MYMETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014MARCH 31, 2015
(UNAUDITED)
Note 1. The Company and Summary of Significant Accounting Policies
BASIS OF PRESENTATION
The amounts in the notes are shown in thousands of EURO rounded to the nearest thousand except for share and per share amounts.
The accompanying interim period consolidated financial statements of Mymetics Corporation (the "Company") set forth herein have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such SEC rules and regulations. The interim period consolidated financial statements should be read together with the audited financial statements and the accompanying notes included in the Company's latest annual report on Form 10-K for the fiscal year ended December 31, 2013.2014.
The accompanying financial statements of the Company are unaudited. However, in the opinion of the Company, the unaudited consolidated financial statements contained herein contain all adjustments necessary to present a fair statement of the results of the interim periods presented. All adjustments made during the three-month period ending June 30, 2014March 31, 2015 were of a normal and recurring nature.
The CompanyMymetics Corporation (the "Company" or "Mymetics") was created for the purpose of engaging in vaccine research and development. Its main research efforts to date have been concentrated in the prevention and treatment of the Respiratory Syncytial Virus (RSV), the AIDS virus and malaria. The Company has established a network which enables it to work with education centers, research centers, pharmaceutical laboratories and biotechnology companies. On April 1, 2009 the Company successfully closed its acquisition of Bestewil Holding BV and Mymetics BV (previously Virosome Biologicals BV) and, as a result, has further increased the pipeline of vaccines under development to include (i) Herpes Simplex which is at the pre-clinical stage, (ii) influenza for elderly which has finished a clinical trial Phase I, and (iii) Respiratory Syncytial Virus (RSV) which is at the pre-clinical stage (ii) Herpes Simplex which isstage. On December 27, 2013, Mymetics signed a License and Collaboration Agreement with RSV Corporation (RSVC), a dedicated entity specifically set-up for developing the Mymetics RSV vaccine. Under this agreement Astellas Pharma Inc. will fund RSVC’s development of the virosome vaccine technology, licensed from Mymetics for the respiratory syncytial virus (RSV) through completion of a Phase 2b human proof‐of‐concept study. Based on the strategic partnership, Astellas received exclusive rights to acquire RSVC as well as further develop and commercialize the vaccine product. Mymetics will continue to provide research and development activities for the pre-clinical phases and prepare for the upscale production, assay developments and provide further scientific advice on the development of the RSV virosome vaccine. As consideration Mymetics has received an irrevocable and non-refundable upfront fee for the license of USD 5 million and will receive monthly Collaboration and R&D fees, milestone payments for specific milestones during development and royalties at the pre-clinical stage, and (iii) intra-nasal influenza which has finished a clinical trial Phase I.time of commercialization.
These financial statements have been prepared treating the Company as a development stage company. As of June 30, 2014,March 31, 2015, the Company is in the initial stagespre-clinical testing of clinical testingsome of its vaccine candidates and a commercially viable product is not expected for several more years. However, the Company generates some revenue through the licensing of its RSV vaccine and from collaboration agreements for R&D services. Management believes that the Company’s research and development activities will result in valuable intellectual property that can generate significant revenues in the future such as by licensing. Vaccines are one of the fastest growing markets in the pharmaceutical industry. For the purpose of these financial statements, the development stage started May 2, 1990.
These consolidated financial statements have also been prepared assuming the Company will continue as a going concern. The Company has experienced significant losses since inception resulting in aan accumulated deficit accumulated during the development stage of E65,887E68,374 at June 30, 2014. Deficits in operating cash flows since inception have been financed through debt and equity funding sources. In order to remain a going concern and continue the Company's research and development activities, management intends to seek additional funding.March 31, 2015. Further, the Company’s current liabilities exceed its current assets by E37,605E40,027 as of June 30, 2014,March 31, 2015, and there is no assurance that cash will become available to pay current liabilities in the near term. Management is seeking additional financing but there can be no assurance that management will be successful in any of those efforts. These conditions raise substantial doubt about our ability to continue as a going concern.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany accounts and transactions have been eliminated.
FOREIGN CURRENCY TRANSLATION
The Company translates non-Euro assets and liabilities of its subsidiaries at the rate of exchange at the balance sheet date. Revenues and expenses are translated at the average rate of exchange throughout the period. Unrealized gains or losses from these translations are reported as a separate component of comprehensive income. Transaction gains or losses are included in general and administrative expenses in the consolidated statements of operations. The translation adjustments do not recognize the effect of income tax because the Company expects to reinvest the amounts indefinitely in operations. The Company's reporting currency is the Euro because substantially all of the Company's activities are conducted in Europe.
CASH
Cash deposits are occasionally in excess of insured amounts.
REVENUE RECOGNITION
Exclusive Licenses
The deliverables under an exclusive license agreement generally include the exclusive license to the Company’s technology, and may also include deliverables related to research activities to be performed on behalf of the collaborative collaborator and the manufacture of preclinical or clinical materials for the collaborative collaborator.
Generally, exclusive license agreements contain non-refundable terms for payments and, depending on the terms of the agreement, provide that the Company will (i) provide research services which are reimbursed at a contractually determined rate which includes margin for the Company, (ii) participate in a joint steering committee to monitor the progress of the research and development which will be reimbursed at a contractually determined rate which includes margin for the Company, (iii) earn payments upon the achievement of certain milestones and (iv) earn royalty payments at the time of commercialization until the later of expiration of the last to expire valid patent rights expire or 10 years after the first commercial sale. The Company may provide technical assistance and share any technology improvements with its collaborators during the term of the collaboration agreements. The Company does not directly control when any collaborator will request research or manufacturing services, achieve milestones or become liable for royalty payments. As a result, the Company cannot predict when it will recognize revenues in connection with any of the foregoing.
The Company follows the provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 605-25, "Revenue Recognition—Multiple-Element Arrangements," and ASC Topic 605-28, "Revenue Recognition—Milestone Method," in accounting for these agreements. In order to account for these agreements, the Company must identify the deliverables included within the agreement and evaluate which deliverables represent separate units of accounting based on if certain criteria are met, including whether the delivered element has stand-alone value to the collaborator. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. Factors considered in this determination include the research and manufacturing capabilities of the collaborator and the availability of technology research expertise in the general marketplace.
RSV Corporation
In December 2013, the Company entered into an agreement with RSV Corporation. The agreement provides RSV Corporation with an exclusive license to the Company’s RSV technology in order to develop and commercialize respiratory syncytial virus virosome vaccines. The Company received a US$5 million upfront payment in connection with the execution of the agreement and the Company is entitled to receive milestone payments potentially totaling $62$77 million plus royalties on product sales, if any. The Company also is entitled to receive payments for research and development activities performed on behalf of RSV Corporation. RSV Corporation is responsible for the development, manufacturing, and marketing of any products resulting from this agreement.
In accordance with ASC 605-25, the Company identified all of the deliverables at the inception of the agreement. The significant deliverables were determined to be the RSV technology license and the research and development services including participation on the Joint Collaboration and Steering Committee (JCSC). The Company has determined that the RSV technology license does have standalone value from the research services. As a result, the research services are considered a separate unit of accounting. The estimated selling prices for these units of accounting were determined based on market conditions and entity-specific factors such as the terms of the collaborators’ previous collaborative agreements, recent preclinical and clinical testing results of therapeutic products that use the Company’s RSV technology, the Company’s pricing practices and pricing objectives, and the nature of the research services to be performed for RSV Corporation and market rates for similar services. The arrangement consideration was allocated to the deliverables based on the relative selling price method. The Company recognized license revenue when the exclusive license was delivered pursuant to the terms of the agreement which was upon execution of the agreement. The Company does not control when RSV Corporation will reach certain development and commercialization’s milestones related to the RSV technology. As a result, the Company cannot predict when or if it will recognize the related milestone and royalty revenue. The Company will recognize research services revenue as the related services are delivered.
Fixed price contracts and research and collaboration agreements
When the performance under a fixed price contract can be reasonably estimated, revenue for such a contract is recognized under the proportional performance method and earned in proportion to the contract costs incurred in performance of the work as compared to total estimated contract costs. Costs incurred under fixed price contracts represent a reasonable measurement of proportional performance of the work. Direct costs incurred under collaborative research and development agreements are recorded as research and development expenses. If the performance under a fixed price contract cannot be reasonably estimated, the Company recognizes the revenue on a straight-line basis over the contract term.
IMUGENE Limited
In July 2014, the Company entered into a master service agreement with Imugene Limited. The agreement provides the terms and conditions upon which Imugene Limited may engage the Company to provide services to produce specific virosome based HER2/neu positive cancer vaccines by executing individual Work Orders with fixed price agreements. In consideration for the exclusive supply rights granted by the Company to Imugene, the Company received options to purchase 2.5 million common shares of Imugene with an exercise price of AUD 0.025 per share with an exercise period of five years, and is entitled to receive milestone payments potentially totaling CHF 2.8 million (None due yet) plus royalties on product sales, if any. The value of the options received is insignificant and has not been recorded. The Company also is entitled to receive payments for research and development activities performed on behalf of Imugene. The Company recognizes revenue under the proportional performance method.
TEXAS BIOMEDICAL RESEARCH INSTITUTE
In September 2014, the Company entered into a material transfer agreement and fixed price contract with Texas Biomedical Research Institute. The agreement provides Texas Biomedical Research Institute the lead of a project which has been proposed to the Bill and Melinda Gates foundation with the objective to confirm previous results obtained in non-human primates with these virosome based HIV vaccine candidates. The Company has tested these different formulations of virosome based HIV vaccines candidates in preclinical non-human primate studies and in Phase I clinical settings. The Company will produce and transfer to Texas Biomedical Research Institute the original material using the Company’s background IP. The Company recognizes revenue under the proportional performance method.
PATH-MVI
In November 2014, the Company signed an agreement with PATH Malaria Vaccine Initiative (MVI) and the Laboratory of Malaria Immunology and Vaccinology (LMIV) of the National Institute of Allergy and Infectious Diseases (NIAID), where Mymetics will develop and produce virosome based vaccine formulations for a malaria transmission-blocking vaccine candidate which will be based on two antigens provided by LMIV. The vaccine formulations will then be tested in animal models. PATH MVI will fund all activities under this project, which started in January 2015. The Company recognizes revenue under the proportional performance method.
RECEIVABLES
Receivables are stated at their outstanding principal balances. Management reviews the collectability of receivables on a periodic basis and determines the appropriate amount of any allowance. There was no allowance necessary at June 30, 2014March 31, 2015 or December 31, 2013.2014. The Company charges off receivables to the allowance when management determines that a receivable is not collectible. The Company may retain a security interest in the products sold.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and is depreciated over its estimated useful life on straight-line basis from the date placed in service. Estimated useful lives are usually taken as three years.
IN-PROCESS RESEARCH AND DEVELOPMENT
In-process research and development (referred to as IPR&D) represents the estimated fair value assigned to research and development projects acquired in a purchased business combination that have not been completed at the date of acquisition and which have no alternative future use. IPR&D assets acquired in a business combination are capitalized as indefinite-lived intangible assets. These assets remain indefinite-lived until the completion or abandonment of the associated research and development efforts. During the periods prior to completion or abandonment, those acquired indefinite-lived assets are not amortized but are tested for impairment annually, or more frequently, if events or changes in circumstances indicate that the asset might be impaired.
IMPAIRMENT OF LONG LIVED ASSETS
Long-lived assets, which include property and equipment, are assessed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. The impairment testing involves comparing the carrying amount to the forecasted undiscounted future cash flows generated by that asset. In the event the carrying value of the assets exceeds the undiscounted future cash flows generated by that asset and the carrying value is not considered recoverable, impairment exists. An impairment loss is measured as the excess of the asset’s carrying value over its fair value, calculated using a discounted future cash flow method. An impairment loss would be recognized in net income in the period that the impairment occurs.
GOODWILL
Goodwill, which represents the excess of purchase price over the fair value of net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value based test. Goodwill is assessed for impairment on an annual basis as of April 1 of each year, unless events or circumstances indicate impairment may have occurred before that time. The Company assesses qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. After assessing qualitative factors, the Company must determine if further testing was necessary. If further testing was necessary, the Company would have performed a two-step impairment test for goodwill. The first step requires the Company to determine the fair value of each reporting unit. To the extent a reporting unit’s carrying amount exceeds its fair value, an indication exists that the reporting unit’s goodwill may be impaired and the Company must perform a second more detailed impairment assessment. The second impairment assessment involves allocating the reporting unit’s fair value to all of its recognized and unrecognized assets and liabilities in order to determine the implied fair value of the reporting unit’s goodwill as of the assessment date. The implied fair value of the reporting unit’s goodwill is then compared to the carrying amount of goodwill to quantify an impairment charge as of the assessment date.
The Company has conducted its impairment testing as of April 1, of 2014 and 2013 of its goodwill recognized in connection to the acquisition of Bestewil. In conclusion of this impairment testing, the carrying amount of the reporting unit was lower than the estimated fair value of the reporting unit. As the fair value of the reporting unit is higher than the carrying amount, Step 2 of the goodwill impairment test did not need to be completed. As of June 30, 2014,March 31, 2015, management believes there are no indications of impairment.
CONTINGENT CONSIDERATION
The Company accounts for contingent consideration in a purchase business combination in accordance with applicable guidance provided within the business combination rules. As per the agreement, which was last amended on February 3, 2014, the Company settled the contingent consideration liability with issuance of 5,338,809 shares of common stock in April 2014.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
TAXES ON INCOME
The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in the tax laws or rates.
The Company reports a liability, if any, for unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Estimated interest and penalties, if any, are recorded as a component of interest expense and other expense, respectively.
The Company has not recorded any liabilities for uncertain tax positions or any related interest and penalties at June 30, 2014March 31, 2015 or at December 31, 2013.2014. The Company’s United States tax returns are open to audit for the years ended December 31, 20092010 to 2013. The returns for the Luxembourg subsidiary LUXEMBOURG 6543 S.A., are open to audit for the year ended December 31, 2013.2014. The returns for the Swiss subsidiary, Mymetics S.A., are open to audit for the years ended December 31, 20092011 to 2013.2014. The returns for the Netherlands subsidiaries, Bestewil B.V. and Mymetics B.V., are open to audit for the year ended December 31, 2013.2014.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income or loss attributable to common shareholders by the weighted average number of common shares outstanding in the period. Diluted earnings per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive securities. For the three and six monthsquarter ended June 30, 2014,March 31, 2015, options, warrants and convertible debt were not included in the computation of diluted earnings per share because their effect would be anti-dilutive due to net losses incurred under the treasury stock method.
For the three and six months ended June 30, 2014,March 31, 2015, the basic weighted average number of shares was 303,112,271, and 300,778,508, respectively.303,757,622. The weighted total potential number of shares issuable of 486,606,984494,877,358 at March 31, 2015 includes 465,756,984474,027,358 potential issuable shares related to convertible loans, and 20,850,000 potential issuable shares related to outstanding not expiredstock options granted to employees.
For the three and six months ended June 30, 2013,March 31, 2014, the basic weighted average number of shares was 295,318,813, respectively.298,418,813. The weighted total potential number of shares issuable of 447,934,383482,820,942 at March 31, 2014 includes 399,418,541456,632,133 potential issuable shares related to convertible loans, 44,940,842 potential5,338,809 issuable shares to Norwood related to warrants,the contingent liability, and 3,575,00020,850,000 potential issuable shares related to outstanding not expiredstock options granted to employees. For the six months ending June 30, 2013, there were no potentially issuable shares included in the diluted earnings calculation as the conversion or exercise price per shares of these instruments were all out-of-the money.
PREFERRED STOCK
The Company has authorized 5,000,000 shares of preferred stock that may be issued in several series with varying dividend, conversion and voting rights. No preferred shares are issued or outstanding at June 30,March 31, 2015 or December 31, 2014.
STOCK-BASED COMPENSATION
Compensation cost for all share-based payments is based on the estimated grant-date fair value. The Company amortizes stock compensation cost ratably over the requisite service period.
The issuance of common shares for services is recorded at the quoted price of the shares on the date the shares are issued. No shares were issued to individuals as fee for services rendered in the sixthree months ended June 30, 2014 orMarch 31, 2015 nor in the sixthree months ended June 30, 2013.
For the year ended DecemberMarch 31, 2013, the Board of Directors of Mymetics awarded 20,600,000 incentive stock options to the employees and officers of the Company which were awarded on October 4, 2013 with an exercise price of USD 0.02 per share. 3,300,000 incentive stock options vested immediately, of which 3,100,000 were exercised as of December 31, 2013, and 17,300,000 vest in equal quantities over the next four years.
Mymetics did not grant any stock options to employees during the six month period ending June 30, 2014.
Stock compensation expense amounted to E28E15 and E2E28 during the three months periods ended June 30,March 31, 2015 and 2014, and 2013, respectively, and E56 and E3 during the six months periods ended June 30, 2014 and 2013, respectively, which is included in the statement of operations within general and administrative expenses.
ESTIMATES
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
FAIR VALUE MEASUREMENTS
Fair value guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
Level 1-Quoted | Level 1- | Quoted prices in active markets for identical assets or liabilities. |
| | |
| Level 2- | Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
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| Level 3- | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
Level 2-Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3-Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company generally has the following financial instruments: cash, receivables, accounts payable, acquisition-related contingent consideration, and notes payable. The carrying value of cash, receivables and accounts payable, approximates their fair value based on the short-term nature of these financial instruments. The carrying value of acquisition-related contingent consideration is equal to fair value since this liability is required to be reported at fair value. Management believes that it is not practicable to estimate the fair value of the notes payable due to the unique nature of these instruments.
CONCENTRATIONS
The Company enters into scientific collaboration agreements with selected partners such as Pevion Biotech Ltd., a Swiss company that granted Mymetics exclusive licenses to use their virosome vaccine delivery technology in conjunction with the Company’s AIDSderived 94% and malaria preventive vaccines under development. Under this agreement, Pevion Biotech was committed to supply the actual Virosomes100% of Research and perform their integration with the Company’s antigens, which requires proprietary know-how, at Pevion’s premises. The agreement included specific mechanisms to mitigate the risk of losing a key component of Mymetics’ vaccines should Pevion become unable to meet its commitment.
During the year ended December 31, 2013, Pevion initiated a process of winding down and communicated their inability to continue to supply the virosomes needed for the HIV and malaria vaccines. Mymetics has taken the necessary steps to ensure the continuing supply of virosomes needed for the HIV and malaria vaccines. Mymetics terminated its agreements with Pevion Biotech in January 2014. Operations between Pevion Biotech and Mymetics had substantially ceased in 2013. Mymetics retained knowledge, rights and access to production and development of the HIV and malaria virosome vaccines by hiring key personnel.
In 2013 and 2014, the Company derived all licensingDevelopment services revenue from its relationship with one collaborative partner RSV Corporation. All ofduring the researchthree month periods ended March 31, 2015 and development support employed inMarch 31, 2014, is from the same collaborative partner.respectively. Furthermore, that same collaborative partner accounted for 98%79% of the receivables balance at December 31, 20132014 and 80%65% of the receivables balance at June 30, 2014.March 31, 2015.
RELATED PARTY TRANSACTIONS
An individual employed by the law firm that acts as the Company's general counsel is a member of the Board of Directors. The Company incurred professional fees to the counsel's law firm totaling E10E7 and E25E23 for the period of three months ended March 31, 2015 and six months ending June 30, 2014, and E23 and E86 for three and six months ending June 30, 2013, respectively.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2014, the FASB issued ASU 2014-10, "Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation". The amendments in this ASU remove all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915, "Development Stage Entities", from the FASB Accounting Standards Codification. In addition, this ASU adds an example disclosure and removes an exception provided to development stage entities in Topic 810, "Consolidation,” for determining whether an entity is a variable interest entity. The presentation and disclosure requirements in Topic 915 will no longer be required for the first annual period beginning after December 15, 2014. The revised consolidation standards are effective for annual periods beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the potential impact of ASU 2014-10 on the presentation of its consolidated financial statements.
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective for the fiscal and interim reporting periods beginning after December 15, 2016 using either of two methods:
| (i) | retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or |
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| (ii) | retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. |
Management is currently evaluating the impact of the Company's pending adoption of ASU 2014-09 on its consolidated financial statements.
Note 2. Intangible Assets
Intangible assets consisted of in process research and development at June 30, 2014March 31, 2015 and December 31, 2013.
Note 3. Acquisition-Related Contingent Consideration
On April 1, 2009 Mymetics and Norwood Immunology Limited (NIL) closed the acquisition of Bestewil Holding B.V. (“Bestewil”) from its parent, NIL, under a Share Purchase Agreement pursuant to which Mymetics agreed to purchase all issued and outstanding shares of capital stock (the “Bestewil Shares”) of Bestewil from its parent, NIL, and all issued and outstanding shares of capital stock of Virosome Biologicals B.V. which were held by Bestewil. Mymetics paid NIL E5,000 (the “Cash Consideration”) raised from bridge financing (the “Bridge Loan”) and issued to NIL a convertible redeemable note (the “Note”) in the principal amount of E2,500 due 36 months after the closing date, bearing interest at 5% per annum, convertible into shares of the Company’s common stock at a conversion rate of $0.50 (“the Conversion Price” since September 2010) and secured by the Company’s pledge of 1/3rd of the Bestewil Shares. The reduction of the Conversion price from $0.80 to $0.50 in September 2010 did not result in an extinguishment and reissuance of the note, nor did it result in a material adjustment in the consolidated financial statements. In addition, Mymetics granted NIL an option to acquire shares of Mymetics common stock equal to the result obtained by dividing $9,609 by the Conversion Price. As part of the Share Purchase Agreement, if Mymetics had issued shares of capital stock in connection with a financing to repay the Bridge Loan that had more favorable financial rights and preferences than the original conversion price or other terms, NIL had the right, at its election, to acquire those shares at the better terms. The difference in the fair value of the shares issuable based on the terms of the original conversion price and the fair value of the shares actually issued based on the inducement terms was recorded as an expense of E807 during 2010.
On March 28, 2013, Mymetics agreed with Norwood Immunology Ltd (NIL) to amend the terms and conditions of the E2,500 loan that expired on March 31, 2013. Under the terms of the Amendment, Mymetics agreed to make a series of payments as follows to release it from any obligation to share future revenues from the sale of Mymetics' intranasal influenza vaccine, RSV vaccine and HSV vaccine: (i) by April 30, 2013 E521 consisting of E500 of principal under the Loan Note and E21 of accrued interest for the month of April 2013 on the outstanding principal balance of E2,500 (ii) by May 31, 2013 E517 consisting of E500 of principal under the Loan Note and E17 of accrued interest for the month of May 2013 on the outstanding principal balance of E2,000, (iii) by September 30, 2013 accrued interest of E51 on the outstanding principal balance of E1,500 under the Loan Note and (iv) by March 31, 2014 E1,576 consisting of E1,500 to extinguish the outstanding principal balance of the Loan Note and E76 to extinguish the remaining unpaid accrued interest owed on the outstanding principal balance of the Loan Note. The Company fully repaid the note and accrued interest during the six months ended June 30, 2014.
The following table presents changes to the Company’s acquisition-related contingent consideration for the periods ending June 30, 2014 and 2013:
| | Fair Value Measurements Using Significant | |
| | Unobservable Inputs(Level 3) | |
| | Acquisition-related Contingent Consideration | |
| | | | |
| | June 30, 2014 | | | June 30, 2013 | |
| | | | |
Balance at January 1 | | E | 236 | | | E | 6,533 | |
Settlement of liability | | E | (236 | ) | | | -- | |
Change in fair value | | | -- | | | | (6,283 | ) |
Balance at June 30 | | E | -- | | | E | 250 | |
During the six month period ending June 30, 2013, the fair value of the acquisition-related contingent consideration has been fully adjusted down based on amendment to the Share Purchase Agreement, and settled with issuance of shares for a total of $325 in April 2014.
Note 4.3. Debt Financing
Certain principal shareholders have granted the Company secured convertible notes (in accordance with the Uniform Commercial Code in the State of Delaware) and short term convertible notes, which have a total carrying value of E38,872E41,251 including interest due to date. Interest incurred on these notes since inception has been added to the principal amounts.
The details of the convertible notes and loans are as follows at June 30, 2014:March 31, 2015:
| | | | | | | | | | | | | | Fixed | | | | | | | | | | | | | Fixed | |
| | | | | | | | | | | Conversion | | | Rate | | | | | | | | | | | Conversion | | Rate | |
Lender | | 1st-Issue | | Principal | | | Duration | | Interest | | Price | | | EUR/USD | | | 1st-Issue | | Principal | | Duration | | Interest | | Price | | EUR/USD | |
Price | | Date | | Amount | | | (Note) | | Rate | | (stated) | | | Conversion | | | Date | | Amount | | (Note) | | Rate | | (stated) | | Conversion | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Eardley Holding A.G. (1) | | 06/23/2006 | | E | 139 | | | | (2 | ) | 10% pa | | $ | 0.10 | | | | N/A | | | 06/23/2006 | | E | 175 | | (2) | | | 10% pa | | $ | 0.10 | | N/A | |
Anglo Irish Bank S.A.(3) | | 10/21/2007 | | E | 500 | | | | (2 | ) | 10% pa | | $ | 0.50 | | | | 1.4090 | | | 10/21/2007 | | E | 500 | | (2) | | | 10% pa | | $ | 0.50 | | 1.4090 | |
Round Enterprises Ltd. | | 12/10/2007 | | E | 1,500 | | | | (2 | ) | 10% pa | | $ | 0.50 | | | | 1.4429 | | | 12/10/2007 | | E | 1,500 | | (2) | | | 10% pa | | $ | 0.50 | | 1.4429 | |
Round Enterprises Ltd. | | 01/22/2008 | | E | 1,500 | | | | (2 | ) | 10% pa | | $ | 0.50 | | | | 1.4629 | | | 01/22/2008 | | E | 1,500 | | (2) | | | 10% pa | | $ | 0.50 | | 1.4629 | |
Round Enterprises Ltd. | | 04/25/2008 | | E | 2,000 | | | | (2 | ) | 10% pa | | $ | 0.50 | | | | 1.5889 | | | 04/25/2008 | | E | 2,000 | | (2) | | 10% pa | | $ | 0.50 | | 1.5889 | |
Round Enterprises Ltd. | | 06/30/2008 | | E | 1,500 | | | | (2 | ) | 10% pa | | $ | 0.50 | | | | 1.5380 | | | 06/30/2008 | | E | 1,500 | | (2) | | 10% pa | | $ | 0.50 | | 1.5380 | |
Round Enterprises Ltd. | | 11/18/2008 | | E | 1,200 | | | | (2 | ) | 10% pa | | $ | 0.50 | | | | 1.2650 | | | 11/18/2008 | | E | 1,200 | | (2) | | 10% pa | | $ | 0.50 | | 1.2650 | |
Round Enterprises Ltd. | | 02/09/2009 | | E | 1,500 | | | | (2 | ) | 10% pa | | $ | 0.50 | | | | 1.2940 | | | 02/09/2009 | | E | 1,500 | | (2) | | 10% pa | | $ | 0.50 | | 1.2940 | |
Round Enterprises Ltd. | | 06/15/2009 | | E | 5,500 | | | | (2,4 | ) | 10% pa | | $ | 0.80 | | | | 1.4045 | | | 06/15/2009 | | E | 5,500 | | (2,4) | | | 10% pa | | $ | 0.80 | | 1.4045 | |
Eardley Holding A.G. | | 06/15/2009 | | E | 100 | | | | (2,4 | ) | 10% pa | | $ | 0.80 | | | | 1.4300 | | | 06/15/2009 | | E | 100 | | (2,4) | | 10% pa | | $ | 0.80 | | 1.4300 | |
Von Meyenburg | | 08/03/2009 | | E | 200 | | | | (2 | ) | 10% pa | | $ | 0.80 | | | | 1.4400 | | | 08/03/2009 | | E | 200 | | (2) | | | 10% pa | | $ | 0.80 | | 1.4400 | |
Round Enterprises Ltd. | | 10/13/2009 | | E | 2,000 | | | | (2 | ) | 5% pa | | $ | 0.25 | | | | 1.4854 | | | 10/13/2009 | | E | 2,000 | | (2) | | | 5% pa | | $ | 0.25 | | 1.4854 | |
Round Enterprises Ltd. | | 12/18/2009 | | E | 2,200 | | | | (2 | ) | 5% pa | | $ | 0.25 | | | | 1.4338 | | | 12/18/2009 | | E | 2,200 | | (2) | | | 5% pa | | $ | 0.25 | | 1.4338 | |
Round Enterprises Ltd. | | 08/04/2011 | | E | 879 | | | | (5,6 | ) | 10% pa | | $ | 0.034 | | | | N/A | | | 08/04/2011 | | E | 1,106 | | (5,6) | | | 10% pa | | $ | 0.034 | | N/A | |
Eardley Holding A.G. | | 08/04/2011 | | E | 220 | | | | (5,6 | ) | 10% pa | | $ | 0.034 | | | | N/A | | | 08/04/2011 | | E | 276 | | (5,6) | | | 10% pa | | $ | 0.034 | | N/A | |
Round Enterprises Ltd. | | 11/08/2011 | | E | 400 | | | | (6 | ) | 10% pa | | $ | 0.034 | | | | 1.3787 | | | 11/08/2011 | | E | 400 | | (6) | | | 10% pa | | $ | 0.034 | | 1.3787 | |
Eardley Holding A.G. | | 11/08/2011 | | E | 100 | | | | (6 | ) | 10% pa | | $ | 0.034 | | | | 1.3787 | | | 11/08/2011 | | E | 100 | | (6) | | | 10% pa | | $ | 0.034 | | 1.3787 | |
Round Enterprises Ltd. | | 02/10/2012 | | E | 1,000 | | | | (6 | ) | 10% pa | | $ | 0.034 | | | | 1.3260 | | | 02/10/2012 | | E | 1,000 | | (6) | | | 10% pa | | $ | 0.034 | | 1.3260 | |
Eardley Holding A.G. | | 02/14/2012 | | E | 200 | | | | (6 | ) | 10% pa | | $ | 0.034 | | | | 1.3260 | | | 02/14/2012 | | E | 200 | | (6) | | | 10% pa | | $ | 0.034 | | 1.3260 | |
Round Enterprises Ltd. | | 04/19/2012 | | E | 322 | | | | (6 | ) | 10% pa | | $ | 0.034 | | | | 1.3100 | | | 04/19/2012 | | E | 322 | | (6) | | 10% pa | | $ | 0.034 | | 1.3100 | |
Eardley Holding A.G. | | 04/19/2012 | | E | 80 | | | | (6 | ) | 10% pa | | $ | 0.034 | | | | 1.3100 | | | 04/19/2012 | | E | 80 | | (6) | | | 10% pa | | $ | 0.034 | | 1.3100 | |
Round Enterprises Ltd. | | 05/04/2012 | | E | 480 | | | | (6 | ) | 10% pa | | $ | 0.034 | | | | 1.3152 | | | 05/04/2012 | | E | 480 | | (6) | | | 10% pa | | $ | 0.034 | | 1.3152 | |
Eardley Holding A.G. | | 05/04/2012 | | E | 120 | | | | (6 | ) | 10% pa | | $ | 0.034 | | | | 1.3152 | | | 05/04/2012 | | E | 120 | | (6) | | | 10% pa | | $ | 0.034 | | 1.3152 | |
Round Enterprises Ltd. | | 09/03/2012 | | E | 200 | | | | (6 | ) | 10% pa | | $ | 0.034 | | | | 1.2576 | | | 09/03/2012 | | E | 200 | | (6) | | 10% pa | | $ | 0.034 | | 1.2576 | |
Eardley Holding A.G. | | 09/03/2012 | | E | 50 | | | | (6 | ) | 10% pa | | $ | 0.034 | | | | 1.2576 | | | 09/03/2012 | | E | 50 | | (6) | | 10% pa | | $ | 0.034 | | 1.2576 | |
Round Enterprises Ltd. | | 11/14/2012 | | E | 500 | | | | (6 | ) | 10% pa | | $ | 0.034 | | | | 1.2718 | | | 11/14/2012 | | E | 500 | | (6) | | | 10% pa | | $ | 0.034 | | 1.2718 | |
Eardley Holding A.G. | | 12/06/2012 | | E | 125 | | | | (6 | ) | 10% pa | | $ | 0.034 | | | | 1.3070 | | | 12/06/2012 | | E | 125 | | (6) | | | 10% pa | | $ | 0.034 | | 1.3070 | |
Round Enterprises Ltd. | | 01/16/2013 | | E | 240 | | | | (6 | ) | 10% pa | | $ | 0.034 | | | | 1.3318 | | | 01/16/2013 | | E | 240 | | (6) | | 10% pa | | $ | 0.034 | | 1.3318 | |
Eardley Holding A.G. | | 01/16/2013 | | E | 60 | | | | (6 | ) | 10% pa | | $ | 0.034 | | | | 1.3318 | | | 01/16/2013 | | E | 60 | | (6) | | 10% pa | | $ | 0.034 | | 1.3318 | |
Round Enterprises Ltd. | | 03/25/2013 | | E | 400 | | | | (6 | ) | 10% pa | | $ | 0.037 | | | | 1.2915 | | | 03/25/2013 | | E | 400 | | (6) | | 10% pa | | $ | 0.037 | | 1.2915 | |
Eardley Holding A.G. | | 04/14/2013 | | E | 150 | | | | (6 | ) | 10% pa | | $ | 0.034 | | | | 1.3056 | | | 04/14/2013 | | E | 150 | | (6) | | 10% pa | | $ | 0.034 | | 1.3056 | |
Round Enterprises Ltd. | | 04/14/2013 | | E | 600 | | | | (6 | ) | 10% pa | | $ | 0.034 | | | | 1.3056 | | | 04/14/2013 | | E | 600 | | (6) | | | 10% pa | | $ | 0.034 | | 1.3056 | |
Eardley Holding A.G. | | 05/15/2013 | | E | 170 | | | | (6 | ) | 10% pa | | $ | 0.037 | | | | 1.2938 | | | 05/15/2013 | | E | 170 | | (6) | | | 10% pa | | $ | 0.037 | | 1.2938 | |
Round Enterprises Ltd. | | 05/15/2013 | | E | 680 | | | | (6 | ) | 10% pa | | $ | 0.037 | | | | 1.2938 | | | 05/15/2013 | | E | 680 | | (6) | | | 10% pa | | $ | 0.037 | | 1.2938 | |
Eardley Holding A.G. | | 06/24/2013 | | E | 60 | | | | (6 | ) | 10% pa | | $ | 0.025 | | | | 1.3340 | | | 06/24/2013 | | E | 60 | | (6) | | | 10% pa | | $ | 0.025 | | 1.3340 | |
Round Enterprises Ltd. | | 06/24/2013 | | E | 240 | | | | (6 | ) | 10% pa | | $ | 0.025 | | | | 1.3340 | | | 06/24/2013 | | E | 240 | | (6) | | | 10% pa | | $ | 0.025 | | 1.3340 | |
Eardley Holding A.G. | | 08/05/2013 | | E | 80 | | | | (6 | ) | 10% pa | | $ | 0.018 | | | | 1.3283 | | | 08/05/2013 | | E | 80 | | (6) | | | 10% pa | | $ | 0.018 | | 1.3283 | |
Round Enterprises Ltd. | | 08/05/2013 | | E | 320 | | | | (6 | ) | 10% pa | | $ | 0.018 | | | | 1.3283 | | | 08/05/2013 | | E | 320 | | (6) | | | 10% pa | | $ | 0.018 | | 1.3283 | |
Total Short Term Principal Amounts | Total Short Term Principal Amounts | | E | 27,515 | | | | | | | | | | | | | | | | | | E | 27,834 | | | | | | | | | | |
Accrued Interest | | | | E | 11,357 | | | | | | | | | | | | | | | | | | E | 13,417 | | | | | | | | | | |
TOTAL LOANS AND NOTES TO RELATED PARTIES | | E | 38,872 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
TOTAL LOANS AND NOTES | | | | | E | 41,251 | | | | | | | | | | |
(1) Private investment company of Dr. Thomas Staehelin, member of the Board of Directors and of the Audit Committee of the Company. Face value is stated in U.S. dollars at $190.
(2) This maturity date is automatically prolonged for periods of 3three months, unless called for repayment.
(3) Renamed Hyposwiss Private Bank Geneve S.A. and acting on behalf of Round Enterprises Ltd. which is a major shareholder.
(4) The loan is secured against 2/3rds of the IP assets of Bestewil Holding BV and against all property of the Company.
(5) The face values of the loans are stated in U.S. dollars at $1,200 and $300, respectively.
(6) This maturity date is automatically prolonged for periods of three months, unless called for repayment. The conversion price per share is determined by the lower of (i) reducing by 10% the price per share of the Company’s common stock paid by the investors in connection with an investment in the Company of not less than $20,000.US$20,000, or (ii) at the stated conversion price using a fixed exchange rate which are noted in the table above.
Note 5. Equity Financing
The Company is in discussions with certain potential investors and lenders to obtain financing and meet the Company’s expenses during fiscal year 2015 and beyond.
Note 6.4. Subsequent Events
On July 16, 2014,April 20, 2015 the Company announced that its subsidiary Mymetics SA entered intoBV in the Netherlands is leading a Master Services Agreementconsortium that has been selected to receive project grants with Imugene Limited, under which Mymetics SAa total value of €8.4 million. A total of €5.3 million is funded as part of Horizon 2020, the European Union research and innovation framework program and up to €3.1 million of funding will be provided by the exclusive producerSwiss State Secretariat for Education, Research and Innovation (SERI) for the Swiss based consortium partners. The grants will fund the evaluation, development and manufacturing scale-up of Imugene's HER2/neu cancerthermo stable and cold-chain independent nano-pharmaceutical virosome-based vaccine product (the "Cancer Vaccine Product"), based oncandidates for a period of three and a half years starting in May 2015.
Of the peptides they will supply Mymetics. Imugene intends to use the Cancer Vaccine Product in a combined Phase I and Phase II trial in the Eastern European Union. Under the terms of the MSA Mymetics shall receive as compensation an option to acquire 2.5total amount, €3.4 million shares of Imugene common stock at an exercise price of AUD 0.025, milestone payments of up to CHF 2.5 million and royalties on net sales of the Cancer Vaccine Product worldwide. Mymetics can terminate the MSA at any time for convenience but Imugene can terminate the MSA only after the Phase II clinical trial for convenience. Termination after the Phase II clinical trial will reduce certain milestone paymentsis directly attributable to Mymetics activities performed under the MSA.subsidiaries Mymetics B.V. and Mymetics S.A., with the balance going to the consortium partners, Catalent UK Swindon Zydis Ltd, Chimera Biotec GmbH (Germany), Upperton Ltd. (UK) and Bachem AG (Switzerland).
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis of the results of operations and financial condition of Mymetics Corporation for the periods ended June 30,March 31, 2015 and 2014 and 2013 should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 20132014 and related notes and the description of the Company's business and properties included elsewhere herein.
This report contains forward-looking statements that involve risks and uncertainties. The statements contained in this report are not purely historical, but are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. These forward looking statements concern matters that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Words such as "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue", "probably" or similar words are intended to identify forward looking statements, although not all forward looking statements contain these words.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We are under no duty to update any of the forward-looking statements after the date hereof to conform such statements to actual results or to changes in our expectations.
Readers are urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business, including without limitation disclosures made under the captions "Management Discussion and Analysis of Financial Condition and Results of Operations," "Risk Factors," "Consolidated Financial Statements" and "Notes to Consolidated Financial Statements" included in our annual report on Form 10-K for the year ended December 31, 20132014 and, to the extent included therein, our quarterly reports on Form 10-Q filed during fiscal year 2014.
THREE MONTHS ENDED JUNE 30,MARCH 31, 2015 AND 2014 AND 2013
Revenue was E515E662 and E527 for the three months ended June 30,March 31, 2015 and 2014, respectively, both mainly related to the research and development services provided under a License and Collaboration Agreement for the RSV vaccine signed on December 23, 2013. There was no revenue recognized for the three months ended June 30, 2013.
Costs and expenses increased to E1,316E969 for the three months ended June 30, 2014March 31, 2015 from E1,126 (16.9%E746 (29.9%) for the three months ended June 30, 2013, MainlyMarch 31, 2014, mainly due to reversalthe foreign exchange revaluation of scientific cost provision, increase in scientific resources and consulting cost related to the RSV projectexisting US$ based loans from third party investors which generated an unrealized loss of E234 during the three months ended June 30, 2014 and legal indemnity cost paid during the three months ended June 30, 2013.March 31, 2015. The unrealized loss was off-set against gains in US$ cash position, resulting in a new loss of E193.
Research and development expenses increaseddecreased to E372E367 in the current period from E34 (994.1%E369 (-0.5%) in the comparative period of 2013. The increase of R&D is mainly due to reversal of scientific cost provision and increase in scientific resources and consulting cost related to the RSV project incurred during the three months ended June 30, 2014.
General and administrative expenses decreasedincreased to E292E393 in the three months ended June 30, 2014March 31, 2015 from E424 (-31.1%E382 (2.9%) in the comparative period of 2013. Mainly due legal indemnity cost paid during the three months ended June 30, 2013.2014.
Interest expense decreased to E634E643 for the three months ended June 30, 2014March 31, 2015 from E655E678 for the three months ended June 30, 2013. This is mainly due to interests of E50 incurred during the three months ended June 30, 2013March 31, 2014 related to the Norwood Immunology loan of E1,500, which has been settled on March 31th, 2014.existing loans from third party investors.
The Company reported a net loss of (E813)(E953), or (E0.00) earnings per share, for the three months ended June 30, 2014,March 31, 2015, compared to a net loss of (E1,129)(E909), or (E0.00) diluted earnings per share, for the three months ended June 30, 2013.
SIX MONTHS ENDED JUNE 30, 2014 AND 2013
Revenue was E1,042 for the six months ended June 30, 2014, related to the research and development provided under a License and Collaboration Agreement for the RSV vaccine signed on December 23, 2013. There was no revenue recognized for the six months ended June 30, 2013.
Costs and expenses increased to E2,740 for the six months ended June 30, 2014 from (E3,933) (-169.7%) for the six months ended June 30, 2013, mainly due to the E6,283 write off of the acquisition-related contingent consideration in the period ending June 30, 2013.
Research and development expenses increased to E741 in the current period from E248 (198.8%) in the comparative period of 2013. The increase of R&D is mainly due to the RSV vaccine project, which requires additional resources and consulting costs, and the reversal of scientific cost provision in the six months ended June 30, 2013.
General and administrative expenses decreased to E674 in the six months ended June 30, 2014 from E744 (-9.4%) in the comparative period of 2013. This is mainly due to legal indemnity paid, increase in related legal cost incurred in the six months ended June 30, 2013 and legal cost provision reversal in the six months ended June 30,March 31, 2014.
Interest expense increased to E1,312 for the six months ended June 30, 2014 from E1,277 for the six months ended June 30, 2013 . This is mainly due to interests of E113 incurred during the six months ended June 30, 2013 and related to the Norwood Immunology loan of E1,500, which has been settled on March 31th, 2014.
As per the amendment of the Norwood Immunology (“NIL”) contract signed on March 25, 2013 and subsequent amendment signed on February 3, 2014, the Company has paid back the remaining part of the loan with NIL and the accrued interest. In April 2014, Mymetics issued NIL 5,338,809 shares of Mymetics common stock, thereby eliminating completely the contingent consideration liability.
The Company reported a net loss of (E1,722), or (E0.00) earnings per share, for the six months ended June 30, 2014, compared to a net income of E3,926, or E0.01 earnings per share, for the six months ended June 30, 2013.
LIQUIDITY AND CAPITAL RESOURCES
We had cash of E1,338E1,709 at June 30, 2014March 31, 2015 compared to E297E1,614 at December 31, 2013.2014.
On December 27, 2013, Mymetics has entered in to a License and Collaboration Agreement (“LCA”) with RSV Corporation (“RSVC”) to license Bestewil Holding BV, a 100% subsidiary of Mymetics’ Corporation virosome technology related to developing, commercializing respiratory syncytial virus (RSV) virosome vaccines for the purpose of development and eventual commercialization, which will generate revenue to support the running cost of Bestewil Holding BV.
As of June 30, 2014,March 31, 2015, we had an accumulated deficit of approximately E66E68 million, and had net loss of E1,722E953 in the sixthree month period ending on that date. We expect to continue to incur expensesnet losses in the future for research, development and activities related to the future licensing of our technologies.technologies, and because of the accrual of interest payable on existing loans.
Net cash provided in operating activities was E1,332E39 for the sixthree month period ended June 30,March 31, 2015. During the three month period ending March 31, 2014 net cash provided in operating activities was E2,930 due to the decrease in receivables after having received the upfront cash payment related to the LCA, compared to net cash used of (E2,846) for the period ended June 30, 2013.LCA.
Investing activities used cash of (E13)(E7) during the sixthree months ended June 30, 2014,March 31, 2015, compared to (E58)(E4) for the comparable period in 2013,2014, all related to the purchase of equipment for our laboratory in Leiden.
Financing activities for the sixthree months ended June 30, 2014March 31, 2015 is NIL compared to (E1,538) of cash used is (E251), mainly duefor the three month period ended March 31, 2014, related to the repayment of the NIL loan and accumulated interests of E1,538 and accrued interests on shareholder loans of E1,287, compared to E2,797 of cash provided for the six months ended June 30, 2013.a loan.
Salaries and related payroll costs represent gross salaries for two executives, our CSO of Mymetics BV and sevennine employees. Under Executive Employment Agreements with our CEO and two CSOs, we pay our executive officers a combined amount of E51E65 per month.
In addition, ourOur Swiss subsidiary, Mymetics S.A., has two employees on its payroll: Director of Finance and Head of Manufacturing and Quality. Mymetics BV has, besides the full time Chief Scientific Officer, six full-time assistants and one part-time assistant.
We intend to continue to incur additional expenditures during the next 12 months for additional research and development of RSV vaccine as per the LCA with RSVC.RSVC and for the development of our HIV and Malaria vaccine candidates, which are funded through agreements the Bill and Melinda Gates Foundation and PATH MVI, respectively. These expenditures will relate to the continued testing of its prototype vaccines and are included in the monthly cash outflow described above. In parallel we are seekingcontinuing to seek partnerships and grant funding for our HIV and Malaria vaccines.vaccine development activities.
In the past, we have financed our research and development activities primarily through debt and equity financings from various parties.
We anticipate that our normal operations will require approximately E1,000E3,000 in the year ending December 31, 2014.2015. We will seek to raise the required capital from equity or debt financings, and grants through donors and potential partnerships with major international pharmaceutical and biotechnology firms. However, there can be no assurance that we will be able to raise additional capital on satisfactory terms, or at all, to finance our operations. In the event that we are not able to obtain such additional capital, we will be required to further restrict or even cease our operations.
Monthly fixed and recurring expenses for "Property leases" of E11E14 represent the monthly lease and maintenance payments to unaffiliated third parties for our offices, of which E4 is related to our executive office located at Route de la Corniche 4, 1066 Epalinges in Switzerland (100 square meters), and E7E10 related to Bestewil Holding B.V. and its subsidiary Mymetics B.V operating from a similar biotechnology campus near Leiden in the Netherlands, where they occupy 100150 square meters.
Included in professional fees are legal fees paid to outside corporate counsel and audit and review fees paid to our independent accountants, and fees paid for investor relations.
Cumulative interest expense of E11,357E13,417 has been accrued on all of the Company’s outstanding notes and advances (see detailed table in Note 43 to the financial statements).
RECENT FINANCING ACTIVITIES
During the sixthree month period ending June 30, 2014,March 31, 2015, our principal source of funds has been revenues related to a License and Collaboration Agreement (“LCA”) with RSV Corporation (“RSVC”) signed on December 27, 2013 to license Bestewil Holding BV IP and the delivery of R&D services.BV.
We have filed or are in the process of filing several new grant applications with U.S. and European institutions in relation to our HIV and malaria vaccines and our virosome technology.vaccines.
We anticipate using our current funds and those we receive in the future both to meet our working capital needs and for funding the ongoing vaccines pre-clinical research costs associated with our gp41 testing. Provided we can obtain sufficient financing resources, we expect to continue the development for RSV, malaria and HIV vaccine and start to develop new vaccine candidates on our proprietary virosome vaccine technology in 2014. In accordance with our past strategy, we intend to subcontract such work to "best of class" research teams unless institutions such as the US National Institutes of Health (NIH) decide to conduct such trials at their own expense, which they presently do.vaccine.
We do anticipateManagement anticipates that our existing capital resources will be sufficient to fund our cash requirements through the next sixtwelve months. However,We have enough cash presently on hand in conjunction with the collection of receivables, based upon our current levels of expenditures and anticipated needs during this period. For 2016 we will need additional proceeds from additionalfunding through future collaborative arrangements, licensing arrangements, and debt and equity investments such as private placementsfinancings under Regulation D and Regulation S under the Securities Act of 1933. We do not know whether additional financing will be available on commercially acceptable terms when needed.
If management cannot raise funds on acceptable terms when needed, we may not be able to successfully commercialize our technologies, take advantage of future opportunities, or respond to unanticipated requirements. If unable to secure such additional financing when needed, we will have to curtail or suspend all or a portion of our business activities and could be required to cease operations entirely. Further, if new equity securities are issued, our shareholders may experience severe dilution of their ownership percentage.
The extent and timing of our future capital requirements will depend primarily upon the rate of our progress in the research and development of our technologies, our ability to enter into one or more licensing ora partnership agreementsagreement with a major pharmaceutical companies,company, and the results of our present and future clinical trials.
With the out-licensing and collaboration agreement for our RSV vaccine candidate, we are generating some revenue, but this is not covering the cost of all our operations. We are unable to predict when or if we will be able to generate more revenues from licensing our technology or the amounts expected from such activities. These new revenue streams may be generated by us or in conjunction with collaborative partners or third party licensing arrangements, and may include provisions for one-time, lump sum payments in addition to ongoing royalty payments or other revenue sharing arrangements. However, we presently have no commitments for any such payments.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements.None