Exhibit 99.1
MESSAGE TO SHAREHOLDERS
Nymox is pleased to present its condensed interim consolidated financial statements for the quarter ended March 31, 2013.
On January 22, Nymox announced new positive Phase 3 safety and efficacy data for study NX02-0020. The NX02-0020 study is a prospective clinical safety evaluation of re-injection of the Company’s NX-1207 drug for benign prostatic hyperplasia (BPH). Study participants consisted of 192 consecutively treated men who had previously participated in the completed NX02-0014 and NX02-0016 Phase 2 trials or in the ongoing NX02-0017 and NX02-0018 trials and who wished an open label injection of NX-1207. The mean duration from the initial injection to the final assessment was 26 months. Improvement in the American Urological Association BPH Symptom Index Score was assessed over this greater than 2 years period, and the mean overall improvement in the 192 treated men was 7.6 points (p <.001).
Nymox made a corporate presentation at the 15th Annual Biotechnology Industry Organization CEO & Investor Conference on February 12 at the Waldorf Astoria in New York City.
On February 19, Nymox announced that its lead drug candidate, NX-1207, had not shown any evidence of eliciting an immune reaction in men treated with intraprostatic injections of the drug. Extensive clinical immunogenicity testing of men in the Company’s pivotal Phase 3 trials (NX02-0017 and NX02-0018) and Phase 3 repeat injection safety study (NX02-0020) showed no evidence of antidrug antibody formation. Periodic safety monitoring reviews of the NX-1207 trials to date have shown no evidence of any allergic reaction to the drug either on first injection or repeat injection. Positive immunogenicity testing of NX-1207 is an important step in the Company’s drug development program. The results are consistent with the pharmacological and pharmacokinetic profile of the drug and augment the extensive safety experience with the drug in men with over 1,000 men having received the drug to date.
On February 21, Nymox provided a safety update on the Company’s Phase 3 pivotal trials for NX-1207. The Safety Monitoring Committee meeting of February 18, 2013 to review safety data from the Phase 3 trials was favorable and indicated no significant safety concerns.
On March 5, Nymox reported that the prostate cancer trial for NX-1207 had reached the halfway point in patient recruitment. Safety assessments were positive with no serious or unexpected adverse effects related to the drug. The NX03-0040 prostate cancer clinical study of 150 men is testing low (2.5 mg) and high (15 mg) single doses of NX-1207 for the effect to eradicate or shrink low grade localized prostate cancer tumors. The NX-1207 dose is administered directly into the area of the prostate where the cancer was detected. The procedure is performed by a urologist in an office setting, does not require anaesthesia, sedation, or catheterization, takes only a few minutes and involves minimal discomfort to the patient. Patients in the study are randomly allocated to either low or high dose NX-1207 or to active surveillance (no drug or surgical or radiation treatment). Patients undergoing active surveillance in the trial also have the opportunity to receive NX-1207 after their trial active surveillance participation is completed.
On March 17, Ronald Tutrone Jr, MD, FACS, the Medical Director of the Chesapeake Urology Research Associates of Towson, MD, presented data on NX-1207 and the NX-1207 clinical trials to date, including the two Phase 3 clinical trials currently in progress in a presentation entitled “Clinical studies of NX-1207: Phase 3 Injectable for BPH” which was given during the 28th Annual European Association of Urology Congress in the Milano Congressi, Milan, Italy. Dr. Tutrone has participated as an investigator in three of the prospective NX-1207 clinical trials as well as follow-up studies.
On March 19, Nymox announced that the Independent Data Monitoring Committee for the Company's Phase 2 study of NX-1207 for low risk localized prostate cancer (NX03-0040) had reported a third positive analysis of safety data from the clinical trial. The Independent Data Monitoring Committee assessed all patients to date who had received NX-1207 for treatment of their localized prostate cancer. The Independent Data Monitoring Committee is an arm's length independent body mandated to conduct periodic interim safety reviews at pre-determined stages during the study. The Committee has the authority to recommend changes to the study or to halt the study in the event of unacceptable drug toxicity. The Committee's interim safety analysis found no evidence of such toxicity and accordingly the study is continuing.
On March 27, Nymox reported that the Company’s FDA Cleared NicAlert™ product continues to achieve widespread acceptance around the world as an important tool in tobacco-related research studies and programs in a broad range of healthcare areas. Researchers in the UK, Canada, Holland, Switzerland, Australia, Brazil, India, and Hong Kong as well as those in major research institutions across the U.S. are employing NicAlert™ in their studies as reported in many new and recent peer-reviewed publications.
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NicAlert™ testing has been used in such areas as:
• studies of the effectiveness of tobacco cessation programs (e.g. Addictive Behaviors March 2013; 38 1792–1795; Journal of Perinatology (2012) 32, 374–380; J Am Board Fam Med. 2013 Jan-Feb;26(1):61-70);
• the extent of exposure to secondhand smoke by children of smokers (Thorax 2013 online publication February 10, 2013);
• the accuracy of NicAlert™ to verify smoking status in patients about to undergo surgery (Nicotine Tob Res. 2013 Mar 20. [Epub ahead of print]); and
• the use of saliva NicAlert™ for confirmation of smoking status by dentists treating periodontal disease (J Indian Soc Periodontol. 2012 Oct-Dec;16(4): 508–512).
The Nymox team wishes to acknowledge the valuable ongoing shareholder support, and we greatly look forward to upcoming exciting developments for your Company.
/s/ Paul Averback MD
Paul Averback
MD President
May 15, 2013
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| MANAGEMENT'S DISCUSSION AND ANALYSIS |
| (in US dollars) |
This Management’s discussion and analysis (“MD&A”) comments on the Corporation’s operations, performance and financial condition as at and for the quarters ended March 31, 2013, 2012 and 2011. This MD&A should be read together with the unaudited condensed interim Consolidated Financial Statements and the related notes. This MD&A is dated May 15, 2013. All amounts in this report are in U.S. dollars, unless otherwise noted.
Except as otherwise indicated, all financial information contained in this MD&A and in the unaudited condensed interim Consolidated Financial Statements has been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The unaudited condensed interim Consolidated Financial Statements and this MD&A were reviewed by the Corporation’s Audit and Finance Committee and were approved by our Board of Directors.
Additional information about the Corporation can be obtained on EDGAR at www.sec.gov or on SEDAR at www.sedar.com.
Overview
Corporate Profile
Nymox Pharmaceutical Corporation is a biopharmaceutical company with a significant R&D pipeline in development. Nymox is developing NX-1207, a novel treatment for benign prostatic hyperplasia which is in Phase 3 trials in the U.S. In December 2010, the Corporation signed a license and collaboration agreement with Recordati, a European pharmaceutical group, for the development and commercialization of NX-1207 in Europe including Russia and the CIS, the Middle East, the Maghreb area of North Africa and South Africa. The license and collaboration agreement covers the use of NX-1207 for the treatment of BPH as the initial indication for development and commercialization. NX-1207 showed positive results for the treatment of BPH in Phase 1 and 2 clinical trials in the U.S. and in follow-up studies of available subjects from the completed clinical trials. In June 2009, the Corporation began conducting the first of two pivotal double blind placebo controlled Phase 3 trials for NX-1207 that incorporate the specific protocol design recommendations provided to the Corporation by the FDA. The two pivotal Phase 3 studies for NX-1207 are being conducted at well-known investigational sites across the U.S. with planned enrollment of 1,000 patients. The first Phase 3 study, NX02-0017, completed enrollment in November 2012. An open-label U.S. re-injection safety study of NX-1207 for BPH was started in July of 2011 and reached completion of its primary endpoint assessment in January 2013. A Phase 2 study of NX-1207 for low grade localized prostate cancer was started in March 2012. The Corporation is also developing new treatments for bacterial infections in humans. Nymox has candidates which are under development as drug treatments aimed at the causes of Alzheimer’s disease, and has several other drug candidates in development. Nymox has U.S. and global patent rights for the use of statin drugs for the treatment and prevention of Alzheimer’s disease. Nymox developed the AlzheimAlert™ test, which is certified with a CE Mark in Europe. Nymox developed and markets NicAlert™ and TobacAlert™; which are tests that use urine or saliva to detect use of and exposure to tobacco products. NicAlert™ has received clearance from the FDA and is also certified with a CE Mark in Europe. TobacAlert™ is the first test of its kind to accurately measure second and third hand smoke exposure in individuals.
We have incurred operating losses throughout our history. Management believes that such operating losses will continue for at least the next few years. The costs relating to clinical trials for our potential therapeutic products will increase expenditures and delay profitability, despite anticipated increases in sales revenue in the coming years.
Risk Factors
The business activities of the Corporation since inception have been devoted principally to research and development. Accordingly, the Corporation has had limited revenues from sales and has not been profitable to date. We refer to the Risk Factors section of our Form 20-F filed on EDGAR and on SEDAR for a discussion of the management and investment issues that affect the Corporation and our industry. The risk factors that could have an impact on the Corporation’s financial results are summarized as follows:
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Our Clinical Trials for Our Therapeutic Products in Development, Such as NX-1207, May Not be Successful and We May Not Receive the Required Regulatory Approvals Necessary to Commercialize These Products
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Our Clinical Trials for Our Therapeutic Products, Such as NX-1207, May Be Delayed, Making it Impossible to Achieve Anticipated Development or Commercialization Timelines
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A Setback in Any of Our Clinical Trials Would Likely Cause a Drop in the Price of our Shares
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We May Not be Able to Make Adequate Arrangements with Third Parties for the Commercialization of our Product Candidates, such as NX-1207
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We May Not Achieve our Projected Development Goals in the Time Frames We Announce and Expect
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Even If We Obtain Regulatory Approvals for Our Product Candidates, We Will be Subject to Stringent Ongoing Government Regulation
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It is Uncertain When, if Ever, We Will Make a Profit
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We May Not Be Able to Raise Enough Capital to Develop and Market Our Products
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We Face Challenges in Developing, Manufacturing and Improving Our Products
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Our Products and Services May Not Receive Necessary Regulatory Approvals
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We Face Significant and Growing Competition
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We May Not Be Able to Successfully Market Our Products
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Protecting Our Patents and Proprietary Information is Costly and Difficult
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We Face Changing Market Conditions
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Health Care Plans May Not Cover or Adequately Pay for Our Products and Services
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We Are Subject to Continuing Potential Product Liability Risks, Which Could Cost Us Material Amounts of Money
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The Issuance of New Shares May Dilute Nymox’s Stock
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We Face Potential Losses Due to Foreign Currency Exchange Risks
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We Have Never Paid a Dividend and are Unlikely to do so in the Foreseeable Future
Critical Accounting Policies
The consolidated financial statements of the Corporation have been prepared under International Financial Reporting Standards as issued by the International Accounting Standards Board. The Corporation’s functional and presentation currency is the United States dollar. Our accounting policies are described in the notes to our annual audited consolidated financial statements. We consider the following policies to be the most critical in understanding the judgments that are involved in preparing our financial statements and the matters that could impact our results of operations, financial condition and cash flows.
Revenue Recognition
The Corporation has generally derived its revenue from product sales and collaboration agreements. Revenue from product sales is recognized when the product has been delivered and obligations as defined in the agreement are performed. Collaboration agreements that include multiple deliverables are considered to be multiple-element arrangements. Under this type of arrangement, the identification of separate units of accounting is required and revenue is allocated among the separate units based on their relative fair values.
Payments received under a collaboration agreement may include upfront payments, milestone payments, sale of goods, royalties and license fees. Revenue for each unit of accounting are recorded as described below:
| (i) | Upfront payments: |
Upfront payments are deferred and recognized as revenue on a systematic basis over the estimated service period. Changes in estimates are recognized prospectively when changes to the expected term are determined.
| (ii) | Milestone payments: |
Revenue subject to the achievement of milestones is recognized only when the specified events have occurred and collectability is reasonably assured.
Specifically, the criteria for recognizing milestone payments are that (i) the milestone is substantive in nature, (ii) the achievement was not reasonably assured at the inception of the agreement, and (iii) the Corporation has no further involvement or obligation to perform associated with the achievement of the milestone, as defined in the related collaboration arrangement.
| (iii) | Sale of goods: |
Revenue from the sale of goods is recognized when the Corporation has transferred to the buyer the significant risks and rewards of ownership of the goods, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.
| (iv) | Royalties and license fees: |
Royalties and license fees are recognized when conditions and events under the license agreement have occurred and collectability is reasonably assured.
Revenue recognition is subject to critical judgments, particularly in the collaboration agreement described above. Management uses judgment in estimating the service period over which revenue is recognized.
Valuation of Property and Equipment
Property and equipment are stated at cost and are amortized on a straight-line basis over the estimated useful lives. The Corporation reviews the unamortized balance of property and equipment, and recognizes any impairment in carrying value when it is identified. Factors we consider important, which could trigger an impairment review include:
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Significant changes in the manner of our use of the acquired assets or the strategy for our overall business; and
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Significant negative industry or economic trends.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows
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from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit, or CGU”).
An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses recognized in respect of CGUs are allocated to reduce the carrying amounts of the assets in the CGU on a pro rata basis. Future events could cause management to conclude that impairment indicators exist and that the carrying values of the Corporation’s property and equipment are impaired.
Stock-based Compensation
Stock-based compensation is recorded using the fair value based method for stock options issued to employees and non-employees. Under this method, compensation cost related to employee awards is measured at fair value at the date of grant, net of forfeitures, and is expensed over the award’s vesting period. The Corporation uses the Black-Scholes options pricing model to calculate stock option values, which requires certain assumptions, including the future stock price volatility and expected time to exercise. There is estimation uncertainty with respect to selecting inputs to the Black-Scholes pricing model used to determine the fair value of the stock options. Changes to any of these assumptions, or the use of a different option pricing model, could produce different fair values for stock-based compensation, which could have a material impact on the Corporation’s earnings.
Recoverability of Deferred Tax Assets
Management judgment is required in assessing the recoverability of deferred tax assets. We have recorded no deferred tax assets as of March 31, 2013 and 2012, due to uncertainties related to our ability to utilize all, or a portion of, our deferred tax assets, primarily consisting of net operating losses carried forward and other unclaimed deductions, before they expire. In assessing the recoverability of deferred tax assets, management considers whether it is probable that some portion or all of the deferred tax assets will not be recovered. The ultimate recoverability of deferred tax assets is dependent upon the generation of future taxable income and tax planning strategies. The generation of future taxable income is dependent on the successful commercialization of the Corporation’s products and technologies.
Results of Operations
| Three Months Ended March 31 | 2013 | 2012 | 2011 | ||||||
| Total revenues | $ | 838,646 | $ | 739,579 | $ | 765,015 | |||
| Net loss | $ | (1,093,906 | ) | $ | (1,846,974 | ) | $ | (4,431,091 | ) |
| Loss per share (basic & diluted) | $ | (0.03 | ) | $ | (0.06 | ) | $ | (0.14 | ) |
| Total assets | $ | 2,281,035 | $ | 3,716,878 | $ | 10,021,394 | |||
| Non-current financial liabilities | $ | 400,000 | $ | 400,000 | $ | 400,000 |
| Quarterly Results | Q1 – 2013 | Q4 – 2012 | Q3 – 2012 | Q2 – 2012 | ||||||||
| Total revenues | $ | 838,646 | $ | 789,550 | $ | 764,564 | $ | 778,894 | ||||
| Net loss | $ | (1,093,906 | ) | $ | (2,813,922 | ) | $ | (1,245,563 | ) | $ | (1,721,128 | ) |
| Loss per share (basic & diluted) | $ | (0.03 | ) | $ | (0.08 | ) | $ | (0.04 | ) | $ | (0.05 | ) |
| Q1 – 2012 | Q4 – 2011 | Q3 – 2011 | Q2 – 2011 | |||||||||
| Total revenues | $ | 739,579 | $ | 777,606 | $ | 804,712 | $ | 766,482 | ||||
| Net loss | $ | (1,846,974 | ) | $ | (1,659,125 | ) | $ | (1,614,041 | ) | $ | (1,948,132 | ) |
| Loss per share (basic & diluted) | $ | (0.06 | ) | $ | (0.05 | ) | $ | (0.05 | ) | $ | (0.06 | ) |
The revenues in 2013, 2012 and 2011 include revenue being recognized on a systematic basis over the estimated service period related to the upfront payment of €10 million (US$13.1 million) received from Recordati in December 2010. The lower net loss in the quarter ended March 31, 2013, compared to 2012 and 2011, is related to reductions in many areas of expenditures.
Results of Operations – Q1 2013 compared to Q1 2012
Net losses were $1,093,906, or $0.03 per share, for the quarter ended March 31, 2013, compared to $1,846,974, or $0.06 per share, for the quarter ended March 31, 2012. Net losses include stock compensation charges of $26,640 in 2013 and $51,496 in 2012. The decrease in net losses is related to reductions in many areas of expenditures mainly due to a reduction in clinical trial expenditures as the NX-1207 studies near completion. The weighted average number of common shares outstanding for the quarter ended March 31, 2013 was 33,679,486 compared to 32,994,621 for the same period in 2012.
Revenues
Revenues from sales of goods amounted to $184,246 for the quarter ended March 31, 2013, compared with $85,179 for the quarter ended March 31, 2012. An increase in orders from one customer for NicAlert™/TobacAlert™ in the first quarter of 2013 (increase of approximately $38,000) compared to the same period in 2012 as well as new revenue relating to the licensing agreement (approximately $73,000) explain the growth in sales. The development of therapeutic candidates and of moving therapeutic product candidates through clinical trials is a priority for the Corporation at this time. The growth of sales will become more of a priority once these candidates have reached the marketing stage. The Corporation expects that revenues will increase if and when product candidates pass clinical trials and are launched on the market.
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For the quarters ended March 31, 2013 and 2012, amounts of $654,400 were recognized as revenue relating to the upfront payment received from Recordati in December 2010. At March 31, 2013, the deferred revenue related to this transaction recorded in the statement of financial position amounted to $7,089,333.
Research and Development
Research and development expenditures were $1,471,153 for the quarter ended March 31, 2013, compared with $2,031,257 for the quarter ended March 31, 2012. Research and development expenditures include costs incurred in advancing Nymox’s BPH product candidate NX-1207 through clinical trials, as well as costs related to its R&D pipeline in development. Research and development expenditures also include stock compensation charges of $4,848 in the quarter ended March 31, 2013 and $22,729 in the comparative period in 2012. The decrease in expenses is attributable to a reduction in clinical trial expenditures as the NX-1207 studies near completion. In 2013, research tax credits and grants amounted to $64,377 compared to $70,958 in 2012. The Corporation expects that research and development expenditures will decrease as product candidates finish development and clinical trials. However, because of the early stage of development of the Corporation’s R&D projects, it is impossible to outline the nature, timing or estimated costs of the efforts necessary to complete these projects, nor the anticipated completion dates for these projects. The facts and circumstances indicating the uncertainties that preclude us from making a reasonable estimate of the costs and timing necessary to complete projects include the risks inherent in any field trials, the uncertainty as to the nature and extent of regulatory requirements both for safety and efficacy, and the ability to manufacture the products in accordance with current good manufacturing requirements (cGMP) and in sufficient quantities both for large scale trials and for commercial use. A drug candidate that shows efficacy can take a long period (7 years or more) to achieve regulatory approval. There is also uncertainty whether we will be able to successfully adapt our patented technologies or whether any new products we develop will pass proof-of-principle testing both in the laboratory and in clinical trials, and whether we will be able to manufacture such products at a commercially competitive price. In addition, given the very high costs of development of therapeutic products, we anticipate having to partner with larger pharmaceutical companies to bring therapeutic products to market. The terms of such partnership arrangements along with our related financial obligations cannot be determined at this time and the timing of completion of the approval of such products will likely not be within our sole control.
Marketing Expenses
Marketing expenditures were $38,427 for the quarter ended March 31, 2013, compared with $43,084 for the quarter ended March 31, 2012. The Corporation expects that marketing expenditures will increase if and when new products are launched on the market.
General and Administrative Expenses
General and administrative expenses were $420,980 for the quarter ended March 31, 2013, compared with $513,411 for the quarter ended March 31, 2012. General and administrative expenditures also include stock compensation charges of $21,792 for the quarter ended March 31, 2013 and $28,506 in the comparative period in 2012. The decrease in expenses is attributable to a reduction in professional fees in the first quarter of 2013 compared to the same period in 2012. The Corporation expects that general and administrative expenditures will increase as new product development leads to expanded operations.
Finance costs - Foreign Exchange
The Corporation incurs expenses in the local currency of the countries in which it operates, which include the United States and Canada. Approximately 51% of 2013 expenses (66% in 2012; 59% in 2011) were in U.S. dollars. Foreign exchange fluctuations had no meaningful impact on the Corporation’s results in 2013 or 2012.
Inflation
The Corporation does not believe that inflation has had a significant impact on its results of operations.
Results of Operations – Q1 2012 compared to Q1 2011
Net losses were $1,846,974, or $0.06 per share, for the quarter ended March 31, 2012, compared to $4,431,091, or $0.14 per share, for the quarter ended March 31, 2011. Net losses include stock compensation charges of $51,496 in 2012 and $3,583,258 in 2011. The decrease in net losses is principally attributable to the substantially higher stock compensation charges recorded in the first quarter of 2011 compared to the same period in 2012. The weighted average number of common shares outstanding for the quarter ended March 31, 2012 was 32,994,621 compared to 32,578,523 for the same period in 2011.
Revenues
Revenues from sales of goods amounted to $85,179 for the quarter ended March 31, 2012, compared with $110,615 for the quarter ended March 31, 2011. The decrease in orders from customers for NicAlert™/TobacAlert™ is attributable to a reduction in U.S. government research grants in 2012 compared to 2011.
For the quarters ended March 31, 2012 and 2011, amounts of $654,400 were recognized as revenue relating to the upfront payment received from Recordati in December 2010. At March 31, 2012, the deferred revenue related to this transaction recorded in the statement of financial position amounted to $9,706,933.
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Research and Development
Research and development expenditures were $2,031,257 for the quarter ended March 31, 2012, compared with $3,708,379 for the quarter ended March 31, 2011. Research and development expenditures include costs incurred in advancing Nymox’s BPH product candidate NX-1207 through clinical trials, as well as costs related to its R&D pipeline in development. Research and development expenditures also include stock compensation charges of $22,729 in the quarter ended March 31, 2012 and $2,233,068 in the comparative period in 2011. The decrease in expenses is primarily attributable to the substantially higher stock compensation charges recorded in 2011 compared to the same period in 2012. In 2012, research tax credits and grants amounted to $70,958 compared to $322,125 in 2011 due to the recognition in 2011 of the grant awarded from the U.S. government under the Qualifying Therapeutic Discovery Project in the amount of $244,479, which was not repeated in 2012.
Marketing Expenses
Marketing expenditures were $43,084 for the quarter ended March 31, 2012, compared with $484,370 for the quarter ended March 31, 2011. Marketing expenditures also include stock compensation charges of $261 for the quarter ended March 31, 2012 and $433,012 in the comparative period in 2011. The decrease in expenses is primarily attributable to the substantially higher stock compensation charges recorded in 2011 compared to the same period in 2012.
General and Administrative Expenses
General and administrative expenses were $513,411 for the quarter ended March 31, 2012, compared with $1,215,628 for the quarter ended March 31, 2011. General and administrative expenditures also include stock compensation charges of $28,506 for the quarter ended March 31, 2012 and $917,178 in the comparative period in 2011. The decrease in expenses is primarily attributable to the substantially higher stock compensation charges recorded in 2011 compared to the same period in 2012.
Contractual Obligations
Nymox has no contractual obligations of significance other than long-term lease commitments for rental of laboratory and office space, insurance premium installments, other operating leases and redeemable preferred shares as follows:
| Contractual Obligations | Total | Less than 1 year | 1-3 years | 4-5 years | ||||||||
| Rent for laboratory and office space | $ | 437,025 | $ | 323,486 | $ | 113,539 | $ | 0 | ||||
| Insurance Premium Installments | $ | 8,562 | $ | 8,562 | $ | 0 | $ | 0 | ||||
| Operating Leases | $ | 24,293 | $ | 10,777 | $ | 11,082 | $ | 0 | ||||
| Total Contractual Obligations | $ | 469,880 | $ | 342,825 | $ | 124,621 | $ | 0 |
The redeemable preferred shares for the Corporation’s subsidiary Serex, Inc. in the amount of $400,000 have no specific terms of repayment.
Off-Balance Sheet Arrangements
The Corporation has no binding commitments for the purchase of property, equipment or intellectual property. The Corporation has no commitments that are not reflected in the statement of financial position except for operating leases.
Transactions with Related Parties
The Corporation had no transactions with related parties in 2013 and 2012.
Refer to note 10 of the unaudited condensed interim Consolidated Financial Statements for key management personnel disclosures.
Financial Position
Liquidity and Capital Resources
As of March 31, 2013, cash and receivables including tax credits receivable totalled $2,130,528 compared with $1,647,174 at December 31, 2012. The increase in cash is primarily due to timing differences in payments of our expenditures and the receipt of cash under our common stock private purchase agreement. The increase in receivables is primarily due to timing of collection of research tax credits. In November 2012, the Corporation signed a common stock private purchase agreement, whereby Lorros-Greyse Investments Limited (the “Purchaser”) was committed to purchase up to $15 million of the Corporation’s common shares over a twenty-four month period. The agreement became effective December 19, 2012. As at March 31, 2013, two drawings were made under the new common stock private purchase agreement, for total proceeds of $2,100,000. On February 4, 2013, 153,610 common shares were issued at a price of $6.51 per share. On March 28, 2013, 214,425 common shares were issued at a price of $5.13 per share.
The Corporation intends to access financing under this agreement when appropriate to fund its research and development. The Corporation believes that cash balances, funds from operations, as well as funds from the common stock private purchase agreement will be sufficient to meet the Corporation’s cash requirements for the next twelve months.
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The Corporation must comply with general covenants in order to draw on its facility including maintaining its stock exchange listing and registration requirements and having no material adverse effects, as defined in the agreement, with respect to the business and operations of the Corporation.
The Corporation relies primarily on this financing as well as collaboration agreements to fund its operations. In order to achieve the Corporation’s business plan and realization of its assets and liabilities in the normal course of operations, the Corporation anticipates the need to raise additional capital and/or achieve sales and other revenue generating activities.
Outstanding Share Data
As at May 15, 2013, there were 33,986,321 common shares of Nymox issued and outstanding. In addition, 5,930,500 share options are outstanding, of which 5,890,500 are currently vested. There are no warrants outstanding.
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed is accumulated and communicated to senior management on a timely basis so that appropriate decisions can be made regarding public disclosure. The Corporation’s Chief Executive Officer and its Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures. They are assisted in this responsibility by the Corporation’s disclosure committee, which is composed of members of senior management. Based on an evaluation of the Corporation’s disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of March 31, 2013.
Internal Control over Financial Reporting
Management’s Annual Report on Internal Control Over Financial Reporting
Management’s annual evaluation and report on the effectiveness of internal control over financial reporting as of our most recent fiscal year end December 31, 2012 was included in the 2012 Annual Management’s Discussion and Analysis and was based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under this framework, the Chief Executive Officer and the Chief Financial Officer concluded that our internal control over financial reporting was effective as of December 31, 2012.
Changes in Internal Controls Over Financial Reporting
There have been no changes since December 31, 2012 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Changes in accounting policies:
New standards and interpretations adopted during the period:
IFRS 10 - Consolidated Financial Statements (“IFRS 10”), which builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of a parent company. IFRS 10 also provides additional guidance to assist in the determination of control where this is difficult to assess.
IFRS 12 - Disclosure of Interests in Other Entities, which is a comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.
IFRS 13 - Fair Value Measurement (“IFRS 13”), which defines fair value, sets out in a single IFRS a framework for measuring fair value and requires disclosures about fair value measurements. IFRS 13 does not determine when an asset, a liability or an entity’s own equity instrument is measured at fair value. Rather, the measurement and disclosure requirements of IFRS 13 apply when another IFRS requires or permits the item to be measured at fair value (with limited exceptions).
The impact of the adoption of these standards and amendments did not have a significant impact on the Corporation’s condensed interim consolidated financial statements.
New standards and interpretations issued but not yet adopted:
A number of new standards, interpretations and amendments to existing standards were issued by the IASB or International Financial Reporting Interpretations Committee (“IFRIC”). They are mandatory but not yet effective for the period ended March 31, 2013, and have not been applied in preparing these condensed interim consolidated financial statements.
Many of these are not applicable or are inconsequential to the Corporation and have been excluded from the discussion below. The following standard and interpretation has been issued by the IASB and the IFRIC and the Corporation is currently assessing its impact on the financial statements:
8
IFRS 9 - Financial Instruments (“IFRS 9”) ultimately replaces IAS 39 - Financial Instruments: Recognition and Measurement (“IAS 39”). The replacement of IAS 39 is a three-phase project with the objective of improving and simplifying the reporting for financial instruments. The issuance of the first phase of the IFRS 9 provides guidance on the classification and measurement of financial assets and financial liabilities. IFRS 9 establishes two measurement categories for financial assets: amortized cost and fair value. Existing IAS 39 categories of loans and receivables, held-to-maturity investments, and available-for-sale financial assets have been eliminated. The criteria for a financial asset to be measured at amortized cost include: the objective of the business model is to hold assets in order to collect contractual cash flows; and, the contractual terms give rise, on contractual dates, to cash flows that are solely payments of principal and interest on principal outstanding. All other financial assets are measured at fair value.
The Company intends to adopt IFRS 9 in its consolidated financial statements for the annual period beginning on January 1, 2015. The Company has not yet assessed the impact of the adoption of this standard on its consolidated financial statements, however does not expect that it will have a significant impact.
Forward Looking Statements
Certain statements included in this MD&A may constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities legislation and regulations, and are subject to important risks, uncertainties and assumptions. This forward-looking information includes amongst others, information with respect to our objectives and the strategies to achieve these objectives, as well as information with respect to our beliefs, plans, expectations, anticipations, estimates and intentions. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “plan”, “foresee”, “believe” or “continue” or the negatives of these terms or variations of them or similar terminology. We refer you to the Corporation’s filings with the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission, as well as the “Risk Factors” section of this MD&A, and of our Form 20-F, for a discussion of the various factors that may affect the Corporation’s future results. The results or events predicted in such forward-looking information may differ materially from actual results or events.
Factors that could cause actual results or plans to differ materially from those projected in forward-looking statements made by, or on behalf of, the Corporation, many of which are beyond our control, include the Corporation’s ability to:
-
identify and capitalize on possible collaboration, strategic partnering or divestiture opportunities;
-
obtain suitable financing to support its operations and clinical trials;
-
manage its growth and the commercialization of its products;
-
achieve operating efficiencies as it progresses from a development-stage to a later-stage biotechnology corporation;
-
successfully compete in its markets;
-
realize the results it anticipates from the clinical trials of its products;
-
succeed in finding and retaining joint venture and collaboration partners to assist it in the successful marketing, distribution and commercialization of its products;
-
achieve regulatory clearances for its products;
-
obtain on commercially reasonable terms adequate product liability insurance for its commercialized products and avoid product liability claims;
-
adequately protect its proprietary information and technology from competitors and avoid infringement of proprietary information and technology of its competitors;
-
assure that its products, if successfully developed and commercialized following regulatory approval, are not rendered obsolete by products or technologies of competitors; and
-
not encounter problems with third parties, including key personnel, upon whom it is dependent.
Forward-looking statements do not take into account the effect that transactions or non-recurring or other special items announced or occurring after the statements are made have on the Corporation’s business. For example, they do not include the effect of business dispositions, acquisitions, other business transactions, asset write-downs or other charges announced or occurring after forward-looking statements are made. The financial impact of such transactions and non-recurring and other special items can be complex and necessarily depends on the facts particular to each of them.
We believe that the expectations represented by our forward-looking statements are reasonable, yet there can be no assurance that such expectations will prove to be correct. Furthermore, the forward-looking statements contained in this report are made as of the date of this report, and we do not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise unless required by applicable legislation or regulation. The forward-looking statements contained in this report are expressly qualified by this cautionary statement.
9
Condensed Interim Consolidated Financial Statements of
(Unaudited)
NYMOX PHARMACEUTICAL
CORPORATION
Three-month periods ended March 31, 2013, 2012 and 2011
| NYMOX PHARMACEUTICAL CORPORATION |
| Condensed Interim Consolidated Financial Statements |
| (Unaudited) |
| Three-month periods ended March 31, 2013, 2012 and 2011 |
| Financial Statements | |
Condensed Interim Consolidated Statements of Financial Position |
1 |
Condensed Interim Consolidated Statements of Operations and Comprehensive Loss |
2 |
Condensed Interim Consolidated Statements of Changes in Equity |
3 |
Condensed Interim Consolidated Statements of Cash Flows |
4 |
| Notes to Condensed Interim Consolidated Financial Statements | ||
| 1. | Business activities | 5 |
| 2. | Basis of preparation | 5 |
| 3. | Significant accounting policies | 6 |
| 4. | Licensing revenues and deferred revenue | 7 |
| 5. | Preferred shares of a subsidiary and non-controlling interest | 8 |
| 6. | Share capital | 8 |
| 7. | Contingencies | 12 |
| 8. | Income taxes | 12 |
| 9. | Earnings per share | 12 |
| 10. | Related parties | 13 |
| NYMOX PHARMACEUTICAL CORPORATION |
| Condensed Interim Consolidated Statements of Financial Position |
| (Unaudited) |
| March 31, 2013 and December 31, 2012 |
| (in US dollars) |
| March 31, | December 31, | ||||||
| Note | 2013 | 2012 | |||||
| Assets | |||||||
| Current assets: | |||||||
Cash |
$ | 1,375,433 | $ | 1,030,075 | |||
Trade accounts receivable |
97,137 | 30,732 | |||||
Other receivables |
61,383 | 54,169 | |||||
Research tax credits receivable |
596,575 | 532,198 | |||||
Prepaid expenses |
2,751 | 31,988 | |||||
Security deposit |
17,396 | 17,396 | |||||
Inventories |
115,955 | 42,503 | |||||
| Total current assets | 2,266,630 | 1,739,061 | |||||
| Non-current assets: | |||||||
Property and equipment |
14,405 | 15,118 | |||||
Total non-current assets |
14,405 | 15,118 | |||||
| Total assets | $ | 2,281,035 | $ | 1,754,179 | |||
| Liabilities and Equity | |||||||
| Current liabilities: | |||||||
Trade accounts payable |
$ | 1,181,462 | $ | 880,533 | |||
Accrued liabilities: |
|||||||
Payroll related liabilities |
9,950 | 14,388 | |||||
Other accrued liabilities |
117,269 | 160,238 | |||||
Deferred revenue |
4 | 2,617,600 | 2,617,600 | ||||
Total current liabilities |
3,926,281 | 3,672,759 | |||||
| Non-current liabilities: | |||||||
Deferred revenue |
4 | 4,471,733 | 5,126,133 | ||||
Preferred shares of a subsidiary |
5 | 400,000 | 400,000 | ||||
Total non-current liabilities |
4,871,733 | 5,526,133 | |||||
| Equity: | |||||||
Share capital |
6 | 71,816,409 | 69,705,389 | ||||
Additional paid-in capital |
12,377,901 | 12,362,281 | |||||
Deficit |
(91,111,289 | ) | (89,912,383 | ) | |||
| Total equity attributable to the shareholders of the Corporation | (6,916,979 | ) | (7,844,713 | ) | |||
| Non-controlling interest | 5 | 400,000 | 400,000 | ||||
| Total equity | (6,516,979 | ) | (7,444,713 | ) | |||
| Contingencies | 7 | ||||||
| Total liabilities and equity | $ | 2,281,035 | $ | 1,754,179 |
See accompanying notes to the condensed interim consolidated financial statements.
On behalf of the Board:
/s/ Paul Averback MD Director
/s/ Paul McDonald Director
1
| NYMOX PHARMACEUTICAL CORPORATION |
| Condensed Interim Consolidated Statements of Operations and Comprehensive Loss |
| (Unaudited) |
| Three-month periods ended March 31, 2013, 2012 and 2011 |
| (in US dollars) |
| Note | 2013 | 2012 | 2011 | |||||||
| Revenues: | ||||||||||
|
Sales of goods |
$ | 184,246 | $ | 85,179 | $ | 110,615 | ||||
|
Licensing Revenues: |
||||||||||
|
Upfront payment |
4 | 654,400 | 654,400 | 654,400 | ||||||
| 838,646 | 739,579 | 765,015 | ||||||||
| Expenses: | ||||||||||
|
Research and development |
6 (c) | 1,471,153 | 2,031,257 | 3,708,379 | ||||||
|
Less research tax credits |
(64,377 | ) | (70,958 | ) | (322,125 | ) | ||||
| 1,406,776 | 1,960,299 | 3,386,254 | ||||||||
|
General and administrative |
6 (c) | 420,980 | 513,411 | 1,215,628 | ||||||
|
Marketing |
6 (c) | 38,427 | 43,084 | 484,370 | ||||||
|
Cost of sales |
66,988 | 62,628 | 88,054 | |||||||
| 1,933,171 | 2,579,422 | 5,174,306 | ||||||||
| Results from operating activities | (1,094,525 | ) | (1,839,843 | ) | (4,409,291 | ) | ||||
| Net finance income (costs): | ||||||||||
|
Finance income |
619 | 2,995 | - | |||||||
|
Finance costs |
(10,126 | ) | (21,800 | ) | ||||||
| 619 | (7,131 | ) | (21,800 | ) | ||||||
|
Net loss and comprehensive loss attributable to the equity holders of the Corporation |
$ | (1,093,906 | ) | $ | (1,846,974 | ) | $ | (4,431,091 | ) | |
| Basic and diluted loss per share | 9 | $ | (0.03 | ) | $ | (0.06 | ) | $ | (0.14 | ) |
|
Weighted average number of common shares outstanding |
9 | 33,679,486 | 32,994,621 | 32,578,523 |
See accompanying notes to the condensed interim consolidated financial statements.
2
| NYMOX PHARMACEUTICAL CORPORATION |
| Condensed Interim Consolidated Statements of Changes in Equity |
| (Unaudited) |
| Three-month periods ended March 31, 2013, 2012 and 2011 |
| (in US dollars) |
| Attributable to equity holders of the Corporation | |||||||||||||||||||
| Additional | Non- | ||||||||||||||||||
| Share capital | paid-in | controlling | Total | ||||||||||||||||
| Note | Number | Dollars | capital | Deficit | Total | interest | equity | ||||||||||||
| Balance, December 31, 2012 | 33,572,442 | $ | 69,705,389 | $ | 12,362,281 | $ | (89,912,383 | ) | $ | (7,844,713 | ) | $ | 400,000 | $ | (7,444,713 | ) | |||
|
Transactions with owners, recorded directly in equity: |
|||||||||||||||||||
|
Issuance of share capital |
368,035 | 2,100,000 | – | – | 2,100,000 | – | 2,100,000 | ||||||||||||
|
Option surrender agreement |
|||||||||||||||||||
|
Cash |
5,440 | – | – | – | – | – | – | ||||||||||||
|
Ascribed value |
– | 11,020 | (11,020 | ) | – | – | – | – | |||||||||||
|
|
|||||||||||||||||||
|
Share issue costs |
– | – | – | (105,000 | ) | (105,000 | ) | – | (105,000 | ) | |||||||||
|
Stock-based compensation |
6 (c) | – | – | 26,640 | – | 26,640 | – | 26,640 | |||||||||||
|
|
|||||||||||||||||||
| Total contributions by owners | 373,475 | 2,111,020 | 15,620 | (105,000 | ) | 2,021,640 | – | 2,021,640 | |||||||||||
|
Net loss and comprehensive loss |
– | – | – | (1,093,906 | ) | (1,093,906 | ) | – | (1,093,906 | ) | |||||||||
| Balance, March 31, 2013 | 33,945,917 | $ | 71,816,409 | $ | 12,377,901 | $ | (91,111,289 | ) | $ | (6,916,979 | ) | $ | 400,000 | $ | (6,516,979 | ) | |||
| Balance, December 31, 2011 | 32,993,302 | $ | 66,062,961 | $ | 10,445,524 | $ | (82,106,044 | ) | $ | (5,597,559 | ) | $ | 400,000 | $ | (5,197,559 | ) | |||
|
Transactions with owners, recorded directly in equity: |
|||||||||||||||||||
|
Exercise of stock options |
3,000 | 9,000 | – | – | 9,000 | – | 9,000 | ||||||||||||
|
Stock-based compensation |
6 (c) | – | – | 51,496 | – | 51,496 | – | 51,496 | |||||||||||
|
|
|||||||||||||||||||
| Total contributions by owners | 3,000 | 9,000 | 51,496 | – | 60,496 | – | 60,496 | ||||||||||||
|
Net loss and comprehensive loss |
– | – | – | (1,846,974 | ) | (1,846,974 | ) | – | (1,846,974 | ) | |||||||||
| Balance, March 31, 2012 | 32,996,302 | $ | 66,071,961 | $ | 10,497,020 | $ | (83,953,018 | ) | $ | (7,384,037 | ) | $ | 400,000 | $ | (6,984,037 | ) | |||
| Balance, December 31, 2010 | 32,573,856 | $ | 62,855,147 | $ | 6,493,544 | $ | (72,203,305 | ) | $ | (2,854,614 | ) | $ | 400,000 | $ | (2,454,614 | ) | |||
|
Transactions with owners, recorded directly in equity: |
|||||||||||||||||||
|
Option surrender agreement |
15,000 | – | – | – | – | – | – | ||||||||||||
|
Stock-based compensation |
6 (c) | – | – | 3,583,258 | – | 3,583,258 | – | 3,583,258 | |||||||||||
|
|
|||||||||||||||||||
| Total contributions by owners | 15,000 | – | 3,583,258 | – | 3,583,258 | – | 3,583,258 | ||||||||||||
|
Net loss and comprehensive loss |
– | – | – | (4,431,091 | ) | (4,431,091 | ) | – | (4,431,091 | ) | |||||||||
| Balance, March 31, 2011 | 32,588,856 | $ | 62,855,147 | $ | 10,076,802 | $ | (76,634,396 | ) | $ | (3,702,447 | ) | $ | 400,000 | $ | (3,302,447 | ) | |||
See accompanying notes to condensed interim consolidated financial statements.
3
| NYMOX PHARMACEUTICAL CORPORATION |
| Condensed Interim Consolidated Statements of Cash Flows |
| (Unaudited) |
| Three-month periods ended March 31, 2013, 2012 and 2011 |
| (in US dollars) |
| Note | 2013 | 2012 | 2011 | |||||||
| Cash flows from (used in) operating activities: | ||||||||||
|
Net loss |
$ | (1,093,906 | ) | $ | (1,846,974 | ) | $ | (4,431,091 | ) | |
|
Adjustments for: |
||||||||||
|
Depreciation of property and equipment |
2,153 | 2,471 | 2,749 | |||||||
|
Stock-based compensation |
6 (c) | 26,640 | 51,496 | 3,583,258 | ||||||
|
Changes in non-cash operating balances: |
||||||||||
|
Prepaid expenses |
29,237 | |||||||||
|
Trade accounts receivable and other receivables |
(73,619 | ) | 63,207 | (25,533 | ) | |||||
|
Research tax credits receivable |
(64,377 | ) | (70,958 | ) | (322,125 | ) | ||||
|
Inventories |
(73,452 | ) | (16,988 | ) | (1,729 | ) | ||||
|
Trade accounts payable and accrued liabilities |
253,522 | (217,510 | ) | (1,978,595 | ) | |||||
|
Deferred revenue |
(654,400 | ) | (654,400 | ) | (654,400 | ) | ||||
| (1,648,202 | ) | (2,689,656 | ) | (3,827,466 | ) | |||||
| Cash flows from (used in) financing activities: | ||||||||||
|
Proceeds from issuance of share capital |
2,100,000 | |||||||||
|
Share issue costs |
(105,000 | ) | ||||||||
|
Proceeds from exercise of stock options |
9,000 | |||||||||
| 1,995,000 | 9,000 | |||||||||
| Cash flows used in investing activities: | ||||||||||
|
Additions to property and equipment |
(1,440 | ) | (980 | ) | (10,298 | ) | ||||
| Net increase (decrease) in cash | 345,358 | (2,681,636 | ) | (3,837,764 | ) | |||||
| Cash, beginning of the period | 1,030,075 | 5,918,921 | 13,174,999 | |||||||
| Cash, end of the period | $ | 1,375,433 | $ | 3,237,285 | $ | 9,337,235 |
See accompanying notes to the condensed interim consolidated financial statements.
4
| NYMOX PHARMACEUTICAL CORPORATION |
| Notes to Condensed Interim Consolidated Financial Statements |
| (Unaudited) |
| Three-month periods ended March 31, 2013, 2012 and 2011 |
| (in US dollars) |
| 1. | Business activities: |
Nymox Pharmaceutical Corporation is a company domiciled in Canada and is incorporated under the Canada Business Corporations Act. Nymox Pharmaceutical Corporation including its subsidiaries, Nymox Corporation, a Delaware Corporation, and Serex Inc. of New Jersey (together referred to as the “Corporation”), is a biopharmaceutical corporation, which specializes in the research and development of products for the aging population. The head-office of the Corporation is located at 9900 Cavendish Boulevard, Saint-Laurent, Québec. The Corporation developed AlzheimAlertTM, a urinary test that aids physicians in the diagnosis of Alzheimer’s disease. The Corporation currently markets NicAlertTM and TobacAlertTM, tests that use urine or saliva to detect use of tobacco products. The Corporation is developing NX-1207, a novel treatment for benign prostatic hyperplasia which is in Phase 3 clinical trials. A Phase 2 study of NX-1207 for low grade localized prostate cancer was started in 2012. The Corporation is also developing therapeutics for the treatment of Alzheimer’s disease and new antibacterial agents for the treatment of bacterial infections in humans, including a treatment for E-coli O157:H7 bacterial contamination in meat and other food and drink products.
Since 1989, the Corporation’s activities and resources have been primarily focused on developing certain pharmaceutical technologies. The Corporation is subject to a number of risks, including the successful development and marketing of its technologies and maintaining access to existing financing arrangements under the Common Stock Private Purchase Agreement referred to in note 6 (a). The Corporation depends on this financing, as well as collaboration agreements, to fund its operations. In order to achieve its business plan and the realization of its assets and liabilities in the normal course of operations, the Corporation anticipates the need to raise additional capital and/or achieve sales and other revenue-generating activities. Management believes that cash balances, funds from operations, as well as funds from the Common Stock Private Purchase Agreement will be sufficient to meet the Corporation’s requirements for the next year.
The Corporation is listed on the NASDAQ Stock Market.
| 2. | Basis of preparation: |
| (a) |
Statement of compliance: |
The condensed interim consolidated financial statements of the Corporation have been prepared using accounting policies consistent with International Financial Reporting Standards (“IFRS”) and its interpretations as issued by the International Accounting Standards Board (“IASB”) and in accordance with IAS 34, Interim Financial Reporting. The condensed interim consolidated financial statements do not include all of the information required for full annual financial statements and accordingly should be read in connection with the previously issued annual financial statements of the Corporation.
5
| NYMOX PHARMACEUTICAL CORPORATION |
| Notes to Condensed Interim Consolidated Financial Statements, Continued |
| (Unaudited) |
| Three-month periods ended March 31, 2013, 2012 and 2011 |
| (in US dollars) |
| 2. | Basis of preparation (continued): |
| (a) |
Statement of compliance (continued): |
The condensed interim consolidated financial statements were authorized for issuance by the Board of Directors on May 10, 2013.
| (b) |
Basis of measurement: |
The condensed interim consolidated financial statements have been prepared on a going concern and on the historical cost basis. The functional and presentation currency of the Corporation is the US dollar.
| 3. | Significant accounting policies: |
The accounting policies described in the Corporation’s 2012 annual consolidated financial statements have been applied consistently to all periods presented in these condensed interim consolidated financial statements except as noted below.
New standards and interpretations adopted during the period:
IFRS 10 - Consolidated Financial Statements (“IFRS 10”), which builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of a parent company. IFRS 10 also provides additional guidance to assist in the determination of control where this is difficult to assess.
IFRS 12 - Disclosure of Interests in Other Entities, which is a comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.
IFRS 13 - Fair Value Measurement (“IFRS 13”), which defines fair value, sets out in a single IFRS a framework for measuring fair value and requires disclosures about fair value measurements. IFRS 13 does not determine when an asset, a liability or an entity’s own equity instrument is measured at fair value. Rather, the measurement and disclosure requirements of IFRS 13 apply when another IFRS requires or permits the item to be measured at fair value (with limited exceptions).
The impact of the adoption of these standards and amendments did not have a significant impact on the Corporation’s condensed interim consolidated financial statements.
New standards and interpretations issued but not yet adopted:
A number of new standards, interpretations and amendments to existing standards were issued by the IASB or International Financial Reporting Interpretations Committee (“IFRIC”). They are mandatory but not yet effective for the period ended March 31, 2013, and have not been applied in preparing these condensed interim consolidated financial statements.
6
| NYMOX PHARMACEUTICAL CORPORATION |
| Notes to Condensed Interim Consolidated Financial Statements, Continued |
| (Unaudited) |
| Three-month periods ended March 31, 2013, 2012 and 2011 |
| (in US dollars) |
| 3. | Significant accounting policies (continued): |
Many of these are not applicable or are inconsequential to the Corporation and have been excluded from the discussion below. The following standard and interpretation has been issued by the IASB and the IFRIC and the Corporation is currently assessing its impact on the financial statements:
IFRS 9 - Financial Instruments (“IFRS 9”) ultimately replaces IAS 39 - Financial Instruments: Recognition and Measurement (“IAS 39”). The replacement of IAS 39 is a three-phase project with the objective of improving and simplifying the reporting for financial instruments. The issuance of the first phase of IFRS 9 provides guidance on the classification and measurement of financial assets and financial liabilities. IFRS 9 establishes two measurement categories for financial assets: amortized cost and fair value. Existing IAS 39 categories of loans and receivables, held-to-maturity investments, and available-for-sale financial assets have been eliminated. The criteria for a financial asset to be measured at amortized cost include: the objective of the business model is to hold assets in order to collect contractual cash flows; and, the contractual terms give rise, on contractual dates, to cash flows that are solely payments of principal and interest on principal outstanding. All other financial assets are measured at fair value.
The Corporation intends to adopt IFRS 9 in its consolidated financial statements for the annual period beginning on January 1, 2015. The Corporation has not yet assessed the impact of the adoption of this standard on its consolidated financial statements, however does not expect that it will have a significant impact.
| 4. | Licensing revenues and deferred revenue: |
On December 16, 2010, the Corporation signed a license and collaboration agreement with Recordati Ireland Ltd. (“Recordati”), a European pharmaceutical group, for the development and commercialization of NX-1207 in Europe, including Russia and the CIS, the Middle East, the Maghreb area of North Africa and South Africa. The license and collaboration agreement covers the use of NX-1207 for the treatment of benign prostatic hyperplasia (“BPH”) as the initial indication for development and commercialization. Recordati made an upfront payment to the Corporation of €10,000,000 (US$13,088,000), in December 2010, and will make regulatory approval and sales milestones payments, and tiered supply and royalty payments of a minimum of 26% to increase progressively up to 40% of total net sales if the case specific contractual conditions are achieved.
The upfront payment of $13,088,000 has been deferred and is being recognized as revenue on a systematic basis over the estimated service period. This period may be modified in the future based on additional information that may be received by the Corporation. In the three-month period ended March 31, 2013, an amount of $654,400 (2012 - $654,400; 2011 - $654,400) was recognized as revenue related to this upfront payment. As at March 31, 2013, the deferred revenue related to this transaction amounted to $7,089,333 (as at December 31, 2012 - $7,743,733).
7
| NYMOX PHARMACEUTICAL CORPORATION |
| Notes to Condensed Interim Consolidated Financial Statements, Continued |
| (Unaudited) |
| Three-month periods ended March 31, 2013, 2012 and 2011 |
| (in US dollars) |
| 5. | Preferred shares of a subsidiary and non-controlling interest: |
The preferred shares of a subsidiary and the non-controlling interest relate to redeemable and/or convertible preferred shares of Serex Inc. in the amount of $800,000. These preferred shares are convertible into common shares of Serex Inc. at a price of $3.946 per share. Up to 50% of the preferred shares are redeemable at any time at the option of the preferred shareholders for their issue price, subject to holders with at least 51% of the face value of the preferred shares asking for redemption, and sufficient funds being available in Serex Inc. These redeemable preferred shares in the amount of $400,000 have been presented as a liability in the statements of financial position and are measured at their issue price which is also the redemption value. The non-redeemable portion is presented within equity, separately from equity of the shareholders of the Corporation, as non-controlling interest.
| 6. | Share capital: |
| March 31, | December 31, | |||||
| 2013 | 2012 | |||||
| Authorized: | ||||||
|
|
An unlimited number of common shares, at no par value |
|||||
| Issued, outstanding and fully paid: | ||||||
|
|
Number of common shares |
33,945,917 | 33,572,442 | |||
|
|
Dollars |
$ | 71,816,409 | $ | 69,705,389 | |
|
|
|
The holders of common shares are entitled to receive dividends as declared, which is at the discretion of the Corporation, and are entitled to one vote per share at the annual general meeting of the Corporation. The Corporation has never paid any dividends.
| (a) |
Common Stock Private Purchase Agreement: |
In November 2011, the Corporation entered into a Common Stock Private Purchase Agreement with an investment company (the “Purchaser”) that established the terms and conditions for the purchase of common shares by the Purchaser. In November 2012, this agreement was terminated and a new agreement was concluded with the Purchaser. In general, the Corporation can, at its discretion, require the Purchaser to purchase up to $15 million of common shares over a 24-month period based on notices given by the Corporation. The Corporation must comply with general covenants in order to draw on its facility, including maintaining its stock exchange listing and registration requirements and having no material adverse effects, as defined in the agreement, with respect to the business and operations of the Corporation.
8
| NYMOX PHARMACEUTICAL CORPORATION |
| Notes to Condensed Interim Consolidated Financial Statements, Continued |
| (Unaudited) |
| Three-month periods ended March 31, 2013, 2012 and 2011 |
| (in US dollars) |
| 6. | Share capital (continued): |
| (a) |
Common Stock Private Purchase Agreement (continued): |
The number of shares to be issued in connection with each notice shall be equal to the amount specified in the notice, divided by 97% of the average price of the Corporation’s common shares for the five days preceding the giving of the notice. The maximum amount of each notice is $1,000,000 and the minimum amount is $100,000. The Corporation may terminate the agreement before the 24-month term, if it has issued at least $8,000,000 of common shares under the agreement.
In the three-month period ended March 31, 2013, the Corporation issued 368,035 common shares to the Purchaser under the agreements for proceeds of $2,100,000. At March 31, 2013, the Corporation can require the Purchaser to purchase up to $12,900,000 of common shares over the remaining 19 months of the new agreement, provided the Corporation adheres to its covenants.
The Corporation records the equity transaction at the amount received.
| (b) |
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 maximum number of shares which may be optioned under the stock option plan is 7,500,000. The maximum number of shares which may be optioned to any one individual is 15% of the total issued and outstanding common shares. Options under the Plan expire ten years after the grant date and vest either immediately or over periods up to six years, and are equity-settled. As at March 31, 2013, 1,569,500 options (2012 - 2,124,500; 2011 - 97,000) could still be granted by the Corporation.
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| NYMOX PHARMACEUTICAL CORPORATION |
| Notes to Condensed Interim Consolidated Financial Statements, Continued |
| (Unaudited) |
| Three-month periods ended March 31, 2013, 2012 and 2011 |
| (in US dollars) |
| 6. | Share capital (continued): |
| (b) |
Stock options (continued): |
The following table provides the activity of stock option awards during the three-month period ended March 31, 2013 and for options outstanding and exercisable at the end of the three-month period ended March 31, 2013, the weighted average exercise price and the weighted average remaining contractual life (in years):
| Options outstanding | |||||||
| Weighted | |||||||
| Weighted | average | ||||||
| average | remaining | ||||||
| exercise | contractual | ||||||
| Number | price | life (in years) | |||||
| Outstanding, December 31, 2012 | 5,940,500 | $ | 4.03 | 4.74 | |||
| Surrendered | (10,000 | ) | 2.90 | ||||
| Outstanding, March 31, 2013 | 5,930,500 | $ | 4.03 | 4.48 | |||
| Options exercisable | 5,890,500 | $ | 4.01 | 4.47 | |||
| (c) |
Stock-based compensation: | |
| 2013 | 2012 | 2011 | ||||||
| Stock options granted in 2006 | $ | $ | 19,798 | $ | 61,478 | |||
| Stock options granted in 2011 | 4,848 | 31,698 | 3,521,780 | |||||
| Stock options granted in 2012 | 21,792 | |||||||
| Total stock-based compensation expense recognized | $ | 26,640 | $ | 51,496 | $ | 3,583,258 |
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| NYMOX PHARMACEUTICAL CORPORATION |
| Notes to Condensed Interim Consolidated Financial Statements, Continued |
| (Unaudited) |
| Three-month periods ended March 31, 2013, 2012 and 2011 |
| (in US dollars) |
| 6. | Share capital (continued): |
| (c) |
Stock-based compensation (continued): |
The stock-based compensation expense is disaggregated in the statements of operations and comprehensive loss as follows:
| 2013 | 2012 | 2011 | ||||||
| Stock-based compensation pertaining to general and administrative | $ | 21,792 | $ | 28,506 | $ | 917,178 | ||
| Stock-based compensation pertaining to marketing | 261 | 433,012 | ||||||
| Stock-based compensation pertaining to research and development | 4,848 | 22,729 | 2,233,068 | |||||
| $ | 26,640 | $ | 51,496 | $ | 3,583,258 |
The fair value of the options granted during the three-month period ended March 31, 2011 was determined using the Black-Scholes pricing model using the following weighted average assumptions:
| 2011 | ||||
| Share price | $ | 7.01 | ||
| Exercise price | $ | 7.01 | ||
| Risk-free interest rate | 2.58 | % | ||
| Expected volatility | 72.23 | % | ||
| Expected option life in years | 5 | |||
| Expected dividends | ||||
No options were granted during the three-month period ended March 31, 2013 (2012 - none granted; 2011 - 865,000 options having a weighted average grant date fair value of $4.26 per option).
Expected volatility was estimated considering a five-year historic average share price volatility.
Expected dividends were determined to be nil, since it is the present policy of the Corporation to retain all earnings to finance operations.
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| NYMOX PHARMACEUTICAL CORPORATION |
| Notes to Condensed Interim Consolidated Financial Statements, Continued |
| (Unaudited) |
| Three-month periods ended March 31, 2013, 2012 and 2011 |
| (in US dollars) |
| 7. | Contingencies: |
In November 2011, two former directors of the Corporation, who ceased to be directors in 2006, served the Corporation with a Motion to Institute Proceedings filed with the Québec Superior Court seeking an order that they are entitled to exercise options to purchase a total of 125,000 shares of the Corporation at a price of US$4.33 or, in the alternative, damages for lost profit. The Corporation believes that the right to exercise these options ended in May 2007 and that the claims are without merit. The Corporation intends to defend the action vigorously. Accordingly, no provision related to this matter has been recorded in these condensed interim consolidated financial statements.
| 8. | Income taxes: |
The Corporation recognized no income taxes in the statements of operations and comprehensive loss, as it has been incurring losses since inception. Furthermore, no deferred tax asset was recognized since the accumulated tax losses available to be carried forward and used to offset future taxable income are not considered probable of being realized.
| 9. | Earnings per share: |
Weighted average number of common shares outstanding:
| 2013 | 2012 | 2011 | |||
| Issued common shares at January 1 | 33,572,442 | 32,993,302 | 32,573,856 | ||
| Effect of stock options exercised | – | 1,319 | 4,667 | ||
| Effect of shares issued | 107,044 | – | – | ||
|
|
Weighted average number of common shares outstanding at March 31 |
33,679,486 | 32,994,621 | 32,578,523 |
Diluted loss per share was the same amount as basic loss per share, as the effect of options would have been anti-dilutive, because the Corporation incurred losses in each of the periods presented. All outstanding options could potentially be dilutive in the future.
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| NYMOX PHARMACEUTICAL CORPORATION |
| Notes to Condensed Interim Consolidated Financial Statements, Continued |
| (Unaudited) |
| Three-month periods ended March 31, 2013, 2012 and 2011 |
| (in US dollars) |
| 10. | Related parties: |
Executive officers and directors participate in the Corporation’s stock option plan (see note 6 (b)). Executive officers are covered under the Corporation’s health plan.
Key management personnel compensation is comprised of:
| 2013 | 2012 | 2011 | ||||||
| Salaries | $ | 170,443 | $ | 162,740 | $ | 153,301 | ||
| Short-term employee benefits | 2,564 | 2,311 | 2,355 | |||||
| Stock-based compensation | – | 19,799 | 3,475,857 | |||||
| $ | 173,007 | $ | 184,850 | $ | 3,631,513 |
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