements expire in March 31, 2000, June 30, 2001 and December 31, 1999, respectively. The facility in Saint Laurent, Quebec, Canada comprises 3,700 square feet of leased space. The lease agreement expires in August 2000, with an option to renew for three years. The Company owns a full complement of equipment used in all aspects of its R&D and its reference laboratories. The Company 14 15 believes that its facilities are adequate for its current needs and that additional space, if required, would be available 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 31,1999 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 Dr. Paul Averback 12,643,895 63.8% All directors and officers as a group 12,666,295 63.9%
In addition, as of such date Dr. Averback's wife owned 1,154,297 common shares (5.8%) and 9022-1433 Canada Inc., a company owned by Dr. Averback and his wife, owns 500,000 common shares (2.5%). To the knowledge of the Company, no other shareholder beneficially owns more than 10% of the shares of the Company. c) Not applicable. 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 and on The Nasdaq Stock Market since November 25, 1997. The following tables set out the high and low reported trading prices of the common shares on The Nasdaq Stock Market and the Montreal Exchange during the periods indicated. THE NASDAQ STOCK MARKET:
High (US$) Low (US$) Volume (Shares) ---------- --------- --------------- 1997 4th quarter $8.750 $6.250 134,276 1998 1st quarter $13.625 $5.688 5,561,919 2nd quarter $8.375 $5.750 4,412,450 3rd quarter $7.375 $2.563 2,078,081 4th quarter $6.250 $2.500 1,769,053 1999 1st quarter $5.875 $2.875 569,842
15 16 THE MONTREAL EXCHANGE:
High (CDN$) Low (CDN$) Volume (Shares) ----------- ---------- --------------- 1997 1st quarter $15.50 $10.95 347,969 2nd quarter $11.25 $ 6.00 477,108 3rd quarter $10.50 $ 7.50 326,504 4th quarter $12.40 $ 7.25 588,709 1998 1st quarter $19.00 $ 8.15 1,478,377 2nd quarter $11.70 $ 8.25 913,909 3rd quarter $10.40 $ 4.50 581,775 4th quarter $ 9.50 $ 4.05 662,379 1999 1st quarter $ 8.95 $ 4.30 551,796
According to information furnished to the Company by the transfer agent for the common shares, as of March 31, 1999, total shares outstanding were 19,807,904. There were approximately 900 holders of record of the common shares and 4,128 beneficial shareholders in total of which 85 were holders of record of the common shares and 1,186 were beneficial shareholders with addresses in the United States and such holders owned an aggregate of 2,783,430 shares, representing 14.1% of the outstanding shares of common stock. 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. 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 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 16 17 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 qualifies as 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 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%, if the beneficial owner of the shares is a corporation owning at least 10% of the voting shares of the Company. The foregoing discussion is limited to Canadian federal taxation and does not deal with provincial or local taxes or United States federal, 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 consult their own tax advisors as to the tax consequences of receiving dividends from the Company or disposing of their common stock. 17 18 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 years ended December 31, 1996,1997 and 1998, 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 period ended July 31, 1994. 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. Effective August 1, 1995, the Company changed its fiscal year from a July 31 year-end to a December 31 year-end. NYMOX PHARMACEUTICAL CORPORATION Selected Financial Data (expressed in Canadian dollars)
July 31 July 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 1994 1995 1995 1996 1997 1998 (5 months) ------- ------- ---------- ----------- ---------- ----------- CANADIAN GAAP Current Assets - 0 - 11,963 2,268,097 2,896,234 2,470,335 3,635,246 Capital & Other Assets 12,576 338,953 366,155 1,317,973 1,475,462 2,120,974 Total Assets 239,403 350,916 2,634,252 4,214,207 3,945,797 5,756,220 Liabilities 95,376 121,589 151,297 384,226 292,330 434,440 Shareholders' Equity 194,027 229,327 2,482,955 3,829,981 3,653,467 5,321,780 Revenues - 0 - - 0 - - 0 - 226,940 101,110 394,837 Research & Development Expenditures (note 1) 55,325 371,939 571,215 2,116,000 2,412,349 3,013,237 Net Loss 58,325 377,570 693,846 3,699,064 4,999,455 6,903,611 Loss Per Share (note 2) - 0 - 0.03 0.04 0.21 0.27 0.36 US GAAP (note 3) Net Loss 71,668 393,841 1,639,194 4,330,230 5,198,988 7,385,188 Loss per share (note 2) - 0 - 0.03 0.11 0.25 0.28 0.38 Shareholders' equity 127,312 146,341 2,391,515 3,107,375 2,731,328 3,918,064
[FN] Notes: 1) Amounts shown are net of investment tax credits. 2) For periods prior to December 31, 1995, 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 10 of the Company's audited financial statements as at and for the year ended December 31, 1998 and to Note 9 of the Company's audited financial statements as at and for the year ended December 31,1997 and to Note 8 of the Company's audited financial statements as at and for the year ended December 31, 1996 for a reconciliation of differences between Canadian and US GAAP. 18 19 As of March 31, 1999 the exchange rate is CAN$1.5087 to US$1.00. The following table sets forth certain information regarding exchange rates for the periods reflected in the preceding financial data. FOR THE PERIOD ENDED
July 31, July 31, Dec.31, Dec.31, Dec.31, Dec.31, CAN$ TO US 1994 1995 1995 1996 1997 1998 (5 Months) ------- -------- ---------- -------- -------- -------- Period end $1.3825 $1.3609 $1.3695 $1.3618 $1.4291 $1.5333 Average During Period $1.3465 $1.3775 $1.3548 $1.3636 $1.3850 $1.4831 High $1.3990 $1.4267 $1.3820 $1.3747 $1.4291 $1.5685 Low $1.2839 $1.3395 $1.3271 $1.3383 $1.3400 $1.4198
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. Subsequently, 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. 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$5,263,800. In May 1997, NYMOX completed a private placement totaling 696,491 units for a total consideration of CAN$4,527,191. Each unit was comprised of one common share of Nymox and one series A common share purchase warrant entitling the holder to subscribe to one common share of NYMOX at a per share price of $8.50 until May 15, 1998. In 1998, the Corporation completed private placements totaling 366,000 common shares for total proceeds of CAN$3,131,500 with institutional and individual investors. A total of 177,500 common share purchase warrants were issued as well entitling the holder to subscribe to one common share of NYMOX at prices of CAN$8.50 (50,000) and CAN$10.00 (127,500). All of the 696,491 Series A warrants issued in connection with the 19 20 1997 private placement were exercised in 1998 for total proceeds to the Company of Can$5,920,174. Subsequent to year-end, the Corporation completed private placements for a total of 55,000 common shares at CAN$8.50 per share, for total proceeds of CAN$467,500. In connection with these private placements, the Corporation issued an additional 27,500 warrants exercisable at a price of $10.00 per share. RESULTS OF OPERATIONS The Company is a development stage company, which has, during the periods presented in the Summary Financial Information above, realized limited revenues from operations. Net losses for the period ended December 31, 1998 were CAN$6,903,611, or CAN$0.36 per share, compared to CAN$4,999,455, or CAN$0.27 per share, for the period ended December 31, 1997. FOR THE YEAR ENDED DECEMBER 31, 1998: Revenues on service fees for the AD7C(TM) test amounted to Can$151,263 for the year ended December 31, 1998, compared with CAN$24,584 for the year ended December 31, 1997. More than half of these revenues were generated in the last two months of 1998 when the AD7C(TM) urine test service was launched through the reference laboratory service. All of the service fee revenue was derived in the United States. Interest revenue increased to CAN$243,574 in 1998 compared to CAN$76,526 in 1997, derived from interest earned on the cash and short-term investments received from the private placements referred to above. Research and development expenditures amounted to CAN$3,019,015 for the year ended December 31, 1998, compared with CAN$2,562,349 for the year ended December 31, 1997. The increase is principally attributable to increased expenditures on reagents and clinical studies related to R&D in therapeutics and anti-infectives (net increase CAN$476,677) at the Kensington, Maryland laboratory during the year. In 1998, research tax credits amounted to CAN$5,778 compared to CAN$150,000 in 1997. The reduction in tax credits is attributable to the transfer of research and development activities to the United States. Marketing expenses amounted to CAN$3,240,242 for the year ended December 31, 1998 compared to CAN$1,925,654 for the year ended December 31, 1997. A major marketing effort in 1998 accounted for the increased expenditures; the effort focused specifically on mass mailings and publicity (net increase CAN$827,189) and presentations at conferences (net increase CAN$579,496). The Company will significantly reduce expenditures in this area in 1999. General and administrative expenses amounted to CAN$896,201 for the year ended December 31, 1998, compared with CAN$589,524 in the year ended December 31, 1997. 20 21 The increase is attributable to increases in professional fees (net increase CAN$193,736) and increased costs related to shareholder relations (net increase CAN$73,146). LIQUIDITY AND CAPITAL RESOURCES As of December 31, 1998, cash, short term investments and subscriptions receivable totaled Can$3,465,705. In addition, proceeds of CAN$467,500 were received in January 1999 from subsequent private placements. Nymox has no financial obligations of significance other than long-term lease commitments for its premises in Canada and the United States of CAN$37,117 per month and ongoing research funding payments to a U.S. medical facility totaling US$172,000 for 1999. The Company invested CAN$563,063 in additional capital assets in the year ended December 31, 1998 compared to CAN$260,183 in 1997, consisting of patent costs (CAN$434,254), laboratory equipment (CAN$93,859) and computer equipment and furnishings (CAN$34,956). The Company does not believe that inflation has had a significant impact on its results of operations. The Company has given to the Chief Financial Officer the responsibility of assessing the impact of and developing a remediation plan for the impact of the Year 2000. The Company has relatively few suppliers due to the nature of its business and the manner in which its business is conducted. The Company is in the process of identifying and contacting key suppliers, partners and collaborators to determine their stage of readiness for the Year 2000. Confirmation of Year 2000 compliance has already been received from the Company's payroll, accounting and most of its internal data processing systems suppliers. The Company has alternative suppliers for each of the key areas of research and office supplies, and may use them if required. The Company does not interface electronically with any of its suppliers or service providers. The Company is also finalizing an inventory of all the equipment and software applications it uses that could be impacted in a material way by the year 2000 issue. Obsolete equipment is being retired from all of the Company's systems that have been identified as being susceptible to the Year 2000. Management believes that the conversion and testing of the systems can be achieved with the Company's existing staff at minimal cost and anticipates that testing and implementation of the necessary changes will be complete by September 1999. FOR THE YEAR ENDED DECEMBER 31, 1997: Research and development expenditures represented the Company's most significant expenditure and amounted to CAN$2,562,349 for the year ended December 31, 1997, compared with CAN$2,356,000 for the year ended December 31, 1996. The increased expenses were largely attributable to increased expenditures related to laboratory 21 22 expenses (CAN$178,000) at the Kensington, Maryland laboratory during the year. The Kensington facility was in operation for only 10 months in 1996. The Company also paid its third installment under its research and license agreement with Massachusetts General Hospital ("MGH") in the amount of CAN$311,310, which was CAN$36,000 higher than the 1996 payment. Under the agreement, the Company was 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"). Gross research and development expenditures were partially offset by research tax credits available to the Company in Quebec. In 1997, research tax credits amounted to CAN$150,000 compared to CAN$240,000 in 1996. The reduction was attributable to the transfer of certain research and development activities to the United States. Marketing expenses in 1997 amounted to CAN$1,925,654 for the year ended December 31, 1997 compared to CAN$1,253,894 for the year ended December 31, 1996. Expenditures in 1997 consisted largely of the costs of establishing and maintaining a sales and marketing force (CAN$1,135,000) and costs related to marketing activities such as presentations at conferences, publicity, travel, general expenses, printing and postage (Can$ 790,000). Expenditures in 1996, consisted of publicity related costs in connection with pre-marketing of AD7C(TM) (CAN$746,000), salaries (CAN$178,000) and other costs related to marketing activities (CAN$330,000). General and administrative expenses amounted to CAN$589,524 for the year ended December 31, 1997 compared with CAN$497,179 in the year ended December 31, 1996. The increase was attributable to legal costs and expenses related to United States public company registration and the NASDAQ listing (CAN$119,600). LIQUIDITY AND CAPITAL RESOURCES At December 31, 1997, the Company's cash and cash equivalents were CAN$2,287,345. In April 1998, Nymox completed private placements totaling 217,000 common shares and 255,384 warrants were exercised for total proceeds of CAN$4,037,864. The Company invested CAN$260,000 in additional capital assets in the year ended December 31, 1997 compared to over CAN$1,000,000 in 1996, consisting of patent costs (CAN$210,000), laboratory equipment (CAN$30,000) and computers (CAN$12,000). FOR YEAR ENDED DECEMBER 31, 1996: Research and development expenditures 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 were largely attributable to the hiring of additional personnel in Canada (CAN$709,000) and the opening of the Kensington, 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 22 23 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. General and administrative expenses, including marketing related 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 was attributable to the hiring of additional non-research personnel, which amounted to approximately CAN$125,000 and to costs incurred in the Company's Kensington, Maryland laboratory which amounted to approximately CAN$70,000. This facility operates as a wholly-owned subsidiary of the Company. The increase in expenses was 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(TM). The remaining increase was related to sundry office expenses. LIQUIDITY AND CAPITAL RESOURCES The Company 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. ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK None; Not applicable. See "Note 8 - Fair Values" in financial report. ITEM 10. 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 (1977-1980), during which time he initiated his research on Alzheimer's disease. He has practiced medicine in numerous Canadian institutions as well as in private practice. Dr. Averback has published extensively in the scientific and medical literature. 23 24 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., Director (since January 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. Martin Barnes , Director (since June 1997) of the Company is Managing Editor of The Bank Credit Analyst. Prior to joining The Bank Credit Analyst Research Group in 1987, Mr. Barnes was the Chief economist at Wood Mackenzie, a leading Edinburgh brokerage firm (1977-1987) and an economist at British Petroleum in London (1973-1977). Mr. Roy M. Wolvin, Secretary-Treasurer (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. 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. ITEM 11. COMPENSATION OF OFFICERS AND DIRECTORS a) The table below provides compensation information for the fiscal year ended December 31, 1997 for each executive officer of the Company and for the directors and executive officers as a group. SUMMARY COMPENSATION TABLE (IN CANADIAN DOLLARS)
FISCAL YEAR ENDED FISCAL YEAR ENDED 12/31/97 12/31/98 NAME AND OTHER CASH OTHER CASH PRINCIPAL POSITION SALARY COMPENSATION SALARY COMPENSATION - ------------------ ------ ------------ ------ ------------ Dr. Paul Averback, $150,000 - $150,000 - President and Director Dr. Hossein A. Ghanbari, $110,000 - $142,000 - Vice-President and Director Mr. Roy Wolvin, $ 70,200 - $ 70,200 - Secretary-Treasury Dr. Iraj Beheshti, $122,000 - $125,000 - Vice-President, Director of Clinical Reference Laboratories All directors and executive officers as a group $402,200 - $487,200 -
24 25 See "Options to Purchase Securities" in Item 12 for stock options granted. The Company does not currently have written employment contracts with the above-named executive officers. Directors of the Company were not paid any fee for board meeting attendance but were reimbursed for expenses incurred in connection with their office. 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 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
Total amount of common stock subject to currently Purchase Price exercisable options (Canadian Dollars) Expiration Date - -------------------------- ------------------ ---------------- 25,000 $ 4.90 September 30, 1999 30,000 $10.00 October 31, 1999 100,000 $ 7.00 November 9, 2002 1,200,000 $ 3.25 January 17, 2006 40,000 $13.75 January 17, 2006 40,000 $ 9.80 January 17, 2006 110,000 $11.50 April 30, 2006 10,000 $16.75 August 13, 2006 10,000 $ 9.00 August 13, 2006 10,000 $10.00 August 13, 2006 30,000 $ 9.00 October 31, 2007 30,000 $10.00 October 31, 1999 80,000 $10.00 October 31, 2007 17,000 $ 9.25 December 19, 2007 50,000 $10.00 January 22, 2009 Warrants 441,107 $ 8.50 May 15, 1998 60,000 $10.00 August 31, 1999 50,000 $ 8.50 August 31, 1999 95,000 $10.00 December 31, 1999
The total number of shares subject to options at March 31, 1999 is 1,976,000, of which options representing 1,727,000 are currently exercisable. Of those, the total number of 25 26 shares subject to options held by directors and officers of NYMOX is 475,000 of which options representing 305,000 shares are currently exercisable. 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 and with the further exception of warrants entitling the holders to acquire up to 205,000 common shares of the Company as outlined in the above table. 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 2,500,000 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 70,000 common shares have been exercised to date. ii) One former senior executive of the Company was granted additional options to acquire 200,000 common shares of the Company at a price of CAN$3.25 per share effective as of each of January 17, 1997, 1998 and 1999 (for a total of 600,000 additional shares which are now vested), provided he still be associated with the Company. 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), provided they still be associated with the Company. The first tranche of such options vested January 17, 1997, 26 27 entitling the option holders to purchase a total of 5,000 shares each at a price of CAN$13.75 per share. The second tranche of such options vested January 17, 1998, entitling the option holders to purchase a total of 5,000 shares each at a price of CAN$9.80 per share. The third tranche of such options vested January 17, 1999, entitling the option holders to purchase a total of 5,000 shares each at a price of CAN$10.00 per share. The price for all unvested options has been fixed at CAN$10.00 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), provided he still be associated with the Company as of the vesting dates. 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. The second tranche of such options vested January 17, 1998, entitling the holder to purchase a total of 20,000 shares at a price of CAN$9.80 per share. The third tranche of such options vested January 17, 1999, entitling the option holder to purchase a total of 20,000 shares at a price of CAN$10.00 per share. The price for all unvested options has been fixed at CAN$10.00 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), provided he still be associated with the Company as of the vesting dates. The first tranche of such options vested on January 17, 1997, entitling the holder to purchase 10,000 shares at a price of CAN$13.75 per share. The second tranche of such options vested January 17, 1998, entitling the holder to purchase a total of 10,000 shares at a price of CAN$9.80 per share. The third tranche of such options vested January 17, 1999, entitling the option holder to purchase a total of 10,000 shares at a price of CAN$10.00 per share. The price for all unvested options has been fixed at CAN$10.00 per share. All of the above options are effective for a period of 10 years from the Granting Date. Under the same plan, on April 30, 1996, 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 five beneficiaries of which options representing 5,000 shares were subsequently canceled. 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 and were subsequently canceled. On August 13, 1996, one consultant of the Company was granted options to acquire 10,000 common shares of the Company at a price of CAN$16.75 for a period of ten years. This consultant 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), provided the consultant remains active with the Company on each such vesting date. The first tranche of such options vested on August 13, 1997, entitling the holder to purchase 10,000 shares at a price of CAN$9.00 per share. The second tranche of such options vested January 17, 1998, entitling the holder to purchase a total of 10,000 shares at a 27 28 price of CAN$10.00 per share. The price for all unvested options has been fixed at CAN$10.00 per share. Under the same plan, on October 31, 1997, options to purchase up to 230,000 common shares were granted to a total of six beneficiaries under the Plan by the Board of Directors. Specifically: (i) Options to purchase 30,000 common shares of the Company at a price of CAN$9.00 per share were granted for a period of 10 years to a total of five beneficiaries. (ii) 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), provided they still be associated with the Company as of the vesting dates. The first tranche of such options vested October 31, 1998, entitling the holders to purchase a total of 5,000 shares each at a price of CAN$10.00 per share. The price for all unvested options has been fixed at CAN$10.00 per share. (iii) A director, an executive and a key employee of the Company were 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), provided they still be associated with the Company as of the vesting dates. The first tranche of such options vested October 31, 1998, entitling the holders to purchase a total of 10,000 shares each at a price of CAN$10.00 per share. The price for all unvested options has been fixed at CAN$10.00 per share. (iv) One consultant of the Company was granted options to acquire 30,000 common shares of the Company at a price of $10.00 per share, such options to be exercisable for a period of 24 months from the Granting Date. On December 19, 1997, options to purchase up to 41,000 common shares at a price of CAN$9.25 per share were granted for a period of ten years to a total of 15 beneficiaries under the Plan by the Board of Directors. All of the above options vest over a period of three years from the Granting Date, with the exception of 5,000 options granted to one key employee which vested immediately. On September 30, 1998, one consultant of the Company was granted options to acquire 25,000 common shares of the Company at a price of $4.90 per share, such options to be exercisable for a period of 12 months from the Granting Date. On November 9, 1998, one consultant of the Company was granted options to acquire 100,000 common shares of the Company at a price of $7.00 per share, such options to be exercisable for a period of 4 years from the Granting Date. On January 22, 1999, one executive of the Company was granted options to acquire 50,000 common shares of the Company at a price of $10.00 per share, such options to be exercisable for a period of 10 years from the Granting Date. 28 29 ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS. The Company holds notes receivable from a former director as follows: 1.CAN$56,000 non-interest bearing, payable on demand. 2.US$124,500 bearing interest at 9% per annum beginning Feb. 1,1999, payable on demand. Additional amounts owing: 3.US$17,979.70 non-interest bearing, payable on demand. PART II ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED a) Not applicable 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): 29 30 At and for the year ended December 31, 1998: Consolidated Balance Sheet -- December 31, 1998 Consolidated Statement of Earnings and Deficit Consolidated Statements of Changes in Financial Position Notes At and for the year ended December 31, 1997: Consolidated Balance Sheet -- December 31, 1997 Consolidated Statement of Earnings and Deficit Consolidated Statements of Changes in Financial Position Notes 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 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) By: /s/ Paul Averback ----------------- Paul Averback Title: President Date: April 30, 1999 30 31 Consolidated Financial Statements of NYMOX PHARMACEUTICAL CORPORATION Years ended December 31, 1998, 1997 and 1996 32 AUDITORS' REPORT TO THE SHAREHOLDERS We have audited the consolidated balance sheets of Nymox Pharmaceutical Corporation as at December 31, 1998 and 1997 and the consolidated statements of earnings, deficit and changes in financial position for the years ended December 31, 1998, 1997 and 1996. 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 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, 1998 and 1997 and the results of its operations and the changes in its financial position for the years ended December 31, 1998, 1997 and 1996 in accordance with generally accepted accounting principles. Chartered Accountants Montreal, Canada February 26, 1999 33 NYMOX PHARMACEUTICAL CORPORATION Consolidated Financial Statements Years ended December 31, 1998, 1997 and 1996 FINANCIAL STATEMENTS 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
34 NYMOX PHARMACEUTICAL CORPORATION Consolidated Balance Sheets December 31, 1998 and 1997 (in Canadian dollars)
1998 1999 ------------ ----------- Assets Current assets: Cash (note 3) $ 714,298 $ 507,259 Short-term investments 2,113,907 1,780,086 Accrued interest 46,082 4,200 Receivable due from a financial institution (note 6 (b)) 637,500 -- Accounts receivable 74,653 -- Research tax credits receivable 5,778 150,000 Notes receivables (note 4) 273,995 56,000 Other receivables 43,028 28,790 ------------ ------------ 3,909,241 2,526,335 Capital assets (note 5) 1,846,979 1,419,462 ------------ ------------ $ 5,756,220 $ 3,945,797 ============ ============ Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 434,440 $ 292,330 Shareholders' equity: Capital stock (note 6) 23,011,556 13,852,632 Capital stock subscription -- 504,000 Deficit (17,689,776) (10,703,165) ------------ ------------ 5,321,780 3,653,467 Commitments (note 7) Subsequent event (note 13) ------------ ------------ $ 5,756,220 $ 3,945,797 ============ ============
See accompanying notes to consolidated financial statements. On behalf of the Board: _______________________ Director _______________________ Director 1 35 NYMOX PHARMACEUTICAL CORPORATION Consolidated Statements of Earnings Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars)
1998 1997 1996 ------------ ------------- -------------- Revenue: Interest $ 243,574 $ 76,526 $ 226,940 Service fees 151,263 24,584 -- ------------ ------------- -------------- 394,837 101,110 226,940 Expenses: Research and development 3,019,015 2,562,349 2,356,000 Less research tax credits (5,778) (150,000) (240,000) ------------ ------------- -------------- 3,013,237 2,412,349 2,116,000 Marketing 3,240,242 1,925,654 1,253,894 General and administrative 896,201 589,524 497,179 Depreciation and amortization 135,551 158,694 78,906 Interest and bank charges 13,217 14,344 8,025 ------------ ------------- -------------- 7,298,448 5,100,565 3,954,004 ------------ ------------- -------------- Loss before income taxes (6,903,611) (4,999,455) (3,727,064) Income taxes (note 8) -- -- 28,000 ------------ ------------- -------------- Net loss $ (6,903,611) $ (4,999,455) $ (3,699,064) ============ ============= ============== Loss per share $(0.36) $(0.27) $(0.21) ============ ============= ============== Weighted average number of common shares outstanding 19,304,435 18,370,873 17,654,862 ============ ============= ==============
See accompanying notes to consolidated financial statements. 2 36 NYMOX PHARMACEUTICAL CORPORATION Consolidated Statements of Deficit Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars)
1998 1997 1996 ------------ ----------- ----------- Deficit, beginning of year $(10,703,165) $ (5,472,710) $(1,539,686) Net loss (6,903,611) (4,999,455) (3,699,064) Share issue costs (83,000) (231,000) (233,960) ------------ ------------ ----------- Deficit, end of year $(17,689,776) $(10,703,165) $(5,472,710) ============ ============ ===========
See accompanying notes to consolidated financial statements. 3 37 NYMOX PHARMACEUTICAL CORPORATION Consolidated Statements of Changes in Financial Position Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars)
1998 1997 1996 ---- ---- ---- Cash provided by (used in): Operations: Net loss $(6,903,611) $(4,999,455) $(3,699,064) Item not involving cash: Depreciation and amortization 135,551 158,694 78,906 Net change in non-cash operating working capital items (481,941) 58,421 (55,855) ----------- ----------- ----------- (7,250,001) (4,782,340) (3,676,013) Financing: Issuance of capital stock 8,654,924 4,549,941 5,280,050 Subscription to capital stock -- 504,000 -- Share issue costs (83,000) (231,000) (233,960) ----------- ----------- ----------- 8,571,924 4,822,941 5,046,090 Investment: Additions to capital assets (563,068) (260,183) (1,030,724) Notes receivable (217,995) -- -- ----------- ----------- ----------- (781,063) (260,183) (1,030,724) Increase (decrease) in cash and short-term investments 540,860 (219,582) 339,353 Cash and short-term investments, beginning of year 2,287,345 2,506,927 2,167,574 ----------- ----------- ----------- Cash and short-term investments, end of year $ 2,828,205 $ 2,287,345 $ 2,506,927 =========== =========== ===========
See accompanying notes to consolidated financial statements. 4 38 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 1. ORGANIZATION AND BUSINESS ACTIVITIES: Nymox Pharmaceutical Corporation (the "Corporation"), incorporated under the Canada Business Corporations Act, is a development stage biopharmaceutical corporation which specializes in the research and development of neurological therapeutics and diagnostics for the aging population, with an emphasis on Alzheimer's disease. Since inception, the Corporation's activities have been primarily focused on developing certain pharmaceutical technologies and obtaining outside funding to support the continued development of its technologies. The Corporation is subject to a number of risks, including the successful development and marketing of its technologies. In order to achieve its business plan, the Corporation anticipates the need to raise additional capital. Management is confident that it will be able to obtain the continued financial support of its shareholders and/or new external financing to pursue its development. The Corporation is listed on the Montreal Exchange and the NASDAQ Stock Market. 2. SIGNIFICANT ACCOUNTING POLICIES: (a) Consolidation: The consolidated financial statements of the Corporation have been prepared under Canadian generally accepted accounting principles ("GAAP") and include the accounts of its wholly-owned US subsidiary, Nymox Corporation. Intercompany balances and transactions have been eliminated on consolidation. Consolidated financial statements prepared under US GAAP would differ in some respects from those prepared in Canada. A reconciliation of earnings and shareholders' equity reported in accordance with Canadian GAAP with US GAAP is presented in note 10. (b) Short-term investments: The Corporation's portfolio of short-term investments, which does not include equity securities, consists principally of government securities and commercial paper that are highly liquid and readily convertible into cash. These are recorded at the lower of cost or market value. 5 39 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): (c) Capital assets: Capital assets are recorded at cost. Depreciation and amortization are provided using the following methods and annual rates:
Asset Method Rate ----- ------ ---- Computer equipment Straight-line 20% Laboratory equipment Straight-line 20% Office equipment and fixtures Straight-line 20%
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 life of the patent. (d) Research and development expenditures: Research expenditures, net of research tax credits, are expensed as incurred. Development expenditures, net of tax credits, if any, are expensed as incurred, except if they meet the criteria for deferral in accordance with generally accepted accounting principles. (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. 6 40 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): (f) Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (g) Loss per share: The loss per share amounts has been calculated using the weighted average number of common shares outstanding during the year. Fully diluted loss per share has not been disclosed because the effect of common shares issuable upon the exercise of options and warrants would be anti-dilutive. 3. CASH: Cash includes $542,953 of cash held in trust by the Corporation's legal counsel at December 31, 1998. This amount, which was received from the closing of various private placements in December 1998, was released to the Corporation in January 1999. 4. NOTES RECEIVABLE:
1998 1997 -------- -------- Note receivable, unsecured, non-interest bearing, payable on demand $ 56,000 $56,000 Note receivable, unsecured, bearing interest at 9% per annum beginning February 1, 1999, payable on demand 217,995 -- -------- ------- $273,995 $56,000 ======== =======
The notes are receivable from a director, who was no longer associated with the Company as of March 1999. 7 41 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 5. CAPITAL ASSETS:
1998 -------------------------------------------- Accumulated Net book Cost depreciation value ---------- ------------ --------- Computer equipment $ 78,438 $ 25,528 $ 52,910 Laboratory equipment 717,820 220,468 497,352 Office equipment and fixtures 38,956 11,687 27,269 Patents 1,276,318 6,871 1,269,447 Intellectual property rights 1 -- 1 ---------- -------- ---------- $2,111,533 $264,554 $1,846,979 ========== ======== ==========
1997 -------------------------------------------- Accumulated Net book Cost depreciation value ---------- ------------ --------- Computer equipment $ 55,803 $ 15,174 $ 40,629 Laboratory equipment 734,041 217,299 516,742 Office equipment and fixtures 26,475 6,449 20,026 Patents 842,064 -- 842,064 Intellectual property rights 1 -- 1 ---------- -------- ---------- $1,658,384 $238,922 $1,419,462 ========== ======== ==========
6. CAPITAL STOCK:
1998 1997 ----------- ----------- Authorized: An unlimited number of common shares Issued and outstanding: 19,727,904 common shares (1997 -- 18,632,873) $23,011,556 $13,852,632 =========== ===========
8 42 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 6. CAPITAL STOCK (CONTINUED): (a) Changes in the Corporation's capital stock are presented below:
Shares Dollars ---------- ----------- Issued and outstanding, December 31, 1996 17,929,382 $ 9,302,691 Issue of common shares for cash (b) 696,491 4,527,191 Issue of common shares pursuant to exercise of stock options 7,000 22,750 ---------- ----------- Balance, December 31, 1997 18,632,873 13,852,632 Issue of common shares for cash (b) 366,000 3,131,500 Cancellation of shares (c) (460) -- Issue of common shares pursuant to exercise of warrants 696,491 5,920,174 Issue of common shares pursuant to exercise of stock options 33,000 107,250 ---------- ----------- Balance, December 31, 1998 19,727,904 $23,011,556 ========== ===========
(b) Private placements: In 1998, the Corporation completed private placements for 366,000 common shares for total aggregate proceeds of $3,131,500. At December 31, 1998, proceeds of $637,500 for the issuance of 75,000 common shares were receivable. These funds were received by the Corporation in January 1999. In 1997, the Corporation completed a private placement of 696,491 common shares at a price of $6.50/share and received gross proceeds of $4,527,191. The share issue costs related to these private placements have been charged against the deficit. 9 43 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 6. CAPITAL STOCK (CONTINUED): (c) Cancellation of shares: During the year, the Corporation was advised by its transfer agent that common shares of the Corporation, which had been issued on the amalgamation of the Company with Monterey Capital Inc. in 1995, were never claimed. These common shares have been cancelled. (d) Warrants: The Corporation has issued the following warrants to purchase common shares:
Exercise Outstanding at price per Exercised December 31, Warrants share Issued to date 1998 Expiry -------- --------- ------ --------- -------------- ------ Series A $ 8.50 696,491 696,491 -- -- Series B 8.50 50,000 -- 50,000 August 31, 1999 Series C 10.00 60,000 -- 60,000 August 31, 1999 Series D 10.00 67,500 -- 67,500 December 31, 1999
The Series A warrants were issued in connection with the 1997 private placement and were exercised in 1998. The Series B, C and D warrants were issued in connection with various private placements completed in 1998. As at December 31, 1998, none of these warrants had been exercised. (e) Stock options: The Corporation has established a stock option plan (the "Plan") for its key employees, its officers and directors, and certain consultants. The Plan is administered by the Board of Directors of the Corporation. The Board may from time to time designate individuals to whom options to purchase common shares of the Corporation may be granted, the number of shares to be optioned to each, and the option price per share. The option price per share cannot involve a discount to the market price at the time the option is granted. The total number of shares to be optioned to any one individual cannot exceed 5% of the total issued and outstanding shares and the maximum number of shares which may be optioned under the Plan cannot exceed 2,500,000 common shares without shareholder approval. 10 44 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 6. CAPITAL STOCK (CONTINUED): (e) Stock options (continued): Changes in outstanding options were as follows for the last two fiscal periods:
Stock options ------------- Balance, December 31, 1996 1,575,000 Granted 271,000 Exercised (7,000) Cancelled (5,000) --------- Balance, December 31, 1997 1,834,000 Granted 125,000 Exercised (33,000) Cancelled -- --------- Balance, December 31, 1998 1,926,000 =========
The weighted average exercise prices of options granted, exercised and cancelled during 1998 were $6.59/share (1997 - $9.42/share), $3.25/share (1997 - $3.25/share) and nil/share (1997 - $11.50/share), respectively. The weighted average exercise price of options exercisable at December 31, 1998 is $5.95/share (1997 - $5.10/share). At December 31, 1998, options outstanding were as follows:
Options outstanding Exercise price per share Expiry date ------------------- ------------------------ ----------- 25,000 $ 4.90 1999 30,000 $10.00 1999 100,000 $ 7.00 2002 40,000 $13.75 2006 40,000 $ 9.80 2006 110,000 $11.50 2006 10,000 $16.75 2006 40,000 $ 9.00 2006 5,000 $ 9.25 2007 1,200,000 $ 3.25 (i) 2006-2009 36,000 $ 9.25 (ii) 2006-2010 290,000 $10.00 (iii) 2006-2012 --------- 1,926,000 =========
11 45 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 6. CAPITAL STOCK (CONTINUED): (d) Stock options (continued): (i) These options are effective and exercisable as follows: Currently 1,000,000 1999 200,000 -------- 1,200,000 =========
(ii) These options are effective and exercisable as follows: Currently 12,000 1999 12,000 2000 12,000 --------- 36,000 =========
(iii) These options become vested at various dates over the next five years. During the year, the board of directors approved an amendment to change the exercise price of these options to $10.00/share. The exercise price was previously set at the trading price of the shares on the date preceding each vesting date. These options vest as follows: Vested 1998 50,000 1999 90,000 2000 90,000 2001 50,000 2002 10,000 --------- 290,000 =========
12 46 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 7. COMMITMENTS: (a) Operating leases: Minimum lease payments under operating leases for the Corporation's premises for the next three years are as follows: 1999 $445,407 2000 151,582 2001 24,089 -------- $621,078 ========
(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 $735,000 (US$516,000) in the next three years as follows: 1999 $245,000 2000 245,000 2001 245,000 -------- $735,000 ========
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, 1998, an amount of approximately US$128,000 (1997 - US$172,000) was paid and expensed in connection with the research grant described above. 13 47 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 7. COMMITMENTS (CONTINUED): (c) License agreements: In January 1999, the Corporation granted a non-exclusive license to an American corporation to utilize all proprietory technology, including its rights to patents and know-how, necessary to conduct the AD7C(TM) test in a reference laboratory. The Corporation will receive compensation under the agreement based on the number of tests conducted by the American company. The license, which is for the US territory, is for an initial term of 24 months and is subject to automatic renewal for two additional one-year terms. 8. INCOME TAXES: Details of the components of income taxes are as follows:
1998 1997 1996 ------------ ------------ ------------ Loss before income taxes: Canadian operations $ (2,573,106) $ (2,489,752) $ (3,106,405) U.S. operations (4,330,505) (2,509,703) (620,659) ------------ ------------ ------------ (6,903,611) (4,999,455) (3,727,064) Basic income tax rate 38.0% 38.0% 38.0% ----------- ----------- ----------- Income tax recovery at statutory rates 2,623,000 1,900,000 1,416,000 Adjustments in income taxes resulting from: Non-recognition of losses and other unclaimed deductions (2,623,000) (1,900,000) (1,416,000) Credit for losses - - 28,000 ------------ ------------ ------------ Income taxes $ - $ - $ 28,000 ============ ============ ============
14 48 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 8. INCOME TAXES (CONTINUED): The Corporation has non-capital losses carried forward and accumulated scientific research and development expenditures which are available to reduce future years' taxable income. The related income tax benefit of these items will be recorded in earnings when realized. These expire as follows:
Federal Provincial ---------- ----------- Non-capital losses: 1999 $ 40,000 $ -- 2000 36,000 36,000 2001 58,000 58,000 2002 920,000 -- 2003 1,990,000 1,276,000 2004 1,388,000 1,090,000 2005 3,024,000 3,024,000 Scientific research and development expenditures: (Indefinitely) 1,671,000 4,200,000
The Corporation also has investment tax credits available in the amount of approximately $464,000 available to reduce future years' federal taxes payable. The benefit of these credits will be recorded when realized. These credits expire as follows: 2005 $ 26,000 2006 290,000 2007 148,000
In addition, the Corporation's US subsidiary has losses carried forward of approximately US$4,900,000 which expire as follows: 2011 $ 460,000 2012 1,730,000 2018 2,710,000
15 49 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 9. FINANCIAL INSTRUMENTS: (a) Foreign currency risk management: A substantial portion of the Corporation's expenses are derived in US dollars. This results in financial risk due to fluctuations in the value of the Canadian dollar relative to those foreign currencies. For the most part, this exposure is reduced to the extent that the Corporation generates revenues in US dollars. Fluctuations in payments made for the Corporation's expenses could cause unanticipated fluctuations in the Corporation's operating results. (b) Credit risk: Financial instruments that potentially subject the Corporation to significant concentrations of credit risk consist principally of short-term investments. The Corporation has investment policies that require placement of short-term investments in financial institutions evaluated as highly creditworthy. (c) Fair value disclosure: The Corporation has determined that the carrying value of its short-term financial assets and liabilities, including cash and short-term investments, accrued interest, accounts receivable, subscriptions receivable, notes receivables and accounts payable and accrued liabilities, approximates fair value due to the immediate or short-term maturity of these financial instruments. 16 50 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 10. CANADIAN/U.S. REPORTING DIFFERENCES: (a) Consolidated statements of earnings: The reconciliation of earnings reported in accordance with Canadian GAAP and with U.S. GAAP is as follows:
1998 1997 1996 ------------ ------------ ------------ Net loss, Canadian GAAP $(6,903,611) $(4,999,455) $(3,699,064) Adjustments: Amortization of patents (i) (75,077) (49,533) (39,166) Stock-based compensation - options granted to non-employees (ii) (406,500) (150,000) (592,000) ------------ ------------ ------------ Net loss, U.S. GAAP $(7,385,188) $(5,198,988) $(4,330,230) ============ ============ ============ Loss per share, U.S. GAAP $ (0.38) $ (0.28) $ (0.25) ============ ============ ============
(b) Consolidated shareholders' equity: The reconciliation of shareholders' equity reported in accordance with Canadian GAAP and with U.S. GAAP is as follows:
1998 1997 1996 ---------- ---------- ----------- Shareholders' equity, Canadian GAAP $ 5,321,780 $ 3,653,467 $ 3,829,981 Adjustments: Amortization of patents (i): Cumulative effect to beginning of the period (180,139) (130,606) (91,440) Current period (75,077) (49,533) (39,166) Stock-based compensation - options granted to non-employees (ii): Accumulative effect to beginning of period (742,000) (592,000) -- Current period (406,500) (150,000) (592,000) ------------ ------------ ------------ Increase in deficit (1,403,716) (922,139) (722,606) ------------ ------------ ------------ Shareholders' equity, U.S. GAAP $ 3,918,064 $ 2,731,328 $ 3,107,375 ============ ============ ============
17 51 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 10. CANADIAN/U.S. REPORTING DIFFERENCES (CONTINUED): (b) Consolidated shareholders' equity (continued): (i) 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 patents, from the date the patent was secured. (ii) In accordance with FAS 123, Accounting for Stock-Based Compensation, compensation related to the stock options granted to non-employees has been recorded in the accounts based on the fair value of the stock options at the grant date. The fair value of the stock options was estimated as described in note 10 (c)(3). (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(TM) test and is currently offering testing services in their CLIA certified clinical reference laboratory. It has had limited revenues to date on the sale of its products under development. Accordingly, the Corporation is a development stage company as defined in Statement of Financial Accounting Standards No. 7 and the following disclosures are required:
Cumulative Cumulative since the date of since the date of inception of inception of the Corporation the Corporation to December 31, to December 31, 1998 1997 ----------------- ----------------- Interest revenue $ 547,040 $ 303,466 Service fees 175,847 24,584 Gross research and development expenditures 9,126,991 6,107,976 Other expenses 9,888,251 5,527,963 Cash inflow (outflow): Operating activities (17,922,963) (10,672,962) Investing activities (2,439,525) (1,658,462) Financing activities 23,190,693 14,618,769 ============ ============
18 52 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 10. 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.
Consideration --------------------- Accumulated Shares Cash Other deficit Total ---------- ------- -------- ------------ ---------- 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 3,812,844 936,894 (2,358,223) 2,391,515 Year ended December 31, 1996: Common shares issued 882,300 5,280,050 -- -- 5,280,050 Net loss -- -- -- (4,330,230) (4,330,230) Share issue costs -- (233,960) -- -- (233,960) ---------- --------- -------- ----------- ---------- Balance December 31, 1996 carried forward 17,929,382 8,858,934 936,894 (6,688,453) 3,107,375
19 53 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 10. CANADIAN/U.S. REPORTING DIFFERENCES (CONTINUED): (c) Other disclosures required by United States GAAP (continued): (1) Development stage company (continued):
Consideration Accumulated ------------------------ ----------------------------- Shares Cash Other deficit Total ---------- ---------- -------- ------------ ---------- Balance December 31, 1996 brought forward 17,929,382 $8,858,934 $936,894 $(6,688,453) $3,107,375 Year ended December 31, 1997: Common shares issued 703,491 4,549,941 -- -- 4,549,941 Net loss -- -- (5,198,988) (5,198,988) Share issue costs -- (231,000) -- -- (231,000) Capital stock subscription -- 504,000 -- -- 504,000 ---------- --------- -------- ----------- ---------- Balance, December 31, 1997 18,632,873 13,681,875 936,894 (11,887,441) 2,731,328 Year ended December 31, 1998: Common shares issued 1,095,031 8,654,924 -- -- 8,654,924 Net loss -- -- -- (7,385,188) (7,385,188) Share issue costs -- (83,000) -- -- (83,000) ---------- ----------- -------- ------------ ----------- Balance, December 31, 1998 19,727,904 $22,253,799 $936,894 $(19,272,629) $ 3,918,064 ========== =========== ======== ============ ===========
(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:
1998 1997 ----------- ----------- Scientific research and experimental development $ 860,000 $ 1,100,000 Non-capital losses 2,600,000 1,594,000 Investment tax credits 464,000 590,000 Share issue costs 162,000 196,000 Less valuation allowance (4,086,000) (3,480,000) ----------- ----------- Net deferred tax asset $ -- $ -- =========== ===========
There are no material deferred tax liabilities. 20 54 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 10. CANADIAN/U.S. REPORTING DIFFERENCES (CONTINUED): (c) Other disclosures required by United States GAAP (continued): (2) Income taxes (continued): In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and tax planning strategies. Since the Corporation is a development stage enterprise, the generation of future taxable income is dependent on the successful commercialization of its products and technologies. (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:
1998 1997 ----------- ----------- Net loss As reported (US GAAP) $(7,385,188) $(5,198,988) Pro-forma (7,385,188) (5,990,365) Loss per share As reported (US GAAP) (0.38) (0.28) Pro-forma (0.38) (0.33)
The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: risk-free interest rate of 5%, dividend yield of 0%, expected volatility of 50%, and expected life of 5 years. (4) Short-term investments: Short-term investments are classified as held-to-maturity as the Corporation has the positive intent and ability to hold these securities to maturity. As the Corporation's short-term investments include government securities and commercial paper, the aggregate fair value approximates carrying value and there are no significant unrealized gross holding gains or losses. 21 55 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 10. CANADIAN/U.S. REPORTING DIFFERENCES (CONTINUED): (c) Other disclosures required by United States GAAP (continued): (5) Comprehensive income: Effective January 1, 1998, the Corporation adopted Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, which establishes new rules for the reporting and display of comprehensive income and its components. The adoption of this statement has no impact on the Corporation's net income or shareholders' equity. 11. SEGMENT DISCLOSURES: Geographic segment information was as follows:
United Canada States -------- -------- Revenues: 1998 $243,574 $151,263 1997 76,526 24,584 1996 226,940 -- Net loss: 1998 (2,573,106) (4,330,505) 1997 (2,489,752) (2,509,703) 1996 (3,106,405) (620,659) Identifiable assets: 1998 4,940,335 815,885 1997 3,579,849 365,948
12. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE: The Year 2000 Issue arises because many computerized systems use two digits rather than four to identify a year. Date-sensitive systems may recognize the year 2000 as 1900 or some other date, resulting in errors when information using year 2000 dates is processed. In addition, similar problems may arise in some systems which use certain dates in 1999 to represent something other than a date. The effects of the Year 2000 Issue may be experienced before, on, or after January 1, 2000, and, if not addressed, the impact on operations and financial reporting may range from minor errors to significant systems failure which could affect an entity's ability to conduct normal business operations. It is not possible to be certain that all aspects of the Year 2000 Issue affecting the entity, including those related to the efforts of customers, suppliers, or other third parties, will be fully resolved. 22 56 NYMOX PHARMACEUTICAL CORPORATION Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (in Canadian dollars) 13. SUBSEQUENT EVENT: In January 1999, the Corporation completed private placements for a total of 55,000 common shares at $8.50 per share, and received gross proceeds of $467,500. In connection with these private placements, the Corporation issued an additional 27,500 Series D warrants exercisable at a price of $10.00 per share, expiring on December 31, 1999. 23 57 EXHIBIT INDEX NYMOX PHARMACEUTICAL CORPORATION Form 20-F Registration Statement
Exhibit No. Description ----------- ----------- Form 20-F Edgar - --------- ----- 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 SGS Lab Simon S.A. and the Registrant (filed previously). 3.5 10.5 Research and License Amendment between the General Hospital Corporation and the Registrant (filed previously). 3.6 10.6 Sole Non-Exclusive License and Supply Agreement for the Nymox AD7C(TM) Diagnostic Test for Alzheimer's Disease between Specialty Laboratories and the Registrant.
SOLE NONEXCLUSIVE U.S. LICENSE AND SUPPLY AGREEMENT FOR THE NYMOX AD7C(TM) DIAGNOSTIC TEST FOR ALZHEIMER'S DISEASE ENTERED INTO ON JANUARY 19, 1999 B Y A N D B E T W E E N : NYMOX CORPORATION Licensor 31 EX-10.6 2 SOLE NON-EXCLUSIVE LICENSE AND SUPPLY AGREEMENT 1 EXHIBIT INDEX NYMOX PHARMACEUTICAL CORPORATION Form 20-F Registration Statement
Exhibit No. Description ----------- ----------- Form 20-F Edgar - --------- ----- 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 SGS Lab Simon S.A. and the Registrant (filed previously). 3.5 10.5 Research and License Amendment between the General Hospital Corporation and the Registrant (filed previously). 3.6 10.6 Sole Non-Exclusive License and Supply Agreement for the Nymox AD7C(TM) Diagnostic Test for Alzheimer's Disease between Specialty Laboratories and the Registrant.
SOLE NONEXCLUSIVE U.S. LICENSE AND SUPPLY AGREEMENT FOR THE NYMOX AD7C(TM) DIAGNOSTIC TEST FOR ALZHEIMER'S DISEASE ENTERED INTO ON JANUARY 19, 1999 B Y A N D B E T W E E N : NYMOX CORPORATION Licensor 31 2 - and - SPECIALTY LABORATORIES, INC. Licensee T A B L E O F C O N T E N T S
Page ARTICLE 1. DEFINITIONS 3 ARTICLE 2. PURPOSE OF AGREEMENT 6 ARTICLE 3. CONFIDENTIALITY 6 ARTICLE 4. THE LICENSE 7 ARTICLE 5 COMPENSATION TO NYMOX 9 ARTICLE 6. REIMBURSEMENT AND PRICE 11 ARTICLE 7. MARKETING 12 ARTICLE 8. PERFORMANCE TARGETS/CONVERSION TO NONEXCLUSIVE LICENSE 13 ARTICLE 9. TERMINATION 14 ARTICLE 10. IMPROVEMENTS 16 ARTICLE 11. RESPONSIBILITIES OF THE PARTIES 17 ARTICLE 12. QUALITY CONTROL 20 ARTICLE 13. EFFECT OF LICENSING AGREEMENT 21 ARTICLE 14. REPRESENTATIONS AND WARRANTIES 22 ARTICLE 15. MISCELLANEOUS PROVISIONS 23 EXHIBIT A: PATENTS LICENSED TO SPECIALTY 27 EXHIBIT B: TRADEMARKS LICENSED TO SPECIALTY 28 ARTICLE 1. DEFINITIONS
The terms defined in this Article shall have the following meanings (applicable to both the singular and plural forms) in this Agreement: "AD7C(TM) Test" means the Nymox Corporation AD7C(TM) Alzheimer's disease test for measuring the level of the biomarker Neural Thread Protein (NTP) in cerebrospinal fluid (CSF), urine, blood or other bodily fluids or tissues. "AD7C(TM) Test", as used herein, is not intended to include a test kit employing the AD7C(TM) testing technology for Diagnostic Purposes and sold or intended to be sold to third parties. "Affiliate" means any person, firm or corporation legally competent to perform the services and carry out the terms of this Agreement, which Controls, is Controlled by or is under common Control with either Nymox Corporation or Specialty Laboratories, Inc. "Average Price" means: (a) for AD7C(TM) Tests conducted for Diagnostic Purposes, the Net Revenue for AD7C(TM) 32 3 Tests conducted for Diagnostic Purposes during a Billing Month, divided by the Number of Tests in that Billing Month; or (b) for any Clinical Study Support contract executed by Specialty, the price per AD7C(TM) Test as stipulated in the contract, or, if the contract does not so stipulate, the Estimated Net Revenue divided by the Estimated Number of Tests for that contract. "Billing Month" (applicable only to the conduct of AD7C(TM) Tests by Specialty for Diagnostic Purposes) means each calendar month during the period of this Agreement, beginning with the month during which Launch occurs. "Billing Quarter" (applicable only to the conduct of AD7C(TM) Tests by Specialty for Clinical Study Support) means each calendar quarter during the period of this Agreement, beginning with the quarter during which Launch occurs. "Clinical Study Support" means the use or performance of the AD7C(TM) Test in clinical trials of therapeutics in Phases 1, 2, 3 or 4 of an Investigational New Drug trial. "Competitor" means any person, firm or corporation, other than Nymox or Specialty, that offers for sale a diagnostic test for Alzheimer's disease or that Controls any corporation or partnership that offers a diagnostic test for Alzheimer's disease. "Confidential Information" means any technical, scientific or business information provided by one Party to the other Party pursuant to this Agreement or the July 8, 1998 Mutual Confidentiality Agreement between the Parties, in connection with: (a) this Agreement (including the negotiations and discussions leading up to the execution of this Agreement, and the specific terms of the Agreement), (b) the AD7C(TM) Test and/or its efficacy, reagents, assays, operating procedures, test methods and technology, (c) training with respect to the AD7C(TM) Test, (d) Improvements in connection with the AD7C(TM) Test, (e) compensation calculations and/or payments under this Agreement and/or any examination in connection therewith, (f) Clinical Study Support information provided by Specialty to Nymox, (g) marketing strategy, customer and contact lists, plans, or materials concerning the AD7C(TM) Test, (h) applications or submissions to any regulatory authority or third party payer in connection with the AD7C(TM) Test, and/or (i) arbitration proceedings pursuant to Paragraph 15.05. "Confidential Information," other than the information described in subparagraphs (a), (b) and (c) above, must either be disclosed in writing and marked "Confidential" or, if orally or visually disclosed, must be confirmed in writing as confidential within 30 days following the oral or visual disclosure. 33 4 "Contract Year" means a twelve-month period beginning on the first day of the sixth month after the Launch of the AD7C(TM) Test by Specialty or an anniversary of that date. "Control" means the direct or indirect ownership of fifty (50%) or more of the voting stock of the subject entity. "Diagnostic Purposes" means the use or performance of the AD7C(TM) Test primarily to aid the diagnosis of a patient by a physician and not for Clinical Study Support. "Effective Date" means the date of signature by the last Party to sign this Agreement. "Estimated Net Revenue" means, for a Clinical Study Support contract, which does not stipulate a price per AD7C(TM) Test, the reasonable estimate made by Specialty in good faith of the gross amount due to Specialty pursuant to that contract for the performance of AD7C(TM) Tests, less any deductions for: (a) any discounts, credits, allowances and/or refunds provided for in the contract; (b) any established shipping, handling, or transportation charges to be paid to an independent third party by Specialty; and (c) any sales taxes separately billed or accounted for. If Specialty provides other services, assays or tests pursuant to a Clinical Study Support contract, only that portion of the gross amount which represents payment for AD7C(TM) Tests shall be considered Estimated Net Revenue. "Estimated Number of Tests" means, for a Clinical Study Support contract, which does not stipulate a price per AD7C(TM) Test, the reasonable estimate made by Specialty in good faith of the number of AD7C(TM) Tests to be performed by Specialty pursuant to that contract, less returns, re- dos or any "no charge"tests. "Improvement" means any advance, improvement or modification, whether or not patentable, in the conduct of the AD7C(TM) Test, including, but not limited to modifications of the method of conducting the AD7C(TM) Test or reagents used therein. "Know-How" means the information, knowledge and trade secrets relating to the AD7C(TM) Test, its reagents, assays, operating procedures, test methods and technology. "Launch" means the date of the first commercial performance of the AD7C(TM) Test by Specialty for a third party. "Minimum Test Volume" means 75% of the reasonable estimate made by Specialty in good faith of the number of AD7C(TM) Tests it anticipates performing for Diagnostic Purposes for a given Contract Year. "Net Revenue" means the gross amount invoiced by Specialty in a given Billing Month for the performance of AD7C(TM) Tests for Diagnostic Purposes, less: 34 5 (a) any usual discount, credit and/or refund; (b) any trade and discount allowances or credits actually given; (c) any bad debts; (d) any amount excluded or disallowed by Medicare, Medicaid or a third party payer or insurance company; (e) any established shipping, handling, or transportation charges paid to an independent third party by Specialty; and (f) any sales taxes separately billed or accounted for. If invoices include charges for assays, services or amounts which are not AD7C(TM) Tests, only that portion of the invoiced amount which represents AD7C(TM) Tests shall be considered Net Revenue. "Number of Tests" means the number of AD7C(TM) Tests invoiced by Specialty in each Billing Month, Billing Quarter or Contract Year, as appropriate, less returns, re-dos or any "no charge" invoices. "Nymox" means Nymox Corporation and its Affiliates. "Party" means either Nymox or Specialty, or both, as will be apparent from the context. "Patents" means and collectively includes: (a) all of the United States and patent applications listed in Exhibit A to this Agreement, together with any reissues, extensions, continuations, divisions and continuations-in-part thereof, and (b) any additional patents or patent applications which Nymox may own or which Nymox may have or acquire the rights to license during the term of this Agreement and which contain one or more claims which cover any aspect of the AD7C(TM) Test. "Specialty" means Specialty Laboratories, Inc. and its Affiliates. "Trademarks" means the trademarks listed in Exhibit B. ARTICLE 2. PURPOSE OF AGREEMENT The purpose of this agreement is to establish operations for the marketing and conducting of the AD7C(TM) Test by Specialty in Specialty's reference laboratories. ARTICLE 3. CONFIDENTIALITY 3.01 USE OF CONFIDENTIAL INFORMATION Each Party will not use Confidential Information provided by the other Party for any purpose other than the performance of this Agreement. 3.02 PROHIBITION ON THE DISCLOSURE OF CONFIDENTIAL INFORMATION TO THIRD PARTIES 35 6 Each Party will treat Confidential Information provided by the other Party with the same degree of care as if it were its own confidential proprietary information and will not disclose such Confidential Information to any third party except as required by law, regulation, legal process or other governmental authority or pursuant to this Agreement. 3.03 EXCEPTIONS A. Information Already Known or Independently Developed Confidential Information shall not include information which: (a) was known or used by the receiving Party, before disclosure, as evidenced by its written or other tangible records made prior to the time of receipt; (b) has become known to the public other than through disclosure by the receiving Party; (c) a third Party having the right to disclose such information has lawfully disclosed to the receiving Party; or (d) the receiving Party developed independently of the Confidential Information provided by the other Party as evidenced by the receiving Party's written or other tangible records. B. Test Results Specialty may disclose the results of the performance of an AD7C(TM) Test and its interpretation to anyone authorized by law to receive such results. C. Consent to Disclose A Party may disclose Confidential Information provided by the other Party with the written consent of the disclosing Party. D. Requirements of Law Nothing in this Agreement shall be deemed to prohibit the receiving Party from disclosing any Confidential Information that is required by law, as determined by the reasonable judgment of the receiving Party's attorney; provided, however, that in the event of such legal requirement, prior to disclosing any Confidential Information, the receiving Party shall notify the other Party of the scope and source of such legal requirement and shall give the other Party the opportunity to challenge the need to disclose and/or limit the scope of the disclosed Confidential Information. 3.04 DURATION OF THE OBLIGATION TO MAINTAIN CONFIDENTIALITY Each Party's obligations under this Article shall be in force during the term of this Agreement and shall survive five (5) years after the termination or expiration of this Agreement. 36 7 ARTICLE 4. THE LICENSE GRANT 4.01 SUBJECT MATTER OF THE LICENSE Nymox hereby grants to Specialty a license to utilize all Nymox proprietary technology, including its rights to the Patents and Know-How, necessary to conduct the AD7C(TM) Test in a reference laboratory. 4.02 NATURE OF THE LICENSE GRANTED A. AD7C(TM) Test Specialty's license to market and perform the AD7C(TM) Test shall include the following: (a) Specialty's license is semi-exclusive for conducting the AD7C(TM) Test for Diagnostic Purposes. Nymox retains the right to conduct the AD7C(TM) Test for Diagnostic Purposes and the right to market, license and sell kits to third parties for conducting the AD7C(TM) Test for Diagnostic Purposes and to license its AD7C(TM) Test Patents, Know-How and technology to third parties in order to develop a kit for conducting the AD7C(TM) Test. (b) Specialty's license is exclusive for conducting the AD7C(TM) Test for Clinical Study Support. Notwithstanding the foregoing, Nymox retains the right to conduct the AD7C(TM) Test in connection with Nymox's research and development activities, including Nymox's own clinical trials and third party clinical trials evaluating Nymox's therapeutics for Alzheimer's disease, and in connection with the clinical trials of a strategic partner of Nymox. (It is understood for the purposes of this Paragraph that any agreement establishing such a strategic relationship shall include other substantive activities (e.g. equity investment, R&D funding etc.) beyond assay services for the clinical trials.) Nymox shall inform Specialty of the name of any such strategic partner in a timely manner and the number of strategic partners shall not exceed three. However, Nymox shall not have the right to market or sell any kits for conducting the AD7C(TM) Test in connection with any clinical trials or to grant licenses for that purpose. Specialty shall have the right to conduct the AD7C(TM) Test on all specimen types, including but not limited to, cerebrospinal fluid (CSF), urine and blood. B. Trademarks Specialty's license includes the right to use the Nymox Trademarks, "AD7C(TM)" and "Nymox," in connection with the promotion, education, marketing and performance of the AD7C(TM) Test, subject to Nymox's right to approve marketing materials as set out below in Article 7. 37 8 4.03 TERRITORY Specialty's license to conduct the AD7C(TM) Test and to use the Nymox and AD7C Trademarks is for the United States and its territories and possessions. 4.04 TERM The initial term of the license is for twenty-four (24) months from the date of Launch by Specialty of the AD7C(TM) Test. The parties anticipate that Specialty will launch the AD7C(TM) Test within two months of the Effective Date. The Agreement shall automatically renew for two (2) additional one (1) year terms, unless terminated earlier pursuant to Article 9. 4.05 NON-TRANSFERABLE; NO SUBLICENSING Specialty's license is not transferable or assignable and Specialty is not entitled to sublicense or to use this license as collateral or security in any lending, financing or other agreement. Nymox shall not transfer or assign this Agreement, or any Nymox obligations under this Agreement, to any third party. 4.06 LAUNCH REQUIREMENTS In order to enable Specialty to achieve timely Launch, Nymox must fulfill its obligations under Paragraphs 11.02 (1), (2) and (3) within ten (10) days of the Effective Date of this Agreement. ARTICLE 5. COMPENSATION TO NYMOX 5.01 COMPENSATION FOR TESTS CONDUCTED FOR DIAGNOSTIC PURPOSES For AD7C(TM) Tests conducted by Specialty for Diagnostic Purposes, the compensation owed to Nymox by Specialty for each Billing Month will be calculated as follows: (1) Where the Average Price for the AD7C(TM) Tests conducted for Diagnostic Purposes for a Billing Month is more than $200: Compensation = ($82 + 60% x (Average Price -$200)) x Number of Tests. (2) Where the Average Price for the AD7C(TM) Tests conducted for Diagnostic Purposes for that Billing Month is $200 or less: Compensation = $82 x Number of Tests. 38 9 5.02 COMPENSATION FOR TEST CONDUCTED FOR CLINICAL TRIALS For AD7C(TM) Tests conducted by Specialty for Clinical Study Support, the compensation owed to Nymox by Specialty will be calculated and reported separately for each Clinical Support Study contract, on a quarterly basis. For each Clinical Study Support contract executed by Specialty, the compensation to Nymox will be calculated for each Billing Quarter as follows: (1) Where the Average Price for the AD7C(TM) Tests conducted under that contract is more than $200: Compensation = ($51.25 + 25% x (Average Price - $200)) x number of tests actually conducted during that Billing Quarter (2) Where the Average Price for the AD7C(TM) Test conducted under that contract is $200 or less: Compensation = $51.25 x number of tests actually conducted during that Billing Quarter. 5.03 INTRODUCTION OF A KIT If Nymox or a Nymox licensee introduces a kit for sale or license to third parties for conducting the AD7C(TM) Test for Diagnostic Purposes, Nymox and Specialty agree to renegotiate the compensation package in keeping with the spirit of this Agreement in order to enable Specialty to market and conduct the AD7C(TM) Test on a competitive basis with Nymox and third parties offering such kits. 5.04 PAYMENT OF COMPENSATION Compensation payments will be made quarterly and will be due and payable within 30 days of the closing of each calendar quarter. Each compensation payment shall be accompanied by an itemized statement detailing how the compensation was calculated. For AD7C(TM) Tests conducted for Diagnostic Purposes, the itemized statement for each compensation payment shall include for each Billing Month in that payment period: (a) the Net Revenue, specifying the gross amount invoiced for the performance of the AD7C(TM) Test by Specialty and the amount of each deduction; (b) the Number of Tests; and (c) the Average Price. For each Clinical Study Support contract, the itemized statement for each Billing Quarter shall include, as applicable, : (a) the Estimated Net Revenue, including the gross amount estimated to be invoiced for the performance of the AD7C(TM) Test by Specialty and the estimated amount of each deduction; 39 10 (b) the Estimated Number of Tests; (c) the Average Price; and (d) the number of tests actually conducted during the Billing Quarter. 5.05 RIGHT TO EXAMINE RECORDS During the term of this Agreement and for one year after its termination or expiration, Nymox shall have the right to retain an independent certified public accounting firm, to which Specialty has no reasonable objection, to examine the relevant books and records of Specialty to verify the calculation and payment of compensation owed to Nymox under this Agreement. Specialty may require the accounting firm to sign a confidential disclosure agreement before the examination is conducted. The accounting firm will only report the results of its examination with respect to the accuracy of the calculation, payment and reporting to Nymox (specifying any inaccuracies found) and shall not disclose to Nymox any other information it obtained. Only one such examination may be conducted a year and any examination shall be conducted during reasonable business hours. Specialty agrees to cooperate with the examination and to provide any financial, business or laboratory records requested by the accounting firm or used by Specialty in calculating the compensation. The accounting firm shall give reasonable notice of an examination date sufficient to allow Specialty to organize its records. Nymox shall bear the costs of any such examination unless the examination results in an adjustment in its favor, which adjustment is at least the greater of $50,000 or more or 5% of the total compensation paid by Specialty for the payment period under examination, in which case Specialty will bear the cost of the examination. Nymox and Specialty agree to be bound by the results of any such examination and to pay to the other Party any sums found owing within 30 days of the examination report. ARTICLE 6. REIMBURSEMENT AND PRICE 6.01 PRICE The Parties anticipate that Specialty will initially invoice the performance of the AD7C(TM) Test at the current market price of $400 per test, but recognize that Specialty may change the invoice price in the future because of cost factors, reimbursement patterns or other market considerations. 6.02 CLINICAL STUDY SUPPORT For AD7C(TM) Tests to be conducted by Specialty for Clinical Study Support, Specialty may negotiate contracts and set prices, for example, based on volume commitments. Both parties agree to review clinical studies on a case by case basis. Nymox has the right to review any proposed clinical study before Specialty enters into a Clinical 40 11 Study Support contract with respect to such study and the right to approve the parties conducting them, such approval not to be unreasonably withheld. For any proposed Clinical Study Support contract, Specialty shall disclose to Nymox the names of the party(ies) who will be conducting the study and the nature of the study. Nymox shall notify Specialty within 10 days of receiving the relevant information from Specialty whether Nymox objects. Nymox must demonstrate a reasonable basis for any objection to the party(ies) conducting the study. Specialty agrees to make it a term of any Clinical Study Support contract that the other party agree that any AD7C(TM) Tests performed pursuant to that contract be only for the purposes of Clinical Study Support. 6.03 REIMBURSEMENT The Parties agree to use reasonable efforts to share all information concerning reimbursement for the AD7C(TM) Test and to cooperate fully with each other about obtaining reimbursement for the AD7C(TM) Test from physicians, hospitals, patients and third party payers. ARTICLE 7. MARKETING 7.01 SHARING MARKETING EXPENSES Nymox shall share all direct marketing and promotional costs incurred by Specialty on the following basis: (a) 50%/50% for the direct marketing and promotional costs for the conduct of the AD7C(TM) Test for Diagnostic Purposes, provided that Specialty be reimbursed a minimum of $10,000 per year for such activities, with amounts above that being subject to Nymox's approval at its sole discretion. (b) 0%(Nymox)/100%(Specialty) for the direct marketing and promotional costs for the conduct of the AD7C(TM) Test for Clinical Study Support purposes during any period when Specialty's license for Clinical Study Support is exclusive; and (c) 50%/50% for the direct marketing and promotional costs for the conducting of the AD7C(TM) Test for Clinical Study Support during any period when Specialty's license for Clinical Study Support purposes is nonexclusive, provided that Specialty be reimbursed a minimum of $10,000 per year for such activities, with amounts above that being subject to Nymox's approval at its sole discretion. 7.02 APPROVAL OF MARKETING STRATEGY Nymox has the right to review and approve Specialty's marketing materials and literature and marketing strategy which approval shall be given within 10 days of receiving all the relevant information from Specialty; any such approval shall not be unreasonably withheld. 41 12 7.03 SPECIALTY TRADEMARKS Nothing herein shall restrict the right of Specialty to use its own trademarks and logos on any and all marketing materials, literature, invoices, reports and the like in connection with its license under this Agreement. ARTICLE 8. PERFORMANCE TARGETS/CONVERSION TO NONEXCLUSIVE LICENSE 8.01 SPECIALTY EFFORTS Specialty shall use commercially reasonable efforts to market and conduct the AD7C(TM) Test. 8.02 TEST VOLUME ESTIMATE Before the start of each Contract Year, Specialty shall make a reasonable estimate in good faith of the number of AD7C(TM) Tests it anticipates performing for Diagnostic Purposes and for Clinical Study Support purposes for a given Contract Year and give Nymox written notice of such estimate at least 30 days before the start of that Contract Year. 8.03 COMPENSATION FOR FAILURE TO MEET MINIMUM TEST If Specialty's actual Number of Tests in a Contract Year do not meet the Minimum Test Volume for that Contract Year, Specialty shall have the right to maintain its semi-exclusive license rights for the following Contract Year by paying Nymox its lost compensation caused by the deficiency. The lost compensation would be calculated as follows: (1) Determine the shortfall in the number of tests: Annual Shortfall = Minimum Test Volume - Number of Tests in the Contract Year (2) Convert to monthly shortfall: Monthly Shortfall in Number of Tests = Annual Shortfall/12. (3) For each Billing Month in the Contract Year, use the Monthly Shortfall in Number of Tests as the "Number of Tests" in the appropriate Paragraph 5.01 formula in order to calculate the lost compensation for that Billing Month. (4) Total the calculated lost compensation revenues for the Billing Months of the Contract Year to arrive at the lost compensation. 42 13 The lost compensation would be due and payable within 30 days of the calendar quarter immediately following the end of the Contract Year in order for Specialty to maintain its semi-exclusive license for Diagnostic Purposes. If Specialty's failure to meet the Minimum Test Volume is due to Nymox's failure to fulfil its obligations under Paragraph 11.04, or Nymox's failure or refusal to approve Specialty's marketing materials or strategy under Paragraph 7.02, then Paragraph 8.03 shall not apply. 8.04 FAILURE TO PAY COMPENSATION If Specialty fails to pay the lost compensation due pursuant to Paragraph 8.03, then Nymox has the option of either converting to nonexclusive Specialty's license for conducting the AD7C(TM) Test for Diagnostic Purposes or terminating that portion of the Agreement. Nymox shall give Specialty 90 days written notice of its intent to exercise either option. Notwithstanding the foregoing, if Specialty's failure to meet the Minimum Test Volume is due to Nymox's failure to fulfil its obligations under Paragraph 11.04 or Nymox's failure or refusal to approve Specialty's marketing materials or strategy under Paragraph 7.02, then Paragraph 8.04 shall not apply. 8.05 CONVERSION TO NONEXCLUSIVE LICENSE If Nymox exercises its option under Paragraph 8.04 to convert Specialty's license to nonexclusive and then licenses one or more third parties to conduct the AD7C(TM) Test, the compensation to Nymox from Specialty would be the lesser of: (a) the compensation which would have been due under this Agreement had the license remained semi-exclusive; or (b) the compensation as calculated under any applicable portions(s) of the third party license. ARTICLE 9. TERMINATION 9.01 TERMINATION FOR MATERIAL BREACH Either Party has the right to terminate the Agreement for material breach by the other Party upon thirty (30) days written notice specifying the breach. The other Party has thirty (30) days from the receipt of the notice to cure the breach, failing which the Agreement shall immediately terminate upon the sending of a second notice of termination to the other Party. A material breach includes (but is not limited to) a failure or refusal to pay compensation which is actually due and owing pursuant to Paragraphs 5.04 and 5.05. 9.02 TERMINATION FOR FAILURE TO LAUNCH TEST Subject to Nymox having fulfilled its obligations under Paragraph 4.06, if Specialty does not launch the AD7C(TM) Test within two months following the Effective Date, Nymox can give Specialty 60 days notice of its intent to terminate this Agreement. If during that 60 day period, Specialty launches the AD7C(TM) Test, the Agreement shall not be terminated for this reason. 43 14 9.03 TERMINATION FOR FAILURE TO PAY LOST COMPENSATION REVENUE If Specialty fails to pay Nymox lost compensation due pursuant to Paragraph 8.03 and Nymox gives Specialty notice of its intent to terminate the Diagnostic Purpose portion of Agreement pursuant to Paragraph 8.04, Nymox may so terminate if Specialty has not paid the lost compensation within the 90 day notice period. If during that 90 day period, Specialty pays the lost compensation, all license rights under this Agreement shall continue in full force and effect. 9.04 TERMINATION ON BANKRUPTCY A. Nymox may elect to terminate this Agreement upon Specialty becoming bankrupt, making an assignment in bankruptcy or an assignment for the benefit of its creditors, coming under receivership, whether as a result of court order, the provisions of a contract or agreement or government action or otherwise being unable to meet its financial obligations as they become due. B. In the event of Nymox becoming bankrupt, entering into bankruptcy proceedings (voluntary or otherwise) or coming under receivership, Specialty may elect to retain its license rights under this Agreement if the trustee, receiver or other entity so authorized by a federal bankruptcy court, seeks to reject Specialty's license. Upon such election, the rights and remedies of the Parties shall continue to be governed by the terms of this Agreement. 9.05 TERMINATION FOR FORCE MAJEURE Should force majeure as described in Paragraph 15.01 make substantial performance of this Agreement impossible for more than one hundred and eighty (180) then the Party not affected by the force majeure may give a thirty (30) day notice of termination of this Agreement pursuant to Paragraph 15.01 and if the Party affected is unable to restore substantial performance of this Agreement in that thirty (30) day notice period, the Agreement shall be terminated. 9.06 TERMINATION FOR COMPETITOR ACQUIRING CONTROL If a Competitor acquires control of Specialty during the term of this Agreement, Nymox may terminate this Agreement on three (3) months written notice to Specialty. 9.07 EFFECT OF TERMINATION OR EXPIRATION Upon the termination or expiration of this Agreement, Specialty shall: (a) return to Nymox any unused reagents, antibodies, proteins, specimens, protocols, promotional material and other property provided by Nymox for the conducting of the AD7C(TM) Test, provided that copies or samples may be retained by Specialty for record purposes; 44 15 (b) cease receiving specimens which are provided to Specialty solely for conducting the AD7C(TM) Test and cease conducting the AD7C(TM) Test with the exception of conducting AD7C(TM) Tests on specimens that Specialty had already received prior to the termination or expiration of this Agreement; (c) cease using the "AD7C(TM)" and "Nymox" trademarks and marketing the AD7CT(TM) Test. It shall not be considered "use" or "marketing" to continue use of the Trademarks in Specialty's then-current catalog or previously printed marketing materials which include assays or services other than the AD7C(TM) Test, provided that Specialty shall remove the Trademarks from all catalogs and marketing materials at the next scheduled revision. The termination or expiration of this Agreement shall not affect any rights or obligations which may have accrued to either Party prior to the termination or expiration date, including the obligation for compensation as outlined in Article 5. Upon the termination or expiration of this Agreement, all rights that Nymox licensed to Specialty under this Agreement revert to Nymox in their entirety, subject only to Specialty's retained rights pursuant to Paragraph 10.01 which shall remain in effect following termination or expiration. It is understood that this paragraph applies only to the termination of the Agreement in its entirety, and not to termination of the Diagnostic Purposes portion of the Agreement pursuant to Paragraph 9.03. ARTICLE 10. IMPROVEMENTS 10.01 SPECIALTY'S IMPROVEMENTS If Specialty makes any Improvements during the term of this Agreement, it shall disclose such Improvements to Nymox in a timely manner, and such Specialty Improvements shall become the property of Nymox. Specialty shall thereafter have the right to use such Specialty Improvements according to the terms of Specialty's license under this Agreement, without payment of any additional compensation for the use of any such Specialty Improvement(s). Specialty shall execute any documents necessary for Nymox to secure its property interests in the Specialty Improvements. In addition, Specialty shall retain an irrevocable, fully-paid, royalty-free, nonexclusive worldwide license to practice the Specialty Improvements in all areas and applications outside the subject matter of this license during the term of this Agreement and following its termination or expiration, to the fullest extent permitted by applicable law Nothing in this Agreement shall be construed as granting to Specialty any express or implied license or right under any of the Patents after the expiration or termination of this Agreement. 10.02 NYMOX IMPROVEMENTS 45 16 If Nymox makes any Improvements during the term of this Agreement, it shall promptly disclose such Improvements to Specialty, and Specialty shall thereafter have the right to use such Nymox Improvements according to the terms of its license under this Agreement. ARTICLE 11. RESPONSIBILITIES OF THE PARTIES 11.01 SPECIALTY'S RESPONSIBILITIES Specialty's responsibilities under this Agreement include: (1) at its expense, specimen collection and shipping, specimen storage, reporting of results, billings and collections and any other additional related tasks that the Parties may agree upon; (2) at its expense, performance of the AD7C(TM) Test, including the provision of the necessary personnel, supplies (other than the Nymox reagents and materials referred to in Paragraph 11.02(3)) and equipment; (3) at its expense, inclusion of the AD7C(TM) Test in Specialty's directory of services; (4) at its share of the expenses as set out in Article 7, marketing and promotional activities for the AD7C(TM) Test; and (5) at its expense, the wages and benefits of Specialty personnel during their training by Nymox in connection with performance of the AD7C(TM) Test. 11.02 NYMOX'S RESPONSIBILITIES Nymox's responsibilities under this Agreement include: (1) at its expense, provision of AD7C(TM) Test protocols, sufficient clinical specimens for assay validation, quality control procedures and technology transfer as may be required for Specialty to perform the AD7C(TM) Test to Nymox's specifications and to obtain AD7C(TM) Test results consistent with those obtained by Nymox personnel experienced in conducting the AD7C(TM) Test; (2) at its expense, training of such Specialty personnel as may be required for Specialty to perform the AD7C(TM) Test to specifications; (3) at its expense, supply of the Nymox proprietary and non-proprietary materials and reagents needed for Specialty to perform the AD7C(TM) Test as further specified in Paragraph 11.04; (4) at its expense, provision of technical support, including interpretation support, technical service support, and confirmation testing to be conducted by Nymox at the request of Specialty; 46 17 (5) at its share of the expenses as set out in Article 7, assisting the marketing and promotional activities for the AD7C(TM) Test carried out by Specialty, including assisting with the preparation of Specialty promotional materials for the AD7C(TM) Test, as requested by Specialty, and approving all Specialty promotional materials for the AD7C(TM) Test, such approval not to be unreasonably withheld pursuant to Paragraph 7.02; and (6) at its expense, sole responsibility for payment of any license fees, royalties or other compensation which may be owed to a third party to secure the right to market and perform the AD7C(TM) Test. 11.03 SHARED TRAVEL AND ACCOMMODATION EXPENSES Specialty and Nymox agree to share any travel and accommodation expenses 50%/50% incurred prior to the Effective Date as a result of either Party's personnel having to travel to the other Party's facilities for training, technology transfer, quality control or other reason relating to the performance of the AD7C(TM) Test to specifications. Any future such travel expenses shall be shared 50%/50% only if mutually agreed upon in advance. 11.04 SUPPLY OBLIGATIONS Nymox shall supply to Specialty all materials and reagents necessary for the conduct of the AD7C(TM) Test as the conduct of the test is specified by Nymox. All such materials and reagents shall meet all specifications and quality requirements then in effect for Nymox's own conduct of the AD7C(TM) Test and, Nymox shall provide Specialty with its data and specifications concerning the stability and shelf life of the materials and reagents, including any changes or new information, on an ongoing basis. During the period prior to the start of the Contract Year, Nymox shall supply materials and reagents to Specialty every two (2) months, in an amount sufficient to conduct at least 500 AD7C(TM) Tests. Such materials and reagents shall have a shelf life of no less than two (2) months. During each Contract Year, Nymox shall supply materials and reagents to Specialty on a quarterly basis, in amounts sufficient for Specialty to conduct one-fourth (1/4) of the test volume estimates in Paragraph 8.02. Such materials and reagents shall have a shelf life of no less than three months. In the event Specialty needs additional quantities of materials and reagents, Specialty shall notify Nymox in writing of its additional needs, and Nymox shall use reasonable efforts to supply the materials and reagents in a timely manner. 11.05 LIMITATIONS ON LIABILITY 47 18 In no event shall either Party be liable to the other in contract, tort, product liability or otherwise for special, indirect, incidental, consequential or punitive damages. Each Party is responsible for: (1) the safety of its own employees and agents while engaged in work at its own facility pursuant to this Agreement, and (2) any liability for damages or personal injuries, including death, resulting from work conducted by that Party's own employees and agents pursuant to this Agreement, without any warranty, liability or indemnification on the part of the other Party unless such damages or personal injuries are due to the negligence or wilful misconduct of such other Party or employees or agents of such other Party. 11.06 INFRINGEMENT A. Notice of Suspected Patent Infringement Specialty shall promptly inform Nymox in writing of any suspected infringement of the Patents by a third party and Nymox shall make reasonable efforts with the cooperation of Specialty to ascertain in a timely manner whether the third party is infringing or has infringed the Patents. Nymox shall communicate in writing the results of its investigation into the suspected infringement to Specialty. B. Purported Patent Infringement If the result of Nymox's investigation is that Nymox believes an infringement has occurred, is occurring or on reasonable ground is believed likely to occur, Nymox will have six months either to halt such infringement (including by licensing such third party if Specialty's license has been converted to nonexclusive pursuant to Paragraph 8.04 or by written agreement by such third party to cease any infringement) or to initiate litigation against the infringing third party (including authorizing Specialty, with Specialty's consent, to initiate such litigation). Specialty agrees that it will, at Nymox's request and expense, furnish reasonable cooperation and assistance. C. Nymox's Failure or Refusal to Take Action Within Six Months Nymox may initiate infringement litigation with respect to Patent(s) owned by Nymox relating to the AD7C(TM) Test, in the sole discretion of Nymox. In the event that Nymox, for any reason, does not halt the infringement or initiate litigation within the six months as set out in Paragraph 11.06(B), Specialty's compensation obligations shall be reduced by one-half until the infringement is discontinued and Specialty may elect, in its discretion, to bring an action in its own name, or, if required by law to bring such action in the name of the holder of the patent, in the name of Nymox. If Specialty elects to bring an action against an alleged infringer under this paragraph, Nymox will cooperate with Specialty in the litigation and Specialty shall bear the cost and expenses incurred in 48 19 relation to the litigation subject to Specialty's right to withhold and be forgiven compensation payments which otherwise would be payable to Nymox, not to exceed Specialty's out-of-pocket expenses for bringing and maintaining such action. From such time as the infringement ceases (whether voluntarily or by court order), Specialty's full compensation obligations to Nymox would resume. D. Infringement Proceedings No settlement, consent judgement, or other voluntary disposition of the litigation which may have an adverse effect on the rights of one party may be entered into without the consent of that Party. The Party initiating any infringement litigation, whether with or without the consent of the other Party, shall bear the costs of litigation against infringers (subject to Specialty's rights to withhold compensation under Paragraph 11.06(C)) and shall receive all damages and recoveries awarded in such instance; provided, however, that in the event of such an award to Specialty, Nymox shall first be paid the amount of the withheld compensation (if any). ARTICLE 12. QUALITY CONTROL 12.01 STANDARD OF QUALITY Specialty shall conduct the AD7C(TM) Tests in compliance with Nymox's written specifications and standard operating procedures (provided that such have been conveyed to Specialty in writing) and to the standards of a fully-certified reference laboratory. 12.02 QUALITY CONTROL Specialty acknowledges that Nymox has the right to ensure that Specialty performs the AD7C(TM) Test to the standard of quality set out in Paragraph 12.01 and agrees to cooperate fully with Nymox's exercise of that right. Without limiting this general right, Nymox has the specific rights to: (1) have Specialty furnish Nymox with any pertinent information about its procedures, records, notes and results for the AD7C(TM) Test, including such information about specific test results (subject to any legal requirements to maintain patient confidentiality) to enable Nymox to verify Specialty's compliance with Paragraph 12.01 in the event of any apparent discrepancies or, in the absence of discrepancies, not more than once per Contract Year; (2) have Specialty supply Nymox with samples of specimens, reagents or other material or supplies for Nymox's own testing for the verification of Paragraph 12.02(1), to the extent reasonably available and not needed for other Specialty testing; and 49 20 (3) upon ten (10) days written notice and at a mutually agreeable time, not more than once per Contract Year, to inspect any facility conducting or assisting in the conducting of AD7C(TM) Tests and any laboratory records, documents, reports or other information relating to the conducting of AD7C(TM) Tests, test any reagents, equipment or other supplies and material used in the conducting of AD7C(TM) Tests (to the extent reasonably available and not required for other Specialty testing, and provided that Specialty approve the competence and qualification of any person prior to allowing tests of Specialty equipment) and interview any laboratory personnel directly involved in the conducting of AD7C(TM) Tests. ARTICLE 13. EFFECT OF LICENSING AGREEMENT 13.01 NO AGENCY RELATIONSHIP ESTABLISHED Neither Party would be an agent, representative, contractor nor employee of the other. 13.02 NO TRANSFER OF INTELLECTUAL PROPERTY RIGHTS Nymox retains all of its patent rights, trademarks, copyrights, trade secrets and other proprietary rights covering or relating to the AD7C(TM) Test and nothing in this Agreement shall be construed as assigning, alienating or transferring any of these rights to Specialty, except as specifically provided in the license grants of this Agreement. 13.03 NO SALE OF PROPRIETARY REAGENTS Nymox retains ownership to any proprietary reagents it supplies to Specialty under the terms of this Agreement. Specialty agrees to use any reagents supplied by Nymox for the conducting of the AD7C(TM) Test pursuant to this Agreement and not to give, transfer or sell any of these reagents to any third party without the written consent of Nymox. ARTICLE 14. REPRESENTATIONS AND WARRANTIES 14.01 WARRANTY OF RIGHTS IN THE SUBJECT MATTER OF LICENSE Nymox warrants that it owns the rights to the Patents listed in Exhibit A and the Trademarks listed in Exhibit B to this Agreement and that it has the authority to grant licenses to use these Patents and Trademarks and its Know-How concerning the AD7C(TM) Test and its performance as provided herein. 14.02 WARRANTY OF SUPPLIES Nymox warrants that the AD7C(TM) Test materials and reagents it supplies to Specialty will meet the internal specifications and quality requirements used by Nymox for those materials and reagents at the time they are shipped. 50 21 14.03 DISCLAIMER OF WARRANTY Other than the warranties set out in Paragraph 14.01 and 14.02, Nymox makes no express or implied warranties about the AD7C(TM) Test materials supplied by Nymox and used by Specialty pursuant to this Agreement or about the AD7C(TM) Test, including but not limited to the implied warranties of merchantability and fitness for a particular purpose. 14.04 REPRESENTATIONS A. Nymox represents to Specialty that, to the best knowledge of Nymox, as of the Effective Date: (1) There are no claims, actions, suits or proceedings, pending or threatened, which relate in any way to the marketing or performance of the AD7C(TM) Test; (2) There are no claims, actions, suits or proceedings, pending or threatened, which allege that marketing or performance of the AD7C(TM) Test infringes the patent, trademark or other rights of a third party; and (3) Nymox is not aware of any third party patent(s) which would be infringed by Specialty's marketing an/or performance of the AD7C(TM) Test. B. Specialty represents to Nymox that: (1) Prior to Launch, Specialty will have clinically validated the AD7C(TM) Test; and (2) Specialty shall treat the AD7C(TM) Test in the same manner as other tests included in Specialty's directory of services and agrees to comply with applicable regulatory requirements. ARTICLE 15. MISCELLANEOUS PROVISIONS 15.0 FORCE MAJEURE The performance by either Party of any covenants or obligations to be performed under this Agreement shall be excused by reason of strikes or other labor disturbances, riots, fires, floods, earthquakes, accidents, wars, embargoes, delays of carriers, inability to obtain materials from sources of supply, or acts, injunctions or restraints of governments or any cause beyond the control of the Parties preventing such performance whether similar or dissimilar to the foregoing, provided, however, that: (1) the Party affected shall inform the other of the occurrence of the force majeure condition as soon as practicable; (2) the Party affected shall exert its reasonable diligent efforts to eliminate or cure or overcome any such causes and to resume performance of its covenants and obligations as soon as practicable; and 51 22 (3) should the force majeure condition make substantial performance of this Agreement impossible for more than one hundred eighty (180) days then the Party not affected may give a thirty (30) day notice of termination of this Agreement and if the Party affected is unable to restore substantial performance of this Agreement in that thirty (30) day notice period, the Agreement shall be terminated. 15.0 PUBLIC STATEMENTS Nymox and Specialty shall mutually develop and approve in writing any press releases or announcements about this Agreement or about any activities by either Party relating to this Agreement. Neither Party shall publicly disclose the specific terms of this Agreement except as required by law or regulation or with the consent of the other Party or unless there has been a prior public disclosure of the information by the other Party. 15.03 NOTICES Any notice or other communication required by this Agreement shall be in writing and shall be effective if hand delivered or if sent by certified or registered mail or by facsimile transmission to the following locations until notified otherwise in writing. Nymox Pharmaceutical Corporation Attention: President Nymox Pharmaceutical Corporation 9900 Boul. Cavendish, Suite 306 Saint Laurent Quebec Canada H4M 2V2 FAX: (514) 332-2227 Specialty Laboratories, Inc. Attention: President Specialty Laboratories, Inc. 2211 Michigan Avenue Santa Monica, CA 90409-3900 FAX: (310) 828-9413 A notice is effective on the date of delivery to the Party. Delivery is deemed to have occurred on the day of delivery by courier, or upon facsimile transmission with confirmation, or on the fifth day after the date of sending the notice by registered mail. 15.04 GOVERNING LAW 52 23 This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of California. 15.05 DISPUTE RESOLUTION In the event of any controversy or claim arising out of or relating to any provisions of this Agreement or the breach thereof, the Parties shall try to settle those conflicts amicably between themselves. Should they fail to agree, the matter in dispute shall be settled through arbitration conducted by and in accordance with the rules of the American Arbitration Association ("A.A.A."). Either Party may furnish the other party with a dated, written notice (the "Arbitration Notice") indicating (I) intent to commence arbitration proceedings, (ii) the nature, with reasonable detail, of the dispute, (iii) the amount involved, if any, and (iv) the remedy sought. The arbitration shall be held at a neutral place mutually agreeable to the parties. Within thirty (30) days of the date of the Arbitration Notice, each party shall select one (1) Arbitrator, who shall not be a current or former employee, agent, consultant or other representative of either party; the two selected Arbitrators shall appoint a third, neutral, Arbitrator. The arbitration award shall be final and binding. Either party may enter any such award in a court having jurisdiction or may make application to such court for judicial acceptance of the award and an order of enforcement, as the case may be. 15.06 CURRENCY All references to money in the Agreement refer to U.S. dollars and all payments made under this Agreement shall be in that currency. 15.07 PARTIAL INVALIDITY If any provision of this Agreement be held invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement and the Parties shall use reasonable efforts to substitute a valid, legal and enforceable provision which, as far as practicable, implements the purposes and intent of the provision held invalid, illegal or unenforceable. If the Parties are unable to arrive at such a substitute, this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained in it, provided that the performance required under this Agreement with such a provision deleted remains substantially consistent with the intent of the Parties. 15.08 WAIVER Failure to require performance of any provision of this Agreement does not waive a Party's right to demand compliance with that provision at a later time. Waiver of any default shall not waive any other default. 53 24 15.08 ENTIRE AGREEMENT This Agreement contains the entire agreement between the Parties with respect to the subject matter covered by this Agreement. No representations, whether oral or written, made before this Agreement is executed shall amend this Agreement. Any modification or amendment to this Agreement shall be in writing and signed by an authorized officer of each Party. IN WITNESS THEREOF, the undersigned have executed this Agreement as of the dates set forth below: ACCEPTED AND AGREED TO: Nymox Corporation Specialty Laboratories, Inc. - -------------------------------------------------------------------------------- Paul Averback Paul Beyer President President EXHIBIT A: PATENTS LICENSED TO SPECIALTY U.S Patent Number Title - ----------------- ----- 5,830,670 Neural Thread Protein Gene Expression and Detection of Alzheimer's Disease U.S. Patent Application Number Title - ------------------------------ ----- 08/450,673 Neural Thread Protein Gene Expression and Detection of Alzheimer's Disease 08/469,629 Neural Thread Protein Gene Expression and Detection of Alzheimer's Disease 08/340,426 Method of Detecting Neurological Disease or Dysfunction 54 25 EXHIBIT B: TRADEMARKS LICENSED TO SPECIALTY The Trademark AD7C(TM) The trademarks on this page are reasonable facsimiles of the actual Trademarks. Nymox will furnish Specialty with materials necessary for reproduction of the actual Trademarks on Specialty promotional materials. 55 -----END PRIVACY-ENHANCED MESSAGE-----