UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO _________
COMMISSION FILE NUMBER: 000-25132
MYMETICS CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 25-1741849
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
European Executive Office
14, rue de la Colombiere
1260 Nyon (Switzerland)
(Address of principal executive offices)
011 41 22 363 13 10
(Registrant's telephone number, including area code)
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 X No
--- ---
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
--- ---
Indicate by check mark whether the Registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes No X
--- ---
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 April 28, 2006
----- ------------------------------
Common Stock, $0.01 95,020,464
par value
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MYMETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS OF EUROS)
March 31, December 31,
2006 2005
-------- --------
ASSETS
Current Assets
Cash E 14 E 70
Receivables 42 42
Prepaid expenses 2 2
-------- --------
Total current assets 58 114
Patents 50 52
-------- --------
E 108 E 166
======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
Current Liabilities
Accounts payable E 1,942 E 2,095
Taxes and social costs payable 15 15
Current portion of notes payable 3,815 3,754
Other 296 301
-------- --------
Total current liabilities 6,068 6,165
Payable to Shareholders 242 242
Note Payable, less current portion 39 39
-------- --------
Total liabilities 6,349 6,446
Shareholders' Equity (Deficit)
Common stock, U.S. $.01 par value; 495,000,000 shares
authorized; issued and outstanding
95,020,464 at March 31, 2006 and
82,670,464 at December 31, 2005 855 778
Common stock issuable; 626,800 shares 84 59
Preferred stock, U.S. $.01 par value; 5,000,000 shares
authorized; none issued or outstanding -- --
Additional paid-in capital 6,536 6,227
Deficit accumulated during the development stage (14,469) (14,087)
Accumulated other comprehensive income 753 743
-------- --------
(6,241) (6,280)
-------- --------
E 108 E 166
======== ========
The accompanying notes are an integral part of these financial statements.
MYMETICS CORPORATION
(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
MARCH 31, 2006 MARCH 31, 2005 DEVELOPMENT STAGE
-------------- -------------- -----------------
Revenue
Sales E -- E -- E 224
Interest -- -- 34
-------- -------- --------
-- -- 258
-------- -------- --------
Expenses
Research and development 96 245 5,182
General and administrative 199 472 6,599
Bank fee -- -- 935
Interest 62 53 1,026
Goodwill impairment -- -- 209
Amortization 25 15 486
Directors' fees -- -- 274
Other -- -- 10
-------- -------- --------
382 785 14,721
-------- -------- --------
Loss before income tax provision (382) (785) (14,463)
Income tax provision -- -- 6
-------- -------- --------
Net loss (382) (785) (14,469)
Other comprehensive income
Foreign currency translation
adjustment 10 (20) 753
-------- -------- --------
Comprehensive loss E (372) E (805) E(13,716)
======== ======== ========
Basic and diluted loss per share E (0.00) E (0.01)
======== ========
The accompanying notes are an integral part of these financial statements.
MYMETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS OF EUROS)
FOR THE THREE FOR THE THREE TOTAL ACCUMULATED
MONTHS ENDED MONTHS ENDED DURING THE
MARCH 31, 2006 MARCH 31, 2005 DEVELOPMENT STAGE
-------------- -------------- -----------------
Cash flow from operating activities
Net Loss E (382) E (785) E (14,469)
Adjustments to reconcile net loss to
net cash used in operating activities
Amortization 25 15 486
Goodwill impairment -- -- 209
Fees paid in warrants -- -- 223
Services and fee paid in common stock 55 379 1,983
Amortization of debt discount -- -- 210
Changes in current assets and
liabilities, net of effects
from reverse purchase
Decrease(increase) in receivable -- -- (4)
Increase(decrease) in accounts payable (153) 184 1,644
Increase(decrease) in taxes and -- -- 15
social costs payable
Other (5) -- 342
-------- -------- --------
Net cash used in operating activities (460) (207) (9,361)
-------- -------- --------
Cash flows from investing activities
Patents and other (23) -- (416)
Cash acquired in reverse purchase -- -- 13
-------- -------- --------
Net cash used in investing activities (23) -- (403)
-------- -------- --------
Cash flows from financing activities
Proceeds from issuance of common stock 356 -- 4,375
Borrowing from shareholders -- -- 242
Increase in note payable and other
short-term advances 61 235 4,538
Loan fees -- -- (130)
-------- -------- --------
Net cash provided by financing activities 417 235 9,025
-------- -------- --------
Effect on foreign exchange rate on cash 10 (20) 753
-------- -------- --------
Net change in cash (56) 8 14
Cash, beginning of period 70 -- --
-------- -------- --------
Cash, end of period E 14 E 8 E 14
======== ======== ========
The accompanying notes are an integral part of these financial statements.
MYMETICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2006
(UNAUDITED)
Note 1. The Company and Summary of Significant Accounting Policies
Basis of Presentation
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, 2005.
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 ended March 31, 2006 were of a normal and recurring nature.
The amounts presented for the three month period ended March 31, 2006, are not
necessarily indicative of the results of operations for a full year.
The amounts in the notes are rounded to the nearest thousand of Euros except for
per share amounts.
Mymetics Corporation ("the Company") was created for the purpose of engaging in
research and development of human health products. Its main research efforts
have been concentrated in the prevention and treatment of the HIV-AIDS virus.
The Company has established a network which enables it to work with 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 March 31, 2006, the Company had not performed
any human clinical testing and revenues obtained from the sale or licensing of
the Company's technology are not expected before 2007 at the earliest. As such,
the Company has not generated significant revenues. Revenues reported by the
Company consist of incidental serum by-products of the Company's research and
development activities and interest income. For the purpose of these financial
statements, the development stage started May 2, 1990.
These financial statements have been prepared assuming the Company will continue
as a going concern. The Company has experienced significant losses since
inception resulting in a deficit in shareholders' equity (deficit) of E6,241 at
March 31, 2006. 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 seek additional funding. Further, the Company's current
liabilities exceed its current assets by E6,010 as of March 31, 2006, 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.
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.
Receivables
Receivables are stated at their outstanding principal balances. Management
reviews the collectibility of receivables on a periodic basis and determines the
appropriate amount of any allowance. Based on this review procedure, management
has determined that the allowances at March 31, 2006, and December 31, 2005 are
sufficient. The Company charges off receivables to the allowance when management
determines that a receivable is not collectible.
Current liabilities
The Company was not able to meet the E400,000 loan repayment due at December 31,
2005 but the bank had accepted to formally postpone the due date to June 30,
2006. The current portion of notes payable at March 31, 2006 includes this past
due amount and the originally scheduled E500,000 repayment on that date.
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.
Earnings per Share
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding in the
period. The weighted average number of shares was 89,374,353 for the three
months ended March 31, 2006, 68,907,864 for the three months ended March 31,
2005. Diluted earnings per share takes into consideration common shares
outstanding (computed under basic earnings per share) and potentially dilutive
securities. Warrants and options were not included in the computation of diluted
earnings per share because their effect would be anti-dilutive due to net losses
incurred.
Stock-Based Compensation
As of January 1, 2006, the Company adopted SFAS No. 123(R) using the modified
prospective method, which requires measurement of compensation cost for all
stock-based awards at fair value on date of grant and recognition of
compensation over the service period for awards expected to vest. The fair value
of stock options is determined using the Black-Scholes valuation model, which is
consistent with the Company's valuation techniques previously utilized for
options in footnote disclosures required under SFAS No. 123, Accounting for
Stock Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure.
Since the Company did not issue stock options to employees during the three
months ended March 31, 2006 or 2005, there is no effect on net loss or earnings
per share had the Company applied the fair value recognition provisions of SFAS
No. 123(R) to stock-based employee compensation. When the Company issues shares
of common stock to employees and others, the shares of common stock are valued
based on the market price at the date the shares of common stock are approved
for issuance.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis of the results of operations and financial
condition of Mymetics Corporation for the periods ended March 31, 2006 and 2005
should be read in conjunction with the Corporation's audited consolidated
financial statements 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, 2005 and, to the extent included therein, our
quarterly reports on Form 10-Q filed during fiscal year 2005.
THREE MONTHS ENDED MARCH 31, 2006 AND 2005
Revenue was nil for the three months ended March 31, 2006 and March 31, 2005.
Costs and expenses decreased to E382,000 for the three months ended March 31,
2006 from E785,000 (51.3%) for the three months ended March 31, 2005. Research
and development expenses decreased to E96,000 in the current period from
E245,000 (-60.8%) in the comparative period of 2005 due essentially to the fact
that we are now waiting for the results of our ongoing non-human primates tests,
which mobilize all our financial resources. General and administrative expenses
decreased to E199,000 in the three months ended March 31, 2006 from E472,000 in
the comparative period of 2004 (57.8%) due mostly to the closing of our French
office and other cost reduction measures.
The Corporation reported a net loss of E382,000, or E0.00 per share, for the
three months ended March 31, 2006, compared to E785,000, or E0.01, for the three
months ended March 31, 2005.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation had cash of E14,000 at March 31, 2006 compared to E70,000 at
December 31, 2005.
As we are a development stage company, we have not generated any material
revenues since we commenced our current line of 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.
Increases in borrowing pursuant to a non-revolving term facility and other short
term advances provided cash of E61,000 in the current period and E235,000 in the
comparative period last year. The non-revolving term facility is in the
principal amount of up to E3.7 million and matures on December 31, 2006, with
partial repayments of E900,000 on June 30, 2006. In addition, any amount repaid
under this facility can be converted at the lender's option into restricted
common shares of Mymetics Corporation at $0.30 per share. At March 31, 2006,
Mymetics had borrowed an aggregate of E3,815,000 pursuant to this non-revolving
term facility.
We were not able to meet the E400,000 loan repayment due at December 31, 2005
but our bank had accepted to formally postpone it to June 30, 2006, to be added
to the originally scheduled E500,000 repayment on that date.
As of March 31, 2006, we had an accumulated deficit of approximately E14.5
million and we incurred losses of E382,000 in the three-month period ending on
that date. These losses are principally associated with the research and
development of our HIV vaccine technologies. We expect to continue to incur
expenses in the future for research, development and activities related to the
future licensing of our technologies.
Accounts payable of E1,942,000 at March 31, 2006, include E587,000 due to our
officers as unpaid salaries, fees and out-of-pocket expenses. Payable to
Shareholders of E242,000 at March 31, 2006, represents various amounts advanced
by a shareholder and former director to Hippocampe S.A. (now Mymetics S.A., our
French affiliate) between 1990 and 1999. These advances are reimbursable subject
to the French legal concept of "retour a meilleure fortune" or "return to better
times". This ambiguous concept has been contractually defined in November 1998
between the lender and Aralis Participations S.A., then a major shareholder of
Hippocampe S.A., as essentially a positive working capital ratio of 1.2 during
four consecutive quarters, said ratio to be computed exclusively on the basis of
commercial revenues for Hippocampe S.A., i.e. to the exclusion of subsidies,
whether from related or unrelated parties. Considering the present status of
Mymetics S.A., it is impossible to predict when such amounts will be reimbursed
to the lender, if at all. Consequently, they are classified as long term debts.
As a result of having put our French subsidiary in receivership (as disclosed in
our Form 8-K dated February 13, 2006), Dr. Serres has made it impossible for
Mymetics SA to ever returning to "better times". Consequently, this amount will
never have to be repaid and we most probably will have to reverse it as soon as
the French courts close the Mymetics SA file.
Net cash used in operating activities was E460,000 for the period ended March
31, 2006, compared to E207,000 for the period ended March 31, 2005. The major
factor was a decrease in Accounts Receivable of E153,000 as we were able to make
certain payments on "old debts".
Investing activities used/provided no cash for the periods ended March 31, 2006
and 2005.
Financing activities provided cash of E417,000 for the period ended March 31,
2006 compared to E235,000 in the same period last year.
Proceeds from issuance of common stock provided E356,000 during the period ended
March 31, 2006 compared to nil in the same period in 2004.
Our budgeted monthly cash outflow, or cash burn rate, for 2006 is approximately
E320,000 per month for fixed and normal recurring expenses, as follows, assuming
we will be able to obtain the necessary financing:
2006 budget Monthly 12 Months
------- ---------
Management salaries, social costs and fees E 60,000 720,000
Travelling expenses 20,000 240,000
Property leases and operating expenses 2,000 24,000
Administration (accounting and 1 secretary) 13,000 156,000
Professional fees 20,000 240,000
Interest expenses 14,000 168,000
------- ---------
Total General and Administrative expenses E 129,000 1,548,000
------- ---------
Internal R&D (salaries and Laboratory reagents) 18,000 216,000
Pre-clinical trials (not financed by the US NIH or other donors) 105,000 1,260,000
External collaborators 68,000 816,000
------- ---------
Total Research and Development expenses 191,000 2,292,000
------- ---------
Total E 320,000 3,840,000
======= =========
We expect that the monthly cash outflow may increase significantly in 2006 over
2005 as the Company increases its research and development activities, and
prepares for additional research and compliance duties associated with the
signing of a partnership agreement with a major pharmaceutical company.
Salaries and related payroll costs represents fees for all of our directors
other than our employee directors, gross salaries for two of our executive
officers, and payments under consulting contracts with two of our officers. We
do not pay our non-employee directors, and we credit our two salaried executive
officers a combined amount of E24,000 per month. Since January 1, 2004 and until
November 30 of that year, payments of $CHF 9,000 (approx. E6,000) per month for
Dr. Sylvain Fleury's services as our Chief Scientific Officer have been made
pursuant to a three-way consulting agreement with Centre Hospitalier
Universitaire Vaudois (CHUV), a Swiss University Hospital located in Lausanne,
where Dr. Fleury is employed to allow him to supervise a research project funded
by the Swiss FNRS (Swiss National Research Foundation) which he had initiated
before joining Mymetics. In April 2005, this agreement was extended to include
the services of a qualified virologist under Dr. Fleury's supervision in order
to reduce the cost and turn-around time of certain scientific work previously
outsourced by the Company to third parties. Payments under this agreement were
suspended in December 2004 due to lack of funds. CHUV accepted nevertheless to
maintain the agreement in force and to finance the resulting expenses until such
time as additional funds could be raised by the Company. The debt owed CHUV
peaked at over CHF 200,000 (E129,000) in December 2005, when CHUV threatened to
terminate the agreement unless a significant portion of the outstanding amount
was repaid, which would have meant the loss of a major Company resource. On
December 20, 2005 and March 8, 2006 the Company was able to pay CHUV CHF 50,000
(E32,000) and CHF 100,000 (USD 77,000) respectively, a total amount considered
sufficient by CHUV in the light of our latest scientific achievements to suspend
all threats of termination.
Since January 15, 2004, payments of E4,000 per month for Professor Marc Girard's
services as our Head of Vaccines Development were due pursuant to a consulting
agreement dated June 10, 2004, as disclosed in our filing on Form 10-Q for the
period ended June 30, 2004 to the Securities and Exchange Commission. We have
not been able to make the payments due under the agreement on a regular basis
and we owed Professor Girard approximately E91,000 at December 31, 2005. We have
been able to make a significant payment recently to Professor Girard and expect
that the matter of payments owed will soon be settled amicably.
Monthly fixed and recurring expenses for "Property leases" of E1,000 represents
the monthly lease and maintenance payments to unaffiliated third parties for our
executive offices located at 14, rue de la Colombiere in Nyon (Switzerland) (600
square feet), which can be cancelled on one month notice. Despite the fact that
the lease of our French facility expired in January 2006, we have been able to
cancel it at no additional cost as of April 30, 2005 as no more company work is
performed in France since that date. We do not lease any research facilities
since Dr. Fleury's facilities are provided free of charge by CHUV as part of his
FNRS project. We will eventually have to lease our own minimal laboratory
facilities to conduct quality checks and to verify scientific results now that
Dr. Fleury's FNRS project has ended. We are planning to lease in the next few
months facilities on the campus of the Swiss Federal Institute of Technology
(EPFL) in Lausanne (Switzerland), located 15 miles from our Nyon office.
Included in professional fees are estimated recurring legal fees paid to outside
corporate counsel and ongoing litigation expenses, audit and review fees paid to
our independent accountants, and fees paid for investor relations.
Interest expense represents interest paid to MFC Merchant Bank S.A. for a note
payable. This note payable in the maximum amount of E3.7 million carries an
interest rate of Libor + 4% which is accrued on a quarterly basis.
As of March 31, 2006, we had two full-time salaried executives, exclusive of our
contracts for the consulting services of our Chief Scientific Officer, his
assistant and our Head of Vaccines Development. Certain secretarial work for our
CEO is outsourced to self-employed secretaries who accept being partially paid
in common stock of Mymetics at the current market price.
We anticipate hiring an assistant to our CFO as well as a part-time laboratory
technician in the first half of 2006, and may need to hire additional personnel
in order to meet the needs and demands of any future workload.
We intend to continue to incur additional expenditures during the next 12 months
for additional research and development of our HIV vaccines. These expenditures
will relate to the continued gp41 testing and are included in the monthly cash
outflow described above. Additional funding requirements during the next 12
months may arise upon the commencement of a phase I clinical trial. We expect
that funding for the cost of any clinical trials would 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.
The Corporation anticipates its operations will require approximately E3.8
million in the year ending December 31, 2006. The Corporation will seek to raise
the required capital from equity or debt financings, donors and/or potential
partnerships with major international pharmaceutical and biotechnology firms.
However, there can be no assurance that the Corporation will be able to raise
additional capital on terms satisfactory to the Corporation, or at all, to
finance its operations. In the event that the Corporation is not able to obtain
such additional capital, it would be required to further restrict or even halt
its operations.
RECENT FINANCING ACTIVITIES
In May 2005, our share price decreased suddenly from USD 0.30 to USD 0.05,
making it extremely difficult to attract new investors under Regulation S. In
June 2005, the animal farm hosting our rabbit tests threatened to destroy the
animals unless their invoices were paid on a continuous basis. This could only
be done if we allocated all our remaining financial resources to our ongoing
scientific work while stopping all payment to corporate service providers such
as auditors, lawyers, tenant, etc. Considering that losing our test animals at
this time would have meant in practice the end of Mymetics, our Management
decided to "go for broke" by allocating all our remaining cash to the ongoing
animal test, accepting the consequences of this strategic decision, notably that
we could not keep current on our filings with the Securities and Exchange
Commission and that we would probably be "Pink Sheeted" as a result. We did
indeed miss the deadline for filing our Form 10-Q at September 30, 2005 and were
subsequently demoted from the Bulletin Board to the Pink Sheet market on
December 30, 2005. We expect to return to the Bulletin Board in the near future.
Our decision to maintain our scientific work at all cost was finally vindicated
in late 2005, when our scientific results turned out to be largely beyond our
best expectations. New investors could be convinced, critical debts could be
repaid, our overdue filing could be filed and above all, our results could be
presented to the US National Institutes of Health (NIH), who decided to test our
prototype vaccine at their own US facilities, and finally to the world
scientific and pharmaceutical business community at the March 2006 Keystone
Meeting in Colorado, where they attracted considerable attention.
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 begin phase I clinical trials in 2007. As in the past
and to the extent this research work will not be conducted by institutions such
as the US National Institutes of Health (NIH), the International AIDS Vaccine
Initiative (IAVI) or the Center for HIV/AIDS Vaccine Immunology (CHAVI), we will
subcontract such work to "best of class" research teams.
We do not anticipate that our existing capital resources will be sufficient to
fund our cash requirements through the next three 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
the exercise of warrants and options and other sources such as private
placements under Regulation D and Regulation S under the Securities Act of 1933.
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 future clinical trials.
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.
Sources of additional capital include funding through future collaborative
arrangements, licensing arrangements, and debt and equity financings. We do not
know whether additional financing will be available on commercially acceptable
terms when needed. If we 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 we are
unable to secure such additional financing when needed, we will have to curtail
or suspend all or a portion of our business activities and we could be required
to cease operations entirely. Further, if we issue equity securities, our
shareholders may experience severe dilution of their ownership percentage.
OFF-BALANCE SHEET ARRANGEMENTS
The Corporation does not have any off-balance sheet arrangements.
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
PAYMENTS DUE BY PERIOD (THOUSANDS OF EUROS)
CONTRACTUAL OBLIGATION TOTAL LESS 1 - 3 3 - 5 MORE
THAN YEARS YEARS THAN
1 YEAR 5 YEARS
Long-term debt E0 E0 E0 E0 E0
Capital Lease Obligations E0 E0 E0 E0 E0
Operating Lease Obligations E0 E0 E0 E0 E0
Purchase Obligations E175 (1,2) E115 E30 E15 E0
Other Long-Term Liabilities Reflected on E242 (3) E0 E0 E0 E242
Mymetics Balance Sheet under GAAP
TOTAL E402 E115 E30 E15 E242
(1) Represents various amounts due to suppliers and partners in respect of the
neutralizing antibodies tests currently under way.
(2) French auditors ("Commissaire aux Comptes") are elected for 6 years and
cannot be terminated. Our French auditor has been re-elected in 2003.
Based on current budget and cost estimates, we posted E15,000 per year for
the audits 2006 until 2009.
(3) Due to P.-F. Serres, one of our former directors, repayable only after
certain conditions related to our French subsidiary's financial situation
have been met. Because of Dr. Serres' legal action against our French
subsidiary which resulted in the latter being put under receivership
("Redressement judiciaire"), it is highly unlikely that these conditions
will ever be met and therefore that we will ever have to repay Dr. Serres.
ITEM 7A. 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 debt obligations which are sensitive to interest
rate fluctuations.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures. As of the end of the registrant's fiscal
year ended December 31, 2005, an evaluation of the effectiveness of the
registrant's "disclosure controls and procedures" (as such term is defined in
Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) was carried out by the registrant's principal executive
officer and principal financial officer. Based upon that evaluation, the
registrant's principal executive officer and principal financial officer have
concluded that as of the end of that fiscal year, the registrant's disclosure
controls and procedures are effective to ensure that information required to be
disclosed by the registrant in reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms.
It should be noted that while the registrant's principal executive officer and
principal financial officer believe that the registrant's disclosure controls
and procedures provide a reasonable level of assurance that they are effective,
they do not expect that the registrant's disclosure controls and procedures or
internal control over financial reporting will prevent all errors and fraud. A
control system, no matter how well conceived or operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Our present policy is to defend vigorously only the suits with material amounts
being sought in damages and after considering the potential legal costs
involved. We do not currently maintain any insurance but are planning to
conclude one as soon as our financial resources will allow it.
Neither Mymetics Corporation nor our wholly owned subsidiary 6543 Luxembourg SA
are presently involved in any litigation incident to our business.
As disclosed in our Form 8-K dated February 13, 2006, our French subsidiary
Mymetics S.A. was placed under receivership ("Redressement Judiciaire") on
February 7, 2006 by the Tribunal de Commerce in Lyon, France, as a result of an
ongoing dispute between Mymetics Corporation and a former officer and director,
Dr. Pierre-Francois Serres, who has a judgment against Mymetics S.A. in France
(that is now under appeal) in the amount of E173,000 for an alleged wrongful
termination by the Company's prior management during 2003. The court appointed
two judges to oversee the case, a lawyer to represent the creditors and a
judicial administrator to manage Mymetics S.A., all of whom are considered
agents of the court. The court further imposed a "two-month observation period"
during which management and the administrator should strive to find a solution
to the crisis, which we are attempting to do. On April 4, 2006, the court
extended the observation period until July 18, 2006, based on a favorable report
about the future of Mymetics delivered by the judicial administrator. We are
actively working on a plan which we expect would allow our French subsidiary to
emerge from "Redressement Judiciaire" on or about that date.
By way of background, Dr. Serres was terminated by the Company's previous
management and later reinstated by existing management as Chief Scientific
Officer retroactively commencing May 5, 2003. In November 2003 Dr. Serres was
appointed Head of Exploratory Research. Dr. Serres resigned on June 13, 2005 as
director of the Company and as an officer of the Company on December 26, 2005.
Previously, the Lyon Industrial Tribunal had granted Dr. Serres an emergency
injunction on October 14, 2003. In consideration for being reinstated by the
Company's new management, Dr. Serres agreed in August 2003 to forfeit all legal
and punitive compensation for having been terminated by the Company's prior
management. Despite this pledge, Dr. Serres maintained his proceeding and on
November 3, 2005, the Lyon Industrial Tribunal awarded Dr. Serres the full
E173,000 he was seeking, of which approximately E100,000 is payable immediately
despite the fact that we immediately appealed the judgment. We have attempted
without success to negotiate with Dr. Serres regarding the payments immediately
due to him under the judgment. In light of limited financial resources at that
time, we did not have enough funds to both pay Dr. Serres the amount immediately
due for approximately E100,000 and to initiate new rounds of animal preclinical
trials supported by the latest encouraging scientific results. We decided to
allocate existing financial resources to the preclinical trials and to contest
the judgment of the Lyon Industrial Tribunal based upon advice of our French
counsel that the judgment was illegal under French law and that an appeal should
be successful. Dr. Serres pursued a strategy of raising pressure on the Company
to pay his judgment by seeking to have our subsidiary liquidated through the
Tribunal de Commerce in Lyon. We intend, therefore, to raise the money necessary
to pay Dr. Serres and remove Mymetics S.A. from receivership. At the same time,
we expect to prevail on the appeal of the decision by the Lyon Industrial
Tribunal and should we do so, we understand that Dr. Serres will have to
reimburse us for all monies we have paid to him under the Industrial Tribunal
judgment.
While we expect to prevail in all of these cases, our management believes that
adverse results in one or more of these cases could have a material adverse
effect on our results of operations in future periods.
ITEM 2. UREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On January 13, 2006 one of our non-US investors acquired an additional 4,000,000
common shares of the Company at a price of USD 0.05 per share under Regulation S
of the Securities Act of 1933. The USD $200,000 amount received allowed us to
satisfy certain key service providers to whom significant outstanding amounts
were owed and to initiate our non human primates tests at the Chinese Academy of
medical Sciences in Beijing (Republic of China).
ITEM 5. OTHER INFORMATION
The presentation of our latest scientific results by our partner Dr. Morganne
Bomsel from the Cochin Institute (Paris, France) at the Keystone HIV-AIDS
Pathogenesis Symposia held from March 27 to April 2, 2006 in Colorado has
attracted considerable attention from academia and industry and we are presently
holding post-presentation discussions with several potential scientific and
industrial partners as a result thereof, although there is no assurance that any
strategic relationships will result from these discussions.
For more information on our latest scientific results visit our website at
www.mymetics.com/mymetics pages/more science mymetics 01.htm
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For more information on Keystone Symposia visit their web site at
http://www.keystonesymposia.org/Meetings/ViewMeetings.cfm?MeetingID=805
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For more information on the Cochin Institute visit their web site at
http://www.cochin.inserm.fr/
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ITEM 6. EXHIBITS
(a) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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31.1 Section 302 Certification of Chief Executive Officer
31.2 Section 302 Certification of Chief Financial Officer
32 Section 906 Certification of Chief Executive Officer
and Chief Financial Officer
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: April 28, 2006 MYMETICS CORPORATION
By: /s/ Christian Rochet
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President and Chief Executive Officer