Mymetics Corporation (the "Company" or "Mymetics")The Company was created for the purpose of engaging in vaccine research and development. Its main research efforts in the beginning have been concentrated in the prevention and treatment of HIVthe AIDS virus and malaria and has later expanded to other vaccines for infectious diseases since the acquisition of Bestewil Holding BV in April 2009.malaria. The Company has established a network which enables it to work with education centers, research centers, pharmaceutical laboratories and biotechnology companies. TheBesides the HIV and malaria vaccine candidates under development, the Company additionally has the following vaccines under development;in its pipeline. (i) Herpes Simplex which is at the pre-clinicalpreclinical stage and currently on hold, (ii) intranasalan intra nasal influenza vaccine which has finished a clinical trial Phase I, for which the Company is seeking partners (iii) Respiratory Syncytial Virus (RSV) which is at the pre-clinicalpreclinical stage and currently on hold and (iv) HIV-1 which has finished a Phase I and has finished a repeat non-human primate study withChikungunya virus at the Texas Biomedical Research Institute, (v) malaria, which has finished a Phase Ib and a malaria transmission blocking vaccine which is in pre-clinical study with PATH-MVI and LMIV and (vi) two vaccine candidates that are currently in a discovery phase, one for Chikungunya and one for Zika.stage.

??As of SeptemberJune 30, 2016,2017, the Company is in the pre-clinicalpreclinical testing of some of its vaccine candidates and a commercially viable product is not expected for several more years. However, the Company generated some revenue through the licensing of its RSV vaccinea small research project with Sanofi for influenza vaccines and from collaboration and grant agreements for R&D services. Management believes that the Company’sCompany?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.

  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 and or collaboration agreements contain non-refundablenonrefundable 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-ElementMultiple 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-alonestandalone 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.

  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.

  In April 2015, the Company was selected to receive project grants with a total of E8.4 million. A total of E5.3 million is funded as part of Horizon 2020, the European Union research and innovation framework program and up to E3.1 million of funding will be provided by the Swiss State Secretariat“Secretariat for Education, Research and InnovationInnovation” (SERI) for the Swiss based consortium partners. The grant funds the evaluation, development and manufacturing scale-up of thermo-stable and cold-chain independent nano-pharmaceutical virosome-based vaccine candidates. Of the total amount, E3.4 million is directly attributable to MymeticsMymetics’ activities, with the remaining balance going to the consortium partners. The project duration is 42 months and started on May 4, 2015. In May 2015, theThe Company received a pre-payment from the two granting organizations for a total value of E1.5 million.million in May 2015, a second tranche of E917 from the EU was received in December 2016, and E614 from “SERI” was received in April 2017, which will be used to finance the next reporting covering the period of November 2016 to October 2017. Thereafter another tranche of funding from the EU will be received which, accumulated with earlier tranches, cannot exceed 90% of the agreed budget. The pre-payment haspre-payments have been recorded as a current liability and revenue has been recognized as services are delivered.

IMPAIRMENT OF LONG LIVED ASSETS

  Goodwill which represents the excess of purchase price over the fair value assigned to the net tangible and identifiable intangible assets of net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment forbusiness acquired. The Company typically performs its annual goodwill impairment by applying a fair value based test. Goodwill is assessed for impairment on an annual basistest effective 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 ifdetermined that no 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. Tounit, and compare 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 asunit's carrying amount. An impairment loss would be recognized for the excess of the assessment date. The implied fair value of thea reporting unit’s goodwill is then compared to theunit's carrying amount of goodwill to quantify an impairment charge as of the assessment date.

  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 quarterperiods ended SeptemberJune 30, 20162017 and 2015,2016, options 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 SeptemberJune 30, 2015,2016, the basic weighted and diluted average number of shares was 303,757,622. The total potential number of shares issuable of 541,314,490494,877,358 at SeptemberJune 30, 20152016 includes 511,734,490474,027,358 potential issuable shares related to convertible loans, and 29,580,00020,850,000 potential issuable shares related to outstanding stock options granted to employees.

  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 Company derived 42%69% and 64% of revenue from its relationship with one collaborative partner during the nine month periods ended September 30, 2016 and September 30, 2015, respectively, and 17% and 57%59% of revenue from its relationship with one collaborative partner during the three month periods ended SeptemberJune 30, 2017 and June 30, 2016, respectively, and September71% and 51% during the six month periods ended June 30, 2015, respectively. Furthermore, that same collaborative partner accounted for 5%2017 and 68% of the receivables balance at SeptemberJune 30, 2016, and December 31, 2015, respectively.

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, 2017 using either of two methods:

  Management is currently evaluating the impact of the Company's pending adoption of ASU 2014-09 on its consolidated financial statements.

(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 three months, unless called for repayment.

(3) Renamed Hyposwiss Private Bank GeneveGenève 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 US$20,000, or (ii) at the stated conversion price using a fixed exchange rate which are noted in the table above.

??Our first significant revenue has beenwas generated through the exclusive negotiation fee recorded in September 9, 2013 and the license and collaboration agreement for our RSV vaccine signed on December 27, 2013. As consideration Mymetics had received an irrevocable and non-refundable upfront fee for the license of USD 5 million at the beginning of 2014 and we have received fixed monthly collaboration and R&D fees. Due to the endingThis license and collaboration agreement ended in 2016. For 2017, we recognized a small amount of the License and Collaboration Agreement with RSVC, for 2016, we anticipate recognizing significantly less revenue related to the researchResearch Agreement with Sanofi Pasteur Biologics, to investigate the immunogenicity of influenza vaccines based on Mymetics? proprietary virosome technology platform in preclinical settings and development activities related to the RSV vaccine andanticipate some revenue related to the Horizon 2020 project. New significant revenues willis not be expected, unless and until a second major licensing agreement or other commercial arrangement is entered into with respect to our technology.

  During the ninesix month period ending SeptemberJune 30, 2016,2017, our principal source of funds has been revenues related to a HIV/MACIVIVAthe Horizon 2020 project and the Research Agreement with Horizon 2020/SERISanofi Pasteur Biologics and a License and Collaboration Agreement (“LCA”) with RSV Corporation (“RSVC”) signed on December 27, 2013 to license Bestewil Holding BV.additionally promissory notes from our two main investors.

  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 a partnership agreement with a major pharmaceutical company, and the results of our present and future clinical trials.

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.