NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
(UNAUDITED)
Note 1. The Company and Summary of Significant Accounting
Policies
BASIS OF PRESENTATION AND GOING CONCERN
The amounts in the notes are shown in thousands of EURO, unless
otherwise noted, and rounded to the nearest thousand except for
share and per share amounts.
The accompanying interim period condensed consolidated financial
statements of Mymetics Corporation (the "Company") set forth herein
have been prepared by the Company pursuant to the rules and
regulations of the U.S. Securities and Exchange Commission (the
"SEC"). Certain information and footnote disclosure normally
included in financial statements prepared in accordance with
accounting principles generally accepted in the United States have
been condensed or omitted pursuant to such SEC rules and
regulations. The interim period condensed consolidated financial
statements should be read together with the audited financial
statements and the accompanying notes included in the Company's
latest annual report on Form 10-K for the fiscal year ended
December 31, 2020.
The accompanying financial statements of the Company are unaudited.
However, in the opinion of the Company, the unaudited condensed
consolidated financial statements contained herein contain all
adjustments necessary to present a fair statement of the results of
the interim periods presented. All adjustments made during the
three-month period ending March 31, 2021 were of a normal and
recurring nature.
The Company was created for the purpose of engaging in vaccine
research and development. Its main research efforts in the
beginning have been concentrated in the prevention and treatment of
the AIDS virus and malaria. The Company has established a network
which enables it to work with education centers, research centers,
pharmaceutical laboratories and biotechnology companies. Besides
the HIV and malaria vaccine candidates under development, the
Company additionally has preclinical data for the following
vaccines: Herpes Simplex and Respiratory Syncytial Virus
(“RSV”), neither of which is currently being developed.
The company also has clinical data for an intranasal influenza
vaccine for the elderly which has finished a Phase I clinical trial
and is currently on hold. As of March 31, 2021, the Company is
working on several research projects with commercial partners for
immunotherapy in the field oncology and for some infectious
diseases with academic partners. Since April 2020, the Company has
additionally started to work on the development of a virosome-based
vaccine to prevent Covid-19, the disease caused by the SARS-CoV-2
virus. For the Covid-19 vaccine candidates, the Company is
collaborating with leading academic institutions, such as Baylor
College of Medicine in Texas, the Amsterdam medical Center (AMC) of
the University of Amsterdam in the Netherlands and the University
Hospital in Bern, Switzerland.
As of March 31, 2021, the Company was engaged in the pre-clinical
testing of some of its vaccine candidates, but a commercially
viable product is not expected for several more years. However, the
Company generated some revenue through collaboration and grant
agreements.
These consolidated financial statements have been prepared assuming
the Company will continue as a going concern. The Company has
experienced negative cash flows from operations and significant
losses since inception resulting in an accumulated deficit of
€94,266 at March 31, 2021. Further, the Company’s
current liabilities exceed its current assets by €63,291 as
of March 31, 2021, and there is no assurance that cash will become
available to pay current liabilities in the near term. Management
is seeking additional financing but there can be no assurance that
management will be successful in any of those efforts. These
conditions raise substantial doubt about our ability to continue as
a going concern within one year from the issuance of the financial
statements. The financial statements do not include any adjustments
that might result from the outcome of this
uncertainty.
LEASES
The Company follows the guidance in ASC 842, which established a
right-of-use ("ROU") model requiring lessees to record a
right-of-use ("ROU") asset and lease obligations on the balance
sheet for all leases with terms longer than 12 months. The Company
determines if an arrangement is a lease at inception. Where an
arrangement is a lease, the Company determines if it is an
operating lease or a finance lease. At lease commencement, the
Company records a lease liability and corresponding ROU asset.
Lease liabilities represent the present value of our future lease
payments over the expected lease term which includes options to
extend or terminate the lease when it is reasonably certain those
options will be exercised. The present value of the Company’s
lease liability is determined using its incremental collateralized
borrowing rate at lease inception. ROU assets represent its right
to control the use of the leased asset during the lease and are
recognized in an amount equal to the lease liability for leases
with an initial term greater than 12 months. Over the lease term
(operating leases only), the Company uses the effective interest
rate method to account for the lease liability as lease payments
are made and the ROU asset is amortized to consolidated statement
of operations in a manner that results in straight-line expense
recognition. The Company does not apply lease recognition
requirements for short-term leases. Instead, the Company recognizes
payments related to these arrangements in the consolidated
statement of operations as lease costs on a straight-line basis
over the lease term.
IMPACT OF THE NOVEL CORONAVIRUS
On January 30, 2020, the World Health Organization
(“WHO”) announced a global health emergency because of
a new strain of coronavirus originating in Wuhan, China (the
“COVID-19 outbreak”) and the risks to the international
community as the virus spreads globally beyond its point of origin.
In March 2020, the WHO classified the COVID-19 outbreak as a
pandemic, based on the rapid increase in exposure
globally.
The COVID-19 pandemic continues to rapidly evolve. The extent to
which the outbreak impacts our business, preclinical studies and
clinical trials will depend on future developments, which are
highly uncertain and cannot be predicted with confidence, such as
the ultimate geographic spread of the disease, the duration of the
pandemic, travel restrictions and social distancing, business
closures or business disruptions and the effectiveness of actions
taken in the U.S., Europe, and other countries to contain and treat
the disease. As such, it is uncertain as to the full magnitude that
the pandemic will have on the Company’s financial condition,
liquidity, and future results of operations.
Management has taken measures in-line with the country requirements
where we are operating, and we are actively monitoring the global
situation on its financial condition, liquidity, operations,
scientific collaborations, suppliers, industry, and workforce.
Given the daily evolution of the COVID-19 outbreak and the global
responses to curb its spread, the Company is not able to estimate
the effects of the COVID-19 outbreak on its results of operations,
financial condition, or liquidity for fiscal year
2021.
The Company’s partner for the oncology immunotherapy project
in the Netherlands has decreased their laboratory experiments due
to reduced operating hours in those facilities. While the Company
considers this disruption to be temporary, continued disruption in
this project will lead to delayed advances by the Company of its
research and could negatively impact revenue for the remainder of
fiscal year 2021 and the Company’s overall
liquidity.
The Company is dependent on its workforce to deliver and advance
its research. Developments such as physical distancing and working
from home directives have and will continue to impact the
Company’s ability to deploy its workforce effectively. While
expected to be temporary, prolonged workforce disruptions may
negatively impact future revenues for the remainder of fiscal year
2021 and the Company’s overall liquidity.
The Company is dependent on its partners in certain projects, such
as the University of Louisiana at Lafayette (“ULL”) for
the NIH funded project to maintain the agreed timelines and execute
their tasks. Developments such as social distancing and
shelter-in-place directives and lock-down directives have and will
continue to impact the Company’s ability to execute on
project plans and research objectives effectively. While expected
to be temporary, prolonged disruptions in collaboration projects
may negatively impact funding for the fiscal year 2021 and the
Company’s overall liquidity.
Although the Company cannot estimate the length or gravity of the
impact of the COVID-19 outbreak at this time, if the pandemic
continues, it may have a material adverse effect on the
Company’s results of future operations, financial position,
and liquidity for the fiscal year 2021.
CORONAVIRUS AID, RELIEF AND ECONOMIC SECURITY ACT
On March 27, 2020, the U.S. Government enacted the Coronavirus Aid,
Relief, and Economic Security Act (“CARES Act”) was
signed into law. The CARES Act includes various income and payroll
tax provisions. The Company has analyzed the tax provisions of the
CARES Act and determined they have no significant financial impact
to the condensed financial statements. The Company has no intention
of taking advantage of other benefits provided by the CARES Act but
will continue to evaluate the impact on the Company’s
financial position.
PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the
accounts of the Company and its subsidiaries. Significant
intercompany accounts and transactions have been
eliminated.
NEW ACCOUNTING PRONOUNCEMENT
In August 2020, the FASB issued ASU
2020-06, Debt—Debt
with Conversion and Other Options (Subtopic 470-20)
and Derivatives
and Hedging—Contracts in Entity’s Own
Equity (Subtopic
815-40): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity, which simplifies the accounting for
certain financial instruments with characteristics of liabilities
and equity, including convertible instruments and contracts on an
entity’s own equity. Specifically, ASU 2020-06 simplifies
accounting for the issuance of convertible instruments by removing
major separation models required under current GAAP. In addition,
the ASU removes certain settlement conditions that are required for
equity contracts to qualify for the derivative scope exception and
simplifies the diluted earnings per share (EPS) calculation in
certain areas. ASU 2020-06 will be effective for fiscal years
beginning after December 15, 2023, including interim periods within
those fiscal years. Early adoption is permitted, beginning in
fiscal years which begin after December 15, 2020. The FASB has
specified that an entity should adopt the guidance as of the
beginning of its annual fiscal year. The Company adopted this
standard effective January 1, 2021, and the adoption
had no impact on the consolidated financial
statements.
FOREIGN CURRENCY TRANSLATION
The Company translates non-Euro assets and liabilities of its
subsidiaries at the rate of exchange at the balance sheet date.
Revenues and expenses are translated at the average rate of
exchange throughout the period. Unrealized gains or losses from
these translations are reported as a separate component of
comprehensive income. Transaction gains or losses are included in
general and administrative expenses in the consolidated statements
of comprehensive loss. The translation adjustments do not recognize
the effect of income tax because the Company expects to reinvest
the amounts indefinitely in operations. The Company's reporting
currency is the Euro because substantially all of the Company's
activities are conducted in Europe.
CASH
We consider all highly liquid investments purchased with maturities
of three months or less to be cash equivalents. Cash deposits are
occasionally in excess of insured amounts.
REVENUE RECOGNITION
The Company recognizes revenue when its customer obtains control of
promised goods or services, in an amount that reflects the
consideration which the entity expects to receive in exchange for
those goods or services. This principle is applied using the
following five steps: (i) identify the contract(s) with a customer;
(ii) identify the performance obligations in the contract; (iii)
determine the transaction price; (iv) allocate the transaction
price to the performance obligations in the contract; and (v)
recognize revenue when (or as) the entity satisfies a performance
obligation. The Company only applies the five-step model to
contracts when it is probable that the Company will collect the
consideration it is entitled to in exchange for the goods or
services it transfers to the customer. At contract inception, once
the contract is determined to be within the scope of Topic 606, the
Company assesses the goods or services promised within each
contract and determine those that are performance obligations and
assess whether each promised good or service is distinct. The
Company then recognizes as revenue the amount of the transaction
price that is allocated to the respective performance obligation
when (or as) the performance obligation is satisfied.
The Company has concluded that government grants are not within the
scope of Topic 606, as they do not meet the definition of a
contract with a “customer”. The Company concluded the
definition of a contract with a “customer” was not met
as the counterparty to the government grants has not contracted to
obtain goods or services and thus the contracts are not considered
to have commercial substance. Government grants provide the Company
with payments for certain types of expenditures related to research
and development activities over a contractually defined period.
Revenue from government grants is recognized in the period during
which the related costs are incurred, provided that the applicable
conditions under the government contracts have been
met.
NIH
On April 29, 2019, the National Institutes of Health
(“NIH”) awarded the Company and Texas Biomedical
Research Institute (“Texas Biomed”) a five-year grant
for the project called “Cold Chain-independent, Needle-free
Mucosal Virosomal Vaccine to Prevent HIV-1 Acquisition at Mucosal
Levels”. The project started on May 1, 2019 and is planned
for five years. The overall budget related to the project is USD
8,850, with USD 1,940 approved for the first year and USD 1,856
approved for the second year.
The amounts mentioned in the following statements are purely
related to the Company and not to the other partners in the
project: The overall portion of the grant allocated to the Company
is USD 5,930, with USD 1,190 approved for the first year and USD
1,052 approved for the second year. It was initially co-led by
Texas Biomed, but due to the move of Dr. Ruth Ruprecht, the
Co-Principal Investigator, to the University of Louisiana at
Lafayette (“ULL”) at the end of 2019, ULL has become
the co-lead with Mymetics for this project. To date, the Company
has recognized €1,305 of grant revenue from the NIH, of which
€131 has been recognized during the quarter ended March 31,
2021. First results are expected to be reported in
2021.
The project has the objective to prepare the Company’s
promising HIV-1 vaccine candidate for clinical trials, by first
executing a non-human primate (“NHP”) study, where the
test subjects will be receiving Mymetics’ virosome based
HIV-1 vaccine candidate by several intra-muscular and intra-nasal
applications, followed by rectal challenges. As of March 31, 2021,
Mymetics has successfully produced two sets of virosome based
vaccines and the NHPs have received two intramuscular vaccinations
and three intranasal vaccinations. The vaccinations were well
tolerated and there were no safety issues. During 2021 the
vaccinated NHPs will start to receive rectal challenges. The
vaccine is created to induce protective mucosal antibodies acting
as a frontline defense against sexual HIV transmission. This
awarded grant from the NIH can continue some of the developments
that were achieved during the European Horizon 2020
project.
Option to License Agreement – ANERGIS SA
In December 2018, the Company announced that the success criteria
of the Research and Option to License Agreement with Anergis SA
(“Anergis”) had been met. Under the terms of the
Research Agreement, a pre-clinical study program evaluated the
immunogenicity profile of the Anergis’ peptides designed to
treat birch allergy when presented on Mymetics’ proprietary
virosomes, with or without undisclosed TLR ligands or other
adjuvants, and these results were compared to Anergis’ AllerT
product combination. In October 2019 Anergis started a new
evaluation study in collaboration with Stallergenes Greer SA, in
which the Mymetics COP virosomes were evaluated in a preclinical
study. In May 2020 the Company announced that Stallergenes Greer
and Anergis reported the results of the joint research study (the
second study) evaluating the effects of the second generation
Contiguous Overlapping Peptides (COP) allergen immunotherapy in a
therapeutic model of birch allergy, with the aim of shortening the
AIT administration schemes. In the second study, conducted by
Stallergenes Greer, COP-Virosomes, and COP and virosomes alone were
compared to a placebo group in an in-house therapeutic model of
birch pollen allergy. Recombinant Bet v 1 alone (the major allergen
of birch pollen) and birch extract were also used as controls in
this setting. COP-virosomes were the only synthetic therapy able to
fully reverse asthma symptoms as well as lung inflammation (i.e.,
significant reduction in eosinophils in bronchial fluids).
Pro-allergic immune responses also decreased with COP-virosome
therapy with a significant decrease of the IL-4, a Th2
cytokine.
In January 2021, following the two successful studies with its
virosome platform, Mymetics announced the acceptance of its joint
publication in the scientific journal Clinical & Experimental
Allergy with Stallergenes Greer SA and Anergis SA, with the title:
Bet v 1 contiguous overlapping peptides anchored to virosomes with
TLR4 agonist enhance immunotherapy efficacy in mice. Since February
1, 2021, Anergis SA has moved into liquidation as it was not able
to raise sufficient funds to continue.
RECEIVABLES
Receivables are stated at their outstanding principal balances.
Management reviews the collectability of receivables on a periodic
basis and determines the appropriate amount of any allowance. There
was no allowance necessary at March 31, 2021 or December 31, 2020.
The Company writes off receivables to the allowance when management
determines that a receivable is not collectible. The Company may
retain a security interest in the products sold.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and is depreciated over
its estimated useful life on straight-line basis from the date
placed in service. Estimated useful lives are usually taken as
three years.
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets, which include property and equipment, are
assessed for impairment whenever events or changes in circumstances
indicate the carrying amount of the asset may not be recoverable.
The impairment testing involves comparing the carrying amount to
the forecasted undiscounted future cash flows generated by that
asset. In the event the carrying value of the assets exceeds the
undiscounted future cash flows generated by that asset and the
carrying value is not considered recoverable, impairment exists. An
impairment loss is measured as the excess of the asset’s
carrying value over its fair value, calculated using a discounted
future cash flow method. An impairment loss would be recognized in
net income (loss) in the period that the impairment
occurs.
GOODWILL
Goodwill represents the excess of purchase price over the value
assigned to the net tangible and identifiable intangible assets of
a business acquired. The Company typically performs its annual
goodwill impairment test effective as of April 1 of each year,
unless events or circumstances indicate impairment may have
occurred before that time. The Company assesses qualitative factors
to determine whether it is more likely than not that the fair value
of the reporting unit is less than its carrying amount. After
assessing qualitative factors, the Company determined that no
further testing was necessary. If further testing was necessary,
the Company would determine the fair value of each reporting unit
and compare the fair value to the reporting unit’s carrying
amount. The Company has one reporting unit.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as
incurred.
WITHHOLDING TAXES
On March 10, 2021, the Swiss Federal tax administration conducted a
withholding tax audit on Mymetics SA’s financial statements
for the years 2015 to 2019. At the end of the tax audit, the tax
inspector concluded that a portion of the intercompany interest
expenses related to the subordinated loan from Mymetics Corporation
to Mymetics SA could be considered as a hidden dividend
distribution and therefore subject to Swiss withholding tax. The
tax inspector encouraged the Company to file the relevant Swiss
withholding tax forms to benefit from the double tax treaty between
Switzerland and the United States. The final amount will be agreed
after the Swiss Federal tax administration has received all
required documentation. The Company filed and sent a preliminary
report to the Federal tax administration. The Company expects to
finalize the report during the fourth quarter of 2021, waiting for
legal documents from the U.S. Federal tax office. The Company made
a payment of €27, which was recognized during the three
months ended March 31, 2021. As Mymetics SA’s audited
financial statements for the year ended December 31, 2020, have
been signed before March 10, 2021 and, in agreement with the Swiss
audit firm, the Swiss withholding tax to be paid by Mymetics SA on
behalf of the Company is recognized in the first quarter of
2021.
TAXES ON INCOME
The Company accounts for income taxes under an asset and liability
approach that requires the recognition of deferred tax assets and
liabilities for expected future tax consequences of events that
have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, the Company
generally considers all expected future events other than
enactments of changes in the tax laws or rates.
The Company reports a liability, if any, for unrecognized tax
benefits resulting from uncertain income tax positions taken or
expected to be taken in an income tax return. Estimated interest
and penalties, if any, are recorded as a component of interest
expense and other expense, respectively.
The Company has not recorded any liabilities for uncertain tax
positions or any related interest and penalties at March 31, 2021
or December 31, 2020. The Company’s United States tax returns
are open to audit for the years ended December 31, 2015 to 2018.
The returns for the Swiss subsidiary, Mymetics S.A., are open to
audit for the year ended December 31, 2020. The returns for the
Netherlands subsidiaries, Bestewil B.V. and Mymetics B.V., are open
to audit for the year ended December 31, 2020.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income or loss
attributable to common shareholders by the weighted average number
of common shares outstanding in the period. Diluted earnings per
share takes into consideration common shares outstanding (computed
under basic earnings per share) and potentially dilutive
securities. For the quarters ended March 31, 2021 and 2020, options
and convertible debt were not included in the computation of
diluted earnings per share because their effect would be
anti-dilutive due to net losses incurred under the treasury stock
method.
For the three months ended March 31, 2021, the basic weighted
average number of shares was 303,757,622. The total potential
number of shares issuable of 738,730,875 at March 31, 2021 includes
712,980,875 potential issuable shares related to convertible loans
and 25,750,000 potential issuable shares related to outstanding not
expired options granted to employees.
For the three months ended March 31, 2020, the basic weighted
average number of shares was 303,757,622. The total potential
number of shares issuable of 703,131,197 at March 31, 2020 includes
676,381,197 potential issuable shares related to convertible loans
and 26,750,000 potential issuable shares related to outstanding not
expired options granted to employees.
PREFERRED STOCK
The Company has authorized 5,000,000 shares of preferred stock that
may be issued in several series with varying dividend, conversion
and voting rights. No preferred shares are issued or outstanding at
March 31, 2021 or December 31, 2020.
ESTIMATES
The preparation of financial statements in conformity with United
States generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
FAIR VALUE MEASUREMENTS
Fair value guidance establishes a three-tier fair value hierarchy,
which prioritizes the inputs used in measuring fair value. These
tiers include:
Level
1-
Quoted
prices in active markets for identical assets or
liabilities.
Level
2-
Inputs
other than Level 1 that are observable, either directly or
indirectly, such as quoted prices for similar assets or
liabilities;
quoted prices in markets that are not active; or other inputs that
are observable or can be corroborated by observable market data for
substantially the full term of the assets or
liabilities.
Level
3-
Unobservable
inputs that are supported by little or no market activity and that
are significant to the fair value of the assets
or liabilities.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company generally has the following financial instruments:
cash, receivables, accounts payable, and notes payable. The
carrying value of cash, accounts receivable, and accounts payable,
approximates their fair value based on the short-term nature of
these financial instruments. Management believes the fair value of
the notes payable is reflecting the actual value reported for these
instruments.
CONCENTRATIONS
The Company derived 94% and 98% of grant revenue for the
three-month period ended March 31, 2020 and 2021 from one partner,
respectively. For the period ended December 31, 2020, the Company
derived 95% of grant revenue from one partner.
RELATED PARTY TRANSACTIONS
Mr. Ernest M. Stern, the Company’s outside U.S. counsel, is
both a director of the Company and is a partner in Culhane Meadows
PLLC, the firm retained as legal counsel by the Company. The
Company incurred professional fees to the counsel's law firm
totaling €6 and €11 for the three months ended March
31, 2021 and 2020, respectively.
Two of the Company’s major shareholders have granted secured
convertible notes and short-term convertible notes and promissory
notes, which have a total carrying amount of €63,467,
including interest due to date. Conversion prices on the
Euro-denominated convertible debt have been fixed to a fixed
Euro/US dollar exchange rate.
Note 2. Debt Financing
Certain principal shareholders have granted the Company secured
convertible notes (in accordance with the Uniform Commercial Code
in the State of Delaware), short term convertible notes and other
short-term notes, which have a total carrying value of
€63,901 including interest due to date. Interest incurred on
these notes since inception has been added to the principal
amounts.
The details of the convertible notes and loans are as follows at
March 31, 2021:
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Fixed
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Conversion
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Rate
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Lender
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1st-Issue
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Principal
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Duration
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Interest
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Price
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EUR/USD
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Price
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Date
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Amount
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(Note)
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Rate
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(stated)
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Conversion
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Eardley
Holding A.G. (1)
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06/23/2006
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E
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162
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(2
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10%
pa
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$
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0.10
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N/A
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Anglo
Irish Bank S.A.(3)
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10/21/2007
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500
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(2
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pa
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$
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0.50
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1.4090
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Round
Enterprises Ltd.
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12/10/2007
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1,500
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pa
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1.4429
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Round
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01/22/2008
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1,500
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1.4629
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Round
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04/25/2008
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2,000
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pa
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1.5889
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Round
Enterprises Ltd.
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06/30/2008
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|
1,500
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(2
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pa
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1.5380
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Round
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11/18/2008
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1,200
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1.2650
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Round
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02/09/2009
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1.2940
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Enterprises Ltd.
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06/15/2009
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5,500
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|
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10%
pa
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$
|
0.80
|
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1.4045
|
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Eardley
Holding A.G.
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|
06/15/2009
|
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E
|
100
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10%
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$
|
0.80
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|
1.4300
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Von
Meyenburg
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08/03/2009
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E
|
200
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(2
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pa
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$
|
0.80
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|
1.4400
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Round
Enterprises Ltd.
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10/13/2009
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|
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E
|
2,000
|
|
(2
|
)
|
5%
pa
|
|
$
|
0.25
|
|
1.4854
|
|
|
Round
Enterprises Ltd.
|
|
12/18/2009
|
|
|
E
|
2,200
|
|
(2
|
)
|
5%
pa
|
|
$
|
0.25
|
|
1.4338
|
|
|
Round
Enterprises Ltd.
|
|
08/04/2011
|
|
|
E
|
1,023
|
|
(5,6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
N/A
|
|
|
Eardley
Holding A.G.
|
|
08/04/2011
|
|
|
E
|
256
|
|
(5,6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
N/A
|
|
|
Round
Enterprises Ltd.
|
|
11/08/2011
|
|
|
E
|
400
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
1.3787
|
|
|
Eardley
Holding A.G.
|
|
11/08/2011
|
|
|
E
|
100
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
1.3787
|
|
|
Round
Enterprises Ltd.
|
|
02/10/2012
|
|
|
E
|
1,000
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
1.3260
|
|
|
Eardley
Holding A.G.
|
|
02/14/2012
|
|
|
E
|
200
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
1.3260
|
|
|
Round
Enterprises Ltd.
|
|
04/19/2012
|
|
|
E
|
322
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
1.3100
|
|
|
Eardley
Holding A.G.
|
|
04/19/2012
|
|
|
E
|
80
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
1.3100
|
|
|
Round
Enterprises Ltd.
|
|
05/04/2012
|
|
|
E
|
480
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
1.3152
|
|
|
Eardley
Holding A.G.
|
|
05/04/2012
|
|
|
E
|
120
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
1.3152
|
|
|
Round
Enterprises Ltd.
|
|
09/03/2012
|
|
|
E
|
200
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
1.2576
|
|
|
Eardley
Holding A.G.
|
|
09/03/2012
|
|
|
E
|
50
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
1.2576
|
|
|
Round
Enterprises Ltd.
|
|
11/14/2012
|
|
|
E
|
500
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
1.2718
|
|
|
Eardley
Holding A.G.
|
|
12/06/2012
|
|
|
E
|
125
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
1.3070
|
|
|
Round
Enterprises Ltd.
|
|
01/16/2013
|
|
|
E
|
240
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
1.3318
|
|
|
Eardley
Holding A.G.
|
|
01/16/2013
|
|
|
E
|
60
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
1.3318
|
|
|
Round
Enterprises Ltd.
|
|
03/25/2013
|
|
|
E
|
400
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.037
|
|
1.2915
|
|
|
Eardley
Holding A.G.
|
|
04/14/2013
|
|
|
E
|
150
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
1.3056
|
|
|
Round
Enterprises Ltd.
|
|
04/14/2013
|
|
|
E
|
600
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.034
|
|
1.3056
|
|
|
Eardley
Holding A.G.
|
|
05/15/2013
|
|
|
E
|
170
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.037
|
|
1.2938
|
|
|
Round
Enterprises Ltd.
|
|
05/15/2013
|
|
|
E
|
680
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.037
|
|
1.2938
|
|
|
Eardley
Holding A.G.
|
|
06/24/2013
|
|
|
E
|
60
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.025
|
|
1.3340
|
|
|
Round
Enterprises Ltd.
|
|
06/24/2013
|
|
|
E
|
240
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.025
|
|
1.3340
|
|
|
Eardley
Holding A.G.
|
|
08/05/2013
|
|
|
E
|
80
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.018
|
|
1.3283
|
|
|
Round
Enterprises Ltd.
|
|
08/05/2013
|
|
|
E
|
320
|
|
(6
|
)
|
10%
pa
|
|
$
|
0.018
|
|
1.3283
|
|
|
Eardley
Holding A.G.
|
|
03/01/2017
|
|
|
E
|
230
|
|
(7
|
)
|
2.5%
pa
|
|
|
N/A
|
|
N/A
|
|
|
Round
Enterprises Ltd.
|
|
03/01/2017
|
|
|
E
|
920
|
|
(7
|
)
|
2.5%
pa
|
|
|
N/A
|
|
N/A
|
|
|
Eardley
Holding A.G.
|
|
10/18/2017
|
|
|
E
|
230
|
|
(7
|
)
|
2.5%
pa
|
|
|
N/A
|
|
N/A
|
|
|
Round
Enterprises Ltd.
|
|
10/18/2017
|
|
|
E
|
920
|
|
(7
|
)
|
2.5%
pa
|
|
|
N/A
|
|
N/A
|
|
|
Eardley
Holding A.G.
|
|
06/01/2018
|
|
|
E
|
160
|
|
(8
|
)
|
2.5%
pa
|
|
|
N/A
|
|
N/A
|
|
|
Round
Enterprises Ltd.
|
|
06/01/2018
|
|
|
E
|
640
|
|
(8
|
)
|
2.5%
pa
|
|
|
N/A
|
|
N/A
|
|
|
Eardley
Holding A.G.
|
|
11/10/2018
|
|
|
E
|
160
|
|
(8
|
)
|
2.5%
pa
|
|
|
N/A
|
|
N/A
|
|
|
Round
Enterprises Ltd.
|
|
11/10/2018
|
|
|
E
|
640
|
|
(8
|
)
|
2.5%
pa
|
|
|
N/A
|
|
N/A
|
|
|
Eardley
Holding A.G.
|
|
06/15/2019
|
|
|
E
|
120
|
|
(9
|
)
|
2.5%
pa
|
|
|
N/A
|
|
N/A
|
|
|
Round
Enterprises Ltd.
|
|
06/15/2019
|
|
|
E
|
480
|
|
(9
|
)
|
2.5%
pa
|
|
|
N/A
|
|
N/A
|
|
|
Eardley
Holding A.G.
|
|
12/20/2019
|
|
|
E
|
120
|
|
(10
|
)
|
2.5%
pa
|
|
|
N/A
|
|
N/A
|
|
|
Round
Enterprises Ltd.
|
|
12/20/2019
|
|
|
E
|
480
|
|
(10
|
)
|
2.5%
pa
|
|
|
N/A
|
|
N/A
|
|
|
Eardley
Holding A.G.
|
|
06/15/2020
|
|
|
E
|
220
|
|
(11
|
)
|
2.5%
pa
|
|
|
N/A
|
|
N/A
|
|
|
Round
Enterprises Ltd.
|
|
06/15/2020
|
|
|
E
|
880
|
|
(11
|
)
|
2.5%
pa
|
|
|
N/A
|
|
N/A
|
|
|
Eardley
Holding A.G.
|
|
12/15/2020
|
|
|
E
|
170
|
|
(12
|
)
|
2.5%
pa
|
|
|
N/A
|
|
N/A
|
|
|
Round
Enterprises Ltd.
|
|
12/15/2020
|
|
|
E
|
680
|
|
(12
|
)
|
2.5%
pa
|
|
|
N/A
|
|
N/A
|
|
|
Total Short Term Principal Amounts
|
|
|
|
|
E
|
34,768
|
|
|
|
|
|
|
|
|
|
|
|
Accrued Interest
|
|
|
|
|
E
|
29,133
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LOANS AND NOTES
|
|
|
|
|
E
|
63,901
|
|
|
|
|
|
|
|
|
|
|
(1)
Private
investment company of Dr. Thomas Staehelin, member of the Board of
Directors and of the Audit Committee of the Company. Face value is
stated in U.S. dollars at $190.
(2)
This
maturity date is automatically prolonged for periods of three
months, unless called for repayment.
(3)
Renamed
Hyposwiss Private Bank Genève S.A. and acting on behalf of
Round Enterprises Ltd. which is a major shareholder.
(4)
The
loan is secured against 2/3rds of the IP assets of Bestewil Holding
BV and against all property of the Company.
(5)
The
face values of the loans are stated in U.S. dollars at $1,200 and
$300, respectively.
(6)
This
maturity date is automatically prolonged for periods of three
months, unless called for repayment. The conversion price per share
is determined by the lower of (i) reducing by 10% the price per
share of the Company’s common stock paid by the investors in
connection with an investment in the Company of not less than
US$20,000, or (ii) at the fixed conversion price using a fixed
exchange rate which are noted in the table above. The convertible
note holder has the right to convert at any time prior to the
maturity date, at the convertible note holder’s option, prior
to the repayment of the outstanding balance under the note by the
Company, to convert the unpaid outstanding principal balance and
accrued interest, in whole or in part, into common stock at the
fixed conversion price as stated in the contract.
(7)
On
March 1, 2017, Round Enterprises Ltd. and Eardley Holding AG each
provided two promissory Notes for a total of €1,840 and
€460, respectively, with a 2.5% interest per annum and a
maturity date of March 1, 2018. The first 50% of the promissory
Notes of €920 and €230, respectively, were provided
immediately. The second 50% of the promissory notes of €920
and €230, respectively, were provided on October 18, 2017
with a 2.5% interest per annum and a maturity date of October 18,
2018. Both Round Enterprises Ltd. And Eardley Holding AG have
agreed to amend the maturity date of these promissory notes to
follow the same terms of the other convertible loans. Therefore,
the maturity date of the promissory notes is amended to be the
later of (i) June 30, 2018, or (ii) the end of a subsequent
calendar quarter in which the Company receives a written request
from the lender for repayment of the unpaid principal and accrued
interest due under the Notes. The amendments were accounted for as
modifications in the consolidated financial
statements.
(8)
On
June 1, 2018, Round Enterprises Ltd. and Eardley Holding AG each
provided two promissory Notes for a total of €1,280 and
€320 in two tranches, respectively, with a 2.5% interest per
annum. The first tranche of the promissory Notes of €640 and
€160, respectively, were provided immediately. The second
tranche of the promissory notes of €640 and €160,
respectively, were provided on November 10, 2018 with a 2.5%
interest per annum. The maturity date of these promissory notes to
follow the same terms of other convertible loans and is the later
of (i) June 30, 2019, or (ii) the end of a subsequent calendar
quarter in which the Company receives a written request from the
lender for repayment of the unpaid principal and accrued interest
due under the Notes.
(9)
On
June 15, 2019, Round Enterprises Ltd. and Eardley Holding AG each
provided promissory Notes for a total of €600 with a 2.5%
interest per annum. The promissory Notes of €480 and
€120, respectively, were provided immediately. The maturity
date of these promissory notes to follow the same terms of other
convertible loans and is the later of (i) December 31, 2020, or
(ii) the end of a subsequent calendar quarter in which the Company
receives a written request from the lender for repayment of the
unpaid principal and accrued interest due under the
Notes.
(10)
On
December 20, 2019, Round Enterprises Ltd. and Eardley Holding AG
each provided promissory Notes for a total of €600 with a
2.5% interest per annum. The promissory Notes of €480 and
€120, respectively, were provided immediately. The maturity
date of these promissory notes to follow the same terms of other
convertible loans and is the later of (i) June 30, 2020, or (ii)
the end of a subsequent calendar quarter in which the Company
receives a written request from the lender for repayment of the
unpaid principal and accrued interest due under the
Notes.
(11)
On
June 15, 2020, Round Enterprises Ltd. and Eardley Holding AG each
provided promissory Notes for a total of €1,100 with a 2.5%
interest per annum. The promissory Notes of €880 and
€220, respectively, were provided immediately. The maturity
date of these promissory notes to follow the same terms of other
convertible loans and is the later of (i) September 30, 2020, or
(ii) the end of a subsequent calendar quarter in which the Company
receives a written request from the lender for repayment of the
unpaid principal and accrued interest due under the
Notes.
(12)
On
December 15, 2020, Round Enterprises Ltd. and Eardley Holding AG
each provided promissory Notes for a total of €850 with a
2.5% interest per annum. The promissory Notes of €680 and
€170, respectively, were provided immediately. The maturity
date of these promissory notes to follow the same terms of other
convertible loans and is the later of (i) March 31, 2021, or (ii)
the end of a subsequent calendar quarter in which the Company
receives a written request from the lender for repayment of the
unpaid principal and accrued interest due under the
Notes.
On
April 2, 2020, the Swiss entity, Mymetics SA, received a Federal
credit line of Chf 168 (€152) in relation with the Covid-19
pandemic. This credit line applies for five years and is fully
guaranteed by the Swiss Confederation via guaranteed organizations.
The interest rate is currently at 0 percent until March 31, 2021.
The Swiss Confederation has the right to adjust the interest rate
to the market rate. The first revision took place as of April 1,
2021 but no modification was applied.
Certain
of the secured convertible notes have conversion features that
should be bifurcated from the debt and recorded at fair value;
however, as of March 31, 2021 and December 31, 2020, the
probability of the conversion features being exercised was zero.
For this reason, the conversion features are not required to be
bifurcated from the debt as the fair value is zero at March 31,
2021 and December 31, 2020.
Note 3. Commitments
The facility lease agreement for Epalinges, Switzerland, is
automatically renewed month by month with a notice period of three
months. The related rent is paid monthly in the amount of €4
and is considered a short-term lease. The facility lease agreement
for Leiden, The Netherlands, runs until March 31, 2022 and can be
terminated with a six month notice as of September 30, 2021. The
related rent is paid monthly in the amount of €9. The Company
does not have any other operating lease for its research and
development facilities, corporate headquarter, offices and
equipment.
Note 4. Subsequent Events
None
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The
following discussion and analysis of the results of operations and
financial condition of Mymetics Corporation for the periods ended
March 31, 2021 and 2020 should be read in conjunction with the
Company's audited consolidated financial statements for the year
ended December 31, 2020 and related notes and the description of
the Company's business and properties included elsewhere
herein.
This
report contains forward-looking statements that involve risks and
uncertainties. The statements contained in this report are not
purely historical but are forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended.
These forward looking statements concern matters that involve risks
and uncertainties that could cause actual results to differ
materially from those projected in the forward-looking statements.
Words such as "may," "will," "should," "could," "expect," "plan,"
"anticipate," "believe," "estimate," "predict," "potential,"
"continue", "probably" or similar words are intended to identify
forward looking statements, although not all forward looking
statements contain these words.
Although
we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results,
levels of activity performance or achievements. Moreover, neither
we nor any other person assumes responsibility for the accuracy and
completeness of the forward-looking statements. We are under no
duty to update any of the forward-looking statements after the date
hereof to conform such statements to actual results or to changes
in our expectations.
Readers
are urged to carefully review and consider the various disclosures
made by us which attempt to advise interested parties of the
factors which affect our business, including without limitation
disclosures made under the captions "Management Discussion and
Analysis of Financial Condition and Results of Operations," "Risk
Factors," "Consolidated Financial Statements" and "Notes to
Consolidated Financial Statements" included in our annual report on
Form 10-K for the year ended December 31, 2020 and, to the extent
included therein, our quarterly reports on Form 10-Q filed during
fiscal year 2020.
IMPACT OF THE NOVEL CORONAVIRUS
On
January 30, 2020, the World Health Organization (“WHO”)
announced a global health emergency because of a new strain of
coronavirus originating in Wuhan, China (the “COVID-19
outbreak”) and the risks to the international community as
the virus spreads globally beyond its point of origin. In March
2020, the WHO classified the COVID-19 outbreak as a pandemic, based
on the rapid increase in exposure globally.
The
full impact of the COVID-19 outbreak continues to evolve as of the
date of this report. As such, it is uncertain as to the full
magnitude that the pandemic will have on the Company’s
financial condition, liquidity, and future results of
operations.
Management
is actively monitoring the global situation on its financial
condition, liquidity, operations, scientific collaborations,
suppliers, industry, and workforce. Given the daily evolution of
the COVID-19 outbreak and the global responses to curb its spread,
the Company is not able to estimate the effects of the COVID-19
outbreak on its results of operations, financial condition, or
liquidity for fiscal year 2021.
The
Company’s partner for the oncology immunotherapy project in
the Netherlands has decreased their laboratory experiments due to
reduced operating hours in those facilities. While the Company
considers this disruption to be temporary, continued disruption in
this project will lead to delayed advances by the Company of its
research and could negatively impact future revenue in fiscal year
2021 and the Company’s overall liquidity.
The
Company is dependent on its workforce to deliver and advance its
research. Developments such as physical distancing and working from
home directives will impact the Company’s ability to deploy
its workforce effectively. While expected to be temporary,
prolonged workforce disruptions may negatively impact future
revenues in fiscal year 2021 and the Company’s overall
liquidity.
The
Company is dependent on its partners in certain projects, such as
the University of Louisiana at Lafayette (“ULL”) for
the NIH funded project to maintain the agreed timelines and execute
their tasks. Developments such as social distancing and
shelter-in-place directives and lock-down directives will impact
the Company’s ability to execute on project plans and
research objectives effectively. While expected to be temporary,
prolonged disruptions in collaboration projects may negatively
impact funding in fiscal year 2021 and the Company’s overall
liquidity.
Although
the Company cannot estimate the length or gravity of the impact of
the COVID-19 outbreak at this time, if the pandemic continues, it
may have a material adverse effect on the Company’s results
of future operations, financial position, and liquidity in fiscal
year 2021.
CORONAVIRUS AID, RELIEF AND ECONOMIC SECURITY ACT
On
March 27, 2020, the U.S. Government enacted the Coronavirus Aid,
Relief, and Economic Security Act (“CARES Act”) was
signed into law. The CARES Act includes various income and payroll
tax provisions. The Company has analyzed the tax provisions of the
CARES Act and determined they have no significant financial impact
to the condensed financial statements. The Company has no intention
of taking advantage of other benefits but will continue to evaluate
the impact on the Company’s financial position.
THREE MONTHS ENDED MARCH 31, 2021 AND 2020
For the three months ended March 31, 2021 and
2020, revenue was €134 and €272, of which €131
and €255 was related to the revenue recognized for the work
performed under the NIH
grant / HIV project and the remaining for a small pre-clinical
research project with a US academic institution, for the years 2021
and 2020, respectively.
Costs and expenses decreased to €545 for the
three months ended March 31, 2021, from €647 (-15.8%) for the
three months ended March 31, 2020. The decrease is mainly due to
the lower R&D costs related to the work performed under
the NIH grant / HIV project.
Research
and development expenses decreased to €254 in the current
period from €322 (-21.1%) in the comparative period of 2020,
mainly due to €88 of subcontracting services paid during the
three-month period ending March 2020 in relation with the NIH grant
/ HIV project.
General and administrative expenses decreased to
€291 in the current period from €325 (-10.5%) in the
comparative period of 2020, mainly due to the 2019 preliminary
annual audit work incurred remotely during the year due to the
pandemic situation.
Other
expenses increased to €122 for the three months ended March
31, 2021 from €106 (+15.1%) for the three months ended March
31, 2020, mainly due to the foreign exchange revaluation impact of
shareholders’ loans based in US$.
Interest
expense increased to €685 for the three months ended March
31, 2021 from €675 for the three months ended March 31, 2020
related to existing loans from third party investors.
The
Company reported a net loss of (€1,246), or (€0.00) per
share, for the three months ended March 31, 2021, compared to a net
loss of (€1,164), or (€0.00) per share, for the three
months ended March 31, 2020.
LIQUIDITY AND CAPITAL RESOURCES
We
had cash of €738 at March 31, 2021 compared to €1,083
at December 31, 2020.
During 2020, our revenue has mainly been generated
through the NIH grant / HIV project. For 2021, new significant
revenues are not expected unless and until a major licensing
agreement or other commercial arrangement is entered into with
respect to our technology or new grant financings are
awarded.
As
of March 31, 2021, we had an accumulated deficit of approximately
€94,266, and had net loss of €1,246 in the three-month
period ending on that date. We expect to continue to incur net
losses in the future for research, development and activities
related to the future licensing of our technologies, and because of
the accrual of interest payable on existing loans.
Net cash used from operating activities decreased
to €327 for the three-month period ended March 31, 2021,
compared to €454 for the same period in 2020, mainly due to
the receivable related to the NIH
grant / HIV project incurred during the three-month period ending
March 31, 2020.
Net
cash used from investing activities was €10 during the three
months ended March 31, 2021 and €5 during the same period in
2020, mainly due to new IT and laboratory equipment in
Leiden.
Net
cash provided from financing activities is NIL for the three months
ended March 31, 2021 and 2020.
Salaries and related payroll costs represent gross
salaries for two executives, our CSO of Mymetics BV and seven
employees. Under Executive Employment Agreements with our
CEO and two CSOs, we pay our executive officers a combined amount
of €65 per month.
Our
Swiss subsidiary, Mymetics S.A., has, besides the CEO and CSO, two
additional employees on its payroll: Director of Finance and Head
of Manufacturing and Quality. Mymetics BV has, besides the full
time Chief Scientific Officer, two full-time technicians and one
part-time assistant.
We
intend to continue to incur additional expenditures during the next
nine months for additional research and development of our HIV,
Covid-19 vaccines and immunotherapy projects, which we will try to
seek through collaborations with pharmaceutical companies or with
not-for-profit organizations. These expenditures will relate to the
continued research and testing of these prototype vaccines and are
included in the monthly cash outflow described above.
In
the past, we have financed our research and development activities
primarily through debt and equity financings from various parties
and through license and collaboration agreements and grant
agreements.
We
anticipate that our normal operations will require approximately
€3,800 additional funding as of December 31, 2021. We will
seek to raise the additional capital from equity or debt
financings, and grants through donors and potential partnerships
with major international pharmaceutical and biotechnology firms.
However, there can be no assurance that it will be able to raise
additional capital on satisfactory terms, or at all, to finance its
operations on the longer term. In the event that we are not able to
obtain such additional capital, we will be required to further
restrict or even cease our operations.
Monthly
fixed and recurring expenses for "Property leases" of €13
represent the monthly lease and maintenance payments to
unaffiliated third parties for our offices, of which €4 is
related to our executive office located at Route de la Corniche 4,
1066 Epalinges in Switzerland (100 square meters), and €9
related to Bestewil Holding B.V. and its subsidiary Mymetics B.V
operating from a similar biotechnology campus near Leiden in the
Netherlands, where they occupy 204 square meters.
Included
in professional fees are legal fees paid to outside corporate
counsel and audit and review fees paid to our independent
accountants, and fees paid for investor relations.
Cumulative
interest expense of €29,133 has been accrued on all of the
Company’s outstanding notes and advances (see detailed table
in Note 2 to the financial statements).
RECENT FINANCING ACTIVITIES
During
the three months period ending March 31, 2021, our principal source
of funds has been promissory notes received in a prior quarter from
our two main investors and the revenue generated through the NIH
grant / HIV project.
We
have filed or are in the process of filing several new grant
applications with U.S. and European institutions in relation to our
virosome based vaccines.
We
anticipate using our current funds and those we receive in the
future both to meet our working capital needs and for funding the
ongoing vaccines pre-clinical research costs for new virosome
vaccine.
Management
anticipates that our existing capital resources will be sufficient
to fund our cash requirements through the next five months. We have
cash presently on hand in conjunction with the collection of
receivables, based upon our current levels of expenditures and
anticipated needs during this period. For 2021, we will need
additional funding through future collaborative arrangements,
licensing arrangements, and debt and equity financings under
Regulation D and Regulation S under the Securities Act of 1933. We
do not know whether additional financing will be available on
commercially acceptable terms when needed. These conditions raise
substantial doubt about our ability to continue as a going
concern.
If
management cannot raise funds on acceptable terms when needed, we
may not be able to successfully commercialize our technologies,
take advantage of future opportunities, or respond to unanticipated
requirements. If unable to secure such additional financing when
needed, we will have to curtail or suspend all or a portion of our
business activities and could be required to cease operations
entirely. Further, if new equity securities are issued, our
shareholders may experience severe dilution of their ownership
percentage.
The
extent and timing of our future capital requirements will depend
primarily upon the rate of our progress in the research and
development of our technologies, our ability to enter into a
partnership agreement with a major pharmaceutical company, and the
results of our present projects and future clinical
trials.
OFF-BALANCE SHEET ARRANGEMENTS
None
ITEM
3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
INTEREST RATE RISK
Fluctuations
in interest rates may affect the fair value of financial
instruments. An increase in market interest rates may increase
interest payments and a decrease in market interest rates may
decrease interest payments of such financial instruments. We have
no debt obligations which are sensitive to interest rate
fluctuations as all our notes payable have fixed interest rates, as
specified on the individual loan notes.
ITEM 4.
CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of the
Company’s management, including its Chief Executive Officer
and Chief Financial Officer the Company conducted an evaluation of
the effectiveness of the Company’s disclosure controls and
procedures, as defined in Rule 13a−15(e) and 15d-15(e) under
the Securities Exchange Act of 1934 (the “Exchange
Act”), as of the end of the period covered by this report.
Based on this evaluation, the Company’s Chief Executive
Officer and Chief Financial Officer (currently the same person to
allow timely decisions regarding required disclosure) concluded as
of March 31, 2021, that the Company’s disclosure controls and
procedures were not effective because of the material weakness
described below.
Management’s Annual Report on Internal Control over Financial
Reporting
Management is responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act). Our internal
control over financial reporting includes policies and procedures
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements
for external reporting purposes in accordance with generally
accepted accounting principles.
Under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, our management
conducted an evaluation of the effectiveness of our internal
control over financial reporting as of March 31, 2021, based on the
criteria established in Internal Control -- Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting such
that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented
or detected on a timely basis.
Our management, with the participation and supervision of our Chief
Executive Officer / Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures as of the
end of the period covered by this report and determined that our
disclosure controls and procedures were not effective due to a
material weakness related to insufficient review of financial
information, which caused the errors discovered in the Edgarized
version of the September 30, 2020 Form 10-Q. These errors
included:
-
the
“Non-convertible notes payable and related accrued interest
to related parties” description and the amount as of
September 30, 2020 of $6,512 from our balance.
-
the
“Consolidated Statements of Changes in Shareholders'
Deficit” title and sums of the “Accumulated Other
Comprehensive Income” and “TOTAL” columns as of
September 30, 2020 from our balance.
Remediation Plan
Management is implementing remedial actions to ensure that the
material weakness is remediated such that the existing controls
will operate effectively. The remedial actions we are taking, and
expect to take, to improve the effectiveness of our controls
include (i) developing a disclosure checklist to ensure all
relevant and required GAAP disclosures and properly included in the
financial statements, and (ii) adding check totals and a financial
statement review process to include a detailed, line-by-line,
review of the numbers prior to issuance.
Although the material weaknesses noted above continued to exist as
of March 31, 2021, management believes that when fully implemented
and operational, these measures will appropriately remediate the
material weaknesses and strengthen our internal control over
financial reporting. Aside from these measures, there have no other
changes in our internal control over financial reporting during the
quarter ended March 31, 2021 that our certifying officers concluded
materially affected or are reasonably likely to materially affect
our internal control over financial reporting.
INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS
Our
management, Ronald Kempers, who is both CEO and CFO, does not
expect that our disclosure controls or our internal control over
financial reporting will prevent or detect all error and all fraud.
A control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the control
system’s objectives will be met. The design of a control
system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their
costs. Further, because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance
that misstatements due to error or fraud will not occur or that all
control issues and instances of fraud, if any, within the company
have been detected.
These
inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because
of simple error or mistake. Controls can also be circumvented by
the individual acts of some persons, by collusion of two or more
people, or by management override of the controls. The design of
any system of controls is based in part on certain assumptions
about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated
goals under all potential future conditions. Projections of any
evaluation of controls effectiveness to future periods are subject
to risks. Over time, controls may become inadequate because of
changes in conditions or deterioration in the degree of compliance
with policies or procedures.