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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO _____
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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
CH-1260 Nyon (Switzerland)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 011 41 22 363 13 10
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed be 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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See definition of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
[ ] Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ]
[X] smaller reporting company
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X].
The aggregate market value of the voting common stock held by non-affiliates of
the Registrant (assuming officers and directors are affiliates) was
approximately U.S. $ 32,453,000 as of June 30, 2008, computed on the basis of
the average of the bid and ask prices on such date.
As of March 26, 2009, there were 195,313,630 shares of the Registrant's
Common Stock outstanding.
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USE OF EUROS
The financial information contained in this Form 10-K is provided in
Euros (E) (except in "Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters" which is provided in United States Dollars, and except as
expressly indicated otherwise herein). See Note 1 to the Consolidated Financial
Statements contained in this Form 10-K for further explanation. As of March 26,
2009, 1 Euro was convertible into 1.35 United States Dollars.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements, which are identified by the words "believe,"
"expect," "anticipate," "intend," "plan" and similar expressions. The statements
contained herein which are not based on historical facts are forward-looking
statements that involve known and unknown risks and uncertainties that could
significantly affect our actual results, performance or achievements in the
future and, accordingly, such actual results, performance or achievements may
materially differ from those expressed or implied in any forward-looking
statements made by or on our behalf. These risks and uncertainties include, but
are not limited to, risks associated with our ability to successfully develop
and protect our intellectual property, our ability to raise additional capital
to fund future operations and compliance with applicable laws and changes in
such laws and the administration of such laws. These risks are described below
and in "Item 1. Business," "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations," and "Item 7A. Quantitative and
Qualitative Disclosures About Market Risk" included in this Form 10-K. Readers
are cautioned not to place undue reliance on these forward-looking statements
which speak only as of the date the statements were made.
i
TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS ...................................................... 4
ITEM 1A. RISK FACTORS .................................................. 14
ITEM 2. PROPERTIES .................................................... 19
ITEM 3. LEGAL PROCEEDINGS ............................................. 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ........... 19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ............. 20
ITEM 6. SELECTED FINANCIAL DATA ....................................... 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ......................................... 22
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .... 30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ................... 30
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE .......................................... 30
ITEM 9A. CONTROLS AND PROCEDURES ....................................... 30
ITEM 9B. OTHER INFORMATION ............................................. 32
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERANCE ......... 33
ITEM 11. EXECUTIVE COMPENSATION ........................................ 36
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS ............................... 39
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE .................................................. 41
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES ........................ 41
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES .................... 43
SIGNATURES ............................................................... 65
ii
PART I
ITEM 1. BUSINESS
THE CORPORATION
OVERVIEW
We are a biotechnology research and development company devoted to fundamental
and applied research in the area of human biology and medicine. We were
incorporated in July 1994 pursuant to the laws of the Commonwealth of
Pennsylvania under the name "PDG Remediation, Inc." In November 1996, we
reincorporated under the laws of the State of Delaware and changed our name to
"ICHOR Corporation." In July 2001, we changed our name to "Mymetics
Corporation."
We own all of the outstanding voting stock of: (i) Mymetics Management Sarl, a
company organized in 2007 under the laws of Switzerland and (ii) 6543 Luxembourg
S.A., a joint stock company organized in 2001 under the laws of Luxembourg. In
this document, unless the context otherwise requires, "Mymetics" and the
"Corporation" refer to Mymetics Corporation and its subsidiaries.
We currently do not make, market or sell any products or services, and thus, we
have no revenues. We believe, however, that our research and development
activities will result in valuable intellectual property that can generate
revenues for us in the future such as by licensing. Vaccines are one of the
fastest growing markets in the pharmaceutical industry. Vaccines have evolved
from being an exclusively low price sector to one where substantial prices may
be paid for some products. Our business model is to make sufficient progress in
our research and development so that one or more major pharmaceutical companies
active in either or both the fields of HIV-AIDS preventive vaccines and
therapies will enter into a partnership agreement with us.
DEVELOPMENT OF THE COMPANY
From our inception in 1990 to December 1997, we operated in the environmental
services industry, focusing on thermal treatment, remediation services and waste
oil recycling. In February 1995, we completed an initial public offering. In
1998 and 1999, after disposing of our environmental services businesses, we
provided consulting services to an industrial customer in Europe. In June 1999,
we acquired a majority interest in Nazca Holdings Ltd., whose business involved
the exploration for and development of groundwater resources in Chile. Following
the disposal of our interest in Nazca in July 2000, we did not have an operating
business.
In March 2001, we acquired 99.9% of the outstanding shares of Mymetics S.A. in
consideration for shares of our common stock and shares of Class B Exchangeable
Preferential Non-Voting Stock of 6543 Luxembourg S.A., which are convertible
into shares of our common stock. In 2002, we acquired all but 0.01% of the
remaining outstanding common stock of Mymetics S.A. pursuant to share exchanges
with the remaining stockholders of Mymetics S.A. The terms of these share
exchanges were substantially similar to the terms of the share exchange that
occurred in March 2001. In 2004, all the remaining convertible shares of 6543
Luxembourg S.A. not already held by Mymetics Corporation were converted into
shares of Mymetics Corporation.
MYMETICS CORPORATION
Mymetics' primary objective is to develop vaccines and therapies to prevent and
treat the effects of certain retroviruses and other infectious diseases,
including the human immunodeficiency virus, or HIV, the virus that leads to
acquired immunodeficiency syndrome, or AIDS. Mymetics has also recently acquired
from a close scientific partner an advanced malaria vaccine project currently in
phase II clinical trial. Additional applications of Mymetics' research include
potential treatments and/or vaccines for malaria, human oncoviral leukemias,
multiple sclerosis, and organ transplantation.
Prior to 2002, our activities such as design of the prototype molecules,
synthesis, and in vitro testing, had been conducted exclusively in Europe.
During the second quarter of 2002, we launched programs in the United States in
an attempt to reinforce our intellectual property portfolio and to accelerate
the commercialization of our technology. Our previous management believed that
expanding our operating activities in the United States offered numerous
advantages, including greater access to expertise, grants, subsidies,
intellectual property and public and private research teams. Due to financial
constraints, the Company decided to limit these activities in January 2003.
Following the management changes of July 2003, our activities have again been
conducted exclusively in Europe, with certain pre-clinical tests being performed
in the United States by the National Institutes of Health (NIH).
Under our "best of class" business model, the overall research strategy, as well
as most original ideas, are defined and contributed by our own scientific team,
including Dr. Sylvain Fleury, Ph.D. (Chief Scientific Officer) , following
discussion with Key collaborators/partners. Any given project is first
subdivided into "technology modules" which are then subcontracted to "best of
class" teams from academia, public or private laboratories or industry, all
chosen for their high standards and specific knowledge. Most of the work that we
outsource is available through other vendors and to date there have not been any
providers that are the only source of expertise that we require.
1
We believe that having such specialized expertise in-house would make us
dependent on the staff required to carry out such tasks. We believe we benefit
from the established relationships with our partners and that it is a cost
effective approach to achieving our business plan. Mymetics pays for and
coordinates the work, consolidates the results and retains all intellectual
property associated with it. In certain limited cases, we will sign partnership
agreements with companies offering technologies that can enhance or add value to
our own products under development. Under this model, Mymetics retains all
intellectual property rights in the combined research and applies for domestic
and international patents whenever justified. In limited cases, the patent
ownership is shared with certain partners such as the French INSERM (Institut
National de la Sante Et de la Recherche Medicale). In this case, Mymetics
nevertheless received an exclusive license for the eventual exploitation of the
shared patents.
We also enter into scientific collaboration agreements with selected,
complementary partners such as Pevion Biotech Ltd., a Swiss company that granted
us exclusive licenses to use their unique virosome vaccine delivery technology
in conjunction with our AIDS and malaria preventive vaccines under development.
Under this agreement, Pevion Biotech is committed to supply the actual virosomes
and perform their integration with our antigens ("formulation"), which requires
proprietary know-how, at their premises. The agreement with Pevion Biotech
includes specific mechanisms to mitigate the risk of losing a key component of
our vaccines should Pevion become unable to live up to its commitment.
MYMETICS MANAGEMENT Sarl.
Our Swiss subsidiary MYMETICS MANAGEMENT Sarl was founded in 2007 to facilitate
the conduct of our business in Switzerland. This includes managing our staff
retirement and social security contributions, leasing our Swiss premises and
other such local tasks which a U.S. registered company cannot easily conduct
without significant legal and organizational costs.
LUXEMBOURG 6543 S.A.
Our Luxembourg subsidiary, Luxembourg 6543 S.A., was founded in 2001 in
connection with the acquisition of Mymetics S.A. of France (formerly Hippocampe
S.A.) by Mymetics Corporation. Luxembourg 6543 S.A. is dormant.
MYMETICS S.A.(defunct)
On February 7, 2006, the Tribunal de Commerce in Lyon, France placed the French
subsidiary Mymetics S.A., under receivership ("Redressement Judiciaire") as a
result of an ongoing dispute between Mymetics Corporation and a former officer
and director. The company was subsequently dissolved under the control of the
French court appointed judicial administrator.
Under the order of the French court, Mymetics S.A. sold its patents to Lomastar
Technologies Sarl, a Swiss company incorporated in Nyon, for E80,000 in order to
pay its creditors and the administration costs of the case. We do not believe
that the sale of the patents is significant to us since they expire in 2017 and
2018, the dates we first expect to be selling the vaccine. To protect the value
of our intellectual property, however, we are negotiating an exclusive worldwide
perpetual license with Lomastar Technologies with respect to these patents.
OVERVIEW OF HIV AND AIDS
HIV (human immunodeficiency virus) is a retrovirus that gradually destroys the
immune system and ultimately leads to AIDS. HIV is among the pathogens harboring
the highest genetic variation, leading to millions of variants, each rapidly
mutating. Indeed, HIV exists under many different versions like members of a
large family, they are different from, but related to each other.
By sequencing the viral genomes (genes), researchers have been able to map out
the family tree of HIV. At the root of the tree, there are three groups called
M, N and O, group M being responsible for the current AIDS pandemic. Group M is
split into nine genetic subtypes, also called nine clades (designated A through
K, with no E or I). The original definition of clades was based on short genomic
sequences, mostly within the HIV envelope protein (Env: gp160).
These nine clades have uneven geographic distribution patterns. Clade C
circulates in South Africa, India and parts of China. Clade A and D are common
in East Africa and clade B is common in North & South America and Western
Europe. Looking at the global numbers, it emerges that four clades (A, B, C and
D) plus two recombinant forms called CRFs 01 and 02 (both of which are about 70%
clade A) account for over 90% of all infections worldwide. From this
perspective, diversity can be mostly limited to 4 key major clades, plus small
contributions from the non-A segments of these two CRFs. According to the
statistics, clade C represents the world's most dominant HIV (over 50%).
2
HIV attaches itself to the target host cell using a harpoon-like surface protein
called gp160. This protein spears the host cell's membrane, drawing them
together so that the virus can fuse with the host cell. Once attached, the virus
penetrates the cell and commandeers the cell's machinery. Then it rapidly
replicates itself.
HIV-1 is lethal since it targets the most central cell of the immune system, the
CD4+ T cells which produce the IL-2 cytokine, a key messenger for immune cells.
These cells usually coordinate the cellular and humoral responses that are
directed to thwart the pathogen (HIV). When the number of such CD4+ T cells
decreases significantly over time, the amount of IL-2 becomes too low for an
efficient immune attack orchestration. Consequently, HIV as well as other
pathogens escape recognition by the immune system, leaving the host vulnerable
to disease.
HIV proves itself an elusive target because it:
- Reproduces itself at an extraordinary rate (several million new virus
particles are created daily)
- Mutates rapidly: as it reproduces itself, it makes mistakes that
produce new virus particles that are slightly different; these
differences make the virus harder to target by the immune system.
Mimicry
Normally, the immune system would respond to this attack: IL-2 would be secreted
mostly by activated CD4+ T cells to signal the alarm to the other T-cells
subtypes and B-cells for developing a strong immune response against the
invader. With HIV, this approach backfires. Why?
Mymetics has discovered a peculiar inter-reactivity between part of the virus'
"harpoon" and the host cell's "alarm" (IL-2). We call it "mimicry". Several
other homologies between HIV and human proteins have been reported. It has also
been reported that most of HIV infected subjects develop auto-antibodies
(antibodies recognizing HIV proteins but also your own proteins), even in early
phase of the infection. It has been postulated that some mimicries must exist
between HIV and human proteins, which could lead to such autoimmunity problems.
The shaft of the virus' harpoon, called gp41, actually appears to "mimic" the
host cell's IL-2. This dynamic enables the virus to attach itself to the host
cell membrane at a precise portal. An unusual consequence: when the "soldiers"
(antibodies against the viral gp41 protein) arrive to battle the virus, they can
potentially "confuse" the virus' gp41 with the host cell IL-2 and attack and
destroy them both.
As the immune system methodically kills its own soldiers, the HIV continues to
replicate swiftly. The equilibrium shifts and the HIV outpace our body's
defenses. Such events likely contribute to the development of AIDS, a fatal
disease that affects an increasing number of people worldwide. In light of these
reported observations, Mymetics is using this information to develop a safer HIV
vaccine that would be constituted of vaccine subunits having minimal human
homologies.
TECHNOLOGY
Current Approaches
Current drug treatments in HIV focus on slowing or impeding the progress of the
virus once it has infected the body's host cells. Recent approaches seek to
develop therapies that prevent the virus from fusing with host cells. If the
virus cannot fuse, it cannot enter inside the cell(infect) and reproduce,
thereby facilitating the successful fight of the body's immune system against
the invasion.
HIV transmission generally occurs through sexual contact. Indeed, semen and
cervico-vaginal secretions may potentially transmit HIV to the gastrointestinal,
anorectal and genitourinary tracts because these fluids contain cell-free HIV
particles and numerous HIV-infected cells. Contracting HIV infection may be
subdivided into early and late events. Early events (less than 24h) are those
comprising mucosal exposure to HIV and viral translocation across mucosal
surfaces, leading to HIV penetration into the organism. Late events (over 24 h)
take place once HIV has infected target cells (ex. CD4+ T lymphocytes)just under
the mucosa tissue that it has crossed, with subsequent additional infections and
migration of infected cells to proximal lymph nodes, ending to HIV spreading
into the body. Therefore, the HIV vaccine should ideally elicit immune responses
capable of acting on the early events and not only on late events. Mymetics'
objective has always remained the same: to prevent the virus from penetrating
the body from the first minutes or hours after exposure to the pathogen, rather
than trying to fight it after infection and its dissemination. Therefore,
Mymetics is developing an HIV vaccine that focuses on the induction of mucosal
antibody protection as the first line of defense, protecting the primary entry
sites, which corresponds to two important anatomically compartments:
genital-reproductive tracts and intestine/rectal mucosal tissues.
3
Vaccines or therapies for preventing these very early events at the mucosa
levels (e.g., Blocking transcytosis and early infections) became another
important research aspect.
Until recently, vaccine development was focusing on clade B strains, which
dominate the epidemic in industrialized countries but cause only about 12% of
infections globally whereas clade C is most prevalent throughout the world,
especially in developing nations in Africa and Asia. Development of non-clade B
candidates, having clade C as a key target became a priority for vaccine
companies. Mymetics intends to invest its research efforts in developing a
"universal" vaccine that will combat clade C strains.
Visit the IAVI web site (www.iavi.org) for more background information on AIDS.
Mymetics' Approach
Mymetics proposes an innovative AIDS vaccine that could prevent or reduce HIV
entry at the mucosal level (primary entry: very early event) as well as
preventing cell infection by HIV at the mucosa level (early event). To achieve
this goal, Mymetics has combined three important concepts in the vaccine design
for eliciting different sets of antibodies:
1- Preferential induction of mucosal antibodies for protecting various
anatomical compartments
Mymetics postulates that the induction of protective mucosal antibodies such as
IgA and secretory IgA might block the early event of HIV entry across the
genito-reproductive and intestinal tracts. These mucosal antibodies could also
contribute to prevent the HIV infection of target cells located just under the
mucosal epithelium, thus preventing early HIV entry and spreading events in the
body. Neutralizing blood antibodies (systemic) such as IgG will also be elicited
by Mymetics' vaccine candidate. These blood antibodies will likely act into the
genital compartment and to lower extend into the gut compartment, as well as on
later events that may take place into secondary lymphoid organs like lymph
nodes, preventing the infection of target cells in the periphery, outside of the
mucosal system. These mucosal (mostly IgA) and blood (mostly IgG) antibodies,
each having their own niche distribution, should act synergistically for optimal
protection against HIV transmission and they may circulate to some extend from
one compartment to another one.
2- Focused antibody response against relevant conserved gp41 regions
To achieve this objective, Mymetics' HIV vaccine candidate is constituted of
gp41 peptides and recombinant proteins that are devoid of immunodistractive and
useless areas. Generally, the immune system develops immune responses toward all
possible regions of the foreign antigens (peptides, proteins, etc.). However,
antigens are often harboring several immunodominant regions, each eliciting an
immune response of different magnitude (low, intermediate or strong
recognition/affinity by the immune system) and frequency (region rarely,
sometimes or often recognized by the immune system). Therefore, it is common to
observe an immune response that preferentially recognizes some protein areas
(immunodominant), while others are neglected. Furthermore, viruses have
developed antigens that contain often immunodominant regions for distracting the
immune system. These immunodistractive regions may have little or no function
for the pathogen protein but may blind the immune system. Consequently, immune
responses against the pathogen might sometimes be useless. Mymetics is
developing vaccines that contain different antigens expressing limited and
useful immunodominant regions, while useless immunodistractive regions have been
removed or altered with minimal effect on the immunogenicity of the viral
antigen. Using this approach, it forces the antibody response to focus on
relevant viral protein regions.
This type of new engineered gp41 molecules should be able to elicit antibodies
with a broad spectrum of action (cross-clade neutralization like A, B and C):
blocking virus translocation across the mucosal barrier and/or to inhibit cell
infection, thus preventing HIV-1 infection.(300)
Based on our recent research results, we believe that Mymetics's HIV vaccine
candidate and strategies places us amongst the most advanced teams devoted to
AIDS prophylactic vaccine research that aims to prevent HIV transmission across
the mucosal barrier.(301)
Mymetics' findings further apply to a range of additional diseases, including
certain oncoviruses often associated with leukemia.
3- Minimal mimicry
This concept is intended to remove in part or entirely the human protein
homologies naturally present in many HIV proteins that serve as a vaccine
component. To achieve that objective, Mymetics intends to use as a candidate
vaccine the smallest engineered viral antigen sequence for two main reasons.
First, the smaller the protein, the more limited are the homologies with human
proteins. Second, it is easier to remove human homologies into a small viral
protein or peptide because of their limited distribution.
4
Using this approach, Mymetics believes that an HIV vaccine constituted of viral
antigens or genes encoding viral antigens with minimal human homologies should
reduce the risk of developing potential long-term autoimmunity side-effects
after HIV vaccination.
How to trigger the protective immune response?
Mymetics' vaccine uses the technology of virosomes, a lipid-like structure
highly efficient for delivering the vaccine's active ingredients.
The virosome-based vaccine is constituted of two types of virosomes, each with
surface anchored gp41-derived conserved antigens, each eliciting different
antibodies not mutually exclusive with a broad activity spectrum:
- Virosomes with peptides corresponding to the conserved Membrane
Proximal Region (MPR) of gp41 for triggering protective mucosal
antibodies (mostly IgA) against a broad spectrum of HIV isolates.
- Virosomes with soluble/stable recombinant gp41 without the MPR
for eliciting complementary neutralizing IgA and IgG antibodies.
This virosomes technology is already market approved in more than 43 countries
with excellent safety profile and no mucosal adjuvant is required for triggering
mucosal antibodies.
Mymetics obtained an exclusive license agreement dated March 1, 2007 with Pevion
Biotech for the use of virosomes in the production of our HIV vaccine. We
believe that our exclusive agreement with Pevion Biotech provides a competitive
advantage by allowing us to avoid using a mucosal adjuvant for our HIV vaccine.
We believe that mucosal adjuvants have not sufficiently advanced to allow
clinical testing for our HIV vaccines.
AIDS: Summary of Our Achievements
The vast majority of pathogens enter their target hosts through mucosal surfaces
such as the respiratory, genito-urinary or gastrointestinal tracts. Many mucosal
pathogens remain a major human health problem, as there are no vaccines capable
of preventing the colonization and/or penetration of these pathogens at the
mucosal epithelium. Therefore, most infections occur at or start with exposure
of an unprotected mucosal surface to e.g. Mycoplasma pneumoniae, influenza
virus, Chlamydia, herpes simplex virus, and HIV.
Over the last twenty years of research in HIV-1 vaccine field, more than one
hundred vaccine candidates have been investigated. During that period,
scientists have pursued vaccines that induce an immune protection against
infection events that take place only after HIV-1 transmission, meaning once the
virus has crossed the mucosal tissues and has already infected cells. These
vaccines were developed for triggering blood IgG antibodies or CTL, two
important defence mechanisms. Today, it is believed that blood IgG and CTL
protections are thought to act too late on infection events, explaining in part
why past vaccines could not protect. However, the failures of the past twenty
years provide also a greater understanding of this complex disease, which has
improved our knowledge in various research fields.
The scientific community is now searching for vaccines that might target earlier
transmission and infection events that take place during the first minutes or
hours following exposure to HIV 1, therefore improving the chance of blocking or
slowing down HIV-1 transmission. Mymetics is the first and most advanced company
in the field of mucosal antibody protection against HIV. Mymetics' approach
mimics what is already found in Mother Nature: mucosal antibody protection as
observed in some naturally resistant subjects. Mymetics' pre-clinical results
achieved in 2005-2008 on mucosal antibodies in rabbits and monkeys were a major
breakthrough. Previous HIV antibody vaccines failed because they were designed
for inducing mostly blood antibodies and not MUCOSAL antibodies. This represents
a major flaw in the original vaccine strategy against HIV because this pathogen
enters mainly through the mucosal barriers. Now, it is becoming more evident
that acting on earlier transmission events could improve the chance of blocking
or slowing down HIV transmission.
From 1997 to 2001, we documented the existence of an important three-dimensional
molecular mimicry between the gp41 glycoprotein of HIV-1 and the human
interleukin-2 (IL-2) cytokine, a mimicry also found in lentiviruses causing AIDS
in other animal species. Mymetics has explored this mimicry as the starting
point for developing a safe HIV-1 candidate vaccine capable of eliciting
protective antibodies, while preventing potential harmful cross-reactivities
toward host proteins such as the human IL-2 (Mymetics US Patent 6,455,265). We
believe that this innovative concept may render vaccines from the 21st century
as efficacious as those from the 20th century, in addition to being safer.
5
In September 2003 we, together with Protein eXpert S.A., succeeded in
engineering and producing in bacteria E. Coli the first gp41 generation which
forms soluble and stable gp41 trimers that closely resemble the native gp41
found in HIV-1. This first generation of gp41 immunogen is devoid of the cluster
I and 2F5/4E10 epitopes, in addition of being mutated in one important IL-2
mimicry area. The design of the first gp41 generation was intended to identify
new important epitopes as well as to focus the immune response on possible
neutralizing epitopes different from the 2F5/4E10 previously identified by other
teams.
In 2004, we started a collaboration with Dr. Morgane Bomsel(Cochin Institute,
Paris, France), a renowned scientist in the field of HIV transcytosis and
mucosal immunity. Dr Bomsel had few monoclonal IgA antibodies obtained from a
phage display libraries issued from B cells of HIV resistant women. These
monoclonal IgA antibodies were found later capable of preventing HIV
transcytosis and HIV infection of primary isolates. Interestingly, these IgA
have recognized epitopes on our gp41 first generation devoid of the 2F5/4E10
epitopes, meaning that other potential neutralizing epitopes exist and they are
not limited to IgG isotypes.
From January to August 2004, we tested the first gp41 generation in rabbits for
its capacity to elicit neutralizing antibodies toward HIV-1. Such antibodies
were obtained in large quantities and their neutralizing potential was evaluated
by our academic collaborators. Thus, Dr. Morgane Bomsel obtained 60% inhibition
of HIV-1 transcytosis with primary strains. Sera were also tested in the
laboratory of Dr. Christiane Moog (Institut Pasteur, Strasbourg, France), a
recognized specialist in neutralizing antibodies in the HIV field. In the
performed assay, primary T cells infection by primary HIV-1 strains from clade B
(Bx-08 and SF-162) and clade C (TV1) were respectively neutralized at 70%, 80%
and 90% by low sera dilutions.
When total rabbit antibodies were purified from the serum, a neutralizing
activity of 80% was obtained with an antibody concentration of 20ug/ml, using
three primary HIV-1 strains. These results are similar to those obtained with
the 2F5 monoclonal antibody (over 90% inhibition), one of the most potent
neutralizing antibodies so far identified. Infection of primary human
macrophages by primary HIV-1 strains was also strongly inhibited (over 90%) with
a low antibody concentration (less than 2ug/ml). We found these preliminary
results highly encouraging, considering that the first gp41 generation of
immunogen did not include the 2F5/4E10 epitopes.
During Winter 2004 and Spring 2005 we engineered a third generation of
recombinant gp41 proteins based on the experience we acquired over the first
three years (2003-2005. In parallel to the protein approach, during Winter 2004
and Spring 2005 and in collaboration with Pevion Biotech Ltd. and Dr. Bomsel, we
formulated the second vaccine prototype. This prototype consisted of using
peptides derived from the conserved proximal membrane region of the gp41
ectodomain grafted in an oriented manner onto biosynthetic stable lipidic
spheres called virosomes. Rabbit immunizations in France were launched from May
to November 2005 for targeting the mucosal immune response. Biological samples
were analyzed and all rabbits have produced specific antibodies toward the gp41
peptides. More importantly, when these samples were tested into transcytosis
assays, most of these vaginal and rectal secretions (diluted 10-fold for the
assay) contained antibodies that were able to prevent translocation
(transcytosis) of primary R5 clades B and C with an efficiency of 70-90%, which
is close to what is observed with human secretions isolated from HIV-resistant
women.
From March to September 2006, based on this successful rabbit study, sixteen
female macaques (non-human primates) in animal facilities in Beijing, China were
immunized four times (40ug/100ul injected) over six months. We were hoping to
reproduce the same results with virosomes-gp41 peptides with as we did with the
rabbit immunizations. We achieved the following:
- Our vaccine based on virosomes-gp41 peptides elicited mucosal IgA and
blood IgG antibodies in over 90% of vaccinated macaques.
- These IgA and IgG antibodies were able to be redistributed into the
genital and intestinal compartments, even in animals vaccinated by
intra-muscular injection in the absence of a mucosal adjuvant.
- These antibodies were also capable of preventing at least 60% of HIV
entry across a human mucosal epithelium in vitro and up to 98% in two
out of sixteen animals. Significant inhibitions were obtained with
primary HIV from clades B and C.
- Antibodies from secretions have been purified and their neutralizing
capacity were as good as the 2F5/4E10 mAbs, when IC50% were compared.
We believe that such success in the macaque animal model, in the absence of a
mucosal adjuvant, is a major breakthrough which is highly encouraging to us for
future human clinical trials.
6
From 2005 to 2007, we designed and produced a fourth generation of rgp41. Based
on epitope studies we believe that such antigen will be a very good HIV vaccine
candidate, especially when incorporated into virosomes.
In October 2007 we launched a second non-human primate study at the Institute of
Laboratory Animal Science & Chinese Academy of Medical Science (ILAS) in China,
using macaques for evaluating the full vaccine. Animal vaccinations were
scheduled over a six month period. We reproduced the results from the first
macaque study done in 2006-2007 with macaques either protected against the
SHIV162p3 or having a viremia between 1-2 log lower than the control group.
During 2008, we performed a viral challenge (vaginal route) on those animals
having received our second generation (two components) AIDS vaccine. The results
were better than expected and have been announced in detail at the 16th
Conference on Retroviruses and Opportunistic Infections held in Montreal
(Canada) in February 2009. We expect to make other presentations at appropriate
scientific conferences later in 2009.
We received approval in sixteen days from the Competent national regulatory
agency, and launched, a clinical trial phase I in Q4 2008 in Belgium for testing
our second generation vaccine formulated with virosomes.
We have identified a third potential vaccine component, which will undergo
pre-clinical study during 2009.
Malaria: Summary of Achievements
The most advanced product from the current Mymetics' pipeline is the malaria
(Plasmodium falciparum) vaccine candidate which we acquired in 2007 from Pevion
Biotech Ltd. This vaccine has successfully completed phase I (in Switzerland)
and II trials (in the UK) with two antigens. A new phase Ib is currently
undergoing in Tanzania under endemic conditions on children and teenagers. At
the end of January 2009, 10 adults have completed the trial and by the end of
March 2009, 40 children should also successfully complete the trial. The final
monitoring and close out visit is scheduled for April/May 2009. The final study
report should be completed by September 2009. A more elaborated vaccine
formulation with five antigens targeting the two parasite forms will be tested
in phase I in Q1 2010 at the Swiss Tropical institute in Basel (Switzerland).
This gradual methodology is necessary for both scientific and ethical reasons
since African countries, which have in the past been used as testing ground
without their fully informed consent, now demand that any human test be first
performed in developed countries.
Among various malaria candidate vaccines currently under development, Mymetics'
vaccine is among the rare approaches designed for targeting the two forms of the
parasite: sporozoites (infecting liver cells) and merozoites (infecting red
blood cells). Other approaches target only one form of the parasite.
RESEARCH AND DEVELOPMENT EXPENSES
Research and Development Expenses of E2,692,000 in 2008 include E480,000
scientific staff expenses and fees of our scientific consultants, E205,000 paid
to scientific partners and suppliers of scientific services, E50,000 for support
of virosomes licenses and the malaria preventive vaccine project and E1,870,000
related to our AIDS vaccine clinical trial phase I.
INTELLECTUAL PROPERTY
We are the exclusive owner of intellectual property relating to our core
business which is focused on the development of novel HIV-AIDS and malaria
preventive and therapeutic vaccines. We have:
- Two issued French patents FR99 06528 and FR01 15424 on IL-2 mimicry.
- One European issued patent EP1034000 on IL-2 mimicry.
- One U.S. issued patent US 6,455,265 on gp41 & IL-2 mimicry and its
corresponding national filings and divisional filings in various
countries including Europe, the United States, Japan, Canada and
Israel.
- Filed two patents under the Patent Cooperation Treaty, or PCT:
- WO 03/048187 (PCT/US02/38152 filed on November 27, 2002 for
peptides rich in tryptophane as inhibitors of HIV infection from
PFS).
- WO 03/104262 (PCT/US03/18251 filled on June 10, 2003 for
describing gp41 peptides or proteins to block HIV
fusion/infection), with national phases in the United States and
EP.
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- Filed four United States provisional applications related to the HIV
field.
- On July 29, 2004, applied for a new PCT (PCT/IB2004/002433 or
WO2005010033) which covers our mutated, trimeric, stable recombinant
gp41 protein.
- A US Provisional was filed on February 6th 2009 by the USPTO. This
application describes the "splitting gp41" to explain Mymetics' HIV-1
vaccine strategies. Dr. Sylvain Fleury, CSO of Mymetics is the only
Inventor.
We have also shared with key scientific partners the ownership of certain patent
applications. In every such instance, we have obtained the exclusive license
rights over our partners' shares at very favorable conditions. We have:
- On May 2, 2005, applied with INSERM for a new PCT (PCT/IB05/001182),
which covers the description of IgA antibodies against our recombinant
gp41 protein.
- On March 3, 2006, applied with INSERM and Pevion for a new PCT which
covers our latest prototype HIV-AIDS preventive vaccine based on the
usage of the virosome technology with HIV peptides and proteins.
- A US Provisional was filed on February 6th 2009 by the USPTO. This
application describes the recombinant "gp41 4th generation" that is
expected be used in the HIV-1 preventive vaccine. The inventors are
from Protein'eXpert and from Mymetics Corporation.
COMPETITION
We have not yet developed an actual product or generated any revenues. Our
future competitive position depends on our ability to successfully develop our
intellectual property, and to license or sell such intellectual property to
third parties on financially favorable terms. Although we believe that the
results of our research and development activities have been favorable, there
are numerous entities and individuals conducting research and development
activities in the area of human biology and medicine all of which could be
considered competitors.
Mymetics' strategies consist of focusing the immune response on relevant regions
of the pathogen proteins by designing specific peptides or recombinant proteins
having irrelevant and immunodistractive parts removed. Most of current malaria
vaccines under development or investigation are still designed to induce
antibodies against only one malaria antigen (merozoite or sporozoite), which
will likely offer only a limited protection against this complex parasite.
Present malaria vaccines tested have induced a limited protection period of
about 3 months. The best observed protection after vaccination (from
GlaxoSmithKline Biologicals, RTS,S/AS02A vaccine) was maintained for about 6-12
months after which has proven difficult to maintain a high level of immune
response, as the amount of antibodies goes down and remains at a low level.
Therefore, protection with the vaccine might be for a short period. The ideal
vaccine should elicit an immune response toward various proteins of the two
parasite forms (sporozoites and merozoites) for optimizing the chance to reduce
significantly the infection rate of target cells and parasite development. The
combination of several target antigens in one vaccine is believed to induce
synergistic protective effects and to reduce the risk of the selection of
resistant strains.
The malaria vaccine proposed by Mymetics/Pevion Biotech induces antibodies
toward various proteins from the two parasite forms; increasing the chance of
double protection
We are conducting research aimed at developing a preventive vaccine that could
elicit protective mucosal and blood antibodies against HIV, with a primary
interest for the clade B, which is present in most industrialized countries, and
clades A and C because of their world dominance. Mymetics' vaccine may be
adapted to the most important HIV-1 clades such as A, B, C and D.
In the field of HIV vaccines, the failure in 2003 of the VAXGEN product in Phase
III clinical trial and more recently the Merck adeno-based vaccine triggering
cytotoxic T cells (CTL) protection underscores the need for an effective
solution to the global challenge posed by HIV. As these particular HIV vaccine
candidates were respectively focusing on blood IgG antibodies and CTL, using
technology unrelated to our technology (virosomes), we do not believe that the
cessation of clinical trials with respect to VAXGEN and Merck negatively impacts
our prospects for developing a viable preventive vaccine. On the contrary, most
of current HIV vaccine trials are oriented to the induction of CTL for killing
HIV-infected cells. Therefore we see no serious alternative projects in the
pipeline of competitors and major companies in the HIV field are now forced to
look for new innovative projects. We believe that this will benefit Mymetics
since it is a leader in the development of a vaccine for protecting the main
points of access for HIV in humans, which are the mucosal compartments.
8
The worldwide vaccine market is dominated by four large multinational companies:
Sanofi Pasteur S.A. (formerly Aventis Pasteur S.A.), Merck & Co.,
GlaxoSmithKline Plc, and Novartis-Chiron Inc. Other companies such as Progenics
Pharmaceuticals, Inc., are developing therapeutic HIV vaccines, i.e. vaccines
that target HIV-infected persons in an attempt to control the development of the
disease.
While many of these individuals and entities have greater financial and
scientific capabilities, and greater experience in conducting pre-clinical and
clinical trials, we believe that our innovative approach to vaccine development
is very competitive. Our approach is based on three main aspects: 1) design of
lipid membrane anchored-antigens forming dimers, trimers and tetramers that
force the immune system to focus the response only on key relevant conserved
regions; 2) the induction of protective antibodies not only in the blood but
most importantly in the genito-reproductive and intestinal mucosal compartments
(primary HIV entry site) and; 3) minimizing potential autoimmune side effects by
removing most of the human protein homologies present onto the well preserved,
antigenic and immunodominant domain of GP41, such as IL-2 homologies, Overall,
Mymetics' HIV vaccine candidate should provide an advantage over existing and
future approaches that have been pursued so far because all our competitors are
using DNA, viral vectors, recombinant proteins or peptides with native viral
sequences with no or limited deletion of human sequence homologies (linear or
tridimensional) and poorly induce mucosal immunity. Therefore, all these vaccine
prototypes are potentially harmful on a long-term basis for human health and do
not target properly mucosal tissues. Vaccine candidates under development of
investigation include:
- Sub-unit vaccine: a technology addressing a piece of the outer surface of
HIV, such as GP160, GP140 or GP120, produced by genetic engineering.
- Live vector vaccine: a live bacterium or virus such as vaccinia (used in
the smallpox vaccine) and adeno modified so it cannot cause disease, but
can transport into the body one or more genes that makes one or more HIV
proteins.
- Vaccine combination: an example includes a "prime-boost strategy", use of
a recombinant vector vaccine to induce cellular immune responses followed
by booster shots of a sub-unit vaccine to stimulate antibody production.
- Peptide vaccine: chemically synthesized pieces of HIV proteins (peptides)
known to stimulate HIV-specific immunity.
- Virus-like particle vaccine (pseudovirion vaccine): a non-infectious HIV
look-alike that has one or more, but not all, HIV proteins.
- DNA vaccine: direct injection of genes coding for HIV proteins.
- Whole-killed virus vaccine: HIV that has been inactivated by chemicals,
irradiation or other means rendering it non-infectious.
- Live-attenuated virus vaccine: live HIV from which one or more apparent
disease-promoting genes of the virus have been deleted.
GOVERNMENTAL REGULATION
Our strategy was crafted in part to minimize the risks usually associated with
phase III clinical trials, regulatory approvals and marketing, which we would
expect to be borne by one or more future partners.
We contract with third parties to perform research projects related to our
business. These third parties are located in various countries and are subject
to the applicable laws and regulations of their respective countries.
Accordingly, regulation by government authorities in the United States, the
European Union and other foreign countries is a significant factor in the
development, manufacture and marketing of our proposed products by our future
partners and therefore has a direct impact on our ongoing research and product
development activities.
Any products that will be developed by our future partners based on our
technology will require regulatory approval by government agencies prior to
commercialization. In particular, human therapeutic products are subject to
rigorous pre-clinical studies and clinical trials and other approval procedures
of the FDA and similar regulatory authorities in foreign countries. In addition,
various federal and state statutes and regulations will also govern, or
influence testing, manufacturing, safety, labeling, storage and record keeping
related to such products and their marketing. The process of obtaining these
approvals and the subsequent substantial compliance with appropriate federal and
state statutes and regulations require the expenditure of substantial time and
financial resources. Obtaining royalties in the future will depend on our future
partners' ability to obtain and maintain the necessary regulatory approvals.
9
Pre-clinical studies generally are conducted on laboratory animals to evaluate
the potential safety and the efficacy of a product. In light of our limited
financial resources, we are conducting clinical trials of our HIV and malaria
vaccines first in Europe under the European Union ("EU") guidelines, a quicker
and less expensive approach than seeking FDA approval which we intend to do
after EU approval is granted and, we expect, our financial resources will be
greater. There is no certainty that such EU approval will be granted, however.
The Phase I, II and III EU trials are similar to those required for FDA
approval. We will address the FDA requirements in this discussion since we
intend to submit our vaccines for FDA review and approval.
In the United States, we must submit the results of pre-clinical studies to the
FDA as a part of an investigational new drug application, or IND, which
application must become effective before we can begin clinical trials in the
United States. An IND becomes effective 30 days after receipt by the FDA unless
the FDA objects to it. Typically, clinical evaluation involves a time-consuming
and costly three-phase process. At this time, neither we nor any of our partners
have submitted any of our pre-clinical results to the FDA and we have only
recently received European Approval to begin Phase I human clinical trials for
our HIV vaccine. The process which is described below is therefore to be
considered as generic background information which is relevant to the industry
as a whole. As such process applies to drugs as well as vaccines, the term
"drugs" as used hereafter refers also to vaccines.
Phase I. Refers typically to closely monitored clinical trials and includes the
initial introduction of an investigational new drug into human patients or
normal volunteer subjects. Phase I clinical trials are designed to determine the
metabolic and pharmacologic actions of a drug in humans, the side effects
associated with increasing drug doses and, if possible, to gain early evidence
on effectiveness. Phase I trials also include the study of structure-activity
relationships and mechanism of action in humans, as well as studies in which
investigational drugs are used as research tools to explore biological phenomena
or disease processes. During Phase I clinical trials, sufficient information
about a drug's pharmacokinetics and pharmacological effects should be obtained
to permit the design of well-controlled, scientifically valid, Phase II studies.
The total number of subjects and patients included in Phase I clinical trials
varies, but is generally in the range of 20 to 80 people.
Phase II. Refers to controlled clinical trials conducted to evaluate the
effectiveness of a drug for a particular indication or indications in patients
with a disease or condition under study and to determine the common short-term
side effects and risks associated with the drug. These clinical trials are
typically well-controlled, closely monitored and conducted in a relatively small
number of patients, usually involving no more than several hundred subjects.
Phase III. Refers to expanded controlled clinical trials, which many times are
designated as "pivotal trials" designed to reach end points that the FDA has
agreed in advance, if met, would allow approval for marketing. These clinical
trials are performed after preliminary evidence suggesting effectiveness of a
drug has been obtained. They are intended to gather additional information about
the effectiveness and safety that is needed to evaluate the overall benefit-risk
relationship of the drug and to provide an adequate basis for physician
labeling. Phase III trials can include from several hundred to tenth of
thousands subjects depending on the specific indication being tested.
The FDA closely monitors the progress of each of the three phases of clinical
trials that are conducted in the United States and may, at its discretion,
re-evaluate, alter, suspend or terminate the testing based upon the data
accumulated to that point and the FDA's assessment of the risk/benefit ratio to
the patient. Once Phase III trials are completed, drug developers submit the
results of pre-clinical studies and clinical trials to the FDA, in the form of
an new drug application, or NDA, for approval to commence commercial sales. In
response, the FDA may grant marketing approval, request additional information
or deny the application if the FDA determines that the application does not meet
the predetermined study goals and other regulatory approval criteria.
Furthermore, the FDA may prevent a drug developer from marketing a product under
a label for its desired indications, which may impair commercialization of the
product.
If the FDA approves the new drug application, the drug becomes available for
physicians to prescribe in the United States. After approval, the drug developer
must submit periodic reports to the FDA, including descriptions of any adverse
reactions reported. The FDA may request additional studies, known as Phase IV
trials, to evaluate long-term effects. We will be required to comply with
similar regulatory procedures in countries other than the United States.
In addition to studies requested by the FDA after approval, a drug developer may
conduct other trials and studies to explore use of the approved compound for
treatment of new indications. The purpose of these trials and studies and
related publications is to broaden the application and use of the drug and its
acceptance in the medical community.
10
Our future partner(s) will have to complete an approval process, similar to the
one required in the United States, in virtually every foreign target market in
order to commercialize product candidates based on our technology in those
countries. The approval procedure and the time required for approval vary from
country to country and may involve additional testing. Approvals (both foreign
and in the United States) may not be granted on a timely basis, or at all. In
addition, regulatory approval of prices is required in most countries other than
the United States. We face the risk that the resulting prices would be
insufficient to generate an acceptable return to our partner(s).
EMPLOYEES
Mymetics Corporation has three full-time employees: Mr. Christian J.-F. Rochet,
our Chief Executive Officer, Mr. Ernst Luebke, our Chief Financial Officer and
Dr. Sylvain Fleury, Ph.D., our Chief Scientific Officer. In addition, our Swiss
subsidiary Mymetics Management Sarl has on its payroll two assistants to our CEO
and CSO respectively as well as one part-time and two full time employees
performing various administrative services on behalf of Mymetics Corporation as
well as Dream Vaccines Foundation, to whom such services are invoiced on a cost
basis.
As of December 31, 2008, our Luxembourg affiliate had no employees.
WWW.MYMETICS.COM
News and information about Mymetics Corporation is available on our web site,
www.mymetics.com.
ITEM 1A. RISK FACTORS
You should carefully consider the risks described below together with all of the
other information included in this report on Form 10-K. An investment in our
common stock is very risky. If any of the following risks materialize, our
business, financial condition or results of operations could be adversely
affected. In such an event, the trading price of our common stock could decline,
and you may lose part or all of your investment. When used in these risk
factors, the terms "we" or "our" refer to Mymetics Corporation and its
subsidiaries.
We are a company engaged exclusively in research and development activities,
focusing primarily on human biology and medicine. Our strategy was crafted in
part to minimize the risks usually associated with clinical trials, regulatory
approvals and marketing, which we would expect to be borne by our future
partner(s).
WE HISTORICALLY HAVE LOST MONEY, EXPECT LOSSES TO CONTINUE FOR THE FORESEEABLE
FUTURE AND MAY NEVER ACHIEVE PROFITABILITY.
We historically have lost money. In the year ended December 31, 2008, we
sustained net losses of approximately E6,938,000. In the years ended December
31, 2007 and December 31, 2006, we sustained net losses of approximately
E9,294,000 and E1,585,000, respectively. At December 31, 2008, we had an
accumulated deficit of approximately E31,904,000. Total cash disbursed since
1990 for operating activities, including research and development, is
E24,612,000.
The amount of these losses may vary significantly from year-to-year and
quarter-to-quarter and will depend on, among other factors:
- the timing and cost of product development;
- the progress and cost of preclinical and clinical development programs;
- the timing and cost of obtaining necessary regulatory approvals;
- the timing and cost of sales and marketing activities for future
products; and
- the costs of pending and any future litigation of which we may be
subject.
We currently are engaged in research and development activities and do not have
any commercially marketable products. The product research and development
process requires significant capital expenditures, and we do not have any other
sources of revenue to off-set such expenditures. Accordingly, we expect to
generate additional operating losses at least until such time as we are able to
generate significant revenues.
To become profitable, we will need to generate revenues to offset our operating
costs, including our general and administrative expenses. We may not achieve or,
if achieved, sustain our revenue or profit objectives, and our losses may
increase in the future, and, ultimately, we may have to cease operations.
11
In order to generate new and significant revenues, we must successfully develop
and commercialize our proposed products or enter into collaborative agreements
with others who can successfully develop and commercialize them. Our business
plan is predicated on commercializing our products in collaboration with others.
Even if our proposed products are commercially introduced, they may never
achieve market acceptance and we may never generate significant revenues or
achieve profitability.
WE NEED TO RAISE SUBSTANTIAL ADDITIONAL CAPITAL TO FUND OUR OPERATIONS AND WE
MAY BE UNABLE TO RAISE SUCH FUNDS ON A TIMELY BASIS AND ON ACCEPTABLE TERMS.
Although we have restructured our bank debt as disclosed in Note 3 of our Form
10-K for the year ended December 31, 2008, we have not alleviated our working
capital needs. We need to address our working capital needs by the end of June
2009 to allow us to continue devoting our efforts to development of the business
instead of raising needed capital. If we must devote a substantial amount of
time to raising capital, it will delay our ability to achieve our business plan
within the time frames that we now expect, which could increase the amount of
capital we need and could threaten the success of our business if competitors
are able to produce an effective vaccine to the market ahead of us. In addition,
the amount of time expended by our management on fund raising distracts them
from concentrating on our business affairs.
OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE OR PREDICT OUR
FUTURE BUSINESS PROSPECTS.
We have no operating history, and our operating results are impossible to
predict because we have not begun selling any products. We are in the
development stage, and our proposed operations are subject to all of the risks
inherent in establishing a new business enterprise, including:
- the absence of an operating history;
- the lack of commercialized products;
- insufficient capital;
- expected substantial and continual losses for the foreseeable future;
- limited experience in dealing with regulatory issues;
- limited marketing experience;
- an expected reliance on third parties for the commercialization of our
proposed products;
- a competitive environment characterized by numerous, well-established
and well-capitalized competitors;
- uncertain market acceptance of our proposed products; and
- reliance on key personnel.
The likelihood of our success must be considered in light of the problems,
expenses, difficulties, complications, and delays frequently encountered in
connection with the formation of a new business, the development of new
technology, and the competitive and regulatory environment in which we will
operate. See "Description of the Business".
Because we are subject to these risks, you may have a difficult time evaluating
our business and your investment in our company.
OUR PROPOSED VACCINES ARE IN THE DEVELOPMENT STAGES AND WILL LIKELY NOT BE
COMMERCIALLY INTRODUCED BEFORE 2017, IF AT ALL.
Our proposed key products still are in the development stage and will require
further development, preclinical and clinical testing and investment prior to
commercialization in the United States and abroad. See "Description of the
Business". While we are pleased about the progress made to date on these
products, we cannot be sure that these products in development will:
- be successfully developed;
- prove to be safe and efficacious in clinical trials;
- meet applicable regulatory standards or obtain required regulatory
approvals;
- demonstrate substantial protective or therapeutic benefits in the
prevention or treatment of any disease;
- be capable of being produced in commercial quantities at reasonable
costs;
12
- obtain coverage and favorable reimbursement rates from insurers and
other third-party payers; or
- be successfully marketed or achieve market acceptance by physicians
and patients.
We do not intend to undertake any product development beyond Phase II human
clinical trials (i.e., Phase III clinical studies) or be responsible for
obtaining regulatory approval or marketing the products. Nevertheless, even if
we are successful in selling or licensing our products to another pharmaceutical
company, it is likely that any revenues we may receive in connection with those
arrangements will depend upon other companies' sales, which will, in turn,
depend upon the factors stated above.
THE LOSS OF OUR PRINCIPAL EXECUTIVE OFFICERS WOULD DIMINISH THE COMPANY'S
ABILITY TO ACHIEVE ITS BUSINESS PLAN.
Messrs. Rochet and Luebke have played an important role in financing,
achievement of strategic goals and administration of the Company. In addition,
Dr. Fleury has been following, and associated with, our AIDS vaccine project
since 1998 and we believe that replacing him as CSO on time for successfully
prosecuting our pending patent applications would be extremely difficult.
Accordingly, the loss of any of these individuals might prevent the Company from
achieving its business plan.
THE LOSS OF KEY SCIENTIFIC OR INDUSTRIAL PARTNERS WOULD DIMINISH THE COMPANY'S
ABILITY TO ACHIEVE ITS BUSINESS PLAN.
Certain components or know-how obtained from partners such as Protein eXpert
S.A., supplier of GMP grade engineered mutated gp41 protein, or Pevion Biotech
Ltd., supplier and integrator of virosomes, are key components of our vaccines
currently under development. Accordingly, the loss of any of these components or
know-how might prevent the Company from achieving its business plan.
OUR BUSINESS MODEL IS PREDICATED ON OUR BELIEF THAT WE WILL BE ABLE TO ENGAGE
LARGE PHARMACEUTICAL COMPANIES TO PARTNER WITH US IN THE DEVELOPMENT OF OUR
PRODUCTS AND FAILURE TO DO SO WILL LIKELY MAKE THE COMPANY UNATTRACTIVE AS AN
ACQUISITION TARGET.
We anticipate that we will need a large pharmaceutical company to assist us with
human trials and financing. See "Funding Requirements". Our failure to succeed
in this endeavor will have a dramatic adverse result regarding our financial
needs and ability to successfully sell any products that we develop.
IF WE FAIL TO OBTAIN REGULATORY APPROVAL TO COMMERCIALLY MANUFACTURE OR SELL ANY
OF OUR FUTURE PRODUCTS, OR IF APPROVAL IS DELAYED OR WITHDRAWN, WE WILL BE
UNABLE TO GENERATE REVENUE FROM THE SALE OF OUR PRODUCTS.
We must obtain regulatory approval to sell any of our products in the United
States and abroad. In the United States, we must obtain the approval of the FDA
for each product or drug that we intend to commercialize. The FDA approval
process is typically lengthy and expensive, and approval is never certain.
Products to be commercialized abroad are subject to similar foreign government
regulation.
Generally, only a very small percentage of newly discovered pharmaceutical
products that enter preclinical development are approved for sale. Because of
the risks and uncertainties in biopharmaceutical development, our proposed
products could take a significantly longer time to gain regulatory approval than
we expect or may never gain approval. If regulatory approval is delayed or never
obtained, our management's credibility, the value of our company and our
operating results and liquidity would be adversely affected. Furthermore, even
if a product gains regulatory approval, the product and the manufacturer of the
product may be subject to continuing regulatory review. Even after obtaining
regulatory approval, we may be restricted or prohibited from marketing or
manufacturing a product if previously unknown problems with the product or its
manufacture are subsequently discovered. The FDA may also require us to commit
to perform lengthy post-approval studies, for which we would have to expend
significant additional resources, which could have an adverse effect on our
operating results and financial condition.
Although we have conducted pre-clinical studies, costly and lengthy human
clinical trials are required to obtain regulatory approval to market our
proposed vaccine, and the results of the trials are highly uncertain. In
addition, the number of pre-clinical studies and human clinical trials that the
FDA requires varies depending on the product, the disease or condition the
product is being developed to address and regulations applicable to the
particular product. Accordingly, we may need to perform additional pre-clinical
studies using various doses and formulations before we can begin human clinical
trials, which could result in delays in our ability to market any of our
products. Furthermore, even if we obtain favorable results in pre-clinical
studies on animals, the results in humans may be different.
13
After we have conducted pre-clinical studies in animals, we must demonstrate
that our products are safe and effective for use on the target human patients in
order to receive regulatory approval for commercial sale. The data obtained from
pre-clinical and human clinical testing are subject to varying interpretations
that could delay, limit or prevent regulatory approval. We face the risk that
the results of our clinical trials in later phases of clinical trials may be
inconsistent with those obtained in earlier phases. A number of companies in the
biopharmaceutical industry have suffered significant setbacks in advanced
clinical trials, even after experiencing promising results in early animal or
human testing. Adverse or inconclusive human clinical results would prevent us
from filing for regulatory approval of our products. Additional factors that can
cause delay or termination of our human clinical trials include:
- slow patient enrollment;
- timely completion of clinical site protocol approval and obtaining
informed consent from subjects;
- longer trial time than foreseen to demonstrate efficacy or safety;
- adverse medical events or side effects in immunized patients; and
- lack of effectiveness of the vaccines being tested.
Delays in our clinical trials could allow our competitors additional time to
develop or market competing products and thus can be extremely costly in terms
of lost sales opportunities and increased clinical trial costs.
EVEN IF OUR PROPOSED PRODUCTS RECEIVE EU AND FDA APPROVAL, THEY MAY NOT ACHIEVE
EXPECTED LEVELS OF MARKET ACCEPTANCE, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR BUSINESS, FINANCIAL POSITION AND OPERATING RESULTS AND COULD CAUSE THE
MARKET VALUE OF OUR COMMON STOCK TO DECLINE.
Even if we are able to obtain required regulatory approvals for our proposed
products, the success of those products is dependent upon market acceptance by
physicians and patients. Levels of market acceptance for our new products could
be impacted by several factors, including:
- the availability of alternative products from competitors;
- the price of our products relative to that of our competitors;
- the timing of our market entry; and
- the ability to market our products effectively.
Some of these factors are not within our control. Our proposed products may not
achieve expected levels of market acceptance. Additionally, continuing studies
of the proper utilization, safety and efficacy of pharmaceutical products are
being conducted by the industry, government agencies and others. Such studies,
which increasingly employ sophisticated methods and techniques, can call into
question the utilization, safety and efficacy of previously marketed products.
In some cases, these studies have resulted, and may in the future result, in the
discontinuance of product marketing. These situations, should they occur, could
have a material adverse effect on our business, financial position and results
of operations, and the market value of our common stock could decline.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, WE MAY NOT BE ABLE TO
COMPETE AS EFFECTIVELY.
The pharmaceutical industry places considerable importance on obtaining patent
and trade secret protection for new technologies, products and processes. Our
success will depend, in part, upon our ability to obtain, enjoy and enforce
protection for any products we develop or acquire under United States and
foreign patent laws and other intellectual property laws, preserve the
confidentiality of our trade secrets and operate without infringing the
proprietary rights of third parties.
Where appropriate, we seek patent protection for certain aspects of our
technology. However, our owned and licensed patents and patent applications may
not ensure the protection of our intellectual property for a number of other
reasons:
- Competitors may interfere with our patents and patent process in a variety of
ways. Competitors may claim that they invented the claimed invention before us
or may claim that we are infringing on their patents and therefore we cannot use
our technology as claimed under our patent. Competitors may also have our
patents reexamined by showing the patent examiner that the invention was not
original or novel or was obvious.
14
- We are in the development stage and are in the process of developing proposed
products. Even if we receive a patent, it may not provide much practical
protection. If we receive a patent with a narrow scope, then it will be easier
for competitors to design products that do not infringe on our patent. Even if
the development of our proposed products is successful and approval for sale is
obtained, there can be no assurance that applicable patent coverage, if any,
will not have expired or will not expire shortly after this approval. Any
expiration of the applicable patent could have a material adverse effect on the
sales and profitability of our proposed product.
- Enforcing patents is expensive and may require significant time by our
management. In litigation, a competitor could claim that our issued patents are
not valid for a number of reasons. If the court agrees, we would lose protection
on products covered by those patents.
- We also may support and collaborate in research conducted by government
organizations or universities. We cannot guarantee that we will be able to
acquire any exclusive rights to technology or products derived from these
collaborations. If we do not obtain required licenses or rights, we could
encounter delays in product development while we attempt to design around other
patents or we may be prohibited from developing, manufacturing or selling
products requiring these licenses. There is also a risk that disputes may arise
as to the rights to technology or products developed in collaboration with other
parties.
It also is unclear whether efforts to secure our trade secrets will provide
useful protection. While we use reasonable efforts to protect our trade secrets,
our employees or consultants may unintentionally or willfully disclose our
proprietary information to competitors resulting in a loss of protection.
Enforcing a claim that someone else illegally obtained and is using our trade
secrets, like patent litigation, is expensive and time consuming, and the
outcome is unpredictable. In addition, courts outside the United States are
sometimes less willing to protect trade secrets. Finally, our competitors may
independently develop equivalent knowledge, methods and know-how.
CLAIMS BY OTHERS THAT OUR PRODUCTS INFRINGE THEIR PATENTS OR OTHER INTELLECTUAL
PROPERTY RIGHTS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION.
The pharmaceutical industry has been characterized by frequent litigation
regarding patent and other intellectual property rights. Patent applications are
maintained in secrecy in the United States and also are maintained in secrecy
outside the United States until the application is published. Accordingly, we
can conduct only limited searches to determine whether our technology infringes
the patents or patent applications of others. Any claims of patent infringement
asserted by third parties would be time-consuming and could likely:
- result in costly litigation;
- divert the time and attention of our technical personnel and management;
- cause product development delays;
- require us to develop non-infringing technology; or
- require us to enter into royalty or licensing agreements.
Although patent and intellectual property disputes in the pharmaceutical
industry often have been settled through licensing or similar arrangements,
costs associated with these arrangements may be substantial and often require
the payment of ongoing royalties, which could hurt our gross margins. In
addition, we cannot be sure that the necessary licenses would be available to us
on satisfactory terms, or that we could redesign our products or processes to
avoid infringement, if necessary. Accordingly, an adverse determination in a
judicial or administrative proceeding, or the failure to obtain necessary
licenses, could prevent us from developing, manufacturing and selling some of
our products, which could harm our business, financial condition and operating
results.
WE HAVE ANTI-TAKEOVER PROVISIONS IN OUR BYLAWS THAT MAY DISCOURAGE A CHANGE OF
CONTROL.
Our bylaws contain provisions that could discourage, delay or prevent a change
in control of our Company or changes in our management that the stockholders of
our company may deem advantageous. These provisions
- limit the ability of our stockholders to call special meetings of
stockholders;
- provide for a staggered board;
- provide that our board of directors is expressly authorized to make, alter
or repeal the bylaws; and
- establish advance notice requirements for nominations for election to our
board or for proposing matters that can be acted upon by stockholders at
stockholder meetings.
15
ITEM 2. PROPERTIES
We currently occupy approximately 100 square meters of office space that houses
our administrative operations in Nyon, Switzerland (20 miles from Geneva), at
14, rue de la Colombiere.
We also lease approximately 50 square meters of office space in Geneva for
Administrative staff engaged in matters involving Dream Vaccines Foundation a
501(c)(3) charitable organization described below. This lease has been
terminated effective March 31, 2009.
Until February 2009, our CSO and his assistants were using offices which
provided access to scientific databases, leased on short term basis from the
Swiss Institute of Experimental Cancer Research (ISREC) in Lausanne (20 miles
from our Nyon office). On March 1, 2009, our CSO and his staff took possession
of 300 square meters of new office space in a campus recently established near
Lausanne by the local state government to attract promising biotech companies.
These facilities will be enhanced in 2010 with new laboratory facilities
We also conduct our research operations at the properties of various third
parties, worldwide.
ITEM 3. LEGAL PROCEEDINGS
Neither Mymetics Corporation, our wholly owned subsidiaries 6543 Luxembourg SA
nor Mymetics Management Sarl are presently involved in any litigation incident
to our business.
MYMETICS S.A.
On February 7, 2006, the Tribunal de Commerce in Lyon, France placed Mymetics
S.A., under receivership ("Redressement Judiciaire") as a result of an ongoing
dispute between Mymetics Corporation and a former officer and director, Dr.
Pierre-Francois Serres, who obtained an initial judgment against Mymetics S.A.
in France in the amount of E173,000 for an alleged wrongful termination by the
Company's prior management during 2003, which judgment was reversed on appeal.
Despite this positive outcome, the financial and legal status of Mymetics S.A.
was too impaired to justify the costs and efforts to revitalize it. We therefore
decided to let the matter run its course under French law and to transfer all
operations to Mymetics Corporation.
Under the order of the French court, Mymetics S.A. sold its patents to Lomastar
Technologies Sarl, a Swiss company incorporated in Nyon, for E80,000 in order to
pay its creditors and the administration costs of the case. Upon completion of
this endeavor, the company will be dissolved under the control of the French
court appointed judicial administrator. As a legal consequence of this court
order, Mymetics Corporation has formally lost control over its French
subsidiary. We do not believe that the sale of the patents is significant to us
since they expire in 2017 and 2018, the dates we first expect to be selling the
vaccine. To protect the value of our intellectual property, however, we are
negotiating an exclusive worldwide perpetual license with Lomastar Technologies
with respect to these patents. There can be no assurance, however, that we will
be successful in achieving this result, which could limit the value of our
intellectual property and the potential value of our company to a prospective
purchaser.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
(a) Market Information. The Corporation's common stock is quoted on
the OTC Bulletin Board under the trading symbol "MYMX"
The following table sets forth the quarterly high and low sales price
per share of the Corporation's common stock for the periods indicated. The
prices represent inter-dealer quotations, which do not include retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
FISCAL QUARTER ENDED HIGH LOW
-------------------- ------ ------
2007
March 31............ $0.240 $0.180
June 30............. 0.130 0.105
September 30........ 0.115 0.110
December 31......... 0.160 0.130
2008
March 31............ $0.250 $0.250
June 30............. 0.210 0.200
September 30........ 0.340 0.320
December 31......... 0.120 0.100
(b) Stockholders. At March 26, 2009, we had approximately 600 holders
of record of our common stock, some of which are securities clearing agencies
and intermediaries.
(c) Dividends. We have not paid any dividends on common stock and do
not intend to pay any dividends in the foreseeable future.
(d) Securities Authorized for Issuance under Equity Compensation
Plans.
17
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about the common stock that may be
issued upon the exercise of options, warrants and rights under all of our
existing equity compensation plans as of December 31, 2008.
Number of Securities remaining
Number of Securities to be Weighted Average Exercise available for issuance under
issued upon exercise of Price of Outstanding equity compensation plans
Options, Warrants and Options, Warrants and (excluding securities reflected
Rights Rights in column (a))
Plan Category (a) (b) (c)
------------- -------------------------- ------------------------- -------------------------------
Equity Compensation Plans
Approved by Security Holders (1) 442,500 (2) U.S. $0.97 4,557,500
Equity Compensation Plans not
Approved by Security Holders -- (3) N/A
------- ---------- ---------
Total 442,500 U.S. $0.97 4,557,500
======= ========== =========
(1) Equity compensation plans approved by our security holders include (i) our
1994 Amended and Restated Stock Option Plan, (ii) our 1995 Qualified
Incentive Stock Option Plan and (iii) our 2001 Stock Option Plan.
(2) Includes (i) 442,500 shares of common stock underlying options granted
under our 2001 Stock Option Plan.
(3) We do not have any formal equity compensation plan that has not been
authorized by our stockholders.
18
ISSUANCES OF UNREGISTERED SECURITIES
Set forth below is information regarding our sales of unregistered
securities during the period commencing on January 1, 2008 and ending on March
26, 2009. These issuances were made pursuant to individual contracts that are
discrete from one another and in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933, and/or Regulation D
promulgated under the Securities Act, as transactions by an issuer not involving
any public offering to persons who are sophisticated in such transactions and
who had knowledge of and access to sufficient information about Mymetics to make
an informed investment decision. Among this information was the fact that the
securities were restricted securities.
- On January 8, 2008, we issued a new investor 800,000 common shares of
Mymetics Corporation at $.155 per share, as fee for services rendered.
- On January 8, 2008, we issued a new investor 200,000 common shares of
Mymetics Corporation at $.155 per share, as fee for services rendered.
- On February 28, 2008, we issued a previous investor 1,000,000 common shares
of Mymetics Corporation for $500,000 or $.50 per share.
- On March 17, 2008, we issued a previous investor and non-executive director
500,000 common shares of Mymetics Corporation at $.24 per share, as fee for
services rendered.
- On March 17, 2008, we issued a previous investor and non-executive director
500,000 common shares of Mymetics Corporation at $.24 per share, as fee for
services rendered.
- On June 23, 2008, we issued a previous investor 300,000 common shares of
Mymetics Corporation for $150,000 or $.50 per share.
- On June 23, 2008, we issued a previous investor 1,300,000 common shares of
Mymetics Corporation for $780,000 or $.60 per share.
- On July 17, 2008, we issued a new investor 2,000,000 common shares of
Mymetics Corporation at $.20 per share, as fee for services rendered.
- On August 2, 2008, we issued a new investor 250,000 common shares of
Mymetics Corporation at $.20 per share, as fee for services rendered.
- On December 23, 2008, we granted a previous investor 1,000,000 common
shares of Mymetics Corporation for $455,000 or $.46 per share. These shares
were issued to the investor in January 2009.
ITEM 6. SELECTED FINANCIAL DATA
Not Applicable
ITEM 7. 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 years ended December 31, 2008 and 2007
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.
19
RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 2008 COMPARED TO YEAR ENDED
DECEMBER 31, 2007
We received grant income of E65,000 for the year ended December 31, 2008, and
recorded a gain on extinguishment of debt of E774,000 in 2007. Our lack of
product revenue is directly attributable to our focus on research and
development. The Company predicts that this focus will continue for the
foreseeable future, but we are unable to predict future economic conditions at
the time that our products are ready to be commercialized by our future
partners(s), as described elsewhere in this document. Future revenues could be
affected by local and other economic conditions, technology, competitive forces,
and/or challenges to the Company's intellectual property.
Costs and expenses decreased to E6,985,000 for the year ended December 31, 2008
from E10,064,000 for the year ended December 31, 2007, a decrease of 30.6%, due
to no additional license purchase but increased activity in anticipation of our
planned human clinical trials.
Research and development expenses decreased to E2,692,000 in the current period
from E5,981,000 in the comparative period of 2007, a decrease of 55.0%.When
excluding E4,760,000 for various HIV and malaria acquisitions in 2007, research
and development expenses for that year amounted to E1,221,000, against which the
2008 expenses represent an increase of 120.5%. This is mostly attributable to
the increased activity required to achieve acceptance to begin phase I trials
with our HIV vaccine.
General & administrative expenses decreased to E3,693,000 in the year ended
December 31, 2008 from E3,945,000 in the comparable period of 2007, or 6.4%,
primarily as a result of improved efficiency in our continuing investor
relations efforts, which has outweighed increased interest expense charges on
our unsecured convertible loans.
CRITICAL ACCOUNTING POLICIES AND MANAGEMENT ESTIMATES
The preparation of consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America
requires management to use judgment in making estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. Certain of the
estimates and assumptions required to be made relate to matters that are
inherently uncertain as they pertain to future events. While management believes
that the estimates and assumptions used were the most appropriate, actual
results could differ significantly from those estimates under different
assumptions and conditions. The following is a description of those accounting
policies believed by management to require subjective and complex judgments
which could potentially affect reported results.
REVENUE RECOGNITION AND RECEIVABLES
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.
However, should we engage in any form of commercial activity, a revenue
recognition and receivables policy according to the following principles would
be implemented:
Revenue related to the sale of products is recognized when all of the following
conditions are met: persuasive evidence of an arrangement exists, delivery has
occurred, the price is fixed or determinable, and collectibility is reasonably
assured. 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 December 31, 2008
and 2007 are sufficient. The Company charges off receivables to the allowance
when management determines that a receivable is not collectible. The Company may
retain a security interest in the products sold.
20
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
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.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1 of Notes to Consolidated Financial Statements for a full description
of recent accounting pronouncements including the respective dates of adoption
and effects on results of operations and financial condition.
BUSINESS PLAN
We subcontract our research project modules to best of class research teams. We
pay for and coordinate the work, consolidate the results, and retain all
associated intellectual property. On rare occasions, we execute partnership
agreements with companies offering technologies that can enhance our products.
As we have initiated human clinical trials, access to our own laboratory
facilities becomes necessary. We have therefore signed a pre-lease agreement for
such facilities in the new Biopole campus established by the local state
government near Lausanne. We expect these facilities to become available by the
end of 2010.
We will continue in the foreseeable future to outsource to specialized third
parties all human clinical trials of our vaccines, such process being complex
and highly regulated.
Our business plan is predicated by the size and available resources of our
company, which preclude us from pursuing our human clinical trials beyond phase
II, which normally involves no more than 250-300 volunteers and a cost in the
range of $5-10 million per phase I and II trial cycle. In contrast, phase III
trials for a prophylactic vaccine involves up to 30,000 patients and several
testing centers spread over two or more continents. The high number of
volunteers, as well as the logistical complexity of such an undertaking, imply a
cost-per-volunteer in the $10,000 to $12,000 range, or up to $360 million per
phase III trial. Similarly, the cost and complexity of the vaccine registration
procedure with the relevant European agencies can be very expensive. The cost of
registration with the U.S. Food and Drug Administration (FDA) is generally
significantly higher due to a variety of factors, including, potential product
liability claims.
In light of the significant phase III costs, Mymetics expects to sign a
partnership agreement with one or more of the major pharmaceutical companies
active in the preventive vaccine market as soon as their human clinical phase II
trials are completed. Such partnership agreements typically involve an initial
cash payment with covers the initial costs of R&D up to that time plus a
adequate margin of profit, followed by a series of payments associated with
specific milestones and finally, royalties on any sales of end products,
assuming these have been approved by the various regulatory authorities
involved, such as the FDA.
We are trying to achieve this for our malaria vaccine by 2012, which has
successfully completed a first round of phases I and II human trials in
Switzerland and the UK respectively and is presently undergoing a new phase 1b
in Tanzania under endemic conditions on children and teenagers , followed at a
later date, probably in 2013 or 2014, by our HIV-AIDS vaccine, which began phase
I human trials in December 2008. These dates are based on our results, which
have been encouraging so far.
21
We will enter into negotiations with potential pharmaceutical partners as soon
as positive intermediary results will be observed in view of a partnership
agreement as described above.
In this regard, we offer a brief summary of our achievements so far:
HIV-AIDS Vaccine
Considering that 85% of HIV transmission is due to sexual contact, we strongly
believe that it is crucial to protect the genital and intestinal mucosa, which
represent the main entry door for HIV during the very first minutes or hours of
transmission. We therefore believe that an HIV vaccine that could successfully
achieve specific mucosal antibodies production in both the genital and
intestinal tracts might allow a new prophylactic vaccine approach, efficient at
preventing or slowing down HIV infection.
It is worth noting that such mucosal protection is naturally present in large
groups of people, for example in East African sex workers. It has further been
demonstrated by other scientists that a high correlation exists between such
natural protection and the presence of so-called IgA antibodies in the mucosa of
naturally protected people. Our goal was therefore to imitate Mother Nature by
trying to induce the production of such mucosal antibodies in vaccinated
subjects. Mymetics is one of the very few companies worldwide that is developing
a vaccine candidate that focuses on the induction of protective mucosal
antibodies, in addition to developing HIV antigens with minimal sequence
homologies with human proteins for preventing potential cross-reactivity. The
majority of the scientific and industrial community decided to take various
other routes, without equivalence in nature, for this reason, we believe that
the failure of other vaccine producers' apparently promising vaccines are not
relevant to us.
Our principal milestones since 2004 have been:
- Our agreement with Pevion Biotech Ltd. (Bern, Switzerland) under which Pevion
granted us an option (later confirmed) to acquire an exclusive world-wide
license to use its unique virosome technology in the field of HIV-AIDS as a form
of "packaging" to protect the trimeric protein against degradation after the
vaccine has been injected into animals or human patients. The virosome
technology has been used since 1994 without problems in 43 countries with over
40 million doses of vaccines produced by other vaccines producers such as Berna
Biotech (Bern, Switzerland). Virosomes boost the effect of antigens,
particularly the production of mucosal antibodies, without the use of an
adjuvant. We believe that this feature gives us a significant strategic
advantage over our competitors as no mucosal adjuvant has been developed so far,
let alone approved, and the development and approval of such an adjuvant being
expected to take several years.
- The completion of our preliminary pre-clinical study on rabbits in 2005 with
the objective to elicit neutralizing antibodies following injections of the
second generation of our proprietary recombinant trimeric (i.e. closely
mimicking the complex natural protein to ensure efficacy), mutated (to boost
efficacy and avoid unwanted side-effects), low cost (for distribution to
underserved and impoverished populations) and stable (to ensure easy and safe
distribution even in hard-to-access regions) rgp41 protein. This work was
conducted in cooperation with four French laboratories. Despite the low
induction of neutralizing antibodies at this time, these results were extremely
important and crucial for a better understanding of our HIV vaccine candidate
and paved the way for our second round of animal studies, conducted at the
Chinese Academy of Medical Sciences in Beijing.
- In March 2006, non-human primates were immunized over six months with HIV gp41
peptides in view of reproducing and above all, improving on the earlier results
obtained in rabbits.
- Our vaccine based on virosomes-gp41 peptides has elicited mucosal IgA and
blood IgG antibodies in more than 90% of vaccinated non-human primates. These
antibodies were found to be present in both the genital and intestinal
compartments, even in animals vaccinated by intra-muscular injection in the
absence of mucosal adjuvant. The mucosal IgA antibodies were harvested and
tested in vitro for their capacity to neutralize native (i.e. not laboratories
attenuated strains) HIV. They were found to
22
be more neutralizing than the best monoclonal antibodies known to date, even at
very low concentration. Vaccinated animals have recently been challenged with
SHIV (a
strain of HIV specific to the animals being tested) for evaluating the level of
protection against the virus.
- In 2007, we were able to complete the production of our fourth generation
rgp41 for HIV clades (strains) B and C, respectively prevalent in developed and
developing countries. In October 2007 we launched a second non-human primate
study at the Institute of Laboratory Animal Science & Chinese Academy of Medical
Science (ILAS) in China, using macaques for evaluating the full vaccine. Animal
vaccinations were scheduled over a six month period. We reproduced the results
from the first macaque study done in 2006-2007 with macaques either protected
against the SHIV162p3 or having a viremia between 1-2 log lower than the control
group.
During 2008, we performed a viral challenge (vaginal route) on those animals
having received our second generation (two component) AIDS vaccine. The results
were better than expected and have been announced in detail at the 16th
Conference on Retroviruses and Opportunistic Infections held in Montreal
(Canada) in February 2009. We expect to make other presentations at appropriate
scientific conferences later in 2009.
- In parallel to these animal studies, we initiated the lengthy and more costly
phase I clinical trial process of our latest generation candidate vaccine. We
received approval in sixteen days from the European Medicines Agency (EMEA) for,
and launched in Belgium, a clinical trial phase I in Q4 2008 for testing our
second generation vaccine formulated with virosomes. As with every phase I
study, its objective will be to evaluate the human tolerance and immunogenicity
of our HIV-AIDS vaccine. This phase I is expected to last 18 months. Considering
the safety record of the virosome technology since 1994, we are very confident
that this phase I trial will show positive results. We have therefore already
initiated the early regulatory procedure required for phase Ib of a new vaccine
formulation enhanced with a third vaccine component recently identified. We
expect to start this phase before the end of 2011, ending in or about mid 2013.
Along with our research on a gp41-based HIV preventive vaccine, we conduct
complementary studies to further and buttress the development of an effective
HIV-1 preventive vaccine.
With regards to financing, we are hopeful that we can obtain significant grants
since many of our competitors' projects have been cancelled or placed on
indefinite hold as a result of recent, widely publicized failures of certain
vaccines in human clinical trials.
Malaria Vaccine
We acquired this promising vaccine project, also based on the virosome platform,
in October 2007 from a business partner, Pevion Biotech Ltd.
This project is more advanced than our initial HIV-AIDS project as it has
already completed a first cycle of human trials phase I and II in 2007 with two
antigens only (five are planned for the complete product). These trials took
place in Switzerland and England with non infected adult European volunteers.
They were very encouraging in terms of level and duration of protection when
compared to the best known competing vaccine. In addition, our vaccine possesses
a unique feature which is the capacity to significantly boost the immune
response of patients having previously been infected by the malaria parasite. In
other words, our vaccine prototype has the potential to act as a therapeutic as
well as a preventive vaccine against malaria, which considerably extends the
size of its potential market.
A second human trial phase I with the same two antigens has recently begun in
Tanzania on young children and teenagers under actual, native conditions, as
African countries now demand that any vaccine tested on their populations be
first tested in developed countries. This was successfully completed in December
2008.
A new round of clinical trials phase I and II are scheduled for testing an
improved vaccine formulation containing 5 antigens.
23
Although we have acquired the full rights to this vaccine project, Pevion will
remain significantly involved in its future development, in accordance with the
terms of our agreement with them.
Dream vaccines Foundation
We believe that our vaccines may have a significant impact on marginalized poor
populations, especially in third world countries currently devastated by these
diseases.
Because this market segment is considered to be unprofitable, there is low
economic interest to research and produce vaccines for diseases specific to
these populations due to high research cost and low commercial return, creating,
we believe, a substantial health and economic disparity between groups of people
who have access to vaccines and those who do not. Sometimes this disparity is
geographical but mostly it is economic. For definition purposes we call these
groups of people underserved and impoverished populations.
We believe that access to vaccines for all populations is a human right. We are,
therefore, establishing Dream Vaccines Foundation as a 501(c)(3) public charity
in the United States. Dream Vaccines Foundation will have a majority of its
board of directors independent of Mymetics. We will have at least one member of
the board of directors of Dream Vaccines Foundation be a current officer of
Mymetics, and any transaction between the two entities will be at arms' length
and fair to both parties.
We expect Dream Vaccines Foundation to play a significant role in the fight
against HIV/AIDS and malaria by financing and leading unbiased vaccine research
and development, which includes unconventional yet promising approaches, using
the latest biotechnology knowledge and methods. We further expect its research
funding to focus on neglected infectious diseases, including specific strains
and clades of these diseases that are prevalent among underserved and
impoverished populations. Finally, we anticipate that the Foundation will ensure
that vaccines reach underserved and impoverished populations at an affordable
price regardless of location, market limitations, or ability to pay.
Visit www.dreamvaccinesfoundation.com to learn more about Dream Vaccines
Foundation.
LIQUIDITY AND CAPITAL RESOURCES
The Company had E509,000 cash at December 31, 2008, compared to E159,000 at
December 31, 2007.
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.
As of December 31, 2008, we had an accumulated deficit of approximately E32.0
million and we incurred losses of E6,938,000 in the twelve-month period ending
December 31, 2008, this compares with losses of E9,294,000 in the twelve month
period ending December 31 2007. These losses are principally associated with the
research and development of our HIV vaccine technologies and the acquisition of
our new malaria project from Pevion Biotech Ltd. 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 E991,000 at December 31, 2008, decreased from E2,307,000 at
December 31, 2007 which included E2,000,000 due to Pevion Biotech Ltd. on
account of our acquisition of their malaria vaccine project, less E774,000 of
various debt amounts forgiven by creditors.
Net cash used by operating activities was E7,718,000 for the year ended December
31, 2008, compared to E6,634,000 for the year ended December 31, 2007. The major
factor
24
in 2008 was costs incurred in connection with our first AIDS vaccine human
clinical trial phase I, which began in December 2008.
INVESTING ACTIVITIES USED CASH OF E23,000 FOR THE YEAR ENDED DECEMBER 31, 2008,
DUE to purchase of property and equipment less sale of short term investments.
Investing activities provided cash of E240,000 for the year ended December 31,
2007.
Financing activities provided cash of E8,078,000 for the year ended December 31,
2008 compared to E6,599,000 in the same period last year.
Proceeds from issuance of common stock provided cash of E1,255,000 for the year
ended December 31, 2008 compared to E5,360,000 in the same period in 2007. As
has been the case since 2003, all private investors having subscribed and
acquired common restricted stock of the Company have done so at a premium of
100% to 300% over the prevailing market price at the time of issuance. The
latest subscriptions have been at USD 0.60 and USD 0.45 per share when the
market was USD 0.13 per share.
Our major shareholder and a member of our Board of Directors have also made
available an aggregate E8,390,000 in the form of convertible, unsecured notes,
the details of which are described in Note 3 of our financial statements.
Our budgeted cash outflow, or cash burn rate, for 2009 is approximately
E12,700,000 for research and fixed and normal recurring expenses, assuming we
will be able to obtain the necessary financing and without taking into account
any grants we may obtain.
Monthly burn rate is only relevant as regards administration expenses and
amounts to E305,000. Other expenditures related to vaccine research and
development have either already been spent during the first quarter of 2009 or
will be very spent in the very near future as the service companies we contract
to perform our clinical trials always require advance, generally non refundable
payments.
12 Months
-----------
2009 budget
GMP lots production & Human Clinical Trials
Phase Ib (AIDS) E 7,500,000
Phases I and II (Malaria) 1,500,000
Administration 3,700,000
-----------
Total E12,700,000
===========
We expect that the cash outflow may increase in 2009 over 2008 as the Company
increases its research and development activities, and proceeds with its
current, or prepares for new, human clinical trials and compliance duties
associated with the signing of a partnership agreement with a major
pharmaceutical company.
Administration costs include E696,000 in gross salaries and related payroll
costs for three of our executive officers, and payments under various consulting
contracts. We did not pay our non-employee directors in 2007, but in 2008 they
were entitled to receive E10,000 each per year of service on the board.
As of March 20, 2009, our Luxembourg affiliate had no employees.
Mymetics Corporation has three full-time employees: Mr. Christian J.-F. Rochet,
our Chief Executive Officer, Mr. Ernst Luebke, our Chief Financial Officer and
Dr. Sylvain Fleury, Ph.D., our Chief Scientific Officer. In addition, our Swiss
subsidiary Mymetics Management Sarl has on its payroll two assistants to our CEO
and CSO respectively as well as one part-time and two full time employees
performing various administrative services on behalf of Mymetics Corporation as
well as Dream Vaccines Foundation, to whom such services are invoiced on a cost
basis.
25
Included in administration costs are E99,000 estimated legal fees paid to
outside corporate counsel, E62,000 audit and review fees paid to our independent
accountants, and E407,000 in investor relations expenses.
We intend to continue to incur additional expenditures during the next 12 months
for additional research and development of our HIV and malaria vaccines. These
expenditures will relate to the continued testing of our prototype vaccines and
are included in the monthly cash outflow described above. Additional funding
requirements during the next 12 months are needed to continue the phase I
clinical trial that started in December 2008.
In the past we have financed our research and development activities primarily
through debt and equity financings from various parties.
We anticipate that our normal operations will require approximately E12,700,000
in the year ending December 31, 2009. We 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 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 would be required to further restrict or
even cease our operations.
RECENT FINANCING ACTIVITIES
During 2008, our principal source of funds was the sale of common restricted
shares to non-US investors under Regulation S of the Securities Act of 1933. All
sales were made at two to three times the current share market price. We also
received funds in the form of convertible unsecured loans from certain major
shareholders. These loans carry a 10% interest rate.
As disclosed in our filing 8-K to the Securities and Exchange Commission dated
February 14, 2008, Mymetics entered into the Next Generation Immunogen Inducing
Broadly Reactive Neutralizing Antibodies HIV-1 Consortium Agreement (the "NGIN
Agreement"), effective February 11, 2008, among fifteen European charitable
organizations, governmental entities, academic institutions and biotech
companies, including Mymetics. Under the NGIN Agreement the consortium will
receive a grant of E7.50 million ($11 million) from the European Commission to
investigate new human immunodeficiency virus ("HIV") antigen formulations for
triggering broadly neutralizing antibodies in the blood and mucosal
compartments, using various adjuvants and platform technologies based on
virus-like particles. Mymetics will support this European consortium through its
expertise with vaccination and HIV mucosal immune response and will provide
access to the HIV virosomes technology for which Mymetics has received an
exclusive license from Pevion Biotech Ltd.
We have filed several other grant applications with European as well as U.S.
institutions which are presently being prosecuted.
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 research
costs for our HIV-AIDS vaccine phase I clinical trial, which began in Belgium
during the last quarter of 2008.
We do not anticipate that our existing capital resources will be sufficient to
fund our cash requirements through the next six 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 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.
26
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.
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.
OFF-BALANCE SHEET ARRANGMENTS
None
ITEM 7 A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary data required with
respect to this Item 7, and as identified in Item 14 of this annual report, are
included in this annual report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. (T) CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to management, as appropriate, to allow timely decisions regarding
required disclosure. Our management, with the participation and supervision of
our Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures as of the end of the
period covered by this report and determined that our disclosure controls and
procedures were effective.
This annual report does not include an attestation report of the company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the company to provide only management's
report in this annual report.
Attached as exhibits to this Form 10-K are certifications of Mymetics' Chief
Executive Officer ("CEO") and Chief Financial Officer ("CFO"), which are
required in
27
accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). This "Controls and Procedures" section includes
information concerning the controls and controls evaluation referred to in the
certifications.
Changes in internal Control over Financial Reporting
As disclosed in our 2007 Annual Report on Form 10-K, we reported material
weaknesses in our internal controls over financial reporting as discussed in
more detail below.
As of December 31, 2008, we have remediated the previously reported material
weaknesses in internal controls over financial reporting. The reported material
weaknesses and remediation results are as follows:
Material Weaknesses in Internal Controls
During the conduct of our assessment of internal control over financial
reporting, we identified three material weaknesses and have advised the audit
committee that the following material weaknesses existed at December 31, 2007.
As defined by the Public Company Accounting Oversight Board Auditing Standard
No. 5, a "material weakness" is a control deficiency or a combination of control
deficiencies such that there is a reasonable possibility that a material
misstatement of the annual or interim financial statements will not be prevented
or detected on a timely basis.
The material weaknesses existed in (i) the lack of independent oversight by an
audit committee of independent members of the Board of Directors, (ii) the lack
of controls over cash receipts and related equity issuances and (iii) the lack
of controls over the period end closing process.
While these material weaknesses did not have an effect on our reported results
or result in the restatement of any previously issued financial statements or
any other related disclosure, they nevertheless constituted deficiencies in our
controls. In light of these material weaknesses and the requirements enacted by
the Sarbanes-Oxley act of 2002, and the related rules and regulations adopted by
the SEC, our Chief Executive Officer and Chief Financial Officer concluded that,
as of December 31, 2007, our controls and procedures needed improvement and were
not effective at a reasonable assurance level. Despite those deficiencies in our
internal controls, management believes that there were no material inaccuracies
or omissions of material fact in the annual report for the year ended
December 31, 2007.
Remediation
Since the discovery of the material weaknesses described above, management
believes that it has corrected the first and third weaknesses by establishing an
audit committee of nonexecutive directors, one of whom is Dr. Thomas Staehelin,
an independent member of our Board of Directors and our audit committee
financial expert. The second weakness was addressed by having the assistant to
the CFO, who is not a direct employee but an independent sub-contracted party;
perform a reconciliation of stock issuances to the detail accounting and stock
records on a quarterly basis.
Management Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting to provide reasonable assurance regarding the
reliability of our financial reporting and the preparation of financial
statements for external purposes in accordance with U.S. generally accepted
accounting principles. Internal control over financial reposting includes those
policies and procedures that (i) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of Mymetics; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with authorizations of management and directors of
Mymetics; and (iii) provide reasonable assurance regarding prevention and timely
detection of unauthorized acquisition, use, or disposition of Mymetics' assets
that could have a material effect on the financial statements.
28
Management assessed our internal control over financial reporting as of December
31, 2008 and considers that the material weaknesses identified previously have
been resolved with respect to the accounts for the period to December 31, 2008.
This has been possible due to the deployment of increased staff numbers in the
accounting department, which has allowed for improved separation of function.
Management now considers that internal control over financial reporting is
effective when reviewed according to the COSO Integrated Framework. We cannot,
however, provide assurance that neither we nor our independent auditors will in
the future identify further material weaknesses or significant deficiencies in
our internal control over financial reporting that we have not discovered to
date.
Inherent Limitations on Effectiveness of Controls
The Company's management, including the 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 of deterioration in the degree of compliance
with policies or procedures.
ITEM 9B. OTHER INFORMATION
None
29
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The number of directors of the Company is established at six.
Our six person board is divided into three classes, designated as Class I, Class
II and Class III. The term of the Class I directors will expire at our 2010
annual meeting of stockholders, the term of the Class II directors will expire
at our 2008 annual meeting of stockholders, and the term of the Class III
directors will expire at our 2009 annual meeting of stockholders. A plurality of
the votes of the shares of our common stock present in person or represented by
proxy at the annual meeting and entitled to vote on the election of directors
are required to elect the directors.
On July 2, 2007, Dr. Thomas Staehelin was elected to fill the vacancy caused by
the resignation of Dr. Zimmer who resigned on June 7, 2005.
On January 1, 2008, Mr. Ernest M. Stern, our outside U.S. counsel, was elected
to fill the vacancy caused by the resignation of Mr. Michael Allio, who resigned
on July 30, 2003.
The position left vacant by the resignation of Mr. Peter McCann, who resigned on
February 14, 2002, will be reserved for a potential investor and/or candidate
related to the securing of a strategic partner.
The following table sets forth information regarding each of our current
directors and executive officers.
EXPIRATION
OF TERM
AS A
NAME CURRENT POSITION WITH THE COMPANY AGE DIRECTOR
-------------- -------------------------------------- --- ----------
Christian Rochet Chief Executive Officer, President 59 2008 (1)
(Class II) And Director (appointed July 31, 2003)
Ernst Luebke Chief Financial Officer, Treasurer, 63 2007 (1)
(Class I) Secretary and Director (appointed
July 31, 2003)
Sylvain Fleury, Ph.D. Chief Scientific Officer (appointed 45 2006 (1)
(Class III) November 3, 2003) and Director
(appointed January 11, 2006)
Thomas Staehelin Director 61 2012
(Class II)
Ernest M. Stern Director 58 2010
(Class I)
Marc Girard, DVM, D.Sc. Head of vaccine development 73 n/a
(appointed January 15, 2004, resigned
March 9, 2009, to continue as a
consultant to the Company)
(1) Under the Company's Bylaws that are subject to the Delaware General
Corporation Law, directors are elected either (i) until the expiration
of the term for which they are selected and until a successor has been
selected and qualified or (ii) until their earlier death, resignation
or removal. Accordingly, since we have not wanted to incur the cost of
a shareholders meeting and, therefore, have not formally reelected the
current directors for another term, the current directors will continue
in their Board positions until their death, resignation or removal
unless we decide to hold a shareholders meeting and extend their terms
or select and qualify successors.
30
CHRISTIAN ROCHET
Mr. Rochet is the Chief Executive Officer and a Director of Mymetics. Prior to
joining Mymetics in July 2003, he had been an independent business consultant on
development and diversification strategies for over 21 years. He became a major
shareholder of our former French subsidiary Mymetics S.A. (f.k.a. Hippocampe
S.A.) in 1997, on the scientific advice of Dr. Sylvain Fleury, Ph. D., and was a
director of that company between 1999 and 2001. On July 31, 2003, Mr. Rochet was
elected as President and Director and appointed as Chief Executive Officer of
the Company.
ERNST LUEBKE
Mr. Luebke was appointed as our Chief Financial Officer and as a Director on
July 31, 2003. Prior to joining Mymetics, Mr. Luebke spent over 21 years as an
independent international business consultant and was the founder of several
companies active in the medical and biotech sectors. Together with Mr. Rochet,
he became a major shareholder of our former French subsidiary Mymetics S.A.
(f.k.a. Hippocampe S.A.) in 1997, and was a director of that company between
1999 and 2001. On July 31, 2003, Mr. Luebke was elected as Director and
appointed as Chief Financial Officer and Treasurer of the Company. Mr. Luebke
was further appointed Secretary of the Company on August 29, 2003.
SYLVAIN FLEURY, Ph.D.
Dr. Fleury was appointed as our Chief Scientific Officer in November 2003 and as
a Director on January 11, 2006. In addition to serving as our Chief Scientific
Officer, Dr. Fleury has maintained until June 2006 his academic research
activity on in heart transplantation at the Department of Experimental Surgery
from the Centre Hospitalier Universitaire Vaudois (CHUV) in Lausanne,
Switzerland. Dr. Fleury moved to the CHUV in January 1997 where he initially
worked as Assistant to Professor Giuseppe Pantaleo until June 2000, a leading
expert in AIDS. During that time, he studied the immune regeneration of HIV
infected subjects under highly active anti-retroviral therapy. He then moved to
the Division of Cardiology (CHUV) as Project leader for developing new research
activities in gene therapy applied to heart transplantation, in collaboration
with Novartis, and genetic studies involving chemokines and chemokine receptors
in heart rejection. In January 2004, Dr. Fleury moved to the Department of
Experimental Surgery directed by Professor Yann Barrandon, a world leader on
stem cells , for completing its research on lentiviral gene therapy . Dr. Fleury
obtained his B.Sc. in Microbiology in 1985 from the University of Montreal
(Canada), his M.Sc. in Virology in 1988 from the Institut Armand-Frappier
(Laval, Canada) and his Ph.D. in 1992 from the Clinical Research Institute of
Montreal in Canada with Rafick Sekaly. During his Ph.D., Dr. Fleury worked on
the CD4 molecule, which is the primary HIV cellular receptor. From 1993-1996,
Dr. Fleury completed his postgraduate studies in Bethesda (USA) at the NIAID,
National Institutes of Health (NIH), with Dr. Ronald N. Germain, a world
renowned Immunologist. Dr. Fleury is the recipient of several awards and prizes
and has published articles in his field of study in scientific journals with a
high impact such as Science, Cell, Nature, Nature Medicine, Circulation.
DR. THOMAS STAEHELIN
Dr. Staehelin is Senior Managing Partner of Fromer, Schultheiss and Staehelin, a
law firm located in Basel, Switzerland. Dr. Staehelin focuses primarily on
corporate and tax law. Dr. Staehelin has served as a member of this law firm
since 1975. Dr. Staehelin also serves on the boards of various Swiss companies
and is Chairman of the Chamber of Commerce of the Basel region. In addition, Dr.
Staehelin is Managing Director of the "Swiss Association of privately held Swiss
Companies" and is a member of the Board of "economiesuisse," The Swiss Business
Federation. Dr. Staehelin received his Ph.D. degree in Law from the University
of Basel. He formerly served as a member of the cantonal parliament of Basel.
31
ERNEST M. STERN
Ernest M. Stern was appointed as a Director in January 2008. Mr. Stern is a
partner in the law firm of Seyfarth Shaw LLP, which serves as outside U.S.
counsel of Mymetics, where he specializes in securities and corporate law,
representing public companies, investment banks and venture funds, and is the
engagement partner for Mymetics. Mr. Stern received his undergraduate degree
from Bowdoin College (Phi Beta Kappa , summa cum laude), and his J.D and LL.M
(Taxation) degrees from Georgetown University Law Center (Case and Note Editor,
Law and Policy in International Business).
MARC GIRARD, DVM, D. SC.
Professor Girard has been a Consultant to Mymetics since January 2004. Prior to
joining Mymetics, Professor Girard served as Director General, Fondation
Merieux, in Lyon, France between 2001 and 2003. Between 1999 and 2001, Professor
Girard served as Director, European Research Center for Virology and Immunology
(CERVI), Lyon, France. Professor Girard has also taught as a professor since
1966, most recently between 1984 and 1999 at the Institut Pasteur, Paris, France
where he also served as the Head of Laboratory of Molecular Virology, Department
of Virology, Institut Pasteur, Paris between 1980 and 1999. During his career,
Professor Girard has served the medical community in a variety of capacities,
including as Head, HIV Vaccine Task Force, French National Agency for AIDS
Research (ANRS), Paris between 1988 and 1998, the Chairman, Department of
Virology, Institut Pasteur, Paris between 1997 and 1999 and the Chairman,
European Consortium for an HIV Vaccine (EuroVac), Brussels between 1999 and
2002. Professor Girard received his D.V.M. (Alfort Veterinary College) in 1960,
his D. Sc. (University of Paris) in 1967 and completed a post doctoral fellow in
1966 through studies with Prof. James Darnell, MIT then Albert Einstein College
of Medicine and Prof. David Baltimore and Renato Dulbecco of the Salk Institute.
Professor Girard is also the published author of several articles in his field
of study.
AUDIT COMMITTEE
Our board of directors has appointed Ernest M. Stern and Dr. Thomas Staehelin to
serve as members of our Audit Committee. Our board of directors has determined
that Dr. Staehelin qualifies as our "audit committee financial expert" and is
independent as that term is defined under NASDAQ Rule 4200(a)(15).
CODE OF ETHICS
We have adopted a Code of Ethics that applies to our executive officers,
including our chief executive officer, as well as to the entire staff of the
Company. A copy of the Code of Ethics is filed as an exhibit to this Form 10-K
annual report.
MEETINGS OF THE BOARD OF DIRECTORS
In 2008, the Board of Directors held nine meetings, four of which were conducted
by telephone conference call, and acted by unanimous written consent four times.
All directors attended at least 75% of the total number of Board meetings. The
Board of Directors has determined that Mr. Staehelin is independent within the
meaning of Section 10A and Rule 10A-3 of the Exchange Act. The Company does not
have a formal policy regarding attendance by members of the board of directors
at the annual meetings of stockholders since it did not hold an annual meeting
in 2008.
Shareholders may contact the Board of Directors by mail addressed to the entire
board of directors, or to one or more individual directors, at, 14, rue de la
Colombiere, CH-1260 Nyon, Switzerland, Attn: Secretary. All communications
directed to the board of directors or individual directors in this manner will
be relayed to the intended recipients.
32
We do not have a separate nominating committee and do not believe that such a
committee is required at this time given our emphasis on research and
development rather than an active revenue generating business and our limited
shareholder base.
DIRECTORS' FEES
Our non-Executive Directors became eligible for compensation of E10,000 each for
their services as directors in 2008.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended, requires
our executive officers, directors and persons who own more than 10% of a
registered class of our equity securities to file reports of ownership and
changes of ownership with the SEC within specified due dates. These persons are
required by SEC regulations to furnish us with copies of all such reports they
file. Based solely on the review of the copies of such reports furnished to us,
we believe that, with respect to our fiscal year ended December 31, 2008, all of
our executive officers, directors and 10% stockholders filed all required
reports under Section 16(a) in a timely manner, except as follows: Dr Fleury and
Professor Girard, in both cases due to incompatibility between the respectively
Swiss and French legal procedures with the electronic filing procedure of the
SEC, and Thomas Staehelin.
ITEM 11. EXECUTIVE COMPENSATION
Compensation Committee Report
The Compensation Committee of the Board of Directors (the "Committee") met with
management to review and discuss the Compensation Discussion and Analysis
disclosures that follow. Based on such review and discussion, the Committee
recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in this Annual Report on Form 10-K, and the Board has
approved that recommendation.
The Compensation Committee is composed of two employee Directors, Mr. Christian
J.F. Rochet, our President and CEO, and Mr. Ernst Luebke, our CFO. The
Compensation Committee does not have a charter.
Compensation Discussion and Analysis
The Committee is responsible for reviewing and approving the compensation
paid to executive officers of the Company, including salaries, bonuses, stock
grants and stock options. Following review and approval by the Committee, action
pertaining to executive compensation for the three named executive officers, our
President and CEO, Christian J.F. Rochet, our CFO, Ernst Luebke, and our CSO,
Sylvain Fleury, for 2008 is reported to the full Board of Directors for further
consideration.
Compensation Philosophy
The Company's compensation of executive officers and its philosophy
regarding executive compensation is comprised of the following characteristics:
(i) Competitive base salary;
(ii) Granting stock awards as a portion of the total compensation,
which vest over a certain number of years; and
(iii) Granting performance-based bonuses either in cash or common
stock.
33
The Company believes its executive compensation should be designed to allow the
Company to attract, motivate and retain executives of a high caliber to permit
the Company to remain competitive in its industry. The Company desires to
maintain for now a uniformity of base salary compensation in light of the
contributions each of the three principal executives has made to the Company's
ability to remain in business and achieve the level of success that it has
reached in meeting scientific results, primarily to date with the HIV-AIDS
vaccine. The Company takes into account the compensation paid at similarly
situated companies, both within and outside of its industry, when determining
executive compensation. The Company believes that by granting shares of the
Company's Common Stock to its executives which vest over a certain number of
years it will be able to encourage executives to remain with the Company.
Additionally, individual performance of the executive is considered as a factor
in determining executive compensation, as well as the overall performance of the
Company, which, since the Company is pre-revenue and primarily involved in
research and development, includes, but is not limited to, fund raising and
meeting the Company's business plan milestones on time and within budget,
including successful conclusion of strategic partner agreements and achieving
the regulatory approvals to commercialize the HIV-AIDS and malaria vaccines,
rather than earnings, revenue growth, cash flow and earnings per share which
would be more typical for a company generating revenues and earnings. The
Committee also uses subjective criteria it deems relevant in its reasonable
discretion.
Compensation of Chief Executive Officer
Mr. Rochet joined us July 31, 2003 as Chief Executive Officer. Mr. Rochet
was paid a base salary of E96,000 in calendar year 2004, the first full year of
his employment by the Company. The Company had very little cash and Mr. Rochet
deferred a significant portion of his salary in 2004, 2005, and 2006. As a
result of Mr. Rochet's efforts, the Company was able to stay in business and
achieve important scientific goals for its HIV-AIDS vaccine that encouraged
investment in the Company. Mr. Rochet's salary was first increased to E120,000
in 2005, then E180,000 in 2006 and E216,000 in 2007 based upon his success in
fund raising for the Company and negotiating an agreement with Pevion Biotech
Ltd. to acquire the malaria vaccine.
Compensation of Chief Financial Officer
Mr. Luebke joined us on July 31, 2003 as Chief Financial Officer. Mr.
Luebke was paid a base salary of E96,000 in calendar year 2004, the first full
year of his employment by the Company. The Company had very little cash and Mr.
Luebke deferred a significant portion of his salary in 2004, 2005, and 2006. As
a result of Mr. Luebke's efforts, the Company was able to stay in business and
achieve important scientific goals for its HIV-AIDS vaccine that encouraged
investment in the Company. Mr. Luebke's salary was first increased to E120,000
in 2005, then E180,000 in 2006 and E216,000 in 2007 based upon his role in
assisting with the Company's fund raising activities and negotiations in
concluding an agreement with Pevion Biotech Ltd. to acquire the malaria vaccine.
Compensation of Chief Scientific Officer
Dr. Fleury was our Scientific Consultant from July 31, 2003 until November
3, 2003 when he was appointed Chief Scientific Officer. Dr. Fleury was paid a
base salary of E96,000 in calendar year 2004, the first full year of his
employment by the Company. The Company had very little cash and Mr. Fleury
deferred a significant portion of his salary in 2004, 2005, and 2006. As a
result of Mr. Fleury's efforts, the Company achieved important scientific goals
for its HIV-AIDS vaccine that encouraged investment in the Company. Dr. Fleury's
salary was first increased to E120,000 in 2005, then E180,000 in 2006 and
E216,000 in 2007 based upon his success in the animal studies leading to the
Company's ability to commence Phase I clinical trials for its HIV-AIDS vaccine
in addition to his role in the negotiations in concluding an agreement with
Pevion Biotech Ltd. to acquire the malaria vaccine.
34
SUMMARY COMPENSATION TABLE
The following table sets forth for the last three fiscal years information on
the annual compensation earned by our directors and officers.
Change in
Pension
Value and
Nonqualified
Non-Equity Deferred
Stock Option Incentive Compensation All Other
Bonus Awards Awards Plan Earnings Compensation Total
Name and Principal Position Year Salary (E) (E) (E) (E) (E) (E) (E) (E)
---------------------------- ---- ------------ ----- -------- ------ ------------ ------------ ------------ --------------
Christian J.-F. Rochet (PEO) (1) 2008 E216,000 (5) - - - - - - E 216,000 (5)
2007 E216,000 (5) - E807,000 - - - - E1,023,000 (5)
2006 E180,000 (5) - - - - - - E 180,000 (5)
Ernst Luebke (PFO) (2) 2008 E216,000 (5) - - - - - - E 216,000 (5)
2007 E216,000 (5) - E672,000 - - - - E 888,000 (5)
2006 E180,000 (5) - - - - - - E 180,000 (5)
Sylvain Fleury, Ph. D. (3) 2008 E216,000 (5) - - - - - - E 216,000 (5)
2007 E216,000 (5) - E672,000 - - - - E 888,000 (5)
2006 E180,000 (5) - - - - - - E 180,000 (5)
Marc Girard, DVM, D.Sc. (4) 2008 E 48,000 - - - - - - E 48,000 (5)
2007 E 48,000 - - - - - - E 48,000 (5)
2006 E 48,000 - - - - - - E 48,000 (5)
(1) Mr. Rochet has been our President and Chief Executive Officer since July
31, 2003.
(2) Mr. Luebke has been our Chief Financial Officer and Treasurer since July
31, 2003 and our Secretary since August 29, 2003.
(3) Dr. Fleury has been appointed as our Chief Scientific Officer on November
3, 2003.
(4) Professor Girard has acted as Head of Vaccine Development since January 15,
2004, a position from which he has resigned for health reasons, as noted
above, but he continues to act in an advisory capacity under a consulting
agreement.
(5) See below "Employment Agreements".
35
The tables entitled "GRANTS OF PLAN-BASED AWARDS," "OUTSTANDING EQUITY AWARDS AT
FISCAL YEAR-END," "OPTION EXERCISES AND STOCK VESTED," "PENSION BENEFITS,"
"NONQUALIFIED DEFERRED COMPENSATION" and "DIRECTOR COMPENSATION" and the
respective discussions related to those tables have been omitted because no
compensation required to be reported in those tables was awarded to, earned by
or paid to any of the named executive officers or directors in any of the
covered fiscal years.
Employment Agreements
Under the Executive Employment Agreement for Christian Rochet, he is employed as
CEO for five years commencing July 1, 2006. Mr. Rochet receives an annual salary
of E216,000 and is entitled to cash bonuses of 3% of all payments to be received
from industry partners of the Company. If Mr. Rochet is terminated without cause
or he terminates for good reason, he is entitled to a lump-sum payment equal to
the greater of 24 months of his salary or the remaining term of his employment
agreement.
Under the Executive Employment Agreement for Ernst Luebke, he is employed as CFO
for five years commencing July 1, 2006. Mr. Luebke receives an annual salary of
E216,000 and is entitled to cash bonuses of 3% of all payments to be received
from industry partners of the Company. If Mr. Luebke is terminated without cause
or he terminates for good reason, he is entitled to a lump-sum payment equal to
the greater of 24 months of his salary or the remaining term of his employment
agreement.
Under the Executive Employment Agreement for Sylvain Fleury Ph.D., he is
employed as CSO for five years commencing July 1, 2006. Dr. Fleury receives an
annual salary of E216,000 and is entitled to cash bonuses of 3% of all payments
to be received from industry partners of the Company. If Dr. Fleury is
terminated without cause or he terminates for good reason, he is entitled to a
lump-sum payment equal to the greater of 24 months of his salary or the
remaining term of his employment agreement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth information about the beneficial ownership of our
common stock as of March 26, 2009, by: (a) each of our named executive officers;
(b) each of our directors; (c) each person known to us to be the beneficial
owner of more than 5% of our outstanding voting securities; and (d) all of our
current executive officers and directors as a group. The following is based
solely on statements and reports filed with the Securities and Exchange
Commission or other information we believe to be reliable.
There were 195,313,630 shares of our common stock outstanding on March 26, 2009.
We have determined beneficial ownership in accordance with the rules of the
Securities and Exchange Commission. Except as indicated by the footnotes below,
we believe, based on the information furnished to us, that the persons and
entities named in the tables below have sole voting and investment power with
respect to all shares of common stock that they beneficially own, subject to
applicable community property laws.
In computing the number of shares of common stock beneficially owned by a person
and the percentage ownership of that person, shares of common stock subject to
options or warrants held by that person that are currently exercisable or
exercisable within 60 days of March 26, 2009, are deemed outstanding. These
shares of common stock, however, are not deemed outstanding for the purposes of
computing the percentage ownership of any other person.
36
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER TITLE OF CLASS BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------- -------------- -------------------- ----------------
Round Enterprises Ltd. Common 44,814,000 22.94%
St. Peter Port, Guernsey
Ernst Luebke (1) Common 10,079,418 (2) 5.16%
Chief Financial Officer, Secretary and Director
Christian Rochet (1) Common 7,377,138 (3) 3.78%
Chief Executive Officer, President and Director
Dr. Sylvain Fleury (1) Common 6,500,000 (4) 3.33%
Chief Scientific Officer, and Director
Dr. Thomas Staehelin (1) Common 8,300,000 4.25%
Director
Prof. Marc Girard (1) Common 1,000,000 (5) 0.51%
Consultant and member of the SAB
Mr. Ernest M. Stern (1) Common 1,500,000 0.77%
Director and outside Counsel
All current executive officers and Common 34,756,556 17.80%
directors as a group (6 persons)
37
----------
(1) Address is Mymetics Corporation, European Executive Office, 14, rue de la
Colombiere, CH-1260 Nyon (Switzerland).
(2) Of which 4,079,418 acquired prior to being elected as director and
appointed as officer, 1,000,000 acquired through conversion of unpaid
salary and expenses and 5,000,000 acquired as bonus.
(3) Of which 377,138 acquired prior to being elected as director and appointed
as officer, 1,000,000 acquired through conversion of unpaid salary and
expenses and 6,000,000 acquired as bonus.
(4) Of which 500,000 issued for services, 1,000,000 acquired through conversion
of unpaid salary and expenses and 5,000,000 acquired as bonus.
(5) Of which 500,000 issued for services and 500,000 acquired through
conversion of unpaid fees and expenses.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
During 2008, there were no transactions, and there are currently no proposed
transactions, to which we were, are or will be a party in which the amount
involved exceeds $120,000 and in which any of our directors, executive officers
or holders of more than 5% of our common stock, or an immediate family member of
any of the foregoing, had or will have a direct or indirect interest.
Furthermore, it is our intention to ensure that all future transactions,
including loans, between us and our officers, directors and principal
stockholders and their affiliates are on terms no less favorable to us than
those that we could obtain from unaffiliated third parties.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table provides information about the fees billed to the registrant
for professional services rendered by Peterson Sullivan LLP during fiscal years
2008 and 2007:
2008 2007
------- -------
Audit Fees $57,000 $57,000
Audit-Related Fees - -
Tax Fees 8,000 41,000
All Other Fees - -
------- -------
Total $65,000 $98,000
======= =======
Audit Fees. Audit fees consist of fees for the audit of the registrant's annual
financial statements or services that are normally provided in connection with
statutory and regulatory filings or engagements.
Audit-Related Fees. Audit-related fees consist of fees for assurance and related
services that are reasonably related to the performance of the audit or review
of the registrant's financial statements and are not reported as Audit Fees.
During fiscal 2008 and 2007, the services provided in this category included due
diligence reviews, audits of employee benefit funds, and consulting on
accounting standards and transactions.
38
Tax Fees. Tax fees consist of fees for tax compliance services, tax advice and
tax planning. During fiscal 2008 and 2007, the services provided in this
category included assistance and advice in relation to the preparation of
corporate income tax returns.
All Other Fees. Any other fees not included in Audit Fees, Audit-Related Fees or
Tax Fees.
Pre-Approval Policies and Procedures.
Our Board of Directors pre-approved all services to be provided by Peterson
Sullivan LLP.
39
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) Index to Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Changes in Shareholders' Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(a)(2) ALL OTHER SCHEDULES HAVE BEEN OMITTED BECAUSE THEY ARE NOT
APPLICABLE OR THE REQUIRED INFORMATION IS SHOWN IN THE
FINANCIAL STATEMENTS OR NOTES THERETO.
(3) List of Exhibits
2.1 Share Exchange Agreement dated December 13, 2001 between the
Corporation and the stockholders of Mymetics S.A. listed on the
signature page thereto (1)
2.2 Share Exchange Agreement dated December 13, 2001 between the
Company and the stockholders of Mymetics S.A. listed on the
signature page thereto (1)
2.3 Purchase Agreement dated October 17, 1998 between the
Company and the majority stockholders of Nazca Holdings
Ltd. (2)
2.4 Amendment to the Purchase Agreement dated October 17, 1998
between the Company and the majority stockholders of Nazca
Holdings Ltd. (3)
2.5 Revised Purchase Agreement dated July 28, 1999 between the
Company and the majority stockholders of Nazca Holdings
Ltd. (4)
2.6 Share Exchange Agreement dated July 30, 2002 between the
Company and the stockholders of Mymetics S.A. listed on the
signature page thereto (5)
3(i) Articles of Incorporation of the Company (as amended through
May 10, 2002) (6)
3(ii) Bylaws (7)
4.1 Form of Specimen Stock Certificate (8)
4.2 Form of letter regarding Warrant (8)
4.3 Form of Share Exchange Agreement (8)
9.1 Voting and Exchange Trust Agreement dated March 19, 2001, among
the Company, 6543 Luxembourg S.A. and MFC Merchant Bank
S.A. (8)
40
10.1 Services Agreement dated May 31, 2001, between the Company
and MFC Merchant Bank, S.A.(7)
10.2 Employment Agreement dated May 3, 2001, between Pierre-Francois
Serres and the Company (7)
10.3 Indemnification Agreement dated March 19, 2001, between the
Company and MFC Bancorp Ltd. (7)
10.4 Agreement dated for reference May 15, 2000, between the
Company and Maarten Reidel (7)
10.5 Preferred Stock Redemption and Conversion Agreement dated for
reference December 21, 2000, between the Company and Sutton
Park International Ltd. (10)
10.6 Preferred Stock Conversion Agreement dated for reference
December 21, 2000, between the Company and Med Net
International Ltd. (11)
10.7 Preferred Stock Conversion Agreement dated December 21, 2000,
between the Company and Dresden Papier GmbH (11)
10.8 Assignment Agreement dated December 29, 2000, among the
Company, Mymetics S.A. and MFC Merchant Bank S.A. (1)
10.9 Credit Facility Agreement dated July 27, 2000, between MFC
Merchant Bank, S.A. and the Company (1)
10.10 Amended Credit Facility Agreement dated for reference August
13, 2001, between MFC Merchant Bank, S.A. and the Company
(16)
10.11 Second Amended Credit Facility Agreement dated for reference
February 27, 2002, between MFC Merchant Bank, S.A. and the
Company (16)
10.12 Amended and Restated Credit Facility Agreement dated for
reference February 28, 2003, among MFC Merchant Bank, S.A., MFC
Bancorp Ltd., and the Company (16)
10.13 Guarantee dated for reference February 28, 2003, by MFC Bancorp
Ltd. to MFC Merchant Bank S.A. (16)
10.14 Shareholder Agreement dated March 19, 2001, among the
Company, the Holders of Class B Exchangeable Preferential
Non-Voting Shares of 6543 Luxembourg S.A. signatory thereto and
6543 Luxembourg S.A.(8)
10.15 Support Agreement dated March 19, 2001, between the Company
and 6543 Luxembourg S.A. (8)
10.16 1995 Qualified Incentive Stock Option Plan (12)
10.17 Amended 1994 Stock Option Plan (13)
10.18 2001 ICHOR Company Stock Option Plan (7)
10.19 Employment Agreement dated March 18, 2002, between the
Company and Peter P. McCann (14)
10.20 Consulting Agreement dated August 31, 2001, between the
Company and Michael K. Allio (8)
41
10.21 Amendment to Consulting Agreement dated August 21, 2002,
between the Company and Michael K. Allio (16)
10.22 Employment Agreement dated March 18, 2002, between the
Company and Dr. Joseph D. Mosca (15)
10.23 Separation Agreement and Release dated January 31, 2003,
between the Company and Peter P. McCann (16)
10.24 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Company and Robert Demers (8)
10.25 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Company and Michael K. Allio (8)
10.26 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Company and John M. Musacchio (8)
10.27 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Company and Patrice Pactol (8)
10.28 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Company and Pierre-Francois Serres (8)
10.29 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Company and Pierre-Francois Serres (16)
10.30 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Company and Patrice Pactol (16)
10.31 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Company and Robert Demers (16)
10.32 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Company and John M. Musacchio (16)
10.33 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Company and Michael K. Allio (16)
10.34 Director and Non-Employee Stock Option Agreement dated August
21, 2002, between the Company and Michael K. Allio (16)
10.35 Director and Non-Employee Stock Option Agreement dated June 20,
2002, between the Company and Peter P. McCann (16)
10.36 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Company and Peter P. McCann (16)
10.37 Director and Non-Employee Stock Option Agreement dated February
6, 2003, between the Company and Peter P. McCann (16)
10.38 Patent Pledge Agreement dated November __, 2002 among Mymetics
S.A., Mymetics Deutschland GmbH, the Company and MFC
Merchant Bank S.A. (16)
10.39 Third Amendment to the Credit Facility Agreement dated for
Reference December 31, 2006, between MFC Merchant Bank, S.A.
and the Company (17)
10.40 Fourth Amendment to the Credit Facility Agreement dated for
Reference February 16, 2005, between MFC Merchant Bank, S.A.
and the Company (17)
10.41 Consulting Agreement dated for reference January 1, 2004,
between the Centre Hospitalier Universitaire Vaudois (CHUV),
the Company and Dr. Sylvain Fleury, Ph.D. (18)
42
10.42 Consulting Agreement dated for reference January 1, 2004,
between the Company and Professor Marc Girard, DVM, D.Sc. (18)
10.43 Cooperation and Option Agreement dated March 10, 2005, between
the Company and Pevion A.G. (18)
10.44 Consulting Agreement dated March 23, 2005, between the
Company and Northern Light International. (18)
10.45 Sixth Amended Credit Facility Agreement dated for reference
December 31, 2005, between MFC Merchant Bank, S.A. and the
Company (19)
10.46 Employment Agreement dated July 1, 2006, between the
Company and Dr. Sylvain Fleury (20)
10.47 Employment Agreement dated July 1, 2006, between the
Company and Christian Rochet (20)
10.48 Employment Agreement dated July 1, 2006, between the
Company and Ernst Luebke (20)
10.49 License Agreement dated March 1, 2007, between the Company
and Pevion Biotech Ltd. (21)
10.50 Settlement Agreement dated March 19, 2007 between Mymetics
and MFC Merchant Bank S.A. (22)
10.51 Co-ownership Agreement dated January 8, 2008 between the Company,
INSERM and Pevion Biotech Ltd. (23)
10.52 Co-ownership Agreement dated January 8, 2008 between the Company
and INSERM (23)
10.53 Exploitation Agreement dated January 8, 2008 between the Company
and INSERM (23)
10.54 Non-Executive Director Agreement dated 21 January, 2008 between the
Company and Mr Ernest M Stern.(24)
10.55 NGIN Material Transfer Agreement dated 11 February 2008 between the
Company, Institute Cochin, Universite Paris Descartes and
Pevion Biotech.(25)
10.56 Acquisition & License Agreement dated 19 May 2008 between the
Company and Pevion Biotech Ltd. (26)
10.57 Extension of Convertible Note Maturity Date Agreement dated 22
August 2008 between the Company, Anglo Irish Bank and Round
Enterprises Ltd. (27)
10.58 Gp41 Manufacturing Technology Agreement dated 26 January 2009
between the Company and PX Therapeutics (28)
10.59 Share Purchase Agreement pursuant to which Mymetics purchased all
issued and outstanding shares of capital stock of Bestewil Holding
B.V. ("Bestewil") from its parent, Norwood Immunology Limited
("NIL"), and all issued and outstanding shares of capital stock of
Virosome Biologicals B.V. now held by Bestewil. (29)
10.60 Resignation of Prof Marc Girard as Head of vaccine development for
reasons of personal health. (30)
43
11.1 Statement Regarding Calculation of Per Share Earnings.
14.1 Code of Ethics.
21.1 List of Subsidiaries
24.1 Powers of Attorney (included on the signature page hereto)
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) or 15d-14 of the Securities Exchange Act of 1934
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) or 15d-14 of the Securities Exchange Act of 1934
32.1 Section 1350 Certification of Chief Executive Officer and Chief
Financial Officer
----------
(1) Incorporated by reference to the Company's Schedule 14C filed with the
Securities and Exchange Commission on April 26, 2001.
(2) Incorporated by reference to the Company's report on Form 8-K filed with
the Securities and Exchange Commission on October 22, 1998.
(3) Incorporated by reference to the Company's report on Form 8-K/A filed with
the Securities and Exchange Commission on April 15, 1999.
(4) Incorporated by reference to the Company's report on Form 8-K/A filed with
the Securities and Exchange Commission on August 13, 1999.
(5) Incorporated by reference to the Company's Amendment No. 1 to Form S-1
filed with the Securities and Exchange Commission on August 8, 2002.
(6) Incorporated by reference to the Company's report on Form 10-Q for the
quarter ended March 31, 2002, filed with the Securities and Exchange
Commission on May 15, 2002.
(7) Incorporated by reference to the Company's report on Form 10-Q for the
quarter ended June 30, 2001, filed with the Securities and Exchange
Commission on August 14, 2001.
(8) Incorporated by reference to the Company's Registration Statement on Form
S-1, File No. 333-88782, filed with the Securities and Exchange Commission
on May 22, 2002.
(9) Incorporated by reference to the Company's report on Form 8-K/A filed with
the Securities and Exchange Commission on August 9, 2000.
(10) Incorporated by reference to Schedule 13D/A filed by MFC Bancorp Ltd. with
the Securities and Exchange Commission on dated January 2, 2001.
(11) Incorporated by reference to the Company's report on Form 10-K for the
fiscal year ended December 31, 2000, filed with the Securities and Exchange
Commission on March 14, 2001.
(12) Incorporate by reference to the Company's Registration Statement on Form
S-8, File No. 333-15831, filed with the Securities and Exchange Commission
on November 8, 1996.
(13) Incorporated by reference to the Company's Registration Statement on Form
S-8, File No. 333-15829, filed with the Securities and Exchange Commission
on November 8, 1996.
44
(14) Incorporated by reference to the Company's report on Form 10-K for the
fiscal year ended December 31, 2004, and filed with the Securities and
Exchange Commission on March 29, 2002.
(15) Incorporated by reference to the Company's report on Form 10-Q for the
quarter ended March 31, 2002, filed with the Securities and Exchange
Commission on May 15, 2002.
(16) Incorporated by reference to the Company's report on Form 10-K for the
fiscal year ended December 31, 2005, and filed with the Securities and
Exchange Commission on March 27, 2003.
(17) Incorporated by reference to the Company's report on Form 8-K filed With
the Securities and Exchange Commission on February 18, 2005.
(18) Incorporated by reference to the Company's report on Form 10-K for the
fiscal year ended December 31, 2004, filed with the Securities and Exchange
Commission on March 30, 2005.
(19) Incorporated by reference to the Company's report on Form 10-K for the
fiscal year ended December 31, 2005, filed with the Securities and Exchange
Commission on April 17, 2006.
(20) Incorporated by reference to the Company's report on Form 10-Q for the
period ended June 30, 2006, and filed with the Securities and Exchange
Commission on August 21, 2006.
(21) Incorporated by reference to the Company's report on Form 10-K for the
fiscal year ended December 31, 2006, filed with the Securities and Exchange
Commission on April 17, 2007.
(22) Incorporated by reference to the Company's report on Form 8-K filed With
the Securities and Exchange Commission on March 21, 2007.
(23) Incorporated by reference to the Company's report on Form 8-K filed With
the Securities and Exchange Commission on January 14, 2008.
(24) Incorporated by reference to the Company's report on Form 8-K filed With
the Securities and Exchange Commission on January 25, 2008.
(25) Incorporated by reference to the Company's report on Form 8-K filed With
the Securities and Exchange Commission on February 19, 2008.
(26) Incorporated by reference to the Company's report on Form 8-K filed With
the Securities and Exchange Commission on May 19, 2008.
(27) Incorporated by reference to the Company's report on Form 8-K filed With
the Securities and Exchange Commission on June 30, 2008.
(28) Incorporated by reference to the Company's report on Form 8-K filed With
the Securities and Exchange Commission on January 30, 2009.
(29) Incorporated by reference to the Company's report on Form 8-K filed With
the Securities and Exchange Commission on March 5, 2009.
(30) Incorporated by reference to the Company's report on Form 8-K filed With
the Securities and Exchange Commission on March 9, 2009.
45
(c) Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders
Mymetics Corporation and Subsidiaries
Nyon, Switzerland
We have audited the accompanying consolidated balance sheets of Mymetics
Corporation (a development stage company) and Subsidiaries as of December 31,
2008 and 2007, and the related consolidated statements of operations and
comprehensive loss, changes in shareholders' equity (deficit), and cash flows
for the years ended December 31, 2008 and 2007, and for the period from May 2,
1990 (inception) to December 31, 2008. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company has determined that it
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Mymetics Corporation
(a development stage company) and Subsidiaries as of December 31, 2008 and 2007,
and the results of their operations and their cash flows for the years ended
December 31, 2008 and 2007, and for the period from May 2, 1990 (inception) to
December 31, 2008, in conformity with accounting principles generally accepted
in the United States.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has not developed a commercially
viable product and, therefore, has not been able to generate revenue, which has
resulted in significant losses. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans
regarding these matters are also described in Note 1. These consolidated
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
/S/ PETERSON SULLIVAN LLP
Seattle, Washington
March 20, 2009
46
MYMETICS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31, 2008 and 2007
(In Thousands of Euros)
2008 2007
-------- --------
ASSETS
Current Assets
Cash E 509 E 159
Short-term investments -- 60
Receivables officer 8 71
Receivables other 6 --
Prepaid expenses 75 17
-------- --------
Total current assets 598 317
Property and equipment, net of accumulated
depreciation of E18 and E2 at December 31,
2008 and 2007, respectively 76 10
-------- --------
E 674 E 317
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable E 991 E 2,307
Taxes and social costs payable 25 4
Current portion of convertible notes payable
to related parties -- 2,000
Other -- 52
-------- --------
Total current liabilities 1,016 4,363
Convertible notes payable to related parties,
less current portion 8,973 150
-------- --------
Total liabilities 9,989 4,513
Shareholders' Equity (Deficit)
Common stock, U.S. $.01 par value;
495,000,000 shares authorized; issued 194,313,630
at December 31, 2008 and 186,963,630 at December 31, 2007 1,742 1,694
Common stock issuable, 1,000,000 at December 31, 2008 and
500,000 at December 31, 2007 7 3
Preferred stock, U.S. $.01 par value;
5,000,000 shares authorized; none issued or outstanding -- --
Additional paid-in capital 20,155 18,401
Deficit accumulated during the development stage (31,904) (24,966)
Accumulated other comprehensive income 685 672
-------- --------
(9,315) (4,196)
-------- --------
E 674 E 317
======== ========
The accompanying notes are an integral part of these financial statements.
47
MYMETICS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Years Ended December 31, 2008 and 2007 and
the Period from May 2, 1990 (Inception) to December 31, 2008
(In Thousands of Euros, Except Per Share Data)
Accumulated
During
Development
Stage
(May 2, 1990 to
December 31,
2008 2007 2008)
------- ------- ---------------
Revenues
Sales E -- E -- E 224
Interest -- -- 34
Gain on extinguishment of debt -- 774 774
Government grants 65 -- 65
------- ------- --------
65 774 1,097
Expenses
Research and development 2,692 5,981 14,302
General and administrative 3,693 3,945 14,761
Bank fee -- -- 935
Interest 583 138 1,952
Goodwill impairment -- -- 209
Depreciation and amortization 17 -- 530
Directors' fees -- -- 274
Other -- -- 10
------- ------- --------
6,985 10,064 32,973
------- ------- --------
Loss before income tax provision (6,920) (9,290) (31,876)
Income tax provision (18) (4) (28)
------- ------- --------
Net loss (6,938) (9,294) (31,904)
Other comprehensive income
Foreign currency translation
adjustment 13 (75) 685
------- ------- --------
Comprehensive loss E(6,925) E(9,369) E(31,219)
======= ======= ========
Basic and diluted loss per share E (0.04) E (0.06)
======= =======
The accompanying notes are an integral part of these financial statements.
48
MYMETICS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the Period from May 2, 1990 (Inception) to December 31, 2008
(In Thousands of Euros)
Accumulated
Other
Comprehensive
Deficit Income -
Accumulated Foreign
Additional During the Currency
Date of Number of Par Paid-in Development Translation
Transaction Shares Value Capital Stage Adjustment Total
-------------- ---------- ----- ---------- ----------- ------------ --------
Balance at May 2, 1990
Shares issued for cash June 1990 33,311,361 E119 E -- E -- E -- E 119
Net losses to December 31, 1999 -- -- -- (376) -- (376)
Balance at December 31, 1999 33,311,361 119 -- (376) -- (257)
---------- ---- ------ -------- ------- -------
Bank fee -- -- 806 -- -- 806
Net loss for the year -- -- -- (1,314) -- (1,314)
---------- ---- ------ -------- ------ -------
Balance at December 31, 2000 33,311,361 119 806 (1,690) -- (765)
Effect on capital structure resulting
from a business combination March 2001 8,165,830 354 (354) -- -- --
Issuance of stock purchase warrants in
connection with credit facility
(restated) March 2001 -- -- 210 -- -- 210
Issuance of shares for bank fee March 2001 1,800,000 21 (21) -- -- --
Issuance of shares for bank fee June 2001 225,144 3 (3) -- -- --
Issuance of shares for cash June 2001 1,333,333 15 2,109 -- -- 2,124
Exercise of stock purchase warrants in
repayment of debt June 2001 1,176,294 13 259 -- -- 272
Exercise of stock purchase warrants for
cash December 2001 3,250,000 37 563 -- -- 600
Net loss for the year (restated) -- -- -- (1,848) -- (1,848)
Translation adjustment -- -- -- -- 100 100
---------- ---- ------ -------- ------- -------
Balance at December 31, 2001 49,261,962 562 3,569 (3,538) 100 693
Exercise of stock options March 2002 10,000 -- 8 -- -- 8
Issuance of stock purchase warrants for
bank fee June 2002 -- -- 63 -- -- 63
Exercise of stock purchase warrants in
repayment of debt July 2002 1,625,567 16 396 -- -- 412
Issuance of remaining shares from 2001
business combination August 2002 46,976 1 (1) -- -- --
Net loss for the year -- -- -- (3,622) -- (3,622)
Translation adjustment -- -- -- -- 97 97
---------- ---- ------ -------- ------- -------
Balance at December 31, 2002 50,944,505 579 4,035 (7,160) 197 (2,349)
========== ==== ====== ======== ======= =======
Issuance of shares for services September 2003 400,000 4 29 -- -- 33
Shares retired October 2003 (51) - - -- -- --
Issuance of shares for services November 2003 1,500,000 12 100 -- -- 112
Issuance of shares for cash December 2003 1,500,000 12 113 -- -- 125
Issuance of stock purchase warrants for
financing fee December 2003 -- -- 12 -- -- 12
Net loss for the year -- -- -- (2,786) -- (2,786)
Translation adjustment -- -- -- -- 453 453
---------- ---- ------ -------- ------- -------
Balance at December 31, 2003 54,344,454 607 4,289 (9,946) 650 (4,400)
========== ==== ====== ======== ======= =======
Issuance of shares for services January 2004 550,000 5 27 -- -- 32
Issuance of shares for cash January 2004 2,000,000 17 150 -- -- 167
Issuance of stock purchase warrants for
financing fee January 2004 -- -- 40 -- -- 40
Issuance of shares for cash February 2004 2,500,000 21 187 -- -- 208
Issuance of stock purchase warrants for
financing fee February 2004 -- -- 62 -- -- 62
Issuance of shares for services April 2004 120,000 1 11 -- -- 12
Issuance of shares for bank fee May 2004 500,000 4 62 -- -- 66
Issuance of shares for cash May 2004 2,000,000 16 148 -- -- 164
Issuance of shares for services August 2004 250,000 2 26 -- -- 28
Issuance of shares for cash August 2004 1,466,667 12 128 -- -- 140
Issuance of stock purchase warrants for
financing fee August 2004 -- -- 46 -- -- 46
Issuance of shares for services September 2004 520,000 4 29 -- -- 33
Issuance of shares for cash September 2004 50,000 -- 4 -- -- 4
Issuance of shares for services October 2004 2,106,743 16 132 -- -- 148
Issuance of shares for services November 2004 2,000,000 15 177 -- -- 192
Issuance of shares for cash November 2004 40,000 -- 4 -- -- 4
Net loss for the year -- -- -- (2,202) -- (2,202)
Translation adjustment -- -- -- -- 191 191
---------- ---- ------ -------- ------- -------
Balance at December 31, 2004 68,447,864 E720 E5,522 E(12,148) E 841 E(5,065)
========== ==== ====== ======== ======= =======
Issuance of shares for services January 2005 500,000 4 83 -- -- 87
Issuance of shares for services March 2005 200,000 2 33 -- -- 35
Issuance of shares for services March 2005 1,500,000 11 247 -- -- 258
Issuance of shares for services April 2005 60,000 1 10 -- -- 11
Issuance of shares for cash May 2005 52,000 -- 5 -- -- 5
Issuance of shares for cash June 2005 50,000 -- 3 -- -- 3
Issuance of shares for cash June 2005 50,000 -- 3 -- -- 3
Issuance of shares for cash June 2005 343,500 3 14 -- -- 17
Issuance of shares for cash June 2005 83,300 1 3 -- -- 4
Issuance of shares for cash June 2005 100,000 1 4 -- -- 5
Issuance of shares for cash July 2005 144,516 1 6 -- -- 7
Issuance of shares for cash July 2005 144,516 1 6 -- -- 7
Issuance of shares for cash July 2005 144,516 1 6 -- -- 7
Issuance of shares for cash August 2005 206,452 2 8 -- -- 10
Issuance of shares for cash August 2005 50,000 -- 2 -- -- 2
Issuance of shares for services September 2005 500,000 4 8 -- -- 12
Issuance of shares for services September 2005 500,000 4 8 -- -- 12
Issuance of shares for services September 2005 500,000 4 8 -- -- 12
Issuance of shares for services September 2005 300,000 3 5 -- -- 8
Issuance of shares for services September 2005 68,000 1 1 -- -- 2
Issuance of shares for services September 2005 173,200 1 3 -- -- 4
Issuance of shares for cash October 2005 87,459 1 2 -- -- 3
Issuance of shares for services October 2005 185,000 2 6 -- -- 8
Issuance of shares for cash October 2005 174,918 1 5 -- -- 6
Issuance of shares for cash October 2005 116,612 1 3 -- -- 4
Issuance of shares for cash November 2005 116,611 1 3 -- -- 4
Issuance of shares for cash November 2005 390,667 3 3 -- -- 6
Issuance of shares for services November 2005 20,000 -- -- -- -- --
Issuance of shares for services November 2005 20,000 -- -- -- -- --
Issuance of shares for services November 2005 20,000 -- -- -- -- --
Issuance of shares for services November 2005 500,000 5 9 -- -- 14
Issuance of shares for services December 2005 140,000 2 2 -- -- 4
Issuance of shares for cash December 2005 390,667 3 3 -- -- 6
Issuance of shares for cash December 2005 390,666 3 3 -- -- 6
Issuance of shares for cash December 2005 6,000,000 50 200 -- -- 250
Net loss for the year -- -- -- (1,939) -- (1,939)
Translation adjustment -- -- -- -- (98) (98)
---------- ---- ------ -------- ------- -------
Balance at December 31, 2005 82,670,464 837 6,227 (14,087) 743 (6,280)
========== ==== ====== ======== ======= =======
Issuance of shares for services January 2006 2,500,000 21 31 -- -- 52
Issuance of shares for cash January 2006 4,000,000 33 132 -- -- 165
Issuance of shares for services January 2006 100,000 1 2 -- -- 3
Issuance of shares for cash March 2006 1,500,000 12 38 -- -- 50
Issuance of shares for cash March 2006 2,500,000 21 62 -- -- 83
Issuance of shares for cash March 2006 250,000 2 6 -- -- 8
Issuance of shares for cash March 2006 1,500,000 12 38 -- -- 50
Issuance of shares for services April 2006 100,000 1 4 -- -- 5
Issuance of shares for cash May 2006 300,000 2 3 -- -- 5
Issuance of shares for cash May 2006 300,000 3 7 -- -- 10
Issuance of shares for cash May 2006 2,350,000 18 82 -- -- 100
Debt Conversion - non cash May 2006 1,000,000 8 31 -- -- 39
Issuance of shares for cash June 2006 2,600,000 20 80 -- -- 100
Debt Conversion - non cash July 2006 1,000,000 8 72 -- -- 80
Debt Conversion - non cash July 2006 1,000,000 8 72 -- -- 80
Debt Conversion - non cash July 2006 1,000,000 8 72 -- -- 80
Debt Conversion - non cash July 2006 500,000 4 36 -- -- 40
Issuance of shares for services November 2006 300,000 2 4 -- -- 6
Issuance of shares for cash November 2006 1,300,000 10 90 -- -- 100
Issuance of shares for cash November 2006 1,280,000 10 90 -- -- 100
Issuance of shares for cash December 2006 1,320,000 10 90 -- -- 100
Issuance of shares for cash December 2006 1,320,000 10 90 -- -- 100
Issuance of shares for cash December 2006 330,000 3 22 -- -- 25
Net loss for the year -- -- -- (1,585) -- (1,585)
Translation adjustment -- -- -- -- 4 4
----------- ----- ------ -------- ------- -------
Balance at December 31, 2006 111,020,464 1,064 7,381 (15,672) 747 (6,480)
=========== ===== ====== ======== ======= =======
49
Issuance of shares for cash January 2007 650,000 5 45 -- -- 50
Issuance of shares for services January 2007 300,000 2 6 -- -- 8
Issuance of shares for services January 2007 200,000 2 4 -- -- 6
Issuance of shares for services January 2007 250,000 2 5 -- -- 7
Issuance of shares for services February 2007 250,000 2 5 -- -- 7
Issuance of shares for cash February 2007 1,420,000 11 99 -- -- 110
Issuance of shares for cash February 2007 325,000 2 22 -- -- 24
Issuance of shares for cash March 2007 650,000 5 45 -- -- 50
Issuance of shares for cash March 2007 8,712,000 115 875 -- -- 990
Debt Conversion - non cash March 2007 12,500,000 94 2,505 -- -- 2,599
Issuance of shares for services April 2007 100,000 1 13 -- -- 14
Issuance of shares for services April 2007 200,000 1 25 -- -- 26
Issuance of shares for services April 2007 1,000,000 7 67 -- -- 74
Issuance of shares for cash May 2007 1,000,000 7 140 -- -- 147
Issuance of shares for cash May 2007 750,000 6 105 -- -- 111
Debt Cancellation - non cash May 2007 -- -- 242 -- -- 242
Debt Conversion - non cash June 2007 9,469,000 70 891 -- -- 961
Issuance of shares for cash June 2007 5,393,000 40 760 -- -- 800
Issuance of shares for services June 2007 261,250 2 25 -- -- 27
Issuance of shares for services June 2007 261,250 2 25 -- -- 27
Issuance of shares for officer
compensation June 2007 2,500,000 19 318 -- -- 337
Issuance of shares for officer
compensation June 2007 2,500,000 19 318 -- -- 337
Issuance of shares for officer
compensation June 2007 4,000,000 30 508 -- -- 538
Issuance of shares for officer
compensation June 2007 1,000,000 7 127 -- -- 134
Issuance of shares for officer
compensation June 2007 6,000,000 45 762 -- -- 807
Issuance of shares for services June 2007 135,000 1 12 -- -- 13
Issuance of shares for cash June 2007 2,250,000 17 12 -- -- 29
Issuance of shares for cash July 2007 5,550,000 42 1,208 -- -- 1,250
Issuance of shares for cash August 2007 933,333 7 193 -- -- 200
Issuance of shares for services August 2007 1,000,000 7 66 -- -- 73
Issuance of shares for services August 2007 1,000,000 7 66 -- -- 73
Issuance of shares for services August 2007 100,000 1 7 -- -- 8
Issuance of shares for services September 2007 300,000 2 21 -- -- 23
Issuance of shares for cash September 2007 1,666,667 12 344 -- -- 356
Cancellation of shares for collateral September 2007 -2,000,000 -- -- -- -- --
Issuance of shares for cash October 2007 2,350,000 17 483 -- -- 500
Issuance of shares for cash November 2007 2,966,666 21 623 -- -- 644
Issuance of shares for services December 2007 500,000 3 48 -- -- 51
Net loss for the year -- -- -- (9,294) -- (9,294)
Translation adjustment -- -- -- -- (75) (75)
----------- ----- ------ -------- ------- -------
Balance at December 31, 2007 187,463,630 1,697 18,401 (24,966) 672 (4,196)
=========== ===== ====== ======== ======= =======
Issuance of shares for services January 2008 800,000 6 79 -- -- 85
Issuance of shares for services January 2008 200,000 1 20 -- -- 21
Issuance of shares for cash February 2008 1,000,000 7 326 -- -- 333
Issuance of shares for services March 2008 500,000 3 73 -- -- 76
Issuance of shares for services March 2008 500,000 3 73 -- -- 76
Issuance of shares for cash June 2008 300,000 2 94 -- -- 96
Issuance of shares for cash June 2008 1,300,000 8 492 -- -- 500
Issuance of shares for services July 2008 2,000,000 13 239 -- -- 252
Issuance of shares for services August 2008 250,000 2 39 -- -- 41
Issuance of shares for cash December 2008 1,000,000 7 319 -- -- 326
Net loss for the period -- -- -- (6,938) -- (6,938)
Translation adjustment -- -- -- -- 13 13
----------- ----- ------ -------- ------- -------
Balance at December 31, 2008 195,313,630 1,749 20,155 (31,904) 685 (9,315)
=========== ===== ====== ======== ======= =======
The accompanying notes are an integral part of these financial statements.
50
MYMETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2008 and 2007 and
the Period from May 2, 1990 (Inception) to December 31, 2008
(In Thousands of Euros)
Total
Accumulated
During
Development
Stage
(May 2, 1990 to
December 31,
2008 2007 2008)
------- ------- ---------------
Cash Flows from Operating Activities
Net loss E(6,938) E(9,294) E(31,904)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 17 -- 530
Goodwill impairment -- -- 209
Fees paid in warrants -- -- 223
Gain on extinguishment of debt -- (774) (774)
Services and fees paid in common stock 551 2,590 5,135
Amortization of debt discount -- -- 210
Changes in operating assets and liabilities,
net of effects from reverse purchase
Receivables 57 (56) 24
Accounts payable (1,316) 1,148 1,747
Taxes and social costs payable 21 (1) 25
Other (110) (247) (37)
------- ------- --------
Net cash used in operating activities (7,718) (6,634) (24,612)
Cash Flows from Investing Activities
Patents and other -- 300 (393)
Purchase of property and equipment (83) -- (83)
Short-term investments 60 (60) --
Cash acquired in reverse purchase -- -- 13
------- ------- --------
Net cash provided by (used in)
investing activities (23) 240 (463)
Cash Flows from Financing Activities
Proceeds from the issuance of
common stock and warrants 1,255 5,360 11,630
Borrowings from shareholders -- 730 972
Increase in notes payable and other
short-term advances 6,823 1,999 13,917
Decrease in notes payable and other
short-term advances -- (1,490) (1,490)
Loan fees -- -- (130)
------- ------- --------
Net cash provided by financing activities 8,078 6,599 24,899
Effect of exchange rate changes on cash 13 (75) 685
------- ------- --------
Net increase in cash 350 130 509
Cash, beginning of period 159 29 --
------- ------- --------
Cash, end of period E 509 E 159 E 509
======= ======= ========
The accompanying notes are an integral part of these financial statements.
51
MYMETICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The Company and Summary of Significant Accounting Policies
Basis of Presentation
The amounts in the notes are rounded to the nearest thousand except for share
and 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 AIDS virus. The
Company has established a network which enables it to work with education
centers, research centers, pharmaceutical laboratories and biotechnology
companies. Mymetics intends to expand its range of candidate vaccines and
network of collaborators by the acquisition of Bestewil Holding B.V. from its
parent, NORWOOD IMMUNOLOGY LIMITED ("NIL") , and all issued and outstanding
shares of capital stock of Virosome Biologicals B.V. See Note 7 Subsequent
Events.
These financial statements have been prepared treating the Company as a
development stage company. As of December 31, 2008, the Company had not
performed any clinical testing and a commercially viable product is not expected
for several more years. As such, the Company has not generated significant
revenue. Revenue reported by the Company for 2008 consist of incidental grant
revenue. For the purpose of these financial statements, the development stage
started May 2, 1990.
These financial statements have also been prepared assuming the Company will
continue as a going concern. The Company has experienced significant losses
since inception resulting in a deficit accumulated during the development stage
of E31,904 at December 31, 2008. 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 E418 as of December
31, 2008, 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.
The Company is focusing its efforts on funding its on-going expenses through
high net worth individuals located in Switzerland. To date, these individuals
have purchased restricted common shares at prices at a premium to the market
price of Mymetics shares and have introduced management to other high net worth
individuals who have a similar interest in the Company's science and mission.
The Company expects to continue to rely on its existing high net worth
shareholders and new individuals who they know to meet its expenses during the
next 12 months.
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.
52
Cash and Cash Flow Disclosure
Cash deposits are occasionally in excess of insured amounts. Interest paid was
zero in 2008 and E138 in 2007. The Company has paid no income tax since its
inception.
Short Term Investments
Short term investments consisted of time deposits with initial three-month
maturities. Short term investments were reported at market value which
approximates cost and there were no gains or losses in 2008.
Revenue Recognition
Revenue related to the sale of products is recognized when all of the following
conditions are met: persuasive evidence of an arrangement exists, delivery has
occurred, the price is fixed or determinable, and collectability is reasonably
assured. Grant revenue is recognized when the associated costs are incurred.
Receivables
Receivables are stated at their outstanding principal balances. Management
reviews the collectability of receivables on a periodic basis and determines the
appropriate amount of any allowance. Based on this review procedure, management
has determined that the allowances at December 31, 2008 and 2007 are sufficient.
The Company charges off receivables to the allowance when management determines
that a receivable is not collectible. The Company may retain a security interest
in the products sold.
Property and Equipment
Property and equipment is recorded at cost and is depreciated over its estimated
useful life on straight line basis from the date placed in service. Estimated
useful lives are usually taken as 3 years.
Current liabilities
Current liabilities at December 31,2008 include E25 due for taxes and social
costs payable and the balance of E991 to various suppliers as accounts payable
and accrued trade creditors.
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 adopted the Financial Accounting Standards Board ("FASB")
interpretation No. 48 ("FIN No. 48"). This interpretation clarifies the
accounting for uncertainty in income taxes recognized in a company's financial
statements in accordance with Statement of Financial Accounting Standard
("SFAS") No. 109. This interpretation prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken in a tax return. It also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The adoption of this interpretation did not
have a material impact on the Company's results of operations or financial
position.
53
As such, the Company has not recorded any liabilities for uncertain tax
positions or any related interest and penalties. The Company's United States tax
returns are open to audit for the years ended December 31, 2005 to 2008. The
accounts for our Luxembourg subsidiary LUXEMBOURG 6543 S.A. are open to audit
for the years ended December 31 2005 to 2008 and the accounts for our Swiss
subsidiary Mymetics Management Sarl are open to audit for the years ended
December 31 2007 to 2008.
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 (including shares issuable) was
191,949,969 for the year ended December 31, 2008 and 156,418,377 for the year
ended December 31, 2007. Diluted earnings per share takes into consideration
common shares outstanding (computed under basic earnings per share) and
potentially dilutive securities. Options were not included in the computation of
diluted earnings per share because their effect would be anti-dilutive due to
net losses incurred.
Preferred Stock
The Company has authorized 5,000,000 shares of preferred stock. No shares are
issued or outstanding at December 31, 2008. The preferred stock is issuable in
several series with varying dividend, conversion and voting rights. The specific
series and rights will be determined upon any issuance of preferred stock.
Stock-Based Compensation
The Company accounts for stock-based compensation according to the fair value
recognition provisions of FAS No. 123(R), Share-Based Payment, ("FAS 123R").
Compensation cost for all share-based payments is based on the grant-date fair
value estimated in accordance with the provisions of FAS 123R. The Company
amortizes stock compensation cost ratably over the requisite service period.
There were no options issued in 2008 and 2007, and there were no stock options
that vested in any of these years.
The issuance of common shares for services is recorded at the quoted price of
the shares on the date the services are rendered.
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.
Recently Issued Accounting Standards
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
157), which defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair-value measurements required under
other accounting pronouncements. It does not change existing guidance as to
whether or not an instrument is carried at fair value. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. In February 2008, the FASB issued
FASB Staff Position No. FAS 157-1 (FSP 157-1), which excludes SFAS No. 13,
"Accounting for Leases" and certain other accounting pronouncements that address
fair value measurements under SFAS 13, from the scope of SFAS 157. In February
2008, the FASB issued FASB Staff Position No. 157-2 (FSP 157-2), which provides
a one-year delayed application of SFAS 157 for nonfinancial assets and
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually).
54
The Company is required to adopt SFAS 157 as amended by FSP 157-1 and FSP 157-2
on January 1, 2009, the beginning of its fiscal year 2009 (as related to
nonfinancial assets and liabilities). The Company does not expect the
application of SFAS No. 157 (as related to nonfinancial assets and liabilities)
to have a material effect on the Company's consolidated financial statements.
In October 2008, the FASB issued FASB Staff Position No. FAS 157-3, "Determining
the Fair Value of a Financial Asset in a Market That Is Not Active" (FSP 157-3),
which clarifies the application of SFAS 157 when the market for a financial
asset is inactive. Specifically, FSP 157-3 clarifies how (1) management's
internal assumptions should be considered in measuring fair value when
observable data are not present, (2) observable market information from an
inactive market should be taken into account, and (3) the use of broker quotes
or pricing services should be considered in assessing the relevance of
observable and unobservable data to measure fair value. The guidance in FSP
157-3 is effective immediately and did not have a material effect on the
Company's consolidated financial statements.
In June 2008, the FASB issued Staff Position EITF 03-06-1, "Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities" (FSP EITF 03-06-1). FSP EITF 03-06-1 provides that unvested
share-based payment awards that contain nonforfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) are participating securities and
shall be included in the computation of earnings per share pursuant to the
two-class method in SFAS No. 128, "Earnings per Share." FSP EITF 03-06-1 did not
have any impact on the Company's consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements, an Amendment of Accounting Research Bulletin
No 51" (SFAS 160). SFAS 160 establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent,
changes in a parent's ownership of a noncontrolling interest, calculation and
disclosure of the consolidated net income attributable to the parent and the
noncontrolling interest, changes in a parent's ownership interest while the
parent retains its controlling financial interest and fair value measurement of
any retained noncontrolling equity investment. SFAS 160 is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. Early adoption is prohibited. The
Company must adopt SFAS 160 on January 1, 2009, the beginning of its fiscal year
2009. The Company does not expect the application of SFAS 160 to have a material
effect on its consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141R, "Business Combinations" (SFAS
141R), which establishes principles and requirements for the reporting entity in
a business combination, including recognition and measurement in the financial
statements of the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree. SFAS 141R applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period on or after December 15, 2008,
and interim periods within those fiscal years. The Company must adopt SFAS 141R
on January 1, 2009, the beginning of its fiscal year 2009. The Company does not
expect the application of SFAS 141R to have a material effect on its
consolidated financial statements for the period up to December 31, 2008. It is
anticipated that the subsequent acquisition of Bestewil Holding B.V and Virosome
Biologicals B.V. will require consideration of SFAS No. 141R for the period
ending December 31, 2009.
Fair Values of Financial Instruments
The Company generally has the following financial instruments: cash, short-term
investments, receivables, accounts payable, and convertible notes payable. The
carrying value of cash, accounts receivable and accounts payable approximate
their fair value based on the short-term nature of these financial instruments.
The Company adjusts the carrying value of its short-term investments to fair
value with any unrecognized gains or losses recorded as a component of
"Accumulated Other Comprehensive Income" and thus the carrying value equals fair
value. Management estimates that it is not practicable to estimate the fair
value of the convertible notes payable due to the unique nature of the
instruments.
55
Concentrations
The Company enters into scientific collaboration agreements with selected
partners such as Pevion Biotech Ltd., a Swiss company that granted Mymetics
exclusive licenses to use their virosome vaccine delivery technology in
conjunction with the Company's AIDS and malaria preventive vaccines under
development. Under this agreement, Pevion Biotech is committed to supply the
actual virosomes and perform their integration with the Company's antigens,
which requires proprietary know-how, at Pevion's premises. The agreement
includes specific mechanisms to mitigate the risk of losing a key component of
Mymetics' vaccines should Pevion become unable to live up to its commitment.
Reclassifications
Certain reclassifications have been made to the December 31, 2007, financial
statements in order for them to conform to the current year presentation.
Note 2. Receivables
2008 2007
---- ----
Receivable officer 8 71
Receivable other 144 --
--- ---
152 71
Allowance for doubtful accounts (138) --
--- ---
E14 E71
=== ===
Note 3. Transactions with Affiliates
On March 19, 2007 the Company entered into a Settlement Agreement with MFC
Merchant Bank S.A. to dismiss with prejudice the lawsuits in Delaware and New
York that Mymetics brought against MFC, KHD Humboldt Wedag International, Ltd.
(f/k/a MFCBancorp., Ltd.), the parent company of MFC, and certain of MFC's prior
and present officers and directors in which Mymetics challenged the validity of
the credit facility agreement. Under the terms of the Settlement Agreement,
Mymetics agreed to pay E1.49 million in cash and to issue 12.5 million
restricted shares of its common stock to convert the remaining debt to equity.
MFC agreed to terminate the E4.02 million credit facility agreement, ending any
further payments or obligations of Mymetics under the credit facility agreement
and releasing from its blanket security interest all assets of Mymetics,
including Mymetics' intellectual property.
Mr. Ernest M. Stern, the Company's outside U.S. counsel is both a director of
the Company and a partner in Seyfarth Shaw LLP. Fees paid to Seyfarth Shaw in
the year ended December 31, 2008, amounted to E95 for Mymetics.
Two of the Company's major shareholders have made available an aggregate E8,350
in the form of convertible, unsecured notes, representing approximately
25,300,000 potentially dilutive common shares at the Euro/$ exchange rate of
0.7095 at December 31, 2008.
56
The details of the notes are:
Principal Issue Duration Interest Conversion
Lender Amount Date (Note) Rate Price
------ ----------- ---------- -------- -------- ----------
Eardley Holding A.G. (1) E 150 06/23/2006 (3) 10% pa US$ 0.50
Anglo Irish Bank (Suisse) S.A. (2) E 500 10/21/2007 (4) 10% pa US$ 0.50
Round Enterprises Ltd. E 1,500 12/10/2007 (4) 10% pa US$ 0.50
Round Enterprises Ltd. E 1,500 01/22/2008 (4) 10% pa US$ 0.50
Round Enterprises Ltd. E 2,000 04/25/2007 (4) 10% pa US$ 0.50
Round Enterprises Ltd. E 1,500 06/30/2007 (4) 10% pa US$ 0.50
Round Enterprises Ltd. E 1,200 11/18/2007 (4) 10% pa US$ 0.50
-----------
Total Principal Amounts E 8,350
-----------
Accrued Interest E 623
-----------
Total E 8,973
===========
(1) Private investment company of Dr. Thomas Staehelin, member of the Board of
Directors and of the Audit Committee of Mymetics Corporation. Face value is
stated in U.S. dollars at $ 190,000
(2) Acting on behalf of Round Enterprises Ltd. which is controlled by a major
shareholder.
(3) The earlier of (i) 90 days after the Company receives its first cash
payment from a major pharmaceutical strategic partner or (ii) upon an event
of default
(4) The earlier of (i) July 31, 2010 or (ii) upon an event of default
57
Note 4. Income Taxes
The reconciliation of income tax on income computed at the federal statutory
rates to income tax expense is as follows:
2008 2007
------- -------
U.S. Federal statutory rates on loss from
operations E(2,353) E(3,160)
Effect of exchange rate changes on
U.S. net operating loss carryforward (454) 639
Increase in valuation allowance 2,925 3,546
Prior year losses not previously recognized
and other (100) (1,021)
------- -------
Income tax provision E 18 E 4
======= =======
Deferred tax asset is composed of the following:
2008 2007
------- -------
Licenses capitalized for United States tax purposes E 1,385 E 1,598
Net operating loss carryforwards
United States 8,722 5,586
Luxembourg 173 171
------- -------
10,280 7,355
Less valuation allowance for deferred tax asset (10,280) (7,355)
------- -------
Net deferred tax asset E -- E --
======= =======
58
The Company's provision for income taxes was derived from U.S., Swiss and
Luxembourg operations. At December 31, 2008, the Company had estimated net
operating loss carryforwards which expire as follows (the Luxembourg losses do
not expire):
United
States Luxembourg
-------- ----------
2009 E --
2010 --
2011 561
2012 1,028
2013 --
2014-2028 24,065
-------- ----
E 25,654 E786
======== ====
The Swiss affiliate made a taxable (intercompany) profit.
Note 5. Stock Option Plan
2001 Qualified Incentive Stock Option Plan
The Company's board of directors approved a stock option plan on June 15, 2001,
which provides for the issuance of up to 5,000,000 shares of the Company's
common stock to employees and non-employee directors. No options were issued in
2007 or 2008. The following table summarizes information with respect to this
plan:
Weighted
Number Average
of Exercise
Shares Price
--------- ---------
Outstanding and exercisable
at December 31, 2007 and 2008 442,500 U.S. $ .97
========= ==========
Reserved for future grants
at December 31, 2008 4,557,500
=========
The weighted average contractual life is 4.1 years.
At December 31, 2008, exercise prices range from $0.12 to $3.50. There was no
material intrinsic value on outstanding options at December 31, 2008.
The Company will issue new shares upon any options exercise.
59
Note 6. Commitments and Contingencies
Total rent expense per year was E20 for 2008 and E20 for 2007. The lease of the
Company's Nyon administrative offices expires in 2012; the lease of the
Company's scientific staff's offices near Lausanne expired in February 2009,
when the Company moved into new scientific facilities at the same location, the
lease of which will expire in 2018.
Future lease payments expected on the above office leases are as follows for the
years ending December 31,
Office Rent Expected 2009 2010 2011 2012 2013 2014-18
----- ----- ----- ----- ----- -------
NYON ............... E 20 E 20 E 20 E 20 E -- E --
LAUSANNE ........... E 117 E 117 E 117 E 117 E 117 E 585
GENEVA ............. E 2 -- -- -- -- --
===== ===== ===== ===== ===== =======
TOTAL .............. E 139 E 137 E 137 E 137 E 117 E 585
Note 7.
Subsequent Events
- On February 6, 2009, the company issued to Round Enterprise ltd. a
convertible note for E1,500 carrying an interest rate of 10% p.a., with a
maturity date of March 27, 2009, convertible at $0.50 per share. The
Company is in the process of negotiating an extension to the maturity date
for this note.
- On March 5, 2009, Mymetics and NIL entered into a Share Purchase Agreement
pursuant to which Mymetics purchased all issued and outstanding shares of
capital stock (the "Bestewil Shares") of Bestewil Holding B.V. ("Bestewil") from
its parent, NIL, and all issued and outstanding shares of capital stock of
Virosome Biologicals B.V. which were held by Bestewil. Mymetics has agreed to
pay E5,000 raised from bridge financing (the "Cash Consideration") to NIL at the
closing date that is anticipated to be April 1, 2009 and to issue a convertible
redeemable note (the "Note") in the principal amount of E2,500 due 36 months
after the closing date, bearing interest at 5% per annum, convertible into
shares of the Company's common stock at a conversion rate of the lower of (i)
$0.80 or (ii) the issue price of the shares of common stock that the Company
intends to issue after the closing date for the purpose of raising the necessary
funds to repay the bridge loan that the Company expects to issue to pay the Cash
Consideration (the "Conversion Price") and secured by the Company's pledge of
1/3rd of the Bestewil Shares. In addition, Mymetics has granted NIL an option to
acquire shares of Mymetics common stock equal to the result obtained by dividing
$9,609 by the Conversion Price, subject to adjustment. Each of such share option
shall give NIL the right to subscribe, for cash consideration equal to the
Conversion Price, one common share of Mymetics. If shares are issued in the
share capital of Mymetics with more favorable financial rights or preferences
attached to them in the context of the fundraising required for the transaction
contemplated in this agreement ("Preferred Shares"), at the election of NIL, one
Preferred Share (the "Share Option"). Each Share Option shall be exercisable for
a period of three years from the closing date.
60
Further contingent consideration to be paid after completion of the Share
Purchase Agreement includes:
- A payment of up to E 2,800 in cash in the event of a license agreement
being signed by April 1, 2011 with a third party to access Bestewil
intellectual property and know how in the field of Respiratory
Syncytial Virus ("RSV Licence"),
- A payment of up to E 3,000 in cash should a third party commence a
Phase III clinical trial by April 1,2013 for its intranasal influenza
vaccine licensed from Bestewil,
- A payment of 50% of Mymetics' net royalties received from a RSV
License, payable in cash,
- A payment of 25% of any net amounts received by Mymetics from a third
party Herpes Simplex Virus License based upon Bestewil intellectual
property payable in cash.
Under the terms of the Share Purchase Agreement, Mymetics also intends to enter
into an employment agreement at the closing date with Antonius Stegmann, CSO of
Virosome Biologicals B.V.
The acquisition of Virosome Biologicals will expand Mymetics' current portfolio
of vaccines and vaccine candidates.
The fair value of the consideration given to NIL, including contingent
consideration, will be determined after the closing date, and will be allocated
to the acquired assets and liabilities at that time.
61
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ Christian J.F. Rochet
------------------------------------
Name: Christian J.F. Rochet
Title: Chief Executive Officer
----------------------------------------
(Date)
62
POWERS OF ATTORNEY
Each person whose signature appears below constitutes and appoints Ernst
Luebke as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments to this Annual Report on
From 10-K, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the U.S. Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or their
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title
--------- -------------------------------------------
/s/ Christian J.F. Rochet Chief Executive Officer and Director
---------------------------------- (Principal Executive Officer)
Christian J.F. Rochet
----------------------------------
March 26, 2009
/s/ Ernst Luebke Chief Financial Officer and Director
---------------------------------- (Principal Financial and Accounting Officer)
Ernst Luebke
----------------------------------
March 26, 2009
/s/ Sylvain Fleury Chief Scientific Officer and
---------------------------------- Director
Sylvain Fleury, Ph. D.
----------------------------------
March 26, 2009
63