UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20172018
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
__________ to _________
Commission file number: 000-25132
MYMETICS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE | | 25-1741849 |
State or Other jurisdiction of Incorporation or Organization | | I.R.S. Employer Identification No. |
Route de la Corniche 4 Epalinges, Switzerland | | CH-1066 |
| Address of Principal Executive Offices | | Zip Code |
| 011 41 21 653 4535 |
| Registrant’s Telephone Number, Including Area Code |
| |
| Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | Large accelerated filer ☐ | | Accelerated filer ☐ | |
| | Non-accelerated filer ☐ | | Smaller reporting company ☒ | |
| | Emerging growth company ☐ | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:
| Class | | Outstanding at November 13, 20172018 |
Common Stock, usd0.01$0.01 par value | | 303,757,622 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MYMETICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In Thousands of Euros, Except Share and Per Share Amounts)
| | | | | |
| | | | | |
| ASSETS | | |
| Current Assets | | |
| Cash | E830 | E1,391 | E254 | E1,180 |
| Receivables | 56 | 170 | 348 | 90 |
| Prepaid expenses | 41 | 38 | 36 |
| Total current assets | 927 | 1,602 | 640 | 1,306 |
| | | |
| Property and equipment, net of accumulated depreciation of E363 at September 30, 2017 and E418 at December 31, 2016 | 73 | 67 | |
| Property and equipment, net of accumulated depreciation of E414 at September 30, 2018 and E391 at December 31, 2017 | | 42 | 65 |
| Goodwill | 6,671 | 6,671 |
| | | E7,353 | E8,042 |
| | E7,671 | E8,340 | |
| | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | | |
| Current Liabilities | | |
| Accounts payable | E96 | E120 | $58 | $237 |
| Deferred revenue from grants | 733 | 1,165 | -- | 274 |
| Non-convertible notes payable and related accrued interest to related parties | 1,167 | -- | 3,180 | 2,330 |
| Convertible notes payable and related accrued interest to related parties | 47,472 | 45,834 | 50,079 | 48,079 |
| Total liabilities | 49,468 | 47,119 | 53,317 | 50,920 |
| | | |
| | | |
| Shareholders' Equity (Deficit) | | |
| Common stock, U.S. $0.01 par value;1,000,000,000 shares authorized; issued 303,757,622 at September 30, 2017 and at December 31, 2016 | 2,530 | |
| Preferred stock, U.S. $0.01 par value; 5,000,000 shares authorized; none issued or Outstanding | -- | |
Common stock, U.S. $0.01 par value; 1,000,000,000 shares authorized; issued and outstanding 303,757,622 at September 30, 2018 and at December 31, 2017 | | 2,530 |
| Preferred stock, U.S. $0.01 par value; 5,000,000 shares authorized; none issued or outstanding | | -- |
| Additional paid-in capital | 34,423 | 34,392 | 34,437 | 34,428 |
| Accumulated deficit | (79,422) | (76,391) | (83,604) | (80,503) |
| Accumulated other comprehensive income | 672 | 690 | 673 | 667 |
| | (41,797) | (38,779) | (45,964) | (42,878) |
| | E7,671 | E8,340 | $7,353 | $8,042 |
The accompanying notes are an integral part of these financial statements.
MYMETICS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(In Thousands of Euros, Except Per Share Data)
| | For The Three Months Ended September 30, | For The Nine Months Ended September 30, | For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
| | | | | | | | | |
| Revenue | | |
| Research and development services | E-- | E30 | E202 | E379 | E75 | E-- | E75 | E202 |
| Grants | 399 | 149 | 897 | 528 | 199 | 399 | 685 | 897 |
| | 399 | 179 | 1,099 | 907 | 274 | 399 | 760 | 1,099 |
| Expenses | | |
| Research and development | 555 | 241 | 1,522 | 599 | 343 | 555 | 922 | 1,522 |
| General and administrative | 276 | 298 | 900 | 930 | 319 | 276 | 832 | 900 |
| Bank fee | 1 | 2 | -- | 1 | 2 |
| Depreciation | 10 | 11 | 28 | 33 | 7 | 10 | 23 | 28 |
| Directors' fees | 5 | 15 | 5 | 15 |
| Foreign exchange and other | (78) | (20) | (285) | (62) | |
| Foreign exchange (gain) loss and other | | 11 | (78) | 84 | (285) |
| | 769 | 536 | 2,182 | 1,517 | 685 | 769 | 1,877 | 2,182 |
| | | |
| Operating loss | (370) | (357) | (1,083) | (610) | |
| Operating (loss) | | (411) | (370) | (1,117) | (1,083) |
| | | |
| Interest expense | 647 | 642 | 1,942 | 1,926 | 660 | 647 | 1,970 | 1,942 |
| Loss before income tax (provision) benefit | (1,017) | (999) | (3,025) | (2,536) | (1,071) | (1,017) | (3,087) | (3,025) |
| | | |
| Income tax (provision) benefit | (3) | (4) | (6) | 16 | -- | (3) | (14) | (6) |
| Net loss | (1,020) | (1,003) | (3,031) | (2,520) | (1,071) | (1,020) | (3,101) | (3,031) |
| | | |
| Other comprehensive loss | | |
| Foreign currency translation adjustment | (9) | -- | (18) | (4) | 3 | (9) | 6 | (18) |
| Comprehensive loss | E(1,029) | E(1,003) | E(3,049) | E(2,524) | E(1,068) | E(1,029) | E(3,095) | E(3,049) |
| | | |
| | | |
| Basic earnings per share | E(0.00) | E(0.01) | E(0.00) | E(0.01) |
| Diluted earnings per share | E(0.00) | E(0.01) | E(0.00) | E(0.01) |
The accompanying notes are an integral part of these financial statements.
MYMETICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In Thousands of Euros)
| | For The Nine Months Ended September 30, | For the Nine Months Ended |
| | | | | |
| Cash Flow from Operating Activities | | |
| Net loss | E(3,031)
| E(2,520)
| E(3,101) | E(3,031) |
| Adjustments to reconcile net loss to net cash used in operating activities | | |
| Depreciation | 28 | 33 | 23 | 28 |
| Stock compensation expense – options | 31 | 63 | 9 | 31 |
| Changes in operating assets and liabilities | | |
| Receivables | 114 | 163 | (258) | 114 |
| Accrued interests on notes payable | 1,655 | 1,863 | 2,050 | 1,655 |
| Accounts payable | (24) | (341) | (179) | (24) |
| Deferred revenue from grants | (432) | (528) | (274) | (432) |
| Other | -- | (3) | (2) | -- |
| Net cash used in operating activities | (1,659) | (1,270) | (1,732) | (1,659) |
| | | |
| Cash Flows from Investing Activities | | |
| Purchase of property and equipment | (34) | (3) | -- | (34) |
| Net cash used in investing activities | (34) | (3) | -- | (34) |
| | | |
| Cash Flows from Financing Activities | | |
| Increase in notes payable | 1,150 | -- | 800 | 1,150 |
| Net cash provided by financing activities | 1,150 | -- | |
| Net cash provided by investing activities | | 800 | 1,150 |
| | | |
| Effect of foreign exchange rate on cash | (18) | (4) | |
| Effect on foreign exchange rate on cash | | 6 | (18) |
| Net change in cash | (561) | (1,277) | (926) | (561) |
| | | |
| Cash, beginning of period | 1,391 | 2,381 | 1,180 | 1,391 |
| Cash, end of period | E830
| E1,104
| E254 | E830 |
The accompanying notes are an integral part of these financial statements.
MYMETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 20172018
(UNAUDITED)
Note 1. The Company and Summary of Significant Accounting Policies
BASIS OF PRESENTATION AND GOING CONCERN
The amounts in the notes are shown in thousands of EURO, unless otherwise noted, and rounded to the nearest thousand except for share and per share amounts.
The accompanying interim period consolidated financial statements of Mymetics Corporation (the "Company" or “Mymetics”) 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, 2016.2017.
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 and nine-month period ending September 30, 20172018 were of a normal and recurring nature.
The CompanyMymetics was created for the purpose of engaging in vaccine research and development. ItsHistorically, its main research efforts in the beginning have been concentrated infocused on the prevention and treatment of 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. Besides the HIV and malaria vaccine candidates under development, the Company additionally has the following vaccines in its pipeline.pipeline; (i) Herpes Simplex which is at the preclinicalpre-clinical stage and currently on hold, (ii) an intra nasal influenza vaccine which has finished a clinical trial Phase I, (iii) Respiratory Syncytial Virus (RSV) which is at the preclinicalpre-clinical stage and currently on hold and (iv) Chikungunya virus at the discovery stage.
As of September 30, 2017,2018, the Company is in the preclinicalpre-clinical 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 a smallits license, collaboration and grant agreements. Currently the Company is working on two research projects with commercial partners. One project with Sanofi for influenza vaccines, for which we are currently conducting a pre-clinical studies and from collaborationresults are expected not before November 2018. A second project with Anergis SA, for which the Company is preparing virosome based vaccines which include Anergis peptides for treating birch pollen allergy, which will subsequently be tested in preclinical studies and results are expected at the beginning of 2019. The Company is also working on a grant agreements for R&D services.funded project in the field of HIV being the EU Horizon 2020 and Switzerland SERI which focuses on developing thermostable and cold chain independent virosome based vaccines (Maciviva project). This project will end by October 2018. 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 bythrough licensing. Vaccines are one of the fastest growing markets in the pharmaceutical industry.
These consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has experienced negative cash flows from operations and significant losses since inception resulting in an accumulated deficit of E79,422E83,604 at September 30, 2017.2018. Further, the Company’s current liabilities exceed its current assets by E48,541E52,677 as of September 30, 2017,2018, 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 the Company’s ability to continue as a going concern.concern within one year from the issuance of the financial statements.
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 loss.income. Transaction gains or losses are included in operating expenses in the consolidated statements of comprehensive loss. 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
We considerThe Company considers all highly liquid investments purchased with maturities of three months or less to be cash equivalents. 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 and or collaboration agreements contain nonrefundable terms for payments and, depending on the terms of the agreement, provide thatEffective January 1, 2018, 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)adopted Accounting Standards Codification (ASC) Topic 605-25, "Revenue Recognition—Multiple Element Arrangements,"606, Revenue from Contracts with Customers, using the modified retrospective method and ASCthere was no impact to financial position and results of operations as a result of the adoption. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under Topic 605-28, "Revenue Recognition—Milestone Method,"606, an entity recognizes revenue when its customer obtains control of promised goods or services, in accountingan amount that reflects the consideration which the entity expects to receive in exchange for these agreements. In orderthose goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to accountthe performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for these agreements,the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company must identifyassesses the deliverables includedgoods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Overall, adoption of the new standard did not result in an adjustment to amounts previously reported in our consolidated financial statements and there were no other significant changes impacting the timing or measurement of our revenue or our business processes and controls.
The Company has concluded that government grants are not within the agreement and evaluate which deliverables represent separate unitsscope of accounting based on if certain criteria areTopic 606, as they do not meet the definition of a contract with a “customer”. The Company concluded the definition of a contract with a “customer” was not met including whetheras the delivered element has standalone valuecounterparty to the collaborator. The consideration received is allocated amonggovernment grants has not contracted to obtain goods or services and thus the separate unitscontracts are not considered to have commercial substance. Government grants provide the Company with payments for certain types of accounting, and the applicable revenue recognition criteria are appliedexpenditures related 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.
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 agreementsactivities over a contractually defined period. Revenue from government grants is recognized in the period during which the related costs are recorded as research and development expenses. Ifincurred, provided that the performanceapplicable conditions under a fixed price contract cannot be reasonably estimated, the Company recognizes the revenue on a straight-line basis over the contract term.government contracts have been met.
Grant Revenue - HORIZON 2020
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 for Education, Research and Innovation” (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, E3.4E3.8 million is directly attributable to Mymetics’ activities, with the remaining balance going to the consortium partners. The project duration is 42 months and started on May 4, 2015.2015 and will end officially on November 2, 2018, after which a final report will be prepared and presented.
The amounts mentioned in the following statements are purely related to Mymetics and not to the other partners in the project: The Company received a pre-payment from the two granting organizations for a total value of E1.5 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 bewas used to finance the next reporting covering the period of November 2016 to October 2017. ThereafterIn November 2017, the Company submitted the second report and a new funding request, which resulted in another tranche of funding from the EU will beof E77 received in February 2018. This brings the total funding received year to date to E3,162, which accumulated with earlier tranches, cannot exceed 90%represents 82% of the agreed budget.contribution. The pre-payments have been recordedtotal cost incurred year to date by Mymetics for this project represents 87% of the awarded grant contribution. The Company received the maximum funding available and will receive the final payment at end of the project after submission of the final report. As a result, the additional cost for this project are funded by the Company until the final payment is received. The total cash funded by the Company is E262 as a current liabilityof September 30, 2018. The year to date amount due by SERI and by the EU of E302 is accounted as receivable and will be paid to the company 60 days after the validation of the final report. The final report will be submitted in deferred revenue and revenue has been recognized as services are delivered.December 2018. The maximum remaining funds available is E379.
SANOFI PASTEUR BIOLOGICSANERGIS SA
On December 1, 2016, Mymetics CorporationIn April 2018, the Company entered into a material definitiveResearch and Option to License Agreement with Anergis SA (“Anergis”). Under the terms of the Research Agreement, with Sanofi Pasteur Biologics, LLC, the vaccine division of Sanofi (SNY). The projecta pre-clinical study program will investigateevaluate the immunogenicity profile of influenza vaccinesthe Anergis’ peptides designed to treat birch allergy when presented on Mymetics’ proprietary virosomes, with or without undisclosed TLR ligands or other adjuvants, and will compare the results to Anergis’ AllerT product combination. The results of the program are expected in the first quarter of 2019 and is included in research and development services revenue.
In the event that the results of the pre-clinical study program are successful, Anergis has the option to obtain an exclusive worldwide license of Mymetics’ virosome technology for the development of allergy vaccines. Should Anergis and Mymetics execute a License and Collaboration Agreement (LCA), Anergis would make an upfront payment to Mymetics in an amount that increases as the date of the LCA is executed. The LCA also includes milestone payments based on certain regulatory clearances and royalties for net sales. 100% of the Company’s proprietary virosome technology platformagreed payments from the Research and Option to License Agreement were received as of end of September 2018. The contractual material has been delivered in preclinical settings. If this project is successful it could result in a further and more extensive collaboration between18Q03, therefore the two companies. The project duration is six to twelve months and started in January 2017. The revenueagreed fee is recognized upon deliveryas revenue as of the contractual material.end of September 30, 2018.
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 September 30, 20172018 or December 31, 2016.2017. The Company chargeswrites 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.
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 (loss) in the period that the impairment occurs.
GOODWILL
Goodwill represents the excess of purchase price over the value assigned to the net tangible and identifiable intangible assets of a business acquired. The Company typically performs its annual goodwill impairment test 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 determined that no further testing was necessary. If further testing was necessary, the Company would determine the fair value of each reporting unit, and compare the fair value to the reporting unit's carrying amount. An impairment loss would be recognized for the excess of a reporting unit's carrying amount over its fair value. The Company currently has only one business unit. As of September 30, 2017,2018, management believes there are no indications of impairment.
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 September 30, 20172018, or December 31, 2016.2017. The Company’s United States tax returns are open to audit for the years ended December 31, 2014 to 2016.2017. The returns for the Swiss subsidiary, Mymetics S.A., are open to audit for the yearsyear ended December 31, 2010 to 2016.2017. The returns for the Netherlands subsidiaries, Bestewil B.V. and Mymetics B.V., are open to audit for the year ended December 31, 2016.2017.
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 periods ended September 30, 20172018 and 2016,2017, 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 nine months ended September 30, 2018, the basic weighted and diluted average number of shares was 303,757,622. The total potential number of shares issuable of 650,633,523 at September 30, 2018 includes 621,533,523 potential issuable shares related to convertible loans, and 29,100,000 potential issuable shares related to outstanding stock options granted to employees.
For the three and nine months ended September 30, 2017, the basic weighted and diluted average number of shares was 303,757,622. The total potential number of shares issuable of 614,033,846 at September 30, 2017 includes 584,933,846 potential issuable shares related to convertible loans, and 29,100,000 potential issuable shares related to outstanding stock options granted to employees.
For the three months ended September 30, 2016, the basic weighted average number of shares was 303,757,622. The total potential number of shares issuable of 577,568,516 at September 30, 2016 includes 548,334,168 potential issuable shares related to convertible loans, and 29,234,348 potential issuable shares related to outstanding stock options granted to employees.
For the nine months ended September 30, 2016, the basic weighted average number of shares was 303,757,622. The total potential number of shares issuable of 577,580,317 at September 30, 2016 includes 548,334,168 potential issuable shares related to convertible loans, and 29,246,149 potential issuable shares related to outstanding stock options granted to employees.
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 September 30, 20172018 or December 31, 2016.2017.
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 nine months ended September 30, 20172018 nor in the nine months ended September 30, 2016.2017.
During the three month periods ended September 30, 20172018 and 2016,2017, stock compensation expense amounted to E13E1 and E18,E13, respectively. Stock compensation expense amounted to E31E9 and E63E31 during the nine month periods ended September 30, 20172018 and 2016,2017, respectively, and is included in the consolidated statements of comprehensive loss 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 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.
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, 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. Management believes that it is not practicable to estimate the fair value of the notes payable due to conversion features and the unique nature of these instruments.
CONCENTRATIONS
The Company derived 100% and 83% of grant revenue from its relationship with one collaborative partner duringfor the three month periods ended September 30, 2017 and September 30, 2016, respectively, and 82% and 57% with the same collaborative partner during the nine month periods ended September 30, 20172018 and September 30, 2016,2017 from one partner, respectively.
RELATED PARTY TRANSACTIONS
Mr. Ernest M. Stern, the Company’s outside U.S. counsel, is both a director of the Company and was a partner in Akerman LLP, the firm retained as legal counsel by the Company. Mr. Stern resigned from the firm Akerman LLP and became a partner in the law firm of Culhane Meadows PLLC as of March 1, 2017. Culhane Meadows PLLC is the Company’s legal counsel effective March 1, 2017. The Company incurred professional fees to the counsel's law firms totaling E31E23 and E51E31 for the nine months ended September 30, 20172018 and 2016,2017, respectively.
Two of the Company’s major shareholders have granted secured convertible notes and short term convertible notes and promissory notes, which have a total carrying amount of E48,276,E52,876, including interest due to date. Conversion prices on the Euro-denominated convertible debt have been fixed to a fixed Euro/US dollar exchange rate.
NEW ACCOUNTING PRONOUNCEMENTS
On May 28, 2014, FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, Topic 606, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. The updated standard becomes effective for us in the first quarter of fiscal 2018. The Company is in the process of analyzing the impact adoption will have on our annual and interim financial statements. The Company will also be required to make additional disclosures under the new guidance. We continue to assess the impact on all areas of our revenue recognition, disclosure requirements, and changes that may be necessary to our internal controls over financial reporting.
In January 2017, the FASB issued ASU 2017-04, Intangibles, Goodwill and Other, to supersede the current guidance by replacing the current two-step impairment test with a one-step impairment test. The guidance is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for goodwill impairment tests performed after January 1, 2017. The Company elected early adoption as of January 1, 2017. Adoption of this standard did not have an impact on Company's consolidated financial statements.
Note 2. Debt Financing
Certain principal shareholders have granted the Company secured convertible notes (in accordance with the Uniform Commercial Code in the State of Delaware), short term convertible notes and other short term notes, which have a total carrying value of E48,276E53,259 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 September 30, 2017:2018:
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Lender | | 1st-Issue | | | Interest | | | | 1st-Issue | | | Interest | | |
| | | | | | | | | | | | | | |
| | | | | | | | |
| Eardley Holding A.G. (1) | | 06/23/2006 | E | 161 | (2) | 10% pa | $0.10 | N/A | | 06/23/2006 | E | 164 | (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 | 1,016 | (5,6) | 10% pa | $0.034 | N/A | | 08/04/2011 | E | 1,034 | (5,6) | 10% pa | $0.034 | N/A |
| Eardley Holding A.G. | | 08/04/2011 | E | 254 | (5,6) | 10% pa | $0.034 | N/A | | 08/04/2011 | E | 259 | (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 |
| Eardley Holding A.G. | | 03/01/2017 | E | 230 | (7) | 2.5% pa | N/A | | 03/01/2017 | E | 230 | (7) | 2.5% pa | N/A |
| Round Enterprises Ltd. | | 03/01/2017 | E | 920 | (7) | | N/A | | 03/01/2017 | E | 920 | (7) | 2.5% pa | N/A |
| Eardley Holding A.G. | | | 10/18/2017 | E | 230 | (7) | 2.5% pa | N/A |
| Round Enterprises Ltd. | | | 10/18/2017 | E | 920 | (7) | 2.5% pa | N/A |
| Eardley Holding A.G. | | | 06/01/2018 | E | 160 | (7) | 2.5% pa | N/A |
| Round Enterprises Ltd. | | | 06/01/2018 | E | 640 | (7) | 2.5% pa | N/A |
| Total Short Term Principal Amounts | | | E | 28,858 | | | | | | E | 30,834 | | | |
| Accrued Interest | | | E | 19,781 | | | | | | E | 22,425 | | | |
| | | | | | | | | | | |
| TOTAL LOANS AND NOTES | | | E | 48,639 | | | | | | E | 53,259 | | | |
(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 Genève 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.
(7) On March 1, 2017, Round Enterprises Ltd. and Eardley Holding AG each provided two promissory Notes for a total of E1,840 and E460, respectively, with a 2.5% interest per annum and aThe maturity date the later of February 28, 2018. The first 50%(i) September 30, 2018, or (ii) the end of a subsequent calendar quarter in which the Company receives a written request from the lender for repayment of the promissory Notesof E920unpaid principal and E230, respectively, were provided immediately.The second 50% ofaccrued interest due under the promissory notes of E920 and E230,respectively, were provided on October 18, 2017.Notes.
Note 3. Subsequent Events
On October 18, 2017,16, 2018, the Company has announced the start of a small research project in the field of cancer immunotherapy together with eTheRNA N.V., a clinical stage biotech company developing novel mRNA cancer immunotherapy. The objective of the project is to evaluate the suitability of Mymetics’ proprietary virosome vaccine delivery technology in combination with mRNA, specifically eTheRNA’s proprietary TriMix mRNA. eTheRNA will evaluate the duration and intensity of mRNA expression in vivo and the induction of antigen specific T cells and antitumor efficacy upon therapeutic vaccination in selected tumor models.
Mymetics’ virosome particles have shown to be able to trigger good specific T cell responses as virosomes are able to be absorbed and processed by dendritic cells, thereby presenting specific antigens to T-Cells to promote immunity against these foreign antigens.
The project is the first step in determining if there is a basis for a further collaboration between Mymetics and eTheRNA, of short duration and without immediate commercial impact for either of the parties involved.
In November, 2018, the Company agreed with Round Enterprises Ltd and Eardley Holding AG and Round Enterprises Ltd. executed the second setissuance of promissory notes forwith a total combined value of E1,150. These notes have the same terms and conditions as the first set of promissory notes issued on March 1, 2017,E800, with an annual interest rate of 2.5% per annum and a maturity date which is the later of October 18, 2018.
On October 20, 2017,(i) June 30, 2019, or (ii) the end of a subsequent calendar quarter in which the Company entered into an Amendmentreceives a written request from the lender for repayment of the Research Agreement dated December 1, 2016 with Sanofi Pasteur Biologics, LLC,unpaid principal and accrued interest due under the vaccine divisionNotes. The total amount of Sanofi SA, (“Sanofi”), to extend the date of the Research Agreement for an additional year. Under the terms of the Research Agreement Sanofi wanted to compare the immunogenicity of Mymetics’ influenza virosomes compared to Sanofi Pasteur’s egg-based split vaccine. The interest of Sanofi in a collaboration with Mymetics was basedE800 has been received on the results of preclinical and clinical studies a few years ago with Solvay Pharmaceuticals that was acquired by Abbott in 2013. The initial results of the recent study did not achieve the expected benefits of Mymetics’ influenza virosomes and were contrary to earlier results Mymetics obtained with Solvay in multiple studies. Mymetics believes that there was an issue with the influenza virosome formulations that were produced. Mymetics has agreed to pay for a redesigned study, which Mymetics believes will be approximately US$125,000.-. Following the new study in the coming months, Mymetics will review the outcomes with Sanofi and determine next steps.November 2018.
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 September 30, 20172018 and 20162017 should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 20162017 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, 20162017 and, to the extent included therein, our quarterly reports on Form 10-Q filed during fiscal year 2017.
THREE MONTHS ENDED SEPTEMBER 30, 20172018 AND 20162017
Revenue was E274 and E399 for the three months ended September 30, 2018 and E1792017, respectively, the decrease in revenue recognized is related to a 55% decrease in the work performed under the Horizon 2020 grants, as compared to the same period in 2017, while the fee from the Research and Option to License Agreement with Anergis of E75 was recognized as of end of September 30, 2018.
Costs and expenses decreased to E685 for the three months ended September 30, 2018 from E769 (-10.9%) for the three months ended September 30, 2017, and 2016, respectively, mainly related to the revenue recognized for the work performed under the Horizon 2020 grants.due a decrease in R&D expenses.
Costs and expenses increased to E769 for the three months ended September 30, 2017 from E536 (43.5%) for the three months ended September 30, 2016, mainly due to the subcontracting services related to the Horizon 2020 project with acronym “Maciviva” (Manufacturing process for Cold-chain Independent Virosome-based Vaccines) incurred during the three months ended September 30, 2017.
Research and development expenses increaseddecreased to E555E343 in the current period from E241 (130.3%E555 (-38.2%) in the comparative period of 2016,2017, mainly due to thelower subcontracting services related to the Maciviva project with acronym “Maciviva” during the three month period ending September 30, 2017.2018.
General and administrative expenses decreasedincreased to E276E319 in the three months ended September 30, 20172018 from E298 (-7.4%E276 (15.6%) in the comparative period of 2016.2017. The increase is mainly due to higher annual D&O insurance premium as compared to previous years.
The Company reported a Net Operating Loss of (E411) in the three months ended September 30, 2018 and (E370) in the comparative period in 2017.
The Company reported a net loss of (E1,071), or (E0.00) per share, for the three months ended September 30, 2018, compared to a net loss of (E1,020), or (E0.00) per share, for the three months ended September 30, 2017, compared to a net loss of (E1,003), or (E0.00) per share, for the three months ended September 30, 2016.2017.
NINE MONTHS ENDED SEPTEMBER 30, 20172018 AND 20162017
Revenue was E760 and E1,099 for the nine months ended September 30, 2018 and E9072017, respectively,mainly related to a decrease of the revenue recognized for the work performed under the Horizon 2020 grants and E202 of revenue related to the Research Agreement with Sanofi Pasteur Biologics (to investigate the immunogenicity of influenza vaccines based on Mymetics’ proprietary virosome technology platform in preclinical) recognized during the nine months ended September 30, 2017.
Costs and expenses decreased to E1,856 for the nine months ended September 30, 2018 from E2,182 (-14.9%) for the nine months ended September 30, 2017, and 2016, respectively. The increase was mainly due to a decrease in the R&D costs related to the revenue recognition of the GMP production related to theHorizon 2020 Maciviva project.
CostsResearch and development expenses increaseddecreased to E2,182 forE922 in the nine months ended September 30,current period from E1,522 (-39.4%) in the comparative period of 2017, from E1,517 (43.8%) for the nine months ended September 30, 2016, mainly due to the reversal of aged R&D cost accrual of E154 during the nine months ended September 30, 2016 and to thelower subcontracting services related to the Maciviva project with acronym “Maciviva” during the nine month period ending September 30, 2017.
Research and development expenses increased to E1,522 in the current period from E599 (154.1%) in the comparative period of 2016, mainly due to the reversal of aged R&D cost accrual of E154 during the nine months ended September 2016, and subcontracting cost paid to vendor for Good Manufacturing Production launched during the nine months ended September 30, 2017.2018.
General and administrative expenses decreased to E900E832 in the nine months ended September 30, 20172018 from E930 (-3.2%E900 (-7.6%) in the comparative period of 2016.2017. The decrease is mainly due to higher legal and audit cost related to the goodwill testing, incurred during the comparative period ended September 2017.
Foreign exchange revaluation generated a net loss of (E84) during the nine months ended September 30, 2018 and a net gain of E285 during the nine months ended September 30, 2017, and a net gain of E62 during the nine months ended September 30, 2016, which is mainly due to the revaluation of existing US$ based loans from related parties.parties and US$ cash position.
The Company reported a Net Operating Loss of (E1,117) in the nine months ended September 30, 2018 and (E1,083) in the comparative period in 2017.
The Company reported a net loss of (E3,101), or (E0.01) per share, for the nine months ended September 30, 2018, compared to a net loss of (E3,031), or (E0.01) per share, for the nine months ended September 30, 2017, compared to a net loss of (E2,520), or (E0.01) per share, for the nine months ended September 30, 2016.2017.
LIQUIDITY AND CAPITAL RESOURCES
We had cash of E830E254 at September 30, 20172018 compared to E1,391E1,180 at December 31, 2016.2017.
Our first significant revenue washas been mainly 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 received an irrevocable and non-refundable upfront fee for the license of USD 5 million at the beginning of 2014 and fixed monthly collaboration and R&D fees. This license and collaboration agreement ended in 2016. For 2017, we recognized a small amount of revenue related to the Research Agreement with Sanofi Pasteur Biologics, to investigate the immunogenicity of influenza vaccines based on Mymetics’ proprietary virosome technology platform in preclinical settings and anticipate revenue related to the Horizon 2020 project. NewFor the remaining period of 2018, new significant revenues iswill not be expected, unless and until a second major licensing agreement or other commercial arrangement is entered into with respect to our technology.
As of September 30, 2017,2018, we had an accumulated deficit of approximately E79E84 million, and had net loss of E3,031E3,101 in the nine monthmonths period ending on that date. We expect to continue to incur net losses in the future for research, development and activities related to the future licensing of our technologies, and because of the accrual of interest payable on existing loans.
Net cash used in operating activities was E1,659E1,732 for the nine month period ended September 30, 20172018 mainly due to the payments for subcontracting services paid to vendorsthird parties related to the Maciviva project of E710.E336. During the nine month period ended September 30, 20162017 net cash used in operating activities was E1,270.E1,659.
Net cash used in investing activities was (E34)nil during the nine months ended September 30, 2018, compared to (E34) for the comparable period in 2017, related to the purchase of equipment for our laboratory in Leiden, compared to (E3) for the comparable period in 2016.Leiden.
Financing activities provided net cash of E1,150E800 for the nine months ended September 30, 2017,2018, related to promissory notes from our main investors, and NILE1,150 for the comparable period ended September 30, 2016.2017.
Salaries and related payroll costs represent gross salaries for two executives, our CSO of Mymetics BV and seven employees. Under Executive Employment Agreements with our CEO and two CSOs, we pay our executive officers a combined amount of E65 per month.
Our 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, three full-time technicians and one part-time assistant.
We intendThe Company intends to continue to incur additional expenditures during the next sixthree months for additional research and development of our HIV, Influenza and Chikungunya vaccines, which we will try to seek through collaborations with not-for-profit organizations. These expenditures will relate to the continued testing of its prototype vaccines and are included in the monthly cash outflow described above.
In the past, we have financed our research and development activities primarily through debt and equity financings from various parties, while the last threetwo years our financing was generated partially through a license and collaboration agreement and grant agreementsagreements.
We anticipateThe Company anticipates that ourits normal operations will require approximately E600 from existing capital resourcesE400 in the year ending December 31, 2017.2018. Additional promissory notes for a total of E1,150E800 from our main investors isare planned to be received in October 2017.November 2018 and we expect to receive the remaining Horizon2020 funds in early 2019. We will seek to raise additional 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 E13 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 E9 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 120204 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 E19,781E22,425 has been accrued on all of the Company’s outstanding notes and advances (see detailed table in Note 2 to the financial statements).
RECENT FINANCING ACTIVITIES
During the nine month period ending September 30, 2017,2018, our principal source of funds has been revenues related to the Horizon 2020 Maciviva project and the Research Agreement with Sanofi Pasteur Biologics and additionally promissory notes from our two main investors.
We have filed or are in the process of filing several new grant applications with U.S. and European institutions in relation to our virosome based 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 for new virosome vaccine.
Management anticipatesWe anticipate that our existing capital resources will be sufficient to fund our cash requirements through the next three months. 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 2018,2019, we will need additional funding through future collaborative arrangements, licensing arrangements, and debt and equity financings 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 managementwe 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 projects and future clinical trials.
OFF-BALANCE SHEET ARRANGEMENTS
None
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
Fluctuations in interest rates may affect the fair value of financial instruments. An increase in market interest rates may increase interest payments and a decrease in market interest rates may decrease interest payments of such financial instruments. We have no debt obligations which are sensitive to interest rate fluctuations as all our notes payable have fixed interest rates, as specified on the individual loan notes.
ITEM 4.
CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation and supervision of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report and determined that our disclosure controls and procedures were effective.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
No changes of internal control over financial reporting were made in the nine months ended September 30, 2017.2018.
INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS
Our management, Ronald Kempers, who is now both CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errorerrors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
PART II.
OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
Neither we, nor our wholly owned subsidiaries Mymetics S.A., Bestewil Holding B.V. nor its subsidiary Mymetics B.V. are presently involved in any litigation incident to our business.
Not Applicable
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.
MINE SAFETY DISCLOSURES
None.
ITEM 5.
OTHER INFORMATION
None.
EXHIBIT NUMBER
DESCRIPTION
Rule 13a-14(a)/15d-14(a) Certification of Chief
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
101.INS
Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
SIGNATURES
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.
| | MYMETICS CORPORATION | |
| | | | |
Dated: November 13, 20172018 | By: | /s/ Ronald Kempers | |
| | Ronald Kempers | |
| | | Chief Executive Officer / Chief Financial Officer | |
| | | |
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