Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2010
OR
o | 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 (State or other jurisdiction of incorporation or organization) | 25-1741849 (I.R.S. Employer Identification No.) |
c/o Mymetics S.A.
Biopole
Route de la Corniche, 4
1066 Epalinges (Switzerland)
Biopole
Route de la Corniche, 4
1066 Epalinges (Switzerland)
(Address of principal executive offices)
REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: 011 41 21 653 4535
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
(Title of Class)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
(Title of Class)
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 þ No o
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 o No o
(the registrant is not yet required to submit Interactive Data)
(the registrant is not yet required to submit Interactive Data)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer o | Accelerated Filer o | Non-Accelerated Filer o (Do not check if a smaller reporting company) | Smaller Reporting Company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o Noþ
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 August 23, 2010 | |
Common Stock, $0.01 par value | 196,263,630 |
TABLE OF CONTENTS
Table of Contents
PART I.FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
MYMETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS OF EUROS)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS OF EUROS)
June 30, | December 31, | |||||||
2010 | 2009 | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash | € | 2,673 | € | 2,959 | ||||
Receivable officer | 24 | 6 | ||||||
Receivable other | 45 | 39 | ||||||
Prepaid expenses | 31 | 34 | ||||||
Total current assets | 2,773 | 3,038 | ||||||
Property and equipment, net of accumulated depreciation of €139 at June 30, 2010 and €100 at December 31, 2009 | 189 | 232 | ||||||
License contract, net of accumulated amortization of €240 at June 30, 2010 and €144 at December 31, 2009 | 2,454 | 2,550 | ||||||
In-process research and development | 2,266 | 2,266 | ||||||
Goodwill | 6,671 | 6,671 | ||||||
€ | 14,353 | € | 14,757 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||
Current Liabilities | ||||||||
Accounts payable | € | 1,336 | € | 1,540 | ||||
Payable to officers and employees | 154 | — | ||||||
Taxes and social costs payable | 27 | 41 | ||||||
Advance on current portion of notes payable to related parties | 2,200 | — | ||||||
Current portion of convertible notes payable to related parties | 5,988 | 5,740 | ||||||
Total current liabilities | 9,705 | 7,321 | ||||||
Convertible notes payable to related parties, less current portion | 22,633 | 21,722 | ||||||
Convertible note payable – other | 2,655 | 2,593 | ||||||
Acquisition-related contingent consideration | 2,119 | 1,936 | ||||||
Total liabilities | 37,112 | 33,572 | ||||||
Shareholders’ Equity (Deficit) | ||||||||
Common stock, U.S. $.01 par value; 495,000,000 shares authorized; Issued and outstanding 196,263,630 at June 30, 2010 and 196,063,630 at December 31, 2009 | 1,756 | 1,754 | ||||||
Preferred stock, U.S. $.01 par value; 5,000,000 shares authorized; none issued or outstanding | — | — | ||||||
Additional paid-in capital | 21,020 | 20,840 | ||||||
Deficit accumulated during the development stage | (46,199 | ) | (42,090 | ) | ||||
Accumulated other comprehensive income | 664 | 681 | ||||||
(22,759 | ) | (18,815 | ) | |||||
€ | 14,353 | € | 14,757 | |||||
The accompanying notes are an integral part of these financial statements.
Table of Contents
MYMETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
(IN THOUSANDS OF EUROS, EXCEPT FOR PER SHARE AMOUNTS)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
(IN THOUSANDS OF EUROS, EXCEPT FOR PER SHARE AMOUNTS)
FOR THE THREE | FOR THE THREE | TOTAL ACCUMULATED | ||||||||||
MONTHS ENDED | MONTHS ENDED | DURING THE | ||||||||||
JUNE 30, 2010 | JUNE 30, 2009 | DEVELOPMENT STAGE | ||||||||||
Revenue | ||||||||||||
Sales | € | 37 | € | 61 | € | 435 | ||||||
Interest | 1 | — | 37 | |||||||||
Gain on extinguishment of debt | — | — | 774 | |||||||||
Government grants | — | 13 | 78 | |||||||||
38 | 74 | 1,324 | ||||||||||
Expenses | ||||||||||||
Research and development | 723 | 1,728 | 21,927 | |||||||||
General and administrative | 680 | 1,180 | 19,378 | |||||||||
Bank fee | 1 | — | 938 | |||||||||
Interest | 631 | 768 | 5,256 | |||||||||
Change in the fair value of acquisition-related contingent consideration | — | — | (1,431 | ) | ||||||||
Goodwill impairment | — | — | 209 | |||||||||
Depreciation | 20 | 21 | 651 | |||||||||
Amortization of intangibles | 48 | — | 240 | |||||||||
Directors’ fees | 5 | — | 326 | |||||||||
Other | — | — | 11 | |||||||||
2,108 | 3,697 | 47,505 | ||||||||||
Loss before income tax provision | (2,070 | ) | (3,623 | ) | (46,181 | ) | ||||||
Income tax benefit (provision) | — | 7 | (18 | ) | ||||||||
Net loss | (2,070 | ) | (3,616 | ) | (46,199 | ) | ||||||
Other comprehensive income (loss) | ||||||||||||
Foreign currency translation adjustment | (13 | ) | 5 | 664 | ||||||||
Comprehensive loss | € | (2,083 | ) | € | (3,611 | ) | € | (45,535 | ) | |||
Basic and diluted loss per share | € | (0.01 | ) | € | (0.02 | ) | ||||||
The accompanying notes are an integral part of these financial statements.
Table of Contents
MYMETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
(IN THOUSANDS OF EUROS, EXCEPT FOR PER SHARE AMOUNTS)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
(IN THOUSANDS OF EUROS, EXCEPT FOR PER SHARE AMOUNTS)
FOR THE SIX | FOR THE SIX | TOTAL ACCUMULATED | ||||||||||
MONTHS ENDED | MONTHS ENDED | DURING THE | ||||||||||
JUNE 30, 2010 | JUNE 30, 2009 | DEVELOPMENT STAGE | ||||||||||
Revenue | ||||||||||||
Sales | € | 75 | € | 61 | € | 435 | ||||||
Interest | 2 | — | 37 | |||||||||
Gain on extinguishment of debt | — | — | 774 | |||||||||
Government grants | — | 13 | 78 | |||||||||
77 | 74 | 1,324 | ||||||||||
Expenses | ||||||||||||
Research and development | 1,261 | 4,530 | 21,927 | |||||||||
General and administrative | 1,373 | 2,164 | 19,378 | |||||||||
Bank fee | 1 | — | 938 | |||||||||
Interest | 1,222 | 995 | 5,256 | |||||||||
Change in the fair value of acquisition-related contingent consideration | 183 | — | (1,431 | ) | ||||||||
Goodwill impairment | — | — | 209 | |||||||||
Depreciation | 39 | 39 | 651 | |||||||||
Amortization of intangibles | 96 | — | 240 | |||||||||
Directors’ fees | 10 | — | 326 | |||||||||
Other | 1 | — | 11 | |||||||||
4,186 | 7,728 | 47,505 | ||||||||||
Loss before income tax provision | (4,109 | ) | (7,654 | ) | (46,181 | ) | ||||||
Income tax provision | — | — | (18 | ) | ||||||||
Net loss | (4,109 | ) | (7,654 | ) | (46,199 | ) | ||||||
Other comprehensive income (loss) | ||||||||||||
Foreign currency translation adjustment | (17 | ) | (43 | ) | 664 | |||||||
Comprehensive loss | € | (4,126 | ) | € | (7,697 | ) | € | (45,535 | ) | |||
Basic and diluted loss per share | € | (0.02 | ) | € | (0.04 | ) | ||||||
The accompanying notes are an integral part of these financial statements.
Table of Contents
MYMETICS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)(UNAUDITED)
For the Period from May 2, 1990 (Inception) to June 30, 2010
(In Thousands of Euros)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)(UNAUDITED)
For the Period from May 2, 1990 (Inception) to June 30, 2010
(In Thousands of Euros)
Accumulated | ||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||
Deficit | Comprehensive | |||||||||||||||||||||||||||
Accumulated | Income - Foreign | |||||||||||||||||||||||||||
Additional | During the | Currency | ||||||||||||||||||||||||||
Date of | Number of | Par | Paid-in | Development | Translation | |||||||||||||||||||||||
Transaction | Shares | Value | Capital | Stage | Adjustment | Total | ||||||||||||||||||||||
Balance at May 2, 1990 | ||||||||||||||||||||||||||||
Shares issued for cash | June 1990 | 33,311,361 | € | 119 | € | — | € | — | € | — | € | 119 | ||||||||||||||||
Net losses to December 31, 1999 | — | — | — | (376 | ) | — | (376 | ) | ||||||||||||||||||||
Balance at December 31, 1999 | 33,311,361 | 119 | — | (376 | ) | — | (257 | ) | ||||||||||||||||||||
Bank fee | — | — | 806 | — | — | 806 | ||||||||||||||||||||||
Net loss for the year | — | — | — | (1,314 | ) | — | (1,314 | ) | ||||||||||||||||||||
Balance at December 31, 2000 | 33,311,361 | 119 | 806 | (1,690 | ) | — | (765 | ) | ||||||||||||||||||||
Effect on capital structure resulting from a business combination | March 2001 | 8,165,830 | 354 | (354 | ) | — | — | — | ||||||||||||||||||||
Issuance of stock purchase warrants in connection with credit facility (restated) | March 2001 | — | — | 210 | — | — | 210 | |||||||||||||||||||||
Issuance of shares for bank fee | March 2001 | 1,800,000 | 21 | (21 | ) | — | — | — | ||||||||||||||||||||
Issuance of shares for bank fee | June 2001 | 225,144 | 3 | (3 | ) | — | — | — | ||||||||||||||||||||
Issuance of shares for cash | June 2001 | 1,333,333 | 15 | 2,109 | — | — | 2,124 | |||||||||||||||||||||
Exercise of stock purchase warrants in repayment of debt | June 2001 | 1,176,294 | 13 | 259 | — | — | 272 | |||||||||||||||||||||
Exercise of stock purchase warrants for cash | December 2001 | 3,250,000 | 37 | 563 | — | — | 600 | |||||||||||||||||||||
Net loss for the year (restated) | — | — | — | (1,848 | ) | — | (1,848 | ) | ||||||||||||||||||||
Translation adjustment | — | — | — | — | 100 | 100 | ||||||||||||||||||||||
Balance at December 31, 2001 | 49,261,962 | 562 | 3,569 | (3,538 | ) | 100 | 693 | |||||||||||||||||||||
Exercise of stock options | March 2002 | 10,000 | — | 8 | — | — | 8 | |||||||||||||||||||||
Issuance of stock purchase warrants for bank fee | June 2002 | — | — | 63 | — | — | 63 | |||||||||||||||||||||
Exercise of stock purchase warrants in repayment of debt | July 2002 | 1,625,567 | 16 | 396 | — | — | 412 | |||||||||||||||||||||
Issuance of remaining shares from 2001 business combination | August 2002 | 46,976 | 1 | (1 | ) | — | — | — | ||||||||||||||||||||
Net loss for the year | — | — | — | (3,622 | ) | — | (3,622 | ) | ||||||||||||||||||||
Translation adjustment | — | — | — | — | 97 | 97 | ||||||||||||||||||||||
Balance at December 31, 2002 | 50,944,505 | 579 | 4,035 | (7,160 | ) | 197 | (2,349 | ) | ||||||||||||||||||||
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Accumulated | ||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||
Deficit | Comprehensive | |||||||||||||||||||||||||||
Accumulated | Income - Foreign | |||||||||||||||||||||||||||
Additional | During the | Currency | ||||||||||||||||||||||||||
Date of | Number of | Par | Paid-in | Development | Translation | |||||||||||||||||||||||
Transaction | Shares | Value | Capital | Stage | Adjustment | Total | ||||||||||||||||||||||
Issuance of shares for services | September 2003 | 400,000 | 4 | 29 | — | — | 33 | |||||||||||||||||||||
Shares retired | October 2003 | (51 | ) | — | — | — | — | — | ||||||||||||||||||||
Issuance of shares for services | November 2003 | 1,500,000 | 12 | 100 | — | — | 112 | |||||||||||||||||||||
Issuance of shares for cash | December 2003 | 1,500,000 | 12 | 113 | — | — | 125 | |||||||||||||||||||||
Issuance of stock purchase warrants for financing fee | December 2003 | — | — | 12 | — | — | 12 | |||||||||||||||||||||
Net loss for the year | — | — | — | (2,786 | ) | — | (2,786 | ) | ||||||||||||||||||||
Translation adjustment | — | — | — | — | 453 | 453 | ||||||||||||||||||||||
Balance at December 31, 2003 | 54,344,454 | 607 | 4,289 | (9,946 | ) | 650 | (4,400 | ) | ||||||||||||||||||||
Issuance of shares for services | January 2004 | 550,000 | 5 | 27 | — | — | 32 | |||||||||||||||||||||
Issuance of shares for cash | January 2004 | 2,000,000 | 17 | 150 | — | — | 167 | |||||||||||||||||||||
Issuance of stock purchase warrants for financing fee | January 2004 | — | — | 40 | — | — | 40 | |||||||||||||||||||||
Issuance of shares for cash | February 2004 | 2,500,000 | 21 | 187 | — | — | 208 | |||||||||||||||||||||
Issuance of stock purchase warrants for financing fee | February 2004 | — | — | 62 | — | — | 62 | |||||||||||||||||||||
Issuance of shares for services | April 2004 | 120,000 | 1 | 11 | — | — | 12 | |||||||||||||||||||||
Issuance of shares for bank fee | May 2004 | 500,000 | 4 | 62 | — | — | 66 | |||||||||||||||||||||
Issuance of shares for cash | May 2004 | 2,000,000 | 16 | 148 | — | — | 164 | |||||||||||||||||||||
Issuance of shares for services | August 2004 | 250,000 | 2 | 26 | — | — | 28 | |||||||||||||||||||||
Issuance of shares for cash | August 2004 | 1,466,667 | 12 | 128 | — | — | 140 | |||||||||||||||||||||
Issuance of stock purchase warrants for financing fee | August 2004 | — | — | 46 | — | — | 46 | |||||||||||||||||||||
Issuance of shares for services | September 2004 | 520,000 | 4 | 29 | — | — | 33 | |||||||||||||||||||||
Issuance of shares for cash | September 2004 | 50,000 | — | 4 | — | — | 4 | |||||||||||||||||||||
Issuance of shares for services | October 2004 | 2,106,743 | 16 | 132 | — | — | 148 | |||||||||||||||||||||
Issuance of shares for services | November 2004 | 2,000,000 | 15 | 177 | — | — | 192 | |||||||||||||||||||||
Issuance of shares for cash | November 2004 | 40,000 | — | 4 | — | — | 4 | |||||||||||||||||||||
Net loss for the year | — | — | — | (2,202 | ) | — | (2,202 | ) | ||||||||||||||||||||
Translation adjustment | — | — | — | — | 191 | 191 | ||||||||||||||||||||||
Balance at December 31, 2004 | 68,447,864 | 720 | 5,522 | (12,148 | ) | 841 | (5,065 | ) | ||||||||||||||||||||
Issuance of shares for services | January 2005 | 500,000 | 4 | 83 | — | — | 87 | |||||||||||||||||||||
Issuance of shares for services | March 2005 | 200,000 | 2 | 33 | — | — | 35 | |||||||||||||||||||||
Issuance of shares for services | March 2005 | 1,500,000 | 11 | 247 | — | — | 258 | |||||||||||||||||||||
Issuance of shares for services | April 2005 | 60,000 | 1 | 10 | — | — | 11 | |||||||||||||||||||||
Issuance of shares for cash | May 2005 | 52,000 | — | 5 | — | — | 5 | |||||||||||||||||||||
Issuance of shares for cash | June 2005 | 50,000 | — | 3 | — | — | 3 | |||||||||||||||||||||
Issuance of shares for cash | June 2005 | 50,000 | — | 3 | — | — | 3 | |||||||||||||||||||||
Issuance of shares for cash | June 2005 | 343,500 | 3 | 14 | — | — | 17 | |||||||||||||||||||||
Issuance of shares for cash | June 2005 | 83,300 | 1 | 3 | — | — | 4 | |||||||||||||||||||||
Issuance of shares for cash | June 2005 | 100,000 | 1 | 4 | — | — | 5 | |||||||||||||||||||||
Issuance of shares for cash | July 2005 | 144,516 | 1 | 6 | — | — | 7 | |||||||||||||||||||||
Issuance of shares for cash | July 2005 | 144,516 | 1 | 6 | — | — | 7 | |||||||||||||||||||||
Issuance of shares for cash | July 2005 | 144,516 | 1 | 6 | — | — | 7 | |||||||||||||||||||||
Issuance of shares for cash | August 2005 | 206,452 | 2 | 8 | — | — | 10 | |||||||||||||||||||||
Issuance of shares for cash | August 2005 | 50,000 | — | 2 | — | — | 2 | |||||||||||||||||||||
Issuance of shares for services | September 2005 | 500,000 | 4 | 8 | — | — | 12 |
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Accumulated | ||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||
Deficit | Comprehensive | |||||||||||||||||||||||||||
Accumulated | Income - Foreign | |||||||||||||||||||||||||||
Additional | During the | Currency | ||||||||||||||||||||||||||
Date of | Number of | Par | Paid-in | Development | Translation | |||||||||||||||||||||||
Transaction | Shares | Value | Capital | Stage | Adjustment | Total | ||||||||||||||||||||||
Issuance of shares for services | September 2005 | 500,000 | 4 | 8 | — | — | 12 | |||||||||||||||||||||
Issuance of shares for services | September 2005 | 500,000 | 4 | 8 | — | — | 12 | |||||||||||||||||||||
Issuance of shares for services | September 2005 | 300,000 | 3 | 5 | — | — | 8 | |||||||||||||||||||||
Issuance of shares for services | September 2005 | 68,000 | 1 | 1 | — | — | 2 | |||||||||||||||||||||
Issuance of shares for services | September 2005 | 173,200 | 1 | 3 | — | — | 4 | |||||||||||||||||||||
Issuance of shares for cash | October 2005 | 87,459 | 1 | 2 | — | — | 3 | |||||||||||||||||||||
Issuance of shares for services | October 2005 | 185,000 | 2 | 6 | — | — | 8 | |||||||||||||||||||||
Issuance of shares for cash | October 2005 | 174,918 | 1 | 5 | — | — | 6 | |||||||||||||||||||||
Issuance of shares for cash | October 2005 | 116,612 | 1 | 3 | — | — | 4 | |||||||||||||||||||||
Issuance of shares for cash | November 2005 | 116,611 | 1 | 3 | — | — | 4 | |||||||||||||||||||||
Issuance of shares for cash | November 2005 | 390,667 | 3 | 3 | — | — | 6 | |||||||||||||||||||||
Issuance of shares for services | November 2005 | 20,000 | — | — | — | — | — | |||||||||||||||||||||
Issuance of shares for services | November 2005 | 20,000 | — | — | — | — | — | |||||||||||||||||||||
Issuance of shares for services | November 2005 | 20,000 | — | — | — | — | — | |||||||||||||||||||||
Issuance of shares for services | November 2005 | 500,000 | 5 | 9 | — | — | 14 | |||||||||||||||||||||
Issuance of shares for services | December 2005 | 140,000 | 2 | 2 | — | — | 4 | |||||||||||||||||||||
Issuance of shares for cash | December 2005 | 390,667 | 3 | 3 | — | — | 6 | |||||||||||||||||||||
Issuance of shares for cash | December 2005 | 390,666 | 3 | 3 | — | — | 6 | |||||||||||||||||||||
Issuance of shares for cash | December 2005 | 6,000,000 | 50 | 200 | — | — | 250 | |||||||||||||||||||||
Net loss for the year | — | — | — | (1,939 | ) | — | (1,939 | ) | ||||||||||||||||||||
Translation adjustment | — | — | — | — | (98 | ) | (98 | ) | ||||||||||||||||||||
Balance at December 31, 2005 | 82,670,464 | 837 | 6,227 | (14,087 | ) | 743 | (6,280 | ) | ||||||||||||||||||||
Issuance of shares for services | January 2006 | 2,500,000 | 21 | 31 | — | — | 52 | |||||||||||||||||||||
Issuance of shares for cash | January 2006 | 4,000,000 | 33 | 132 | — | — | 165 | |||||||||||||||||||||
Issuance of shares for services | January 2006 | 100,000 | 1 | 2 | — | — | 3 | |||||||||||||||||||||
Issuance of shares for cash | March 2006 | 1,500,000 | 12 | 38 | — | — | 50 | |||||||||||||||||||||
Issuance of shares for cash | March 2006 | 2,500,000 | 21 | 62 | — | — | 83 | |||||||||||||||||||||
Issuance of shares for cash | March 2006 | 250,000 | 2 | 6 | — | — | 8 | |||||||||||||||||||||
Issuance of shares for cash | March 2006 | 1,500,000 | 12 | 38 | — | — | 50 | |||||||||||||||||||||
Issuance of shares for services | April 2006 | 100,000 | 1 | 4 | — | — | 5 | |||||||||||||||||||||
Issuance of shares for cash | May 2006 | 300,000 | 2 | 3 | — | — | 5 | |||||||||||||||||||||
Issuance of shares for cash | May 2006 | 300,000 | 3 | 7 | — | — | 10 | |||||||||||||||||||||
Issuance of shares for cash | May 2006 | 2,350,000 | 18 | 82 | — | — | 100 | |||||||||||||||||||||
Debt Conversion — non cash | May 2006 | 1,000,000 | 8 | 31 | — | — | 39 | |||||||||||||||||||||
Issuance of shares for cash | June 2006 | 2,600,000 | 20 | 80 | — | — | 100 | |||||||||||||||||||||
Debt Conversion — non cash | July 2006 | 1,000,000 | 8 | 72 | — | — | 80 | |||||||||||||||||||||
Debt Conversion — non cash | July 2006 | 1,000,000 | 8 | 72 | — | — | 80 | |||||||||||||||||||||
Debt Conversion — non cash | July 2006 | 1,000,000 | 8 | 72 | — | — | 80 | |||||||||||||||||||||
Debt Conversion — non cash | July 2006 | 500,000 | 4 | 36 | — | — | 40 | |||||||||||||||||||||
Issuance of shares for services | November 2006 | 300,000 | 2 | 4 | — | — | 6 | |||||||||||||||||||||
Issuance of shares for cash | November 2006 | 1,300,000 | 10 | 90 | — | — | 100 | |||||||||||||||||||||
Issuance of shares for cash | November 2006 | 1,280,000 | 10 | 90 | — | — | 100 | |||||||||||||||||||||
Issuance of shares for cash | December 2006 | 1,320,000 | 10 | 90 | — | — | 100 | |||||||||||||||||||||
Issuance of shares for cash | December 2006 | 1,320,000 | 10 | 90 | — | — | 100 | |||||||||||||||||||||
Issuance of shares for cash | December 2006 | 330,000 | 3 | 22 | — | — | 25 | |||||||||||||||||||||
Net loss for the year | — | — | — | (1,585 | ) | — | (1,585 | ) | ||||||||||||||||||||
Translation adjustment | — | — | — | — | 4 | 4 | ||||||||||||||||||||||
Balance at December 31, 2006 | 111,020,464 | 1,064 | 7,381 | (15,672 | ) | 747 | (6,480 | ) | ||||||||||||||||||||
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Accumulated | ||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||
Deficit | Comprehensive | |||||||||||||||||||||||||||
Accumulated | Income - Foreign | |||||||||||||||||||||||||||
Additional | During the | Currency | ||||||||||||||||||||||||||
Date of | Number of | Par | Paid-in | Development | Translation | |||||||||||||||||||||||
Transaction | Shares | Value | Capital | Stage | Adjustment | Total | ||||||||||||||||||||||
Issuance of shares for cash | January 2007 | 650,000 | 5 | 45 | — | — | 50 | |||||||||||||||||||||
Issuance of shares for services | January 2007 | 300,000 | 2 | 6 | — | — | 8 | |||||||||||||||||||||
Issuance of shares for services | January 2007 | 200,000 | 2 | 4 | — | — | 6 | |||||||||||||||||||||
Issuance of shares for services | January 2007 | 250,000 | 2 | 5 | — | — | 7 | |||||||||||||||||||||
Issuance of shares for services | February 2007 | 250,000 | 2 | 5 | — | — | 7 | |||||||||||||||||||||
Issuance of shares for cash | February 2007 | 1,420,000 | 11 | 99 | — | — | 110 | |||||||||||||||||||||
Issuance of shares for cash | February 2007 | 325,000 | 2 | 22 | — | — | 24 | |||||||||||||||||||||
Issuance of shares for cash | March 2007 | 650,000 | 5 | 45 | — | — | 50 | |||||||||||||||||||||
Issuance of shares for cash | March 2007 | 8,712,000 | 115 | 875 | — | — | 990 | |||||||||||||||||||||
Debt Conversion — non cash | March 2007 | 12,500,000 | 94 | 2,505 | — | — | 2,599 | |||||||||||||||||||||
Issuance of shares for services | April 2007 | 100,000 | 1 | 13 | — | — | 14 | |||||||||||||||||||||
Issuance of shares for services | April 2007 | 200,000 | 1 | 25 | — | — | 26 | |||||||||||||||||||||
Issuance of shares for services | April 2007 | 1,000,000 | 7 | 67 | — | — | 74 | |||||||||||||||||||||
Issuance of shares for cash | May 2007 | 1,000,000 | 7 | 140 | — | — | 147 | |||||||||||||||||||||
Issuance of shares for cash | May 2007 | 750,000 | 6 | 105 | — | — | 111 | |||||||||||||||||||||
Debt Cancellation — non cash | May 2007 | — | — | 242 | — | — | 242 | |||||||||||||||||||||
Debt Conversion — non cash | June 2007 | 9,469,000 | 70 | 891 | — | — | 961 | |||||||||||||||||||||
Issuance of shares for cash | June 2007 | 5,393,000 | 40 | 760 | — | — | 800 | |||||||||||||||||||||
Issuance of shares for services | June 2007 | 261,250 | 2 | 25 | — | — | 27 | |||||||||||||||||||||
Issuance of shares for services | June 2007 | 261,250 | 2 | 25 | — | — | 27 | |||||||||||||||||||||
Issuance of shares for officer compensation | June 2007 | 2,500,000 | 19 | 318 | — | — | 337 | |||||||||||||||||||||
Issuance of shares for officer compensation | June 2007 | 2,500,000 | 19 | 318 | — | — | 337 | |||||||||||||||||||||
Issuance of shares for officer compensation | June 2007 | 4,000,000 | 30 | 508 | — | — | 538 | |||||||||||||||||||||
Issuance of shares for officer compensation | June 2007 | 1,000,000 | 7 | 127 | — | — | 134 | |||||||||||||||||||||
Issuance of shares for officer compensation | June 2007 | 6,000,000 | 45 | 762 | — | — | 807 | |||||||||||||||||||||
Issuance of shares for services | June 2007 | 135,000 | 1 | 12 | — | — | 13 | |||||||||||||||||||||
Issuance of shares for cash | June 2007 | 2,250,000 | 17 | 12 | — | — | 29 | |||||||||||||||||||||
Issuance of shares for cash | July 2007 | 5,550,000 | 42 | 1,208 | — | — | 1,250 | |||||||||||||||||||||
Issuance of shares for cash | August 2007 | 933,333 | 7 | 193 | — | — | 200 | |||||||||||||||||||||
Issuance of shares for services | August 2007 | 1,000,000 | 7 | 66 | — | — | 73 | |||||||||||||||||||||
Issuance of shares for services | August 2007 | 1,000,000 | 7 | 66 | — | — | 73 | |||||||||||||||||||||
Issuance of shares for services | August 2007 | 100,000 | 1 | 7 | — | — | 8 | |||||||||||||||||||||
Issuance of shares for services | September 2007 | 300,000 | 2 | 21 | — | — | 23 | |||||||||||||||||||||
Issuance of shares for cash | September 2007 | 1,666,667 | 12 | 344 | — | — | 356 | |||||||||||||||||||||
Cancellation of shares for collateral | September 2007 | -2,000,000 | — | — | — | — | — | |||||||||||||||||||||
Issuance of shares for cash | October 2007 | 2,350,000 | 17 | 483 | — | — | 500 | |||||||||||||||||||||
Issuance of shares for cash | November 2007 | 2,966,666 | 21 | 623 | — | — | 644 | |||||||||||||||||||||
Issuance of shares for services | December 2007 | 500,000 | 3 | 48 | — | — | 51 | |||||||||||||||||||||
Net loss for the year | — | — | — | (9,294 | ) | — | (9,294 | ) | ||||||||||||||||||||
Translation adjustment | — | — | — | — | (75 | ) | (75 | ) | ||||||||||||||||||||
Balance at December 31, 2007 | 187,463,630 | 1,697 | 18,401 | (24,966 | ) | 672 | (4,196 | ) | ||||||||||||||||||||
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Accumulated | ||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||
Deficit | Comprehensive | |||||||||||||||||||||||||||
Accumulated | Income - Foreign | |||||||||||||||||||||||||||
Additional | During the | Currency | ||||||||||||||||||||||||||
Date of | Number of | Par | Paid-in | Development | Translation | |||||||||||||||||||||||
Transaction | Shares | Value | Capital | Stage | Adjustment | Total | ||||||||||||||||||||||
Issuance of shares for services | January 2008 | 800,000 | 6 | 79 | — | — | 85 | |||||||||||||||||||||
Issuance of shares for services | January 2008 | 200,000 | 1 | 20 | — | — | 21 | |||||||||||||||||||||
Issuance of shares for cash | February 2008 | 1,000,000 | 7 | 326 | — | — | 333 | |||||||||||||||||||||
Issuance of shares for services | March 2008 | 500,000 | 3 | 73 | — | — | 76 | |||||||||||||||||||||
Issuance of shares for services | March 2008 | 500,000 | 3 | 73 | — | — | 76 | |||||||||||||||||||||
Issuance of shares for cash | June 2008 | 300,000 | 2 | 94 | — | — | 96 | |||||||||||||||||||||
Issuance of shares for cash | June 2008 | 1,300,000 | 8 | 492 | — | — | 500 | |||||||||||||||||||||
Issuance of shares for services | July 2008 | 2,000,000 | 13 | 239 | — | — | 252 | |||||||||||||||||||||
Issuance of shares for services | August 2008 | 250,000 | 2 | 39 | — | — | 41 | |||||||||||||||||||||
Issuance of shares for cash | December 2008 | 1,000,000 | 7 | 319 | — | — | 326 | |||||||||||||||||||||
Net loss for the year | — | — | — | (6,938 | ) | — | (6,938 | ) | ||||||||||||||||||||
Translation adjustment | — | — | — | — | 13 | 13 | ||||||||||||||||||||||
Balance at December 31, 2008 | 195,313,630 | 1,749 | 20,155 | (31,904 | ) | 685 | (9,315 | ) | ||||||||||||||||||||
Issuance of shares for services | March 2009 | 250,000 | 2 | 36 | — | — | 38 | |||||||||||||||||||||
Issuance of stock options for acquisition | April 2009 | — | — | 601 | — | — | 601 | |||||||||||||||||||||
Issuance of shares for services | May 2009 | 250,000 | 1 | 27 | — | — | 28 | |||||||||||||||||||||
Issuance of shares for services | September 2009 | 250,000 | 2 | 21 | — | — | 23 | |||||||||||||||||||||
Net loss for the year | — | — | — | (10,186 | ) | — | (10,186 | ) | ||||||||||||||||||||
Translation adjustment | — | — | — | — | (4 | ) | (4 | ) | ||||||||||||||||||||
Balance at December 31, 2009 | 196,063,630 | 1,754 | 20,840 | (42,090 | ) | 681 | (18,815 | ) | ||||||||||||||||||||
Issuance of shares for services | March 2010 | 200,000 | 2 | 18 | — | — | 20 | |||||||||||||||||||||
Net loss for the period | — | — | — | (2,039 | ) | — | (2,039 | ) | ||||||||||||||||||||
Translation adjustment | — | — | — | — | (4 | ) | (4 | ) | ||||||||||||||||||||
Balance at March 31, 2010 | 196,263,630 | 1,756 | 20,858 | (44,129 | ) | 677 | (20,838 | ) | ||||||||||||||||||||
Stock compensation expense — options | June 2010 | — | — | 162 | — | — | 162 | |||||||||||||||||||||
Net loss for the period | — | — | — | (2,070 | ) | — | (2,070 | ) | ||||||||||||||||||||
Translation adjustment | — | — | — | — | (13 | ) | (13 | ) | ||||||||||||||||||||
Balance at June 30, 2010 | 196,263,630 | 1,756 | 21,020 | (46,199 | ) | 664 | (22,759 | ) | ||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
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MYMETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS OF EUROS)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS OF EUROS)
TOTAL | ||||||||||||
ACCUMULATED | ||||||||||||
FOR THE SIX | FOR THE SIX | DURING THE | ||||||||||
MONTHS ENDED | MONTHS ENDED | DEVELOPMENT | ||||||||||
JUNE 30, 2010 | JUNE 30, 2009 | STAGE | ||||||||||
Cash Flow from Operating Activities | ||||||||||||
Net loss | € | (4,109 | ) | € | (7,654 | ) | € | (46,199 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||||||
Change in the fair value of acquisition- related contingent consideration | 183 | — | (1,431 | ) | ||||||||
Depreciation | 39 | 39 | 651 | |||||||||
Amortization of intangibles | 96 | — | 240 | |||||||||
Goodwill impairment | — | — | 209 | |||||||||
Fees paid in warrants | — | — | 223 | |||||||||
Gain on extinguishment of debt | — | — | (774 | ) | ||||||||
Services and fee paid in common stock | 20 | 66 | 5,244 | |||||||||
Stock compensation expense — options | 162 | — | 162 | |||||||||
Amortization of debt discount | — | — | 210 | |||||||||
Changes in operating assets and liabilities, Receivables | (24 | ) | (3 | ) | 1 | |||||||
Accounts payable and payable to officers and employees | (50 | ) | 3,739 | 2,071 | ||||||||
Taxes and social costs payable | (14 | ) | (2 | ) | 27 | |||||||
Other | 3 | 50 | 14 | |||||||||
Net cash used in operating activities | (3,694 | ) | (3,765 | ) | (39,352 | ) | ||||||
Cash Flows from Investing Activities | ||||||||||||
Patents and other | — | — | (393 | ) | ||||||||
Sale (purchase) of property and equipment | 4 | (151 | ) | (219 | ) | |||||||
Acquisition of subsidiary, net of cash acquired of €58 | — | (4,942 | ) | (4,942 | ) | |||||||
Cash acquired in reverse purchase | — | — | 13 | |||||||||
Net cash provided by (used in) investing activities | 4 | (5,093 | ) | (5,541 | ) | |||||||
Cash Flows from Financing Activities | ||||||||||||
Proceeds from issuance of common stock | — | — | 11,630 | |||||||||
Borrowing from shareholders | — | — | 972 | |||||||||
Increase in notes payable and other short-term advances | 3,421 | 8,644 | 35,920 | |||||||||
Decrease in notes payable and other short-term advances | — | — | (1,490 | ) | ||||||||
Loan fees | — | — | (130 | ) | ||||||||
Net cash provided by financing activities | 3,421 | 8,644 | 46,902 | |||||||||
Effect on foreign exchange rate on cash | (17 | ) | (43 | ) | 664 | |||||||
Net change in cash | (286 | ) | (257 | ) | 2,673 | |||||||
Cash, beginning of period | 2,959 | 509 | — | |||||||||
Cash, end of period | € | 2,673 | € | 252 | € | 2,673 | ||||||
The accompanying notes are an integral part of these financial statements.
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MYMETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010
(UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010
(UNAUDITED)
Note 1. The Company and Summary of Significant Accounting Policies
BASIS OF PRESENTATION
The amounts in the notes are shown in thousands of EURO rounded to the nearest thousand except for share and per share amounts.
The accompanying interim period consolidated financial statements of Mymetics Corporation (the “Company”) set forth herein have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such SEC rules and regulations. The interim period consolidated financial statements should be read together with the audited financial statements and the accompanying notes included in the Company’s latest annual report on Form 10-K for the fiscal year ended December 31, 2009.
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 six-month period ending June 30, 2010 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 have been concentrated in the prevention and treatment of the AIDS virus until it acquired an ongoing malaria vaccine project from one of its close scientific partners. On April 1, 2009 the Company successfully closed its acquisition of Bestewil Holding BV and Mymetics BV (previously Virosome Biologicals BV) and, as a result, has further increased the pipeline of vaccines under development to include (i)Herpes Simplex which is at the pre-clinical stage, (ii)influenza for elderly which is at clinical trial Phase II and is being developed in collaboration with Solvay Pharmaceutical (now Abbott Laboratories), and (iii) Resporatory Syncytial Virus (RSV) which is at the pre-clinical stage. The Company has established a network of partners and sub-contractors to further develop its vaccines, including education centers, research centers, pharmaceutical laboratories and biotechnology companies.
These financial statements have been prepared treating the Company as a development stage company. As of June 30, 2010, the Company is in the initial stages of clinical testing and a commercially viable product is not expected for several more years. As such, the Company has not generated significant revenues. For the purpose of these financial statements, the development stage started May 2, 1990.
These financial statements have also been prepared assuming the Company will continue as a going concern. The Company has experienced significant losses since inception resulting in a deficit accumulated during the development stage of €46,199 at June 30, 2010. Deficits in operating cash flows since inception have been financed through debt and equity funding sources. In order to remain a going concern and continue the Company’s research and development activities, management intends to
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seek additional funding. Management is seeking additional financing but there can be no assurance that management will be successful in any of those efforts.
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 year. Unrealized gains or losses from these translations are reported as a separate component of comprehensive income. Transaction gains or losses are included in general and administrative expenses in the consolidated statements of operations. The translation adjustments do not recognize the effect of income tax because the Company expects to reinvest the amounts indefinitely in operations. The Company’s reporting currency is the Euro because substantially all of the Company’s activities are conducted in Europe.
CASH
Cash deposits are occasionally in excess of insured amounts. No interest was paid for the three months ended June 30, 2010 and 2009, respectively. No interest was paid for the six months ended June 30, 2010 and 2009, respectively.
REVENUE RECOGNITION
Revenue related to the sale of products is recognized when all of the following conditions are met: persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectability is reasonably assured.
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. Based on this review procedure, management has determined that the allowance at June 30, 2010 and at December 31, 2009 are sufficient. The Company charges off receivables to the allowance when management determines that a receivable is not collectible. The Company may retain a security interest in the products sold.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and is depreciated over its estimated useful life on straight-line basis from the date placed in service. Estimated useful lives are usually taken as 3 years.
LICENSE CONTRACT
The license contract was acquired as part of the acquisition of Bestewil. It is amortized over 14 years on a straight-line basis.
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IN-PROCESS RESEARCH AND DEVELOPMENT
In-process research and development (referred to as IPR&D) represents the estimated fair value assigned to research and development projects acquired in a purchased business combination that have not been completed at the date of acquisition and which have no alternative future use. IPR&D assets acquired in a business combination after January 1, 2009, are capitalized as indefinite-lived intangible assets. These assets remain indefinite-lived until the completion or abandonment of the associated research and development efforts. During the period prior to completion or abandonment, those acquired indefinite-lived assets are not amortized but are tested for impairment annually, or more frequently, if events or changes in circumstances indicate that the asset might be impaired.
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets, which include property and equipment, and the license contract, are assessed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. The impairment testing involves comparing the carrying amount to the forecasted undiscounted future cash flows generated by that asset. In the event the carrying value of the assets exceeds the undiscounted future cash flows generated by that asset and the carrying value is not considered recoverable, impairment exists. An impairment loss is measured as the excess of the asset’s carrying value over its fair value, calculated using a discounted future cash flow method. An impairment loss would be recognized in net income in the period that the impairment occurs.
GOODWILL
Goodwill, which represents the excess of purchase price over the fair value of net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value based test. Goodwill is assessed for impairment on an annual basis as of April 1st of each year or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment model prescribes a two-step method for determining goodwill impairment. In the first step, the Company determines the fair value of its reporting unit using an enterprise value analysis. If the net book value of its reporting unit exceeds the fair value, then the second step of the impairment test is performed which requires allocation of the Company’s reporting unit’s fair value to all of its assets and liabilities using the acquisition method prescribed under authoritative guidance for business combinations with any residual fair value being allocated to goodwill. An impairment charge will be recognized only when the implied fair value of the reporting unit’s goodwill is less than its carrying amount. No impairment was necessary based on the test as of April 1, 2010.
CONTINGENT CONSIDERATION
The Company accounts for contingent consideration in a purchase business combination in accordance with applicable guidance provided within the business combination rules. As part of the consideration for the Bestewil acquisition, the Company is contractually obligated to pay additional purchase price consideration upon achievement of certain commercial milestones. Therefore, the Company is required to update the assumptions at each reporting period, based on new developments, and record such amounts at fair value until such consideration is satisfied.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
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TAXES ON INCOME
The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in the tax laws or rates.
The Company reports a liability, if any, for unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Estimated interest and penalties, if any, are recorded as a component of interest expense and other expense, respectively.
The Company has not recorded any liabilities for uncertain tax positions or any related interest and penalties at June 30, 2010 or at December 31, 2009. The Company’s United States tax returns are open to audit for the years ended December 31, 2006 to 2009. The returns for the Luxembourg subsidiary LUXEMBOURG 6543 S.A., are open to audit for the year ended December 31, 2009. The returns for the Swiss subsidiary, Mymetics S.A., are open to audit for the years ended December 31, 2007 to 2009. The returns for the Netherlands subsidiaries, Bestewil B.V. and Mymetics B.V., are open to audit for the year ended December 31, 2009.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding in the period. The weighted average number of shares was 196,263,630 and 195,659,784 for the three months ended June 30, 2010 and 2009, respectively. The weighted average number of shares was 196,212,801 and 195,513,906 for the six months ended June 30, 2010 and 2009, respectively . Diluted earnings per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive securities. 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.
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 shares are issued or outstanding at June 30, 2010.
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.
On April 1, 2009 Mymetics issued an option to Norwood Immunology Limited (“NIL”) as part of its acquisition of Bestewil Holding B.V. (“Bestewil”). See Note 2.
The issuance of common shares for services is recorded at the quoted price of the shares on the date the shares are issued. In the six months ended June 30, 2010, 200,000 shares were issued to individuals as fee for services rendered.
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On June 17 2010, the Board of Directors of Mymetics awarded incentive stock options to the employees and officers of the Company. Incentive stock options were awarded for a total of 3,350,000 shares with an exercise price of USD 0.14 per share, of which 1,850,000 vested immediately and 1,500,000 vest in equal quantities over the next three years. No compensation options were issued in the three and six months ended June 30, 2009.
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, employee receivables, other receivables, accounts payable, payable to officers and employees, taxes and social costs payable, acquisition-related contingent consideration and notes payable. The carrying value of cash, employee receivables, other receivables, accounts payable, payable to officers and employees and taxes and social costs payable approximate their fair value based on the short-term nature of these financial instruments. The carrying value of acquisition-related contingent consideration is equal to fair value since this liability is required to be reported at fair value. Due to the unique nature of the notes payable, management believes it is not practicable to estimate the fair value of these instruments.
CONCENTRATIONS
The Company enters into scientific collaboration agreements with selected partners such as Pevion Biotech Ltd., a Swiss company that granted Mymetics exclusive licenses to use their virosome vaccine delivery technology in conjunction with the Company’s AIDS and malaria preventive vaccines under development. Under this agreement, Pevion Biotech is committed to supply the actual Virosomes and perform their integration with the Company’s antigens, which requires proprietary know-how, at Pevion’s premises. The agreement includes specific mechanisms to mitigate the risk of losing a key component of Mymetics’ vaccines should Pevion become unable to meet its commitment.
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RELATED PARTY TRANSACTIONS
The Company’s general counsel is a member of the Board of Directors. The Company incurred professional fees to the counsel’s law firm during the three and six months ended June 30, 2010, totaling €8 and €72, respectively, of which €20 is payable at June 30, 2010. The professional fees incurred by the Company to the counsel’s law firm during the three and six months ended June 30, 2009, totaled €22 and €69, respectively.
COMMITMENTS
As per an agreement signed on December 22, 2008, PX Therapeutics has granted the license rights of the general know-how of Gp41 manufacturing technology to Mymetics for five years. During this period, the Company pays to PX Therapeutics an annual fee of €200 until the expiration date of December 23, 2013. The second milestone payment of €200 is due on December 23, 2010.
NEW ACCOUNTING PRONOUNCEMENTS
No new accounting pronouncements are expected to have a material impact on the Company’s consolidated financial statements.
Note 2. Acquisition of Bestewil
On April 1, 2009, Mymetics and NIL closed the acquisition of Bestewil Holding B.V. (Bestewil”) from its parent, NIL, under a Share Purchase Agreement pursuant to which Mymetics agreed to purchase all issued and outstanding shares of capital stock (the “Bestewil Shares”) of Bestewil from its parent, NIL, and all issued and outstanding shares of capital stock of Virosome Biologicals B.V. which were held by Bestewil. Mymetics paid NIL €5,000 (the “Cash Consideration”) raised from bridge financing (the “Bridge Loan”)and issued to NIL a convertible redeemable note (the “Note”) in the principal amount of €2,500 due 36 months after the closing date, bearing interest at 5% per annum, convertible into shares of the Company’s common stock at a conversion rate of the lower of (i) $0.80 or (ii) the issue price of the shares of common stock that the Company intends to issue after the closing date for the purpose of raising the necessary funds to repay the bridge loan that the Company expects to issue to pay the Cash Consideration (the “Conversion Price”) and secured by the Company’s pledge of 1/3rd of the Bestewil Shares. In addition, Mymetics granted NIL an option to acquire shares of Mymetics common stock equal to the result obtained by dividing $9,609 by the Conversion Price. If Mymetics had issued shares of capital stock in connection with a financing to repay the Bridge Loan that had more favorable financial rights and preferences than its shares of common stock, NIL had the right, at its election, to purchase those shares in place of shares of Mymetics common stock. However, the conversion price on the option and convertible debt is set at $0.80 since the Company did not issue stock subsequently at a lower price. The result is that the option allows NIL to acquire 12,011,531 shares of common stock.
Further contingent consideration to be paid under the Share Purchase Agreement includes:
• | A payment of up to €2,800 in cash in the event of a license agreement being signed by April 1, 2011 with a third party to access Bestewil intellectual property and know-how in the field of Respiratory Syncytial Virus (“RSV License”); | ||
• | A payment of up to €3,000 in cash should a third party commence a Phase III clinical trial by April 1, 2013 for Mymetics’ Intranasal Influenza Vaccine licensed from Bestewil; |
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• | A payment of 50% of Mymetics’ net royalties received from a Respiratory Syncytial Virus license (RSV license), payable in cash, maximum amount unlimited; and | ||
• | A payment in cash, maximum amount unlimited, of 25% of any net amounts received by Mymetics from a third party Herpes Simplex Virus license (HSV license) based upon Bestewil intellectual property. |
Under the terms of the Share Purchase Agreement, Mymetics has entered into an employment agreement with Antonius Stegmann, CSO of Virosome Biologicals B.V. (renamed Mymetics B.V.).
The acquisition of Bestewil has expanded Mymetics’ current portfolio of vaccines and vaccine candidates.
The acquisition of Bestewil has been recorded as a business acquisition. In a business acquisition, the purchase price of an acquired entity is allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition.
The Company has concluded the measurement period for estimating the fair value of the purchase consideration. The fair value of the purchase consideration for the Bestewil acquisition on April 1, 2009 was as follows:
As | Measurement | |||||||||||
Initially | Period | As | ||||||||||
Recorded | Adjustments | Adjusted | ||||||||||
Cash paid to Norwood | € | 5,000 | € | — | € | 5,000 | ||||||
Convertible note payable issued | 2,500 | — | 2,500 | |||||||||
Equity options issued | 601 | — | 601 | |||||||||
Contingent consideration: | ||||||||||||
Royalties for Influenza Vaccine | — | 1,800 | 1,800 | |||||||||
Royalties for RSV | 700 | 729 | 1,429 | |||||||||
Royalties for HSV | 750 | (429 | ) | 321 | ||||||||
Total purchase consideration | € | 9,551 | € | 2,100 | € | 11,651 | ||||||
The range of the undiscounted amounts the Company could pay in contingent consideration is not determinable since it is based on sales of vaccines that are yet to be developed. The fair value of the contractual obligations to pay the contingent consideration recognized on the acquisition date was determined based on a risk-adjusted, discounted cash flow approach. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The resultant cash flows were discounted using a discount rate of 25%, which the Company believes is appropriate and is representative of a market participant assumption.
The Company’s fair value estimates of the purchase price consideration are assigned to the assets acquired and liabilities assumed based on their estimated fair values as of April 1, 2009:
Purchase Price | ||||
Allocation | ||||
Assets: | ||||
Current assets | € | 90 | ||
License contract (Intranasal Influenza Vaccine) | 2,694 | |||
In-process research and development (HSV and RSV) | 2,266 | |||
Goodwill | 6,671 | |||
Property and equipment | 98 |
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Purchase Price | ||||
Allocation | ||||
Other non-current assets | 7 | |||
Total assets | 11,826 | |||
Liabilities: | ||||
Current liabilities | 175 | |||
Total liabilities | € | 175 | ||
Total purchase consideration | € | 11,651 | ||
The above allocation is final. The license contract will be amortized over 14 years.
Note 3. Intangible Assets
Intangible assets consisted of the following at June 30, 2010 and December 31, 2009:
June 30, 2010 | December 31, 2009 | |||||||
Indefinite-lived intangibles: | ||||||||
In process research and development | € | 2,266 | € | 2,266 | ||||
Definite-lived intangibles: | ||||||||
License contract | € | 2,694 | € | 2,694 | ||||
Less accumulated amortization | (240 | ) | (144 | ) | ||||
2,454 | 2,550 | |||||||
Other intangibles, net | € | 4,720 | € | 4,816 | ||||
Amortization of intangibles amounting to €96 has been recorded during the six months ended June 30, 2010.
Note 4. Acquisition-Related Contingent Consideration
As of June 30, 2010, the Company held a liability for acquisition-related contingent consideration that is required to be measured at fair value on a recurring basis.
The following table presents changes to the Company’s acquisition-related contingent consideration for the period ending June 30, 2010:
Fair Value Measurements | ||||
Using Significant | ||||
Unobservable Inputs | ||||
(Level 3) | ||||
Balance at January 1, 2010 | € | 1,936 | ||
Change in fair value recorded in earnings | 183 | |||
Balance at June 30, 2010 | € | 2,119 | ||
During the period ending June 30, 2010, the fair value of the acquisition-related contingent consideration increased due to the passage of time.
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Note 5. Debt Financing
The Company is focusing its efforts on funding its on-going expenses through high net worth individuals located in Europe. To date, investors in Switzerland have purchased restricted common shares at prices which are at a premium to the market price of Mymetics shares, and have introduced management to other high net worth individuals who have a similar interest in the Company’s science and mission.
In addition to purchasing shares, certain principal shareholders have granted the Company secured convertible notes (in accordance with the Uniform Commercial Code in the State of Delaware), which have a total carrying value of €28,621 including interest due to date. Interest incurred on these notes since inception has been added to the principal amounts.
The details of the advance on loans, convertible notes, loans and contingent liabilities are as follows at June 30, 2010:
Fixed | ||||||||||||||||||||||||
EUR/USD | ||||||||||||||||||||||||
Conversion | Rate for | |||||||||||||||||||||||
1st-Issue | Principal | Duration | Interest | Price | Conversion | |||||||||||||||||||
Lender | Date | Amount | (Note) | Rate | (stated) | Price | ||||||||||||||||||
Round Enterprises Ltd. | 06/29/2010 | € | 2,200 | (5 | ) | 5% pa | None | |||||||||||||||||
Total advance on short term Loans to Related Parties | € | 2,200 | ||||||||||||||||||||||
Round Enterprises Ltd. | 04/03/2009 | € | 4,000 | (4 | ) | 10% pa | US$ | 0.80 | 1.3486 | |||||||||||||||
Eardley Holding A.G. | 04/03/2009 | € | 1,000 | (4 | ) | 10% pa | None | |||||||||||||||||
Total short term Principal Amounts | € | 5,000 | ||||||||||||||||||||||
Accrued Interest | € | 988 | ||||||||||||||||||||||
Total short term Convertible Notes to Related Parties | € | 5,988 | ||||||||||||||||||||||
Eardley Holding A.G. (1) | 06/23/2006 | € | 156 | (2 | ) | 10% pa | US$ | 0.10 | N/A | |||||||||||||||
Anglo Irish Bank S.A. (3) | 10/21/2007 | € | 500 | (2 | ) | 10% pa | US$ | 0.50 | 1.4090 | |||||||||||||||
Round Enterprises Ltd. | 12/10/2007 | € | 1,500 | (2 | ) | 10% pa | US$ | 0.50 | 1.4429 | |||||||||||||||
Round Enterprises Ltd. | 01/22/2008 | € | 1,500 | (2 | ) | 10% pa | US$ | 0.50 | 1.4629 | |||||||||||||||
Round Enterprises Ltd. | 04/25/2008 | € | 2,000 | (2 | ) | 10% pa | US$ | 0.50 | 1.5889 | |||||||||||||||
Round Enterprises Ltd. | 06/30/2008 | € | 1,500 | (2 | ) | 10% pa | US$ | 0.50 | 1.5380 | |||||||||||||||
Round Enterprises Ltd. | 11/18/2008 | € | 1,200 | (2 | ) | 10% pa | US$ | 0.50 | 1.2650 | |||||||||||||||
Round Enterprises Ltd. | 02/09/2009 | € | 1,500 | (2 | ) | 10% pa | US$ | 0.50 | 1.2940 |
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Fixed | ||||||||||||||||||||||||
EUR/USD | ||||||||||||||||||||||||
Conversion | Rate for | |||||||||||||||||||||||
1st-Issue | Principal | Duration | Interest | Price | Conversion | |||||||||||||||||||
Lender | Date | Amount | (Note) | Rate | (stated) | Price | ||||||||||||||||||
Round Enterprises Ltd. | 06/15/2009 | € | 5,500 | (2 | ) | 10% pa | US$ | 0.80 | 1.4045 | |||||||||||||||
Eardley Holding A.G. | 06/15/2009 | € | 100 | (2 | ) | 10% pa | US$ | 0.80 | 1.4300 | |||||||||||||||
Von Meyenburg | 08/03/2009 | € | 200 | (2 | ) | 10% pa | US$ | 0.80 | 1.4400 | |||||||||||||||
Round Enterprises Ltd. | 10/13/2009 | € | 2,000 | (2 | ) | 5% pa | US$ | 0.25 | 1.4854 | |||||||||||||||
Round Enterprises Ltd. | 12/18/2009 | € | 2,200 | (2 | ) | 5% pa | US$ | 0.25 | 1.4338 | |||||||||||||||
Total long term principal Amounts | € | 19,856 | ||||||||||||||||||||||
Accrued Interest | € | 2,777 | ||||||||||||||||||||||
Total long term convertible Notes to Related Parties | € | 22,633 | ||||||||||||||||||||||
Total Convertible Notes to Related Parties | € | 28,621 | ||||||||||||||||||||||
Norwood Secured Loan | 04/03/2009 | € | 2,500 | (6 | ) | 5% pa | US$ | 0.80 1 | .2812 | |||||||||||||||
Total Principal Amount | € | 2,500 | ||||||||||||||||||||||
Accrued Interest | € | 155 | ||||||||||||||||||||||
Total Convertible Note Payable — other | € | 2,655 | ||||||||||||||||||||||
Norwood Contingent Liability | € | 2,119 | (7 | ) | ||||||||||||||||||||
TOTAL ADVANCE ON LOANS, NOTES, LOANS AND CONTINGENT LIABILITY | € | 35,595 | ||||||||||||||||||||||
(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 $190,000. | |
(2) | The earlier of: (i) the date that the Company has sufficient revenues to repay, or (ii) upon an event of default. The loan is secured against IP assets of Mymetics Corporation. | |
(3) | Renamed Hyposwiss Private Bank Genève S.A. and acting on behalf of Round Enterprises Ltd. which is a major shareholder. | |
(4) | The earlier of (i) June 30, 2010 or (ii) upon an event of default. The loan is secured against two third of the IP assets of Bestewil Holding BV and convertible for shares. These two loans matured on June 30 2010. The terms are being renegotatiated without being in default of obligations. A signed agreement with the two parties will be in place by the beginning of September 2010. A preliminary agreement indicates the willingness from both parties to convert the full loan including interest at $0.50. | |
(5) | The earlier of (i) June 30, 2011 or (ii) upon an event of default. The term of the loan agreement started on July 1, 2010. | |
(6) | Under the terms of the acquisition of Bestewil BV, as part of the consideration, the Company issued to Norwood Immunology Limited (“NIL”) a convertible redeemable note (the “Note”) in the principal amount of €2,500 with maturity 36 months after the closing date and bearing interest at 5% per annum. The note is secured against one third of Bestewil shares. |
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(7) | Under the terms of the acquisition of Bestewil BV, as part of the consideration, the Company is committed to make further payments to NIL in the event that certain stated milestones for the development of vaccines are achieved. These have been considered on a risk probability basis. |
Note 6. Equity Financing
The Company expects to continue to rely on its existing high net worth shareholders until at least the end of 2010. Collaboration is ongoing with two reputable private financial organizations in order to create further equity investment by private placement to meet the Company’s expenses during the next 12 months and beyond.
On February 4, 2010, Mymetics engaged a US based investment bank to lead the effort of raising approximately €35 million in a private placement to meet Mymetics’ capital requirements for continued development of its vaccine pipeline.
Note 7. Subsequent Events
The Board of Directors of Mymetics has approved the issuance of 1,550,000 shares of Mymetics common stock related to current and future services provided by a third prty in the field of investor relations. The approval took place on August 5, 2010 and the shares will be issued by the end of August 2010.
The Board of Directors of Mymetics has accepted the resignation of Ernst Luebke as its Chief Financial Officer and has appointed Ronald Kempers, its Chief Operating Officer, as its Chief Financial Officer, effective August 1, 2010. Mr. Luebke remains a member of Mymetics’ Board of Directors and will serve as a consultant to Mymetics through December 31, 2010.
The short term €5 million convertible loans provided by Round Enterprises and Eardley in April 2009 for the acquisition of Bestewil Holding B.V. matured on June 30, 2010. Mymetics management is in negotiation with both parties and a preliminary agreement indicates the willingness from both parties to convert the full loan including interest at US$0.50.
In order to finance the ongoing development of the Company, Mymetics has agreed with Round Enterprises on a new loan of €2.2 million that started July 1, 2010 with 5% interest per year and with a maturity date of June 30, 2011. The entire amount of €2.2 million was received by Mymetics on June 29, 2010, but is reported as advance on current portion of notes payable to related parties in the accompanying balance sheet. Also on July 1 2010, Mymetics issued a warrant to Round Enterprises providing the right to buy 32 million of Mymetics common shares at a price of US$0.25 per share. The warrant is valid from July 1, 2010 until June 30, 2013. The agreement is still to be signed. Round Enterprises has also indicated an intent to provide an additional €1.1 million loan in September 2010 and a E1.1 million loan in October 2010.
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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS
GENERAL
The following discussion and analysis of the results of operations and financial condition of Mymetics Corporation for the periods ended June 30, 2010 and 2009 should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2009 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, 2009 and, to the extent included therein, our quarterly reports on Form 10-Q filed during fiscal year 2009.
SIX MONTHS ENDED JUNE 30, 2010 AND 2009
Revenue was E77 for the six months ended June 30, 2010, of which E75 relate to licensing agreements, and E74 for the six months ended June 30, 2009. This revenue has been earned by the acquired Company “Bestewil Holding/Virosome Biological”.
Costs and expenses decreased to E4,186 for the six months ended June 30, 2010 from E7,728 (-45.8%) for the six months ended June 30, 2009. Research and development expenses decreased to E1,261 in the current period from E4,530 (-72.2%) in the comparative period of 2009. This decrease is mainly due to minimal expenses on malaria after the Phase Ib was successfully completed in Tanzania in early 2010. General and administrative expenses decreased to E1,373 in the six months ended June 30, 2010 from E2,164 (-36.6%) in the comparative period of 2009 due to the due diligence cost for the Bestewil acquisition incurred during the six months ended June 30, 2009.
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The Company reported a net loss of €4,109, or €0.02 per share, for the six months ended June 30, 2010, compared to a net loss of €7,654, or €0.04 per share, for the six months ended June 30, 2009.
THREE MONTHS ENDED JUNE 30, 2010 AND 2009
Revenue was €38 for the three months ended June 30, 2010, of which €37 relate to licensing agreements, and €74 for the three months ended June 30, 2009, of which €61 relate to licensing agreements. This revenue has been earned by the acquired Company “Bestewil Holding/Virosome Biological”.
Costs and expenses decreased to €2,108 for the three months ended June 30, 2010 from E3,697 (-43.0%) for the three months ended June 30, 2009. Research and development expenses decreased to €723 in the current period from €1,728 (-58.2%) in the comparative period of 2009. The decrease in these expenses is mainly due to minimal expenses on malaria after the Phase 1b was successfully completed in Tanzania in early 2010. General and administrative expenses decreased to €680 in the three months ended June 30, 2010 from E1,180 (-42.4%) in the comparative period of 2009 due to the due diligence cost for the Bestewil acquisition incurred during the three months ended June 30, 2009.
The Company reported a net loss of €2,070, or €0.01 per share, for the three months ended June 30, 2010, compared to a net loss of €3,616, or €0.02 per share, for the three months ended June 30, 2009.
LIQUIDITY AND CAPITAL RESOURCES
We had cash of €2,673 at June 30, 2010 compared to €2,959 at December 31, 2009.
We have not generated any material revenues since we commenced our vaccine research and development business in 2001, and we do not anticipate generating any material revenues on a sustained basis unless and until a licensing agreement or other commercial arrangement is entered into with respect to our technology.
As of June 30, 2010, we had an accumulated deficit of approximately €46 million, and we incurred losses of €4,109 in the six-month period ending on that date. These losses are principally associated with the research and development of our HIV vaccine technologies and our malaria vaccine project. We expect to continue to incur expenses in the future for research, development and activities related to the future licensing of our technologies.
Net cash used in operating activities was (€3,694) for the six-month period ended June 30, 2010, compared to (€3,765) for the period ended June 30, 2009.
Investing activities provided €4 during the six months ended June 30, 2010, as compared to using (€5,093) during the six months ended June 30, 2009, mostly due to the acquisition of Bestewil Holding BV.
Financing activities provided cash of €3,421 for the six-month period ended June 30, 2010, compared to €8,644 in the same period last year, primarily from notes payable and advances from shareholders.
Salaries and related payroll costs represent fees for all of our directors other than our employee directors, gross salaries for three of our executive officers, and payments under consulting contracts with two of our officers. Under Executive Employment Agreements with our CFO, CSO and COO, we pay our salaried executive officers a combined amount of €54 per month, exclusive of our contracts for the
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consulting services of Mr. Jacques-François Martin, Professor Marc Girard and Mr Christian Rochet who is currently employed by the Company as Senior Advisor to the President.
Mr. Jacques-François Martin is President and Chief Executive Officer of Mymetics Corporation and Mr. Ronald Kempers has joined the Company as Chief Operating Officer. In addition, our Swiss subsidiary, Mymetics S.A., has on its payroll three assistants to our CEO, CFO and CSO, respectively, as well as one employee performing various administrative services on our behalf. Mymetics BV has one full time executive officer (CSO) plus two full-time assistants. As of June 30, 2010, our Luxembourg affiliate had no employees.
The ten member Scientific Advisery Board (SAB) created in 2009, is made up of emminent intellectuals from around the world with expertise related to the Company’s products as follows:-
Chairman of the Scientific Advisory Board — Dr. Stanley Plotkin, Emeritus Professor Wistar Institute, University of Pennsylvania, consultant to Sanofi Pasteur, developed the rubella vaccine in 1960s; worked extensively on the development and application of other vaccines including polio, rabies, varicella, rotavirus and cytomegalovirus as well as senior roles at the Epidemic Intelligence Service, U.S. Public Health Service; Aventis Pasteur (medical and scientific director); and Sanofi Pasteur (executive advisor).
Vice Chairman of the Scientific Advisory Board — Dr. Marc Girard, has over 20 years of experience in the HIV-1 research field, past Director of the Mérieux Foundation and a consultant to the WHO and former Chairman of EuroVac (European Consortium for HIV vaccine).
• | Dr. Morgane Bomsel, Cochin Institute, France | |
• | Dr. Ruth Ruprecht, Harvard University, Dana Farber Cancer Institute, Boston USA | |
• | Dr. Ronald H. Gray, Johns Hopkins University, Baltimore, USA | |
• | Dr. Malegapuru William Makgoba, University of KwaZulu-Natal, Durban, South Africa | |
• | Dr. Souleymane Mboup, Cheikh Anta DIOP University, Dakar, Sénégal | |
• | Dr. Juliana McElrath, University of Washington, Seattle, USA | |
• | Dr. Odile Puijalon, Pasteur Institute, Paris, France | |
• | Dr. Caetano Reis e Sousa, Cancer Research UK, London, UK |
Monthly fixed and recurring expenses for “Property leases” of €18 represent the monthly lease and maintenance payments to unaffiliated third parties for our offices, of which €2 is related to the office located at 14, rue de la Colombiere in Nyon (Switzerland) (100 square meters), €12 is related to our executive office located at Route de la Corniche 4, 1066 Epalinges in Switzerland (400 square meters), and €4 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 100 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 €3,920 has been incurred on all of the Company’s outstanding notes and advances (see detailed table in note 5).
We intend to continue to incur additional expenditures during the next 12 months for additional research and development of our HIV, Respiratory Syncytial Virus and Herpes Simplex vaccines, while also further developing the R&D of Bestewil. Additional funding requirements during the next 12 months will arise as we continue to develop the pipeline of vaccines and move forward in our clinical trials. We
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expect that funding for the cost of any clinical trials will be available either from debt or equity financings, donors and/or potential pharmaceutical partners before we commence the human trials.
In the past we have financed our research and development activities primarily through debt and equity financings from various parties.
We anticipate our operations will require approximately €3 million until December 31, 2010. To allow the Company to achieve our business plan, we have engaged Gilford Securities to raise on a best efforts basis through its selling group up to US$60,000,000 through the sale of convertible Series A Preferred Stock which has to be authorized by our shareholders through an amendment to our certificate of incorporation. Under the terms of the letter of engagement with Gilford Securities dated February 1, 2010, we will (i) pay a cash fee of 8% of the purchase price of the Series A Preferred Stock sold by Gilford Securities, not including up to US$15,000,000 that we are allowed to sell to investors which are not introduced by Gilford Securities, (ii) issue placement warrants to Gilford Securities to acquire Series A Preferred Stock in an amount equal to 10% of the number of shares of Series A Preferred Stock sold by Gilford Securities that are exercisable for five years at US$1.00 per share, which is equal to the Series A Preferred purchase price and which Series A Preferred conversion shares will have piggyback registration rights, (iii) register the shares of our common stock underlying the Series A Preferred Stock within three months of selling a minimum of US$40,000,000 of Series A Preferred Stock. The proposed Series A Preferred Stock is nonvoting, convertible into shares of our common stock at a price of US$.50 per share, preferred as to liquidation only and will not pay any dividend. We will continue to seek to raise the required capital from donors and/or 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 terms satisfactory to us, or at all, to finance our operations. In the event that we are not able to obtain such additional capital, we would be required to further restrict or even halt our operations.
RECENT FINANCING ACTIVITIES
To date we have generated no material revenues from our business operations. We are unable to predict when or if we will be able to generate revenues from licensing our technology or the amounts expected from such activities. These revenue streams may be generated by us or in conjunction with collaborative partners or third party licensing arrangements, and may include provisions for one-time, lump sum payments in addition to ongoing royalty payments or other revenue sharing arrangements. However, we presently have no commitments for any such payments.
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 research costs associated with our gp41 testing. Provided we can obtain sufficient financing resources, we expect to continue phase I clinical trials for our HIV vaccine in 2010. In accordance with our past strategy, we intend to subcontract such work to “best of class” research teams unless institutions such as the US National Institutes of Health (NIH) decide to conduct such trials at their own expense, which they presently do.
We do not anticipate that our existing capital resources will be sufficient to fund our cash requirements through the next twelve months. We do not have enough cash presently on hand, based upon our current levels of expenditures and anticipated needs during this period, and we will need additional proceeds from additional equity investments such as private placements under Regulation D and Regulation S under the Securities Act of 1933. We are working closely with Gilford Securities, as stated above, to assist us in an effort to generate further equity investments within the
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next twelve months. The extent and timing of our future capital requirements will depend primarily upon the rate of our progress in the research and development of our technologies, our ability to enter into one or more licensing or partnership agreements with major pharmaceutical companies, and the results of future clinical trials.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates which could affect our financial condition and results of operations. We have not entered into derivative contracts for our own account to hedge against such 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
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 not effective due to the fact that financial reporting and complex transactions are not reviewed by a qualified consultant.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
No changes of internal control over financial reporting were made in the six months ended June 30, 2010. The Company is in the process of evaluating to which extend a qualified consultant should be involved to review and disclose complex transactions.
INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS
Our management, including our CEO and CFO, do 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
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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 of deterioration in the degree of compliance with policies or procedures.
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PART II.OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
Neither Mymetics Corporation nor its wholly owned subsidiaries 6543 Luxembourg SA and Mymetics S.A. (formerly Mymetics Management Sàrl), Bestewil BV or Mymetics BV are presently involved in any material litigation incident to our business.
ITEM 1A.RISK FACTORS
Not applicable.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5.OTHER INFORMATION
None.
ITEM 6.EXHIBITS
EXHIBIT | ||
NUMBER | DESCRIPTION | |
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer | |
31.2 | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer | |
32 | Section 1350 Certification of Chief Executive Officer and Chief Financial Officer |
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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.
Dated: August 23, 2010 | MYMETICS CORPORATION | |||
By: | /s/ Jacques-François Martin | |||
President and Chief Executive Officer | ||||
By: | /s/ Ronald Kempers | |||
Chief Financial Officer | ||||