UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

or

 

 

 

(Exact name of registrant as specified in its charter)

 

 

 

 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.

 

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

The number of shares outstanding of the Registrant’s Common Stock, $0.01 par value, was 303,757,622 as of May 15, 20192020

 

 

MYMETICS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

 (UNAUDITED)

(In Thousands of Euros, Except Share and Per Share Amounts)Par Value)

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 (UNAUDITED)

(In Thousands of Euros, Except Share and Per Share Data)

 

  

MYMETICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)DEFICIT

 (UNAUDITED)

 (In Thousands of Euros)

 

 

 

 

  

MYMETICS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In Thousands of Euros)

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 20192020

(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 condensed 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 condensed 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, 2018.2019.

 

The accompanying financial statements of the Company are unaudited. However, in the opinion of the Company, the unaudited condensed 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 March 31, 20192020 were of a normal and recurring nature.

 

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 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; (i) Herpes Simplex which is at the pre-clinical stage and currently on hold, (ii) influenza for elderly which has finished a clinical trial Phase I, (iii) Respiratory Syncytial Virus (RSV)(“RSV”) which is at the pre-clinical stage and currently on hold and (iv) Chikungunya virus at the discovery stage and currently on hold.

 

As of March 31, 2019,2020, the Company was engaged in the pre-clinical testing of some of its vaccine candidates andbut a commercially viable product is not expected for several more years. However, the Company generated some revenue as of the prior quarter through license, collaboration and grant agreements. The Company is working on several research projects with commercial partners for immunotherapy in the fields of allergy and oncology.oncology and for some infectious diseases with academic partners. The allergy project is in collaboration with Anergis SA, for which the Company prepared virosome basedvirosome-based vaccines which include Anergis peptides for treating birch pollen allergy. These formulations were tested in preclinical studies and compared to the Anergis earlier formulations. The success criteria were met and Anergis has now a time limited exclusive option to enter into a License and Collaboration Agreement (“LCA”) with Mymetics for the use of virosomes in the field of allergies that will require it to raise funds from third parties to pay Mymeticsallergies. During the license fee underlast quarter of 2019, the termsCompany signed Amendment 3 of the LCAResearch and Option to License Agreement and in October, 2019, Mymetics announced that Stallergenes Greer, a worldwide leader in Allergen Immunotherapy (“AIT”), and Anergis, started a new research study to evaluate the clinical development, and there is no certainty that Anergis will be able to do so. The Company also finished the grant funded project in the field of HIV from the EU Horizon 2020 and Switzerland SERI which focused on developing thermostable and cold chain independent virosome based vaccines (MACIVIVA project). This project ended on November 3, 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 through licensing. Vaccines are oneeffects of the fastest growing marketssecond generation virosome-based COP allergen immunotherapy in the pharmaceutical industry.a therapeutic model of birch allergy in mice.

 

These condensed 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 E85,903E90,026 at March 31, 2019.2020. Further, the Company’s current liabilities exceed its current assets by E54,948E59,180 as of March 31, 2019,2020, 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 within one year from the issuance of the financial statements.

 

 

PRINCIPLES OF CONSOLIDATION

 

 

NEW ACCOUNTING PRONOUNCEMENT

 

 

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 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

 

 

REVENUE RECOGNITION

 

Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those 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 the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for 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, we assess the goods or services promised within each contract and determine those that are performance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

 

The Company has concluded that government grants are not within the scope of Topic 606, as they do not meet the definition of a contract with a “customer”. We concluded the definition of a contract with a “customer” was not met as the counterparty to the government grants has not contracted to obtain goods or services and thus the contracts are not considered to have commercial substance. Government grants provide the Company with payments for certain types of expenditures related to research and development activities over a contractually defined period. Revenue from government grants is recognized in the period during which the related costs are incurred, provided that the applicable conditions under the government contracts have been met.

 

  

 

  InOn April 2015,29, 2019, the National Institutes of Health (“NIH”) awarded the Company was selected to receive project grants withand Texas Biomedical Research Institute (“Texas Biomed”) a total of E8.4 million. A total of E5.3 million would be funded as part of Horizon 2020, the European Union research and innovation framework program and up to E3.1 million of funding would be provided by the Swiss State “Secretariat for Education, Research and Innovation” (SERI)five-year grant for the Swiss based consortium partners. The grant funded the evaluation, development and manufacturing scale-up of thermo-stable and cold-chain independent nano-pharmaceutical virosome-based vaccine candidates. Of the total amount, E3.8 million was directly attributableproject called “Cold Chain-independent, Needle-free Mucosal Virosomal Vaccine to Mymetics’ activities, with the remaining balance going to the consortium partners and has not been part of Mymetics financial statements.Prevent HIV-1 Acquisition at Mucosal Levels”. The project started on May 4, 20151, 2019 and officiallyis planned for five years. The overall budget related to the project is USD 8,850, with USD 1,940 approved for the first year. The overall portion of the grant allocated to the Company is USD 5,930, with USD 1,190 approved for the first year. It was initially co-led by Texas Biomed, but due to the move of Dr. Ruth Ruprecht, the Co-Principal Investigator, to the University of Louisiana at Lafayette (“ULL”) at the end of 2019, ULL has become the co-lead with Mymetics for this project. To date, the Company has recognized E797 of grant revenue from the NIH, of which E255 has been recognized during the quarter ended March 31, 2020. First results are expected to be reported in 2020.

On July 26, 2019 Mymetics and Upperton Ltd. signed a License Agreement (the “Agreement”) that sets out the rights and obligations of the two parties with respect to the development, manufacturing and exploitation of certain virus-like particles based vaccines (which includes virosomes) into solid (powder or tablet) form that are based on November 3,each party’s background or pre-existing intellectual property (“IP”) and the foreground IP rights or the IP that was developed by either party or both parties during the Maciviva project and could be developed during future collaborations.

In December 2018, after which a final reportthe Company announced that the success criteria of the Research and Option to License Agreement with Anergis SA (“Anergis”) had been prepared,met. Under the terms of the Research Agreement, a pre-clinical study program evaluated the immunogenicity profile of the Anergis’ peptides designed to treat birch allergy when presented on Mymetics’ proprietary virosomes, with or without undisclosed TLR ligands or other adjuvants, and submittedthese results were compared to the EU for a total costs declared of E8,262 for the total project and E3,673 for Mymetics.Anergis’ AllerT product combination.

 

 

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 March 31, 20192020 or December 31, 2018.2019. The Company writes 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 LIVEDLONG-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. The Company has one reporting unit.

 

RESEARCH AND DEVELOPMENT

 

 

 

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 March 31, 20192020 or December 31, 2018.2019. The Company’s United States tax returns are open to audit for the years ended December 31, 2015 to 2018. The returns for the Swiss subsidiary, Mymetics S.A., are open to audit for the year ended December 31, 2018.2019. The returns for the Netherlands subsidiaries, Bestewil B.V. and Mymetics B.V., are open to audit for the year ended December 31, 2018.2019.

 

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 quarters ended March 31, 20192020 and 2018,2019, 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 months ended March 31, 2019, the basic weighted average number of shares was 303,757,622. The total potential number of shares issuable of 668,933,362 at March 31, 2019 includes 639,833,362 potential issuable shares related to convertible loans and 29,100,000 potential issuable shares related to outstanding not expired options granted to employees.

 

 

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 March 31, 20192020 or December 31, 2018.2019.

 

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 three months ended March 31, 20192020 nor in the three months ended March 31, 2018.2019.

 

Stock compensation expense amounted to E2E0 and E6E2 during the three months periods ended March 31, 20192020 and 2018,2019, respectively, and is included in the condensed 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:

 

 

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 tois reflecting the unique nature ofactual value reported for these instruments.

 

CONCENTRATIONS

 

The Company derived 100%94% of grant revenue for the three monththree-month period ended March 31, 20182020 from one partner.

 

RELATED PARTY TRANSACTIONS

 

 

Two of the Company’s major shareholders have granted secured convertible notes and short termshort-term convertible notes and promissory notes, which have a total carrying amount of E55,085,E59,004, including interest due to date. Conversion prices on the Euro-denominated convertible debt have been fixed to a fixed Euro/US dollar exchange rate.

 

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 termshort-term notes, which have a total carrying value of E55,479E59,417 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 March 31, 2019:2020:

 

 

  

Note 3.4. Subsequent Events

 

On April 29, 2019,2, 2020, the Swiss entity, Mymetics announced thatSA, received a Federal credit line of Chf 168 (E159) in relation with the National Institutes of Health (NIH) has awarded Mymetics and Texas Biomedical Research Institute (Texas Biomed) a five-year grantCovid-19. This credit line applies for the project called “Cold Chain-independent, Needle-free Mucosal Virosomal Vaccine to Prevent HIV-1 Acquisition at Mucosal Levels”.

 

 

GENERAL

 

The following discussion and analysis of the results of operations and financial condition of Mymetics Corporation for the periods ended March 31, 20192020 and 20182019 should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 20182019 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, 20182019 and, to the extent included therein, our quarterly reports on Form 10-Q filed during fiscal year 2018.2019.

 

THREE MONTHS ENDED MARCH 31, 20192020 AND 20182019

 

 

Research and development expenses decreasedincreased to E215E322 in the current period from E308 (-30.2%E215 (+49.8%) in the comparative period of 2018,2019, mainly due to E85E88 of subcontracting services paid during the three monththree-month period ending March 20182020 in relation with the Horizon 2020 MacivivaNIH grant / HIV project. During the three months ended March 31, 2019, no R&D expenses have been incurred related to the Horizon 2020 Maciviva project as the projected ended in November 2018.

 

General and administrative expenses increased to E325 in the current period from E278 (+16.9%) in the comparative period of E278 in2019, mainly due to the D&O liability annual insurance premium expensed during the three months ended March 31, 2019 are comparable with E277 incurred in2020, and increase of the comparative period of 2018.annual audit fees.

 

Foreign exchange (gain) lossOther expenses increased to E55E95 for the three months ended March 31, 20192020 from (E65)E55 (+184.6%72.7%) for the three months ended March 31, 2018,2019, mainly due to the foreign exchange revaluation impact of shareholders’ loans based in US$.

 

Interest expense increased to E675 for the three months ended March 31, 2020 from E666 for the three months ended March 31, 2019 from E653 for the three months ended March 31, 2018 related to existing loans from third party investors.

 

The Company reported a net loss of (E1,164), or (E0.00) per share, for the three months ended March 31, 2020, compared to a net loss of (E1,228), or (E0.00) per share, for the three months ended March 31, 2019, compared to a net loss of (E898), or (E0.00) per share, for the three months ended March 31, 2018.

LIQUIDITY AND CAPITAL RESOURCES

 

We had cash of E231 at March 31, 2020 compared to E475 at March 31, 2019 compared to E479 at December 31, 2018.2019.

 

  During 20182019, our revenue has mainly been generated through the HorizonNIH grant / HIV project. For 2020, project, which has now come to an end. For 2019, new significant revenues willare not be expected unless and until a major licensing agreement or other commercial arrangement is entered into with respect to our technology or new grant financings are awarded.

 

As of March 31, 2019,2020, we had an accumulated deficit of approximately E86 million,E90,026, and had net loss of E1,228E1,164 in the three monththree-month 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 from operating activities was E9E454 for the three monththree-month period ended March 31, 2019.2020. During the three monththree-month period ending March 31, 20182019 net cash used from operating activities was E634E9 mainly due to the subcontracting services paid during the three month period ending March 31, 2018 and final funding amount received during the three monththree-month period ending March 31, 2019 both related to the Maciviva project.

 

Net cash used from investing activities was NILE5 during the three months ended March 31, 20192020 and 2018.NIL during the same period in 2019.

 

Net cash provided from financing activities is NIL for the three months ended March 31, 20192020 and 2018.2019.

 

 

  Our Swiss subsidiary, Mymetics S.A., has, besides the CEO and CSO, two additional employees on its payroll: Director of Finance and Head of Manufacturing and Quality. Mymetics BV has, besides the full time Chief Scientific Officer, threetwo full-time technicians and one part-time assistant.

 

  We intend to continue to incur additional expenditures during the next nine months for additional research and development of our HIV, Influenza vaccines and immunotherapy projects, which we will try to seek through collaborations with pharmaceutical companies or with not-for-profit organizations. These expenditures will relate to the continued research and testing of these 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 and through license and collaboration agreements and grant agreements.

 

  We anticipate that our normal operations will require approximately E1,200E1,360 of cash in the year ending December 31, 2019.2020. 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 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 204 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 E23,795E26,503 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 three month period ending March 31, 2019,2020, our principal source of funds has been promissory notes received in a prior quarter from our two main investors and the final payment forrevenue generated through the MacivivaNIH grant / HIV project.

 

  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 anticipates that our existing capital resources will be sufficient to fund our cash requirements through the next five months. We have 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 2019,2020, 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. These conditions raise substantial doubt about our ability to continue as a going concern.

 

  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 projects and future clinical trials.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

None

 

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.

 

 

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 three months ended March 31, 2019.2020.

 

INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS

 

Our management, Ronald Kempers, who is both CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.