MYMETICS CORP - Quarter Report: 2019 June (Form 10-Q)

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

or

 

 

 

 

MYMETICS CORPORATION

(Exact name of registrant as specified in its charter)

 

DELAWARE		25-1741849
State or Other jurisdiction of		I.R.S. Employer Identification No.
Incorporation or Organization
c/o Mymetics SA		CH-1066
Route de la Corniche 4		Zip Code
Epalinges, Switzerland
Address of Principal Executive Offices

 

 

011 41 21 653 4535

Registrant’s Telephone Number, Including Area Code

 

 

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, Par Value $0.01 per share		MYMX		OTCQB venture stage marketplace

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒    No ☐   

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☒          No ☐

 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer ☐		Accelerated filer ☐
	Non-accelerated filer ☐		Smaller reporting company ☒
	Emerging growth company ☐

  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐         No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:

 

Class		Outstanding at August 13, 2019
Common Stock, $0.01 par value		303,757,622

 

 

 

PART I.    FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

MYMETICS CORPORATION

CONSOLIDATED BALANCE SHEETS

 (UNAUDITED)

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

 

 

	June 30,	December 31,
	2019	2018
ASSETS
Current Assets
Cash	E598	E479
Receivables	190	585
Prepaid expenses	44	37
Total current assets	832	1,101
Property and equipment, net of accumulated depreciation of E444 at June 30, 2019     and E434 at December 31, 2018	26	36
Goodwill	6,671	6,671
	E7,529	E7,808
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable	E48	E75
Non-convertible notes payable and related accrued interest to related parties	4,651	4,002
Convertible notes payable and related accrued interest to related parties	52,057	50,756
Total liabilities	56,756	54,833
Shareholders' Equity (Deficit)
Common stock, U.S. $0.01 par value; 1,000,000,000 shares authorized; issued and outstanding     303,757,622 at June 30, 2019 and at December 31, 2018	2,530	2,530
Preferred stock, U.S. $0.01 par value; 5,000,000 shares authorized; none issued or outstanding	--	--
Additional paid-in capital	34,443	34,441
Accumulated deficit	(86,885)	(84,675)
Accumulated other comprehensive income	685	679
	(49,227)	(47,025)
	E7,529	E7,808

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

MYMETICS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 (UNAUDITED)

(In Thousands of Euros, Except Per Share Data)

 

 

 

	For The Three Months Ended June 30,		For The Six Months Ended June 30,
	2019	2018	2019	2018
Revenue
Grants	E128	E189	E128	E486
	128	189	128	486
Expenses
Research and development	210	271	425	579
General and administrative	249	236	527	513
Bank fee	--	1	1	1
Depreciation	5	8	10	16
Directors' fees	5	5	10	10
Foreign exchange (gain) loss	(33)	138	22	73
	436	659	995	1,192
Operating Loss	(308)	(470)	(867)	(706)
Interest expense	667	657	1,333	1,310
Loss before income tax provision	(975)	(1,127)	(2,200)	(2,016)
Income tax provision	(7)	(5)	(10)	(14)
Net Loss	(982)	(1,132)	(2,210)	(2,030)
Other comprehensive income
Foreign currency translation adjustment	1	4	6	3
Comprehensive loss	E(981)	E(1,128)	E(2,204)	E(2,027)
Basic earnings per share	E(0.00)	E(0.00)	E(0.01)	E(0.01)

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

MYMETICS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)

 (UNAUDITED)

 (In Thousands of Euros)

 

 

	Three and Six-month Period Ended June 30, 2018
	Common Stock	Additional Paid in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income	Total
January 1, 2018	E2,530	E34,428	E(80,503)	E667	E(42,878)
Stock compensation expense		6			6
Net loss			(898)		(898)
Other comprehensive loss:
Translation adjustment				(1)	(1)
March 31, 2018	E2,530	E34,434	E(81,401)	E666	E(43,771)
Stock compensation expense		2			2
Net loss			(1,132)		(1,132)
Other comprehensive loss:
Translation adjustment				4	4
June 30, 2018	E2,530	E34,436	E(82,533)	E670	E(44,897)

 

	Three and Six-month Period Ended June 30, 2019
	Common Stock	Additional Paid in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income	Total
January 1, 2019	E2,530	E34,441	E(84,675)	E679	E(47,025)
Stock compensation expense		2			2
Net loss			(1,228)		(1,228)
Other comprehensive loss:
Translation adjustment				5	5
March 31, 2019	E2,530	E34,443	E(85,903)	E684	E(48,246)
Net loss			(982)		(982)
Other comprehensive loss:
Translation adjustment				1	1
June 30, 2019	E2,530	E34,443	E(86,885)	E685	E(49,227)

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

MYMETICS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In Thousands of Euros)

 

	For The Six Months Ended	For The Six Months Ended
	June 30, 2019	June 30, 2018
Cash Flow from Operating Activities
Net loss	E(2,210)	E(2,030)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation	10	16
Stock compensation expense – options	2	8
Changes in operating assets and liabilities
Receivables	395	(65)
Accrued interests on notes payable	1,350	1,379
Accounts payable	(27)	(210)
Deferred revenue from grants	--	(231)
Other	(7)	(7)
Net cash used in operating activities	(487)	(1,140)
Cash Flows from Financing Activities
Increase in notes payable	600	800
Net cash provided by financing activities	600	800
Effect on foreign exchange rate on cash	6	3
Net change in cash	119	(337)
Cash, beginning of period	479	1,180
Cash, end of period	E598	E843

 

 

The accompanying notes are an integral part of these consolidated financial statements. 

 

MYMETICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2019

(UNAUDITED)

 

 

Note 1. The Company and Summary of Significant Accounting Policies

 

 

BASIS OF PRESENTATION AND GOING CONCERN

 

The amounts in the notes are shown in thousands of EURO, unless otherwise noted, and rounded to the nearest thousand except for share and per share amounts.

 

  The accompanying interim period consolidated financial statements of Mymetics Corporation (the "Company") 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, 2018.

 

  The accompanying financial statements of the Company are unaudited. However, in the opinion of the Company, the unaudited consolidated financial statements contained herein contain all adjustments necessary to present a fair statement of the results of the interim periods presented. All adjustments made during the three-month period ending June 30, 2019 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) which is at the pre-clinical stage and currently on hold and (iv) Chikungunya virus at the discovery stage and currently on hold. In addition to these vaccine candidates the Company is working with partners on pre-clinical immunotherapy studies in the fields of allergy and oncology.

 

  As of June 30, 2019, the Company was engaged in the pre-clinical testing of some of its vaccine candidates and a commercially viable product is not expected for several more years. The Company is working on several research projects with commercial partners for immunotherapy in the fields of allergy and oncology. The allergy project is in collaboration with Anergis SA, for which the Company prepared virosome 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 in December 2018 and Anergis has now a time limited exclusive option until December 2019 to enter into a License and Collaboration Agreement (“LCA”) with Mymetics for the use of virosomes in the field of allergies that will require Anergis to raise funds from third parties to pay Mymetics the license fee under the terms of the LCA and 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 one of the fastest growing markets in the pharmaceutical industry.

 

  On April 29, 2019, the National Institutes of Health (NIH) awarded the Company and Texas Biomedical Research Institute (Texas Biomed) a five-year grant for the project called “Cold Chain-independent, Needle-free Mucosal Virosomal Vaccine to Prevent HIV-1 Acquisition at Mucosal Levels”. The project started on May 1, 2019 and is planned for five years. The overall budget related to the project is USD 8.67 million, with USD 1.9 million approved for the first year. The overall portion of the grant allocated to the Company is USD 6.76 million, with USD 1.2 million approved for the first year. It is co-led by Texas Biomed and the Company, and includes sub-awards to the University of Louisiana at Lafayette, and the University of Virginia. First results are expected to be reported in 2020.

 

The project has the objective to prepare the Company’s, promising HIV-1 vaccine candidate for clinical trials. The vaccine is created to induce protective mucosal antibodies acting as a frontline defense against sexual HIV transmission. This newly awarded grant from the NIH can continue some of the developments that were achieved during the European Horizon 2020 project.

 

 

  These consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has experienced negative cash flows from operations and significant losses since inception resulting in an accumulated deficit of E86,885 at June 30, 2019. Further, the Company’s current liabilities exceed its current assets by E55,924 as of June 30, 2019, 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

 

The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany accounts and transactions have been eliminated.

 

NEW ACCOUNTING PRONOUNCEMENT

 

  In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-02, Leases: Topic 842 (ASU 2016-02), which replaces existing lease guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use (ROU) assets and corresponding lease liabilities on the balance sheet. The new standard initially required application with a modified retrospective approach to each prior reporting period presented with various optional practical expedients. In July 2018, this requirement was amended with the issuance of Accounting Standards Update No. 2018-11, Leases: Topic 842: Targeted Improvements (ASU 2018-11), which permits an additional (and optional) transition method to adopt the new leases standard.

 

  The Company adopted ASU 2016-02 and related ASUs, collectively ASC 842, on January 1, 2019 using the optional transition method. Consequently, periods before January 1, 2019 will continue to be reported in accordance with the prior accounting guidance, ASC 840, Leases.

 

  The Company elected the package of practical expedients, which permits the Company to retain prior conclusions about lease identification, lease classification and initial direct costs for leases that commenced before January 1, 2019. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify. The Company also elected the practical expedient to combine lease and non-lease components for all of its leases. Adoption of ASC 842 did not affect the Company’s consolidated financial statements’ at January 1, 2019, as one of its leases is considered short-term and the other is not material to the consolidated financial statements.

 

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 foreign exchange (gain) loss 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

 

  The Company consider all highly liquid investments purchased with maturities of three months or less to be cash equivalents. Cash deposits are occasionally in excess of insured amounts.

 

REVENUE RECOGNITION

 

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.

Grant Revenue - HORIZON 2020

  In April 2015, the Company was selected to receive project grants with a total of E8.4 million. A total of E5.3 million 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) 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 attributable to the Company’s activities, with the remaining balance going to the consortium partners and has not been part of the Company’s financial statements. The project started on May 4, 2015 and officially ended on November 3, 2018, after which a final report had been prepared, presented and submitted to the EU for a total costs declared of E8,262 for the total project and E3,673 for the Company.

  The amounts mentioned in the following statements are purely related to the Company and not to the other partners in the project: The Company received a pre-payment from the two granting organizations for a total value of E1,554 in May 2015, a second tranche of E917 from the EU was received in December 2016, and E614 from “SERI” was received in April 2017, which was used to finance the next reporting covering the period of November 2016 to October 2017. In November 2017, the Company submitted the second report and a new funding request, which resulted in another tranche of funding from the EU of E77 received in February 2018. This brought the total funding received at December 31, 2018 to E3,162, which represented 82% of the awarded grant contribution. On December 21, 2018, the final report was submitted to the EU with a total cost incurred by the Company of E3,673, which represented 96% of the maximum grant. The report has been audited and validated by the EU and SERI for a total eligible cost of E3,368. As a result, the Company received a final amount of E164 by the EU in February 2019 and E342 by SERI in March 2019. No revenue has been recognized related to this grant during the period ended June 30, 2019.

Grant Revenue - NIH

  On April 29, 2019, the National Institutes of Health (NIH) awarded the Company and Texas Biomedical Research Institute (Texas Biomed) a five-year grant for the project called “Cold Chain-independent, Needle-free Mucosal Virosomal Vaccine to Prevent HIV-1 Acquisition at Mucosal Levels”. The project started on May 1, 2019 and is planned for five years. The overall budget related to the project is USD 8.67 million, with USD 1.9 million approved for the first year. The overall portion of the grant allocated to the Company is USD 6.76 million, with USD 1.2 million approved for the first year. It is co-led by Texas Biomed and the Company, and includes sub-awards to the University of Louisiana at Lafayette, and the University of Virginia. First results are expected to be reported in 2020.

 

 The amounts mentioned in the following statements are purely related to the Company and not to the other partners in the project: The funds are released by Texas Biomed within 45 days upon receipt of a monthly invoice from the Company. The cost incurred by the Company as of June 30, 2019 has been invoiced to Texas Biomed for a total of US$145 (E128) and recognized as revenue.

 

RECEIVABLES

Receivables are stated at their outstanding principal balances. Management reviews the collectability of receivables on a periodic basis and determines the appropriate amount of any allowance. There was no allowance necessary at June 30, 2019 or December 31, 2018. 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 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

 

Research and development costs are expensed as incurred.

 

TAXES ON INCOME

 

The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in the tax laws or rates.

 

The Company reports a liability, if any, for unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Estimated interest and penalties, if any, are recorded as a component of interest expense and other expense, respectively.

 

The Company has not recorded any liabilities for uncertain tax positions or any related interest and penalties at June 30, 2019, or December 31, 2018. 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. The returns for the Netherlands subsidiaries, Bestewil B.V. and Mymetics B.V., are open to audit for the year ended December 31, 2018.

 

EARNINGS PER SHARE

 

  Basic earnings per share is computed by dividing net income or loss attributable to common shareholders by the weighted average number of common shares outstanding in the period. Diluted earnings per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive securities. For the periods ended June 30, 2019 and 2018, options and convertible debt were not included in the computation of diluted earnings per share because their effect would be anti-dilutive due to net losses incurred under the treasury stock method.

 

  For the three and six months ended June 30, 2019, the basic weighted and diluted average number of shares was 303,757,622. The total potential number of shares issuable of 678,083,281 at June 30, 2019 includes 648,983,281 potential issuable shares related to convertible loans, and 29,100,000 potential issuable shares related to outstanding stock options granted to employees.

 

For the three and six months ended June 30, 2018, the basic weighted and diluted average number of shares was 303,757,622. The total potential number of shares issuable of 641,483,604 at June 30, 2018 includes 612,383,604 potential issuable shares related to convertible loans, and 29,100,000 potential issuable shares related to outstanding stock options granted to employees.

 

 

PREFERRED STOCK

 

The Company has authorized 5,000,000 shares of preferred stock that may be issued in several series with varying dividend, conversion and voting rights. No preferred shares are issued or outstanding at June 30, 2019 or December 31, 2018.

 

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 six months ended June 30, 2019 nor in the six months ended June 30, 2018.

 

During the three month periods ended June 30, 2019 and 2018, stock compensation expense amounted to E0 and E2, respectively. Stock compensation expense amounted to E2 and E8 during the six month periods ended June 30, 2019 and 2018, respectively, and is included in the consolidated statements of comprehensive loss within general and administrative expenses.

 

ESTIMATES

 

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

FAIR VALUE MEASUREMENTS

 

Fair value guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

 

FAIR VALUES OF FINANCIAL INSTRUMENTS

 

The Company generally has the following financial instruments: cash, receivables, accounts payable, and notes payable. The carrying value of cash, receivables and accounts payable, approximates their fair value based on the short-term nature of these financial instruments. Management believes that it is not practicable to estimate the fair value of the notes payable due to the unique nature of these instruments.

 

CONCENTRATIONS

 

  The Company derived 100% of grant revenue for the three and six month periods ended June 30, 2019 and June 30, 2018 from one grantor, respectively.

 

RELATED PARTY TRANSACTIONS

 

Mr. Ernest M. Stern, the Company’s outside U.S. counsel, is both a director of the Company and is a partner in Culhane Meadows PLLC, the firm retained as legal counsel by the Company. The Company incurred professional fees to the counsel's law firms totaling E13 and E16 for the six months ended June 30, 2019 and 2018, respectively.

 

Two of the Company’s major shareholders have granted secured convertible notes and short term convertible notes and promissory notes, which have a total carrying amount of E56,310 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 term notes, which have a total carrying value of E56,708 including interest due to date. Interest incurred on these notes since inception has been added to the principal amounts.

 

   The details of the convertible notes and loans are as follows at June 30, 2019:

 

						Fixed
					Conversion	Rate
Lender	1st-Issue	Principal	Duration	Interest	Price	EUR/USD
Price	Date	Amount	(Note)	Rate	(stated)	Conversion
Eardley Holding A.G. (1)	06/23/2006	E167	(2)	10% pa	$0.10	N/A
Anglo Irish Bank S.A.(3)	10/21/2007	E500	(2)	10% pa	$0.50	1.4090
Round Enterprises Ltd.	12/10/2007	E1,500	(2)	10% pa	$0.50	1.4429
Round Enterprises Ltd.	01/22/2008	E1,500	(2)	10% pa	$0.50	1.4629
Round Enterprises Ltd.	04/25/2008	E2,000	(2)	10% pa	$0.50	1.5889
Round Enterprises Ltd.	06/30/2008	E1,500	(2)	10% pa	$0.50	1.5380
Round Enterprises Ltd.	11/18/2008	E1,200	(2)	10% pa	$0.50	1.2650
Round Enterprises Ltd.	02/09/2009	E1,500	(2)	10% pa	$0.50	1.2940
Round Enterprises Ltd.	06/15/2009	E5,500	(2,4)	10% pa	$0.80	1.4045
Eardley Holding A.G.	06/15/2009	E100	(2,4)	10% pa	$0.80	1.4300
Von Meyenburg	08/03/2009	E200	(2)	10% pa	$0.80	1.4400
Round Enterprises Ltd.	10/13/2009	E2,000	(2)	5% pa	$0.25	1.4854
Round Enterprises Ltd.	12/18/2009	E2,200	(2)	5% pa	$0.25	1.4338
Round Enterprises Ltd.	08/04/2011	E1,055	(5,6)	10% pa	$0.034	N/A
Eardley Holding A.G.	08/04/2011	E264	(5,6)	10% pa	$0.034	N/A
Round Enterprises Ltd.	11/08/2011	E400	(6)	10% pa	$0.034	1.3787
Eardley Holding A.G.	11/08/2011	E100	(6)	10% pa	$0.034	1.3787
Round Enterprises Ltd.	02/10/2012	E1,000	(6)	10% pa	$0.034	1.3260
Eardley Holding A.G.	02/14/2012	E200	(6)	10% pa	$0.034	1.3260
Round Enterprises Ltd.	04/19/2012	E322	(6)	10% pa	$0.034	1.3100
Eardley Holding A.G.	04/19/2012	E80	(6)	10% pa	$0.034	1.3100
Round Enterprises Ltd.	05/04/2012	E480	(6)	10% pa	$0.034	1.3152
Eardley Holding A.G.	05/04/2012	E120	(6)	10% pa	$0.034	1.3152
Round Enterprises Ltd.	09/03/2012	E200	(6)	10% pa	$0.034	1.2576
Eardley Holding A.G.	09/03/2012	E50	(6)	10% pa	$0.034	1.2576
Round Enterprises Ltd.	11/14/2012	E500	(6)	10% pa	$0.034	1.2718
Eardley Holding A.G.	12/06/2012	E125	(6)	10% pa	$0.034	1.3070
Round Enterprises Ltd.	01/16/2013	E240	(6)	10% pa	$0.034	1.3318
Eardley Holding A.G.	01/16/2013	E60	(6)	10% pa	$0.034	1.3318
Round Enterprises Ltd.	03/25/2013	E400	(6)	10% pa	$0.037	1.2915
Eardley Holding A.G.	04/14/2013	E150	(6)	10% pa	$0.034	1.3056
Round Enterprises Ltd.	04/14/2013	E600	(6)	10% pa	$0.034	1.3056
Eardley Holding A.G.	05/15/2013	E170	(6)	10% pa	$0.037	1.2938
Round Enterprises Ltd.	05/15/2013	E680	(6)	10% pa	$0.037	1.2938
Eardley Holding A.G.	06/24/2013	E60	(6)	10% pa	$0.025	1.3340
Round Enterprises Ltd.	06/24/2013	E240	(6)	10% pa	$0.025	1.3340
Eardley Holding A.G.	08/05/2013	E80	(6)	10% pa	$0.018	1.3283
Round Enterprises Ltd.	08/05/2013	E320	(6)	10% pa	$0.018	1.3283
Eardley Holding A.G.	03/01/2017	E230	(2)	2.5% pa	N/A	N/A
Round Enterprises Ltd.	03/01/2017	E920	(2)	2.5% pa	N/A	N/A
Eardley Holding A.G.	10/18/2017	E230	(2)	2.5% pa	N/A	N/A
Round Enterprises Ltd.	10/18/2017	E920	(2)	2.5% pa	N/A	N/A
Eardley Holding A.G.	06/01/2018	E160	(7)	2.5% pa	N/A	N/A
Round Enterprises Ltd.	06/01/2018	E640	(7)	2.5% pa	N/A	N/A
Eardley Holding A.G.	11/10/2018	E160	(7)	2.5% pa	N/A	N/A
Round Enterprises Ltd.	11/10/2018	E640	(7)	2.5% pa	N/A	N/A
Eardley Holding A.G.	06/15/2018	E120	(8)	2.5% pa	N/A	N/A
Round Enterprises Ltd.	06/15/2018	E480	(8)	2.5% pa	N/A	N/A
Total Short Term Principal Amounts		E32,263
Accrued Interest		E24,445
TOTAL LOANS AND NOTES		E56,708

 

 

 

(1) Private investment company of Dr. Thomas Staehelin, member of the Board of Directors and of the Audit Committee of the Company. Face value is stated in U.S. dollars at $190.

 

(2) This maturity date is automatically prolonged for periods of three months, unless called for repayment.

 

(3) Renamed Hyposwiss Private Bank Genève S.A. and acting on behalf of Round Enterprises Ltd. which is a major shareholder.

 

(4) The loan is secured against 2/3rds of the IP assets of Bestewil Holding BV and against all property of the Company.

 

(5) The face values of the loans are stated in U.S. dollars at $1,200 and $300, respectively.

 

(6) This maturity date is automatically prolonged for periods of three months, unless called for repayment. The conversion price per share is determined by the lower of (i) reducing by 10% the price per share of the Company’s common stock paid by the investors in connection with an investment in the Company of not less than US$20,000, or (ii) at the stated conversion price using a fixed exchange rate which are noted in the table above.

 

(7) On June 1, 2018, Round Enterprises Ltd. and Eardley Holding AG each provided two promissory Notes for a total of E1,280 and E320 in two tranches, respectively, with a 2.5% interest per annum. The first tranche of the promissory Notes of E640 and E160, respectively, were provided immediately. The second tranche of the promissory notes of E640 and E160, respectively, were provided on November 10, 2018 with a 2.5% interest per annum. The maturity date of these promissory notes to follow the same principle of other convertible loans and is the end of a calendar quarter in which the Company receives a written request from the lender for repayment of the unpaid principal and accrued interest due under the Notes.

 

(8) On June 15, 2019, Round Enterprises Ltd. and Eardley Holding AG each provided a promissory Note for a total of E600, with a 2.5% interest per annum. The promissory Notes of E480 and E120, respectively, were provided immediately. The maturity date of these promissory notes to follow the same principle of other convertible loans and is the later of (i) December, 31, 2019, or (ii) the end of a subsequent calendar quarter in which the Company receives a written request from the lender for repayment of the unpaid principal and accrued interest due under the Notes.

 

 

Note 3. Subsequent Events

 

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 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.

 

Under the terms of the Agreement Mymetics receives an exclusive and royalty free, worldwide license to use the Upperton background IP for the development, research, sale or in/out license for virus-like particle vaccines that use the foreground IP rights. All title, right and interest in and to all foreground IP rights vests in Mymetics for such development, research, sale or in/out license, and Mymetics is free to use and exploit such foreground IP rights.

 

Mymetics has provided Upperton the non-exclusive license to manufacture virus-like particle based vaccines for third parties for indications other than respiratory viruses, certain allergies, HIV, malaria and chikungunya.

 

For these foreground IP licenses, the parties have agreed to pay each other a certain low single digit percentage of revenues, license fees and royalties that each of the parties receives from their exploitation.

 

Note 4. Leases

 

The facility lease agreement for Epalinges, Switzerland, is automatically renewed month by month with a notice period of three months. The related rent is paid monthly in the amount of E4 and is considered a short-term lease. The facility lease agreement for Leiden, The Netherlands, runs until March 31, 2020 and can be terminated with a six months' notice period. The related rent is paid monthly in the amount of E9. This lease is not considered short-term, however, the effect of recording the right to use asset and related liability are not material to the consolidated financial statements. The Company doesn't have any other operating lease for its research and development facilities, corporate headquarter, offices and equipment.

 

 

 

GENERAL

 

The following discussion and analysis of the results of operations and financial condition of the Company for the periods ended June 30, 2019 and 2018 should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2018 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, 2018 and, to the extent included therein, our quarterly reports on Form 10-Q filed during fiscal year 2018.

 

THREE MONTHS ENDED JUNE 30, 2019 AND 2018

 

For the three months ended June 30, 2019 revenue was E128, related to the revenue recognized for the work performed under the “Cold Chain-independent, Needle-free Mucosal Virosomal Vaccine to Prevent HIV-1 Acquisition at Mucosal Levels” grant (“NIH grant”) provided by the NIH via Texas Biomedical Institute, and E189 for the three months ended June 30, 2018, mainly related to the revenue recognized for the work performed under the Horizon 2020 grants.

 

Costs and expenses decreased to E436 for the three months ended June 30, 2019 from E659 (-33.8%) for the three months ended June 30, 2018, mainly due to forex revaluation gain of existing US$ based shareholder loans of (E33) incurred during the three months ended June 30, 2019, while a forex revaluation loss of existing US$ based shareholder loans of E138 incurred during the three months ended June 30, 2018.

 

  Research and development expenses decreased to E210 in the current period from E271 (-22.5%) in the comparative period of 2018, mainly due to subcontracting services in relation with the Horizon 2020 Maciviva project, which ended in November 2018.

 

General and administrative expenses increased to E249 in the three months ended June 30, 2019 from E236 (5.5%) in the comparative period of 2018.

 

Interest expense increased to E667 for the three months ended June 30, 2019 from E657 for the three months ended June 30, 2018 related to an increase in existing loans from related parties.

 

The Company reported a net loss of (E982), or (E0.00) per share, for the three months ended June 30, 2019, compared to a net loss of (E1,132), or (E0.00) per share, for the three months ended June 30, 2018.

 

 

SIX MONTHS ENDED JUNE 30, 2019 AND 2018

 

Revenue was E128 for the six months ended June 30, 2019 related to the revenue recognized for the work performed under the NIH grant provided by the NIH via Texas Biomedical Institute, and E486 for the six months ended June 30, 2018, related to the revenue recognized for the work performed under the Horizon 2020 grants.

 

Costs and expenses decreased to E995 for the six months ended June 30, 2019 from E1,192 (-16.5%) for the six months ended June 30, 2018, mainly due to subcontracting services during the same period in 2018, related to the Horizon 2020 Maciviva project.

 

Research and development expenses decreased to E425 in the current period from E579 (-26.6%) in the comparative period of 2018, mainly due to higher subcontracting services during the same period in 2018, related to the Horizon 2020 Maciviva project.

 

General and administrative expenses increased to E527 in the six months ended June 30, 2019 from E513 (2.7%) in the comparative period of 2018.

 

Foreign exchange revaluation generated a net loss of E22 and E73 during the six months ended June 30, 2019 and 2018, respectively, which is due to the revaluation of existing US$ based loans from related parties and US$ cash position.

 

The Company reported a net loss of (E2,210), or (E0.01) per share, for the six months ended June 30, 2019, compared to a net loss of (E2,030), or (E0.01) per share, for the six months ended June 30, 2018.

 

LIQUIDITY AND CAPITAL RESOURCES

 

We had cash of E598 at June 30, 2019 compared to E479 at December 31, 2018.

 

  During 2018 our revenue has been generated through the Horizon 2020 project, which has now come to an end. For 2019, besides revenue recognized under the NIH grant project, new significant revenues will 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 June 30, 2019, we had an accumulated deficit of approximately E87 million, and had net loss of E2,210 in the six 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 in operating activities was E487 and E1,140 for the six month period ended June 30, 2019 and 2018, respectively. The decrease was mainly due to the subcontracting services paid during the six month period ending June 30, 2018 and final funding amount received during the six month period ending June 30, 2019, both related to the Maciviva project.

 

Net cash used in investing activities was NIL during the six months ended June 30, 2019 and 2018.

 

Financing activities provided net cash of E600 and E800 for the six months ended June 30, 2019 and 2018, respectively, both related to promissory notes from our main investors.

 

  Salaries and related payroll costs represent gross salaries for two executives, our CSO of Mymetics BV and seven employees. Under Executive Employment Agreements with our CEO and two CSOs, we pay our executive officers a combined amount of E65 per month.

 

  Our Swiss subsidiary, Mymetics S.A., has, 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, two 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 E800 of cash in the year ending December 31, 2019. 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 E24,445 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 six month period ending June 30, 2019, our principal source of funds has been promissory notes received from our two main investors and the final payment for the Maciviva project.

  On April 29, 2019, the National Institutes of Health (NIH) awarded the Company and Texas Biomedical Research Institute (Texas Biomed) a five-year grant for the project called “Cold Chain-independent, Needle-free Mucosal Virosomal Vaccine to Prevent HIV-1 Acquisition at Mucosal Levels”. The project started on May 1, 2019 and is planned for five years. The overall budget related to the project is USD 8.67 million, with USD 1.9 million approved for the first year. The overall portion of the grant allocated to the Company is USD 6.76 million, with USD 1.2 million approved for the first year. It is co-led by the Texas Biomed and the Company, and includes sub-awards to the University of Louisiana at Lafayette, and the University of Virginia. First results are expected to be reported in 2020.

  We have filed or are in the process of filing several new grant applications with 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, we will need additional funding through future collaborative arrangements, licensing arrangements, and debt and equity financings under Regulation D and Regulation S under the Securities Act of 1933. We do not know whether additional financing will be available on commercially acceptable terms when needed.

  If 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 six months ended June 30, 2019.

 

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.

 

 

 

 

Neither we, nor our wholly owned subsidiaries, Mymetics S.A. and Bestewil Holding B.V., nor its subsidiary Mymetics B.V., are presently involved in any litigation incident to our business.

 

 

Not Applicable

 

 

None

 

 

None.

 

 

None.

 

 

None.

 

 

EXHIBIT NUMBER		DESCRIPTION
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief
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
101.INS		Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

 

SIGNATURES

 

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

 

	MYMETICS CORPORATION
Dated:  August 13, 2019	By:	/s/ Ronald Kempers
		Chief Executive Officer / Chief Financial Officer