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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, 20032005
[ ] 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 [ ]
If this report is a an annual or transition report, indicate by check mark
if the registrant is not required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934. Yes [ ] No [X]
Indicate by check mark whether the Registrant:registrant (1) has filed all reports
required to be filed bybe Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrantregistrant 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 the Registrant'sregistrant'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 Registrantregistrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X].
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. $2,371,982.80$2,683,6 as of December 31, 2003,2005, computed on the basis of
the average of the bid and ask prices on such date. The Registrant has no
non-voting common stock.
As of March 18, 2004,31, 2006, there were 59,394,45495,020,464 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 18,
2004,31,
2006, 1 Euro was convertible into 1.223541.2074 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.
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.
We are a company engaged exclusively in research and development activities,
focusing primarily on human and veterinary biology and medicine. When used in these risk
factors, the terms "we" or "our" refer to Mymetics Corporation and its
subsidiaries.
2
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 A NOTE PAYABLE AMOUNTING TO E3,127 WHICH IS DUE JUNE 30, 2004, WHERE
THERE IS NO ASSURANCE THAT THE NOTE MAY BE PAID, EXTENDED, RESTRUCTURED OR
REFINANCED. THESE CONDITIONS RAISE SUBSTANTIAL DOUBT ABOUT OUR ABILITYLOST MONEY AND EXPECT LOSSES TO CONTINUE AS A GOING CONCERN.
As more fully disclosed under Item 13 of this Form 10-K, we have no
reasonable hope to be able to reimburse the credit facility due to MFC Bank on
or before its present due date of June 30, 2004, and despite our efforts and
recent achievements, we have no assurance that MFC Bank will accept to
renegotiate it on terms acceptable to us.
WE NEED TO RAISE ADDITIONAL CAPITAL OR OBTAIN SIGNIFICANT GRANTS TO FUND OUR
RESEARCH EFFORTS AND TO FULLY DEVELOP COMMERCIALLY VIABLE PRODUCTS. WE CANNOT
ASSURE YOUFOR THE
FORESEEABLE FUTURE, WHICH MEANS THAT WE WILLMAY NOT BE ABLE TO CONTINUE OPERATIONS
UNLESS WE OBTAIN ADDITIONAL CAPITAL OR OBTAIN
SIGNIFICANT GRANTS WHEN NEEDED OR THAT SUCH CAPITAL OR GRANTS WILL BE AVAILABLE
ON FAVORABLE TERMS, IF AT ALL. OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE
CANNOT RAISE ADDITIONAL CAPITAL OR OBTAIN SIGNIFICANT GRANTS WHEN NEEDED.
The costs for us to continue our researchFUNDING.
i
We historically have lost money. In the year ended December 31, 2005, we
sustained net losses of approximately E1,939,000. In the years ended December
31, 2004 and to develop our
intellectual property will be substantial. We expect that our existing capital
resources will satisfy our capital requirements throughDecember 31, 2003, we sustained net losses of approximately June 2004.
However, given the fact that we do not have any current sources of revenue,
substantial additional capital or grants will likely be needed to continue the
developmentE
2,202,000 and commercialization of our intellectual property. Currently there
are no firm commitments for any additional financing. Any additional equity
financing may be dilutive to stockholders, and debt financing, if available, may
include restrictive covenants and there can be no assurance that additional
financing will be available. While the amount of capital required cannot be
estimated with precision, we estimate it will require approximately 2 million
Euros just to move our business forward into a position of being prepared to
initiate clinical trials.
The availability of and the need for future capital will depend on many
factors, including:
- continued scientific progress in our research and development
program;
- results of pre-clinical tests;
- results of any clinical trials;
- the time and cost involved in obtaining regulatory approvals;
- future collaborative relationships; and
- the cost of manufacturing.
If adequate funds are not available, we may be required to curtail or
cease operations.
3
WE HAVE A HISTORY OF OPERATING LOSSES AND WE EXPECT TO GENERATE OPERATING LOSSES
FOR THE FORESEEABLE FUTURE.E 2,786,000, respectively. We currently are engaged in research
and development activities and do not have any commercially marketedmarketable 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. IF WE ARE UNABLE TO SUCCESSFULLY DEVELOP AND COMMERCIALIZE OUR RESEARCH AND
INTELLECTUAL PROPERTY, WE MAY NEVER GENERATE SIGNIFICANT REVENUES OR ACHIEVE
PROFITABILITY.
Our current objective is to develop vaccine and therapeutic compounds
and specific therapies for certain retroviral diseases or diseases with a viral
autoimmune content. All of our potential products and production technologies
are in the research or pre-development stages and no revenues have been
generated from product sales. The first products and applications target human
immunodeficiency virus, or HIV, and feline immunodeficiency virus, or FIV, the
precursors to human and feline acquired immunodeficiency syndrome, or AIDS. We
will not become profitable, if ever, unless we develop our intellectual property
to a point where it can be licensed to third parties on financially favorable
terms or applied in the creation and development of one or more products that
can generate revenues.
Although our due diligence has indicated that our research and
discovery regarding "mimicry" may lead to important discoveries in the
scientific community regarding the HIV infection process, other discoveries may
be necessary to develop an effective vaccine, and we may never be able to
develop our research and intellectual property into a commercially profitable
product.
Our success will depend on our ability to:
- effectively commercialize the research through collaborative
relationships with third parties;
- prepare acceptable protocols necessary to obtain regulatory
approvals;
- effectively conclude clinical trials;
- effectively establish commercial viability; and
- effectively establish marketing and manufacturing
relationships.
If we are
unable to commercializedraw down on the current research,Standby Equity Distribution Agreement provided by
Cornell Capital or find alternative financing on commercially reasonable terms
or generate revenue from the sale of products, we docould be forced to curtail or
cease our operations.
At December 31, 2005, we had an accumulated deficit of approximately
E14,087,000. Total cash disbursed since 1990 for operating activities, including
Research and Development, is E 8,901,000. In order to become profitable, we will
need to generate revenues to off-set our operating costs, including our general
and administrative expenses. We may not achieve or sustain our revenue or profit
objectives, and our losses may increase in the future, and, ultimately, we may
have other products from which to derive revenue.
4
WE MUST OVERCOME SIGNIFICANT OBSTACLEScease operations.
Our operating results are impossible to predict, because we have not begun
selling any products. As a result, we cannot determine if we will be successful
in our proposed plan of operation. Accordingly, we cannot determine what the
future holds for our proposed plan of business. As such, an investment in our
business is extremely risky and could result in the entire loss of your
investment.
OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO SUCCESSFULLY DEVELOPEVALUATE OR MARKET
PRODUCT CANDIDATES.
ThePREDICT OUR
FUTURE BUSINESS PROSPECTS.
We have no operating history. We are in the development of product candidates isstage, and our proposed
operations are subject to significantall of the risks of failure, which are inherent in establishing a new
business enterprise. 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 medical productstechnology, and products based on new technologies. These risks include:
- delaysthe competitive and regulatory environment in pre-clinical testing, product development, clinical
testing or manufacturing;
- unplanned expenditures for product development, clinical
testing or manufacturing;
- failurewhich we
will operate. We have made no material sales to date and have accumulated a net
deficit from inception through December 31, 2006 of approximately Euro 14
million. It is likely that additional losses will be incurred in the future. See
"Description of the technologiesBusiness" and products being developed to
have the desired effect or an acceptable safety profile;
- failure to receive regulatory approvals;
- emergence"Plan of equivalent or superior products;
- inability to manufacture (directly or through third parties)
product candidates on a commercial scale;
- inability to market products due to third party proprietary
rights;
- inability to find collaborative partners to pursue product
development; and
- failure by future collaborative partners to successfully
develop products.
If these risks materialize, our research and development efforts may
not result in any commercially viable products.
COMMERCIALIZATION OF OUR INTELLECTUAL PROPERTY AND CREATION OF VIABLE PRODUCTS
DEPEND ON COLLABORATIONS WITH OTHERS.Operations."
IF WE ARE UNABLE TO FIND COLLABORATORSCANNOT DEVELOP AND INTRODUCE NEW PRODUCTS, WE CANNOT COMPETE SUCCESSFULLY
IN THE FUTURE,MARKETPLACE.
Our key products still are in the development stage. See "Business - Where Are
We and Where Are We Going?". While we are pleased about the progress made to
date on these products, we cannot be sure that these products in development
will be completed or, if completed, will be commercially viable.
WE MAY NOT BE ABLE TO DEVELOP PROFITABLECOMPETE SUCCESSFULLY AGAINST CURRENT AND FUTURE
COMPETITORS, WHICH COULD HARM OUR FUTURE SALES OF PRODUCTS.
Our strategy for the research, development and commercialization of
products requires us to enter into contractual arrangements with corporate
collaborators, licensors, licensees and others. We do not have the funds to
develop products on our own, and intend to depend on collaborators to develop
products on our behalf. If collaborative relationships cannot be found, we may
not be able to continue our development programs.
Moreover, we could become involved in disputes with collaborative
partners, which could lead to delays or termination of development programs and
time-consuming, expensive and distracting litigation or arbitration. Even if we
fulfill our obligations under a collaborative agreement, a partner may terminate
the agreement. If any collaborative partner terminates or breaches an agreementA few companies currently compete with us in the market for our products. Some
of these companies have far greater capital, marketing, and other resources than
we do. Furthermore, we cannot assure you that these or otherwise failsother firms will not
develop new or enhanced products that are more effective than any that we
currently have or will develop in the future.
ii
We have no certainty as to complete its obligations in a timely manner,the availability and terms of future financing. We
believe that we will have sufficient working capital available through lines of
credit and the proceeds of future offerings to finance our ability to successfully commercialize our intellectual property will be
adversely affected.
5
IF WE ARE NOT ABLE TO DEMONSTRATE THE RESULTS OF OUR RESEARCH IN CLINICAL
TRIALS, OR IF CLINICAL TRIALS ARE DELAYED, WE MAY NOT BE ABLE TO OBTAIN
REGULATORY CLEARANCE TO MARKET OUR PRODUCTS IN THE UNITED STATES OR IN FOREIGN
COUNTRIES ON A TIMELY BASIS, OR AT ALL.
Assuming we are able to successfully develop our research into
potential products,activities through at
least June 2006. We anticipate, however, that such products will require regulatory approval. Before
obtaining regulatory approvals for the commercial sale of any of the products
under development, pre-clinical studies and clinical trials must demonstrate
that the product is safe and effective for use in each target indication. If any
of the products fail in clinical trials, the approval of the United States Food
and Drug Administration (the "FDA") and similar agencies operating in foreign
countriesfunds will not be obtainedsufficient
to meet our capital needs for the foreseeable future. Therefore, we expect that
we will be required to seek additional financing in the future. We cannot be
sure that such products, andfinancing will be available or available on attractive terms, or
that such financing would not result in a substantial dilution of shareholders'
interest. If we cannot obtain financing when we need it or on terms that are
commercially reasonable to us, we will not be able to generate revenues from such products.
Clinical testing is a long, expensivepursue our business plan
as we currently anticipate. See "Use of Proceeds", "Plan of Operations",
"Management's Discussion and uncertain process. One cannot
be certain that the data collected from the clinical trials will be sufficientAnalysis", and "Projections."
ALTHOUGH WE HAVE RESTRUCTURED OUR EXISTING DEBT, WE HAVE NOT ALLEVIATED OUR
WORKING CAPITAL NEEDS.
We need to support approvaladdress our working capital needs by the FDA or any foreign regulatory authorities, thatend of June 2006 to allow us
to continue devoting our efforts to development of the clinical trials willbusiness instead of
raising needed capital.
NEITHER CHRISTIAN ROCHET, OUR CHIEF EXECUTIVE OFFICER, NOR ERNST LUEBKE, OUR
CHIEF FINANCIAL OFFICER, ARE FULLY PAID FOR THEIR EFFORTS.
Finding people of comparable talent and dedication to our business would be
completed on schedule or, even if the clinical trials
are successfully completed and on schedule, that the FDA or any foreign
regulatory authorities will ultimately approve the productdifficult given our inability to pay management for commercial use.
Clinical trials could be delayed for a variety of reasons, including:
- delays in enrolling volunteers;
- lower than anticipated retention rate of volunteers in the
trials; and
- serious adverse events related to the products being
developed.
Our research is presently focused on developing vaccines and
therapeutics to prevent and treat HIV. Trials will be conducted on animals prior
to humans. Results of animal trials, even if successful, may not be relevant for
determining the preventive or therapeutic effect of any potential product
designed to prevent or treat HIV infection in humans. In addition, results from
early clinical trials are not necessarily indicative of future results. A number
of companies in the biotechnology and pharmaceutical industries have suffered
significant setbacks in late stage clinical trials even after promising results
in early stage development. Furthermore, pre-clinical and clinical data can be
interpreted in different ways, which could delay, limit or prevent regulatory
approvals. Negative or inconclusive results or interpretations could cause the
trials to be unacceptable for submission to regulatory authorities.
IFtheir work.
ALTHOUGH WE DO NOT BELIEVE EITHER SYLVAIN FLEURY, OUR CHIEF SCIENTIFIC OFFICER
OR MARC GIRARD, AN IMPORTANT SCIENTIFIC CONSULTANT, HEAD OF OUR VACCINE
DEVELOPMENT PROGRAM, ARE UNABLEPLANNING TO ATTRACT AND RETAIN KEY EMPLOYEES AND CONSULTANTS, WE WILLLEAVE US, REPLACING EITHER OF THESE MEMBERS
OF OUR SCIENTIFIC TEAM WOULD BE UNABLE TO DEVELOP AND COMMERCIALIZE PRODUCTS.
We are dependent on the principal members of our management and
scientific staff. In order to successfully complete our research and development
activities and our commercialization plans, we will need to hire personnel with
experience in clinical testing, drug discovery, government regulation,
manufacturing, marketing and finance. We may not be able to attract and retain
personnel on acceptable terms given the intense competition for such personnel
among high technology enterprises, including biotechnology, pharmaceutical and
healthcare companies, universities and non-profit research institutions.
6
IF WE FAIL TO ENTER INTO SUCCESSFUL MARKETING ARRANGEMENTS WITH THIRD PARTIES,
WE WILL NOT BE ABLE TO COMMERCIALIZE PRODUCTS.
We do not currently have any sales or marketing infrastructure, and we
do not have significant experience in marketing, sales and distribution. Future
profitability will depend in part on plans to enter into successful marketing
arrangements with third parties. To the extent that we enter into marketing and
sales arrangements with other companies, revenues will depend on the efforts of
others. These efforts may not be successful.DIFFICULT.
If we are unable to enter into
successful third-party arrangements,pay Sylvain Fleury's salary, he may soon lose his Swiss
residency permit. Dr Fleury has been following, and associated with, our AIDS
vaccine project since 1998 and we may notbelieve that replacing him as CSO on time for
successfully prosecuting our pending patent applications would be ablenext to
commercializeimpossible. We are therefore exposed to the risk of losing our products.
IFpending patent
applications.
OUR BUSINESS MODEL IS PREDICATED ON OUR BELIEF THAT WE DO NOT SUCCESSFULLY COMPETEWILL BE ABLE TO ENGAGE
LARGE PHARMACEUTICAL COMPANIES TO PARTNER WITH US IN THE DEVELOPMENT AND COMMERCIALIZATION OF PRODUCTS AND KEEP PACE WITH RAPID TECHNOLOGICAL CHANGE, WE WILL BE UNABLE TO
CAPTURE AND SUSTAIN A MEANINGFUL MARKET POSITION.
The biotechnologyOUR
PRODUCTS.
Our failure to succeed in this endeavor will dramatically change our financial
needs and pharmaceutical industries are highly competitive
and subjectability to significant and rapid technological change. We are aware of
several companies that are actively engaged in research and development in areas
related to our research focus. Many of these companies are addressing the same
diseases and disease indications that we are addressing. As a result of this
intense competition,successfully sell any products that we develop may become obsolete beforedevelop.
INDUSTRY RISKS.
Like any other bio-technology company, we also face the risk that any results
that we achieve in animal tests will not be replicated in human patients. We
also work in an extremely competitive industry where patent protection is vital
to the long-term success of our company.
OUR PRINCIPAL OFFICES ARE LOCATED IN SWITZERLAND AND IT MAY BE DIFFICULT FOR YOU
TO ENFORCE JUDGMENTS AGAINST US OR OUR DIRECTORS AND EXECUTIVE OFFICERS.
Although we are able to recovera company incorporated under the expenses incurred in their development. Moreover, manylaws of these companies, either alone or together with their collaborative partners,
have substantially greater financial resourcesDelaware, all our
officers and larger researchdirectors are located outside of the United States. A substantial
portion of our assets now are, and
development staffs. These competitors, either alone or together with their
collaborative partners, also have significantly greater experience in:
- developing products;
- undertaking pre-clinical testing and human clinical trials;
- obtaining FDA and other regulatory approvals of products; and
- manufacturing and marketing products.
IF OUR INTELLECTUAL PROPERTY DOES NOT ADEQUATELY PROTECT PRODUCT CANDIDATES, WE
COULD ENCOUNTER MORE DIRECT COMPETITION, WHICH COULD ADVERSELY IMPACT REVENUES.
Our success depends, in part, on our ability to:
- obtain and maintain patents or rights to patents;
- protect trade secrets;
- operate without infringing upon the proprietary rights of
others; and
- prevent others from infringing on our proprietary rights.
We will be able to protect proprietary rights from unauthorized use by
third parties only to the extent that our proprietary rights are covered by
valid and enforceable patents or are effectively maintained as trade secrets.
The patent position of biotechnology companies involves complex legal and
factual questions and, therefore, enforceability cannot be predicted with
certainty. Patents, if issued, may be challenged, invalidated or circumvented.
Thus, any patents that are owned or licensed from third parties may not provide
7
adequate protection against competitors. Pending patent applications, those
applications that we may file in the future we expect will be, located
outside the U.S. As a result, it may be difficult for investors to effect
service of process on those persons in the U.S. or to enforce in the U.S.
judgments
iii
obtained in U.S. courts against us or those applications thatpersons based on the civil liability
provisions of the U.S. securities laws. It may be licensed from third parties, may not resultdifficult and costly for an
investor to get a court in patents being issued. Also,
patent rights may not provide adequate proprietary protectionSwitzerland to enforce a judgment obtained in other
jurisdictions, including the U.S., against us or competitive
advantages against competitors with similar technologies. The laws of certain
foreign countries do not protect intellectual property rights toour directors or officers under
the same extent
as do thesecurities laws of the United States.
In addition to patents, we rely on trade secrets and proprietary
know-how. Protection of trade secrets and know-how is sought,States
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 part, through
confidentiality and proprietary information agreements and customary principles
of "work-for-hire." These agreements may not provide meaningful protection or
adequate remedies in the event of unauthorized use or disclosure of confidential
and proprietary information. Failure to protect proprietary rights could
seriously impair our competitive position.
IF THIRD PARTIES CLAIM WE ARE INFRINGING THEIR INTELLECTUAL PROPERTY RIGHTS, WE
COULD BECOME SUBJECT TO SIGNIFICANT LITIGATION OR LICENSING EXPENSES OR BE
PREVENTED FROM MARKETING OUR PRODUCTS.
The areas in which we have focused our research and development have a
number of competitors. This has resulted in a number of issued patents and
still-pending patent applications. Patent applications in the United States are,
in most cases, maintained in secrecy until the patents issue. The publication of
discoveries in the scientific or patent literature frequently occurs
substantially later than the date on which the underlying discoveries were made.
Commercial success depends significantly on our ability to operate without
infringing the patents and other proprietary rights of third parties. In the
event of such infringement, we may be prevented from pursuing certain product
development or commercialization and may be required to obtain a license for the
use of the proprietary rights or patents. We may also be required to pay damages
for past infringement.
The biotechnology and pharmaceutical industries have been characterized
by extensive litigation regarding patents and other intellectual property
rights. The defense and prosecution of intellectual property lawsuits, U.S.
Patent and Trademark Office interference proceedings and related legal and
administrative proceedings in the United States and in foreign countries involve
complex legal and factual questions. As a result, such proceedings are costly
and time consuming to pursue and their outcome is uncertain.
Litigation may be necessary in the future to:
- enforce patents that we own or license;
- protect trade secrets or know-how that we own or license; or
- determine the enforceability, scope and validity of the
proprietary rights of others.
We believe that our technology has been independently developed and
does not infringe upon the proprietary or intellectual property rights of
others. We cannot, however, guarantee that our technology does not, and will not
in the future, infringe upon the rights of third parties. We may be a party to
legal proceedings and claims relating to the proprietary information of others
from time to time in the ordinary coursecontrol of our business. If we become involvedcompany or changes in any litigation, interference or other administrative proceedings, we will
8
incur substantial expense andour management that the efforts of technical and management personnel
will be significantly diverted. An adverse determination may subject us to loss
of proprietary position or to significant liabilities, or require licenses that
may not be available from third parties. We may be restricted or prevented from
manufacturing and selling products, if any, in the event of an adverse
determination in a judicial or administrative proceeding or if we fail to obtain
necessary licenses. Costs associated with these arrangements may be substantial
and may include ongoing royalties. Furthermore, the necessary licenses may not
be available on satisfactory terms, if at all.
WE CAN NOT BE SURE THAT ANY FUTURE OR CURRENTLY PENDING PATENT APPLICATIONS
RELATING TO OUR PRODUCTS WILL ISSUE ON A TIMELY BASIS, IF EVER.
Since patent applications in the United States are maintained in
secrecy until 18 months from the priority date, and since publication of
discoveries in the scientific or patent literature often lag behind actual
discoveries, we cannot be certain that we were the first to develop the
inventions covered by eachstockholders of
our pending patent applications or that we werecompany may deem advantageous. These provisions
- - limit the firstability of our stockholders to file patent applications for such inventions. Even if patents are
issued, the degreecall special meetings of
protection afforded by such patents will depend upon the:stockholders;
- scope of the patent claims;
- validity and enforceability of the claims obtained in such
patents; and
- our willingness and financial ability to enforce and/or defend
them.
EVEN IF WE OBTAIN REGULATORY APPROVAL TO MARKET AND SELL OUR PRODUCTS, WE WILL
BE SUBJECT TO ONGOING REGULATORY REVIEW, WHICH WILL BE EXPENSIVE AND MAY AFFECT
OUR ABILITY TO SUCCESSFULLY COMMERCIALIZE OUR PRODUCTS.
Even if regulatory approvalprovide for a product is secured, such approval may
be subject to limitations on the indicated uses for which the product may be
marketed. Such limitations may restrict the size of the available market for the
product or contain requirements for costly post-marketing surveillance studies.
Manufacturers of medical products are subject to continued review and periodic
inspections by the FDA and other regulatory authorities. The subsequent
discovery of previously unknown problems with the product, clinical trial
subjects, or with the manufacturer or its manufacturing facility may result in
the imposition of restrictions on the product or manufacturer, including
withdrawal of the product from the market. If we or any of our collaborative
partners fail to comply with applicable regulatory requirements, we may be
subject to fines, suspension or withdrawal of regulatory approvals, product
recalls, seizure of products, operating restrictions and criminal prosecution.
9
IF OUR PRODUCTS ARE NOT ACCEPTED BY THE MARKET, WE ARE NOT LIKELY TO GENERATE
SIGNIFICANT REVENUES OR BECOME PROFITABLE.
Even if we are able to successfully develop a viable product and obtain
regulatory approval of such product, such product may not gain market acceptance
among physicians, patients, healthcare payors and the medical community. The
degree of market acceptance of any medical product depends on a number of
factors, including:staggered board;
- demonstration of clinical efficacy and safety;
- cost-effectiveness;
- potential advantages over alternative therapies;
- reimbursement policies of government and third party payors;
- effectiveness of marketing and distribution capabilities; and
- the success of physician education programs.
Physicians will not recommend therapies using products until clinical
data or other factors demonstrate their safety and efficacy as compared to other
drugs or treatments. Even if the clinical safety and efficacy of therapies using
the products is established, physicians may elect not to recommend the therapies
for other reasons, including whether the mode of administration of products is
effective for certain indications.
WE ARE A PARTY TO LITIGATION WHICH HAS BEEN DETERMINED ADVERSELY TO US AND WE
ARE UNABLE TO PAY THE PLAINTIFF WITH THE FUNDS NOW AVAILABLE TO US.
We and our French subsidiary were party to several lawsuits seeking
damages from our company and our subsidiary, as described under "Item 3. Legal
Proceedings.". All except one case were immaterial and have been settled, either
in court or out of court, with all amounts previously accounted for in our
financial statements. One material case was lost and although the full amount
had been provided for in our financial statements, we do not have sufficient
funds to meet our obligations should the plaintiff demand immediate payment of
the amount we now owe him, unless we are able to raise a sufficient amount of
additional capital. Our inability to meet such obligations would have a material
adverse effect on our liquidity and could threaten our business.
OUR STOCK PRICE MAY EXPERIENCE SIGNIFICANT VOLATILITY, WHICH COULD ADVERSELY
AFFECT THE VALUE OF YOUR INVESTMENT.
The market price of our common stock, likeprovide that of the common stock of
many other development stage biotechnology companies, may be highly volatile. In
addition, the stock market has experienced extreme price and volume
fluctuations. This volatility has significantly affected the market prices of
securities of many biotechnology and pharmaceutical companies for reasons
frequently unrelated to, or disproportionate to, the operating performance of
the specific companies. These broad market fluctuations may adversely affect the
market price of our common stock.
10
THE MARKET FOR OUR COMMON STOCK IS VERY LIMITED
Our common stock is currently traded only on the OTC Bulletin Board.
Accordingly, we cannot provide assurances as to the future liquidity of our
common stock or the price at which you would be able to sell your shares in any
available market.
THE ISSUANCE OF ADDITIONAL EQUITY SECURITIES MAY DILUTE YOUR INVESTMENT.
We currently have 59,394,454 shares of common stock outstanding, 1
share of Special Voting Preferred Stock, options to purchase an aggregate of
606,250 shares of common stock and warrants to purchase an aggregate of
6,080,166 shares of common stock. We are authorized to issue up to 80 million
shares of common stock and 5 million shares of preferred stock without
additional stockholder approval. The issuance of additional common stock or
preferred stock will dilute our stockholders' percentage ownership, and,
depending on the offering price of such stock, may also serve to dilute the
value of such ownership interest.
WE CURRENTLY DO NOT INTEND TO PAY CASH DIVIDENDS ON OUR SHARES.
We have never declared or paid any cash dividends on our common stock,
nor do we intend on doing so in the foreseeable future. The payment of
dividends, if any, in the future is within the discretion of our board of directors is expressly authorized to make, alter
or repeal the bylaws; and
will depend- - establish advance notice requirements for nominations for election to our
board or for proposing matters that can be acted upon our earnings, capital requirements and financial
condition as well as other relevant factors. We currently intend to retain all
earnings, if any, to finance our continued growth and the development of our
business. Furthermore, our ability to declare or pay dividends may be limited in
the future by the terms of any then-existing credit facilities, which may
contain covenants that restrict the payment of cash dividends.
POLITICAL OR SOCIAL FACTORS MAY ADVERSELY IMPACT REVENUES BY DELAYING OR
IMPAIRING THE CORPORATION'S ABILITY TO MARKET ITS PRODUCTS.
We are focused on developing vaccines and products for the treatment
and prevention of HIV. Products developed to address the HIV/AIDS epidemic have
been, and may continue to be, subject to competing and changing political and
social pressures. The political and social response to the HIV/AIDS epidemic has
been emotionally charged and unpredictable. Such political and social forces may
serve to delay or prevent introduction of our products into the marketplace or
to place restrictions upon the pricing, availability and marketing of such
products.
11stockholders at
stockholder meetings.
iv
TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS............................................. 13
ITEM 2. PROPERTIES .......................................... 26
ITEM 3. LEGAL PROCEEDINGS ................................... 26
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.. 27
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.................................. 28
ITEM 6. SELECTED FINANCIAL DATA ............................. 31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................. 31
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.......................................... 33
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ......... 34
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.................. 34
ITEM 9A. CONTROLS AND PROCEDURES.............................. 34
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT .. 35
ITEM 11. EXECUTIVE COMPENSATION .............................. 38
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS....... 42
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ...... 43
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES............... 49
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.......................................... 51
SIGNATURES............................................................. 71
12
PART I
ITEM 1. BUSINESS....................................................... 1
ITEM 2. PROPERTIES .................................................... 13
ITEM 3. LEGAL PROCEEDINGS ............................................. 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............ 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS............................................ 15
ITEM 6. SELECTED FINANCIAL DATA ....................................... 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................ 19
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.................................................... 29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ................... 31
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE............................ 31
ITEM 9A. CONTROLS AND PROCEDURES........................................ 31
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ............ 32
ITEM 11. EXECUTIVE COMPENSATION ........................................ 35
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS................. 41
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ................ 43
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES......................... 44
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.................................................... 45
SIGNATURES................................................................ 68
v
PART I
ITEM 1. BUSINESS
THE CORPORATION
OVERVIEW
We are a holdingbiotechnology research and development company devoted to fundamental
and applied research in the area of human biology and medicine conducting our
business throughfrom our subsidiaries
6543 Luxembourg S.A.European offices located in Lausanne and Nyon (near Geneva),
a joint stock company organized in 2001 under the laws of
Luxembourg ("LuxCo"), and Mymetics S.A. (formerly Hippocampe S.A.), a company
organized in 1990 under the laws of France ("Mymetics S.A.").Switzerland. 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 LuxCo6543 Luxembourg S.A., a joint
stock company organized in 2001 under the laws of Luxembourg, and Mymetics S.A.
(formerly Hippocampe S.A.), a company organized in 1990 under the laws of France
("Mymetics S.A."), which is a wholly-owned subsidiary of LuxCo.6543 Luxembourg S.A. 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 and the resultingwill result in strong intellectual property will lead to the creation
of commercially viable products, whichthat can generate
revenues for us in the future. If financially favorable terms are available, we may license Our business model is to conduct our research and
development far enough to be able to sign a partnership agreement with one (or
more) major pharmaceutical company(ies) active in the field(s) of HIV-AIDS
preventive vaccines and/or sell our
intellectual property to third parties. If we fail to develop our intellectual
property, we are unlikely to generate significant revenues.therapies.
DEVELOPMENT OF THE CORPORATIONCOMPANY
From our inception in 19941990 to December 1997, we operated in the environmental
services industry, focusing on thermal treatment (in Florida), remediation
services (in Florida and Pennsylvania) and waste oil recycling (in Illinois). In
February 1995, we completed an initial public offering. In 1998 and 1999, after
disposing of our thermal treatment, remediation services and waste oil recycling
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 LuxCo,6543 Luxembourg S.A., or Preferential Shares,
which are convertible into shares of our common stock. In 2002, we acquired the
remaining 0.1% of the outstanding common stock of Mymetics S.A. pursuant to
share exchanges with the remaining stockholders of Mymetics S.A. The terms of
these recent share exchanges were substantially similar to the terms of the share
exchange that occurred in March 2001. Mymetics S.A. was, and continues to
be, a biotechnology research and development company.
On June 30, 2001, we closed on a private offering of 1,333,333In 2004, all the remaining convertible
shares of our common stock, at E1.77 (U.S. $1.50) per share,6543 Luxembourg S.A. not already held by Mymetics Corporation have
been converted into shares of Mymetics Corporation.
MYMETICS CORPORATION
Mymetics' primary objective is to develop vaccines and therapies to prevent,
respectively treat the effect of certain retroviruses, including the human
immunodeficiency virus, or HIV, the virus that leads to acquired
immunodeficiency
1
syndrome, or AIDS. Additional applications of Mymetics' research include
potential treatments and/or vaccines for an aggregate price of
E2,355,600 (U.S. $2,000,000). This private placement was exempt from
registration pursuant to Regulation S of the Securities Act of 1933,human oncoviral leukemias, multiple
sclerosis, and the
shares were sold to foreign investors meeting the requirements of Regulation S.
13
In August, 2002 the Company formed Mymetics Deutschland GmbH for the
purpose of applying for German government support of research activities to be
conducted in Germany. This company never became active and was finally sold to
MFC Securities (Deutschland) GmbH, an affiliate of our lender, MFC Merchant Bank
S.A.
MYMETICS CORPORATIONorgan transplantation.
Prior to 2002, our activities were primarily conducted in Europe. During the
second quarter of 2002, through our operations in the United States, we launched
programs in the United States in an attempt to reinforce our intellectual
property portfolio and to accelerate the commercialization of our technology.
This was done, in part, by attempting to target products and business
development in the United States. Again, prior to this time, activities such as
design of the prototype molecules, synthesis, and in vitro testing had been
conducted exclusively in Europe. WeOur 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, we were forcedit decided
to limit these activities in January 2003. MYMETICS S.A.
Our subsidiary, Mymetics S.A., is a biotechnology researchFollowing the management changes of
July 2003, our activities have again been conducted exclusively in Europe, with
certain in-vitro and development company devoted to fundamental and applied researchpre-clinical tests being performed in the areaUnited States.
Under our "best of human and veterinary biology and medicine. Mymetics S.A.'s primary objective is
to develop therapies to treat certain retroviruses, includingclass" R&D model, the human
immunodeficiency virus, or HIV, the virus that leads to acquired
immunodeficiency syndrome, or AIDS. Additional applications of Mymetics S.A.'s
research include potential treatments and/or vaccines for animal AIDS, human and
animal oncoviral leukemias, multiple sclerosis and organ transplantation. To
date, Mymetics S.A. has conducted its fundamental research in Europe.
Mymetics S.A.'soverall 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) and Professor
Marc Girard, DVM, D.Sc. (Head of Vaccine Development). Any given project is
to structure and manage a network
of public and private best-in-class research teams, each with a clearly
delineated focus. Mymetics S.A. has segmented its primary researchfirst subdivided into modules,"technology modules" which are then out-sourced,subcontracted to "best
of class" teams from academia, public or private laboratories or industry, all
chosen for their high standards and specific know how. For example, if we need
rabbits to be bred, we will outsource this work on a commercial basis to the
best company we can find. Most of the work that we outsource is easily replaced
by other vendors. In unique cases, like protein engineering, we are more
dependent upon companies like Protein eXpert. That said, we believe that with
rare exception, we can replace these providers as well. We also believe that
having such specialized expertise in-house would make us dependant on the staff
required to carry out such tasks. We believe we benefit from the established
relationships with our "partners" and approach our relationship in that manner.
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 which can
enhance or add value to our own products under its direct supervision,development. Our agreement with
Pevion AG, a small Swiss company with which we signed a scientific collaboration
agreement which includes an option to high-level,
specialized and complementary public and private research teams.receive an exclusive license to use their
Virosome Vaccine delivery technology in conjunction with our AIDS preventive
vaccine under development is an example of such an agreement. Under this model,
Mymetics S.A. retains all intellectual property rights in the combined research and
applies for domestic and international patents whenever justified. As agreed and
coordinated by Mymetics, S.A., the research teams are authorized to co-publish their
results.
MYMETICS GMBH
Mymetics Deutschland GmbH was formedWe intend to sign a partnership agreement with one of the few major
pharmaceutical companies presently active in 2002 for the purposepreventive vaccine against
HIV-AIDS as soon as our human clinical phase I trials are completed. We hope
this could happen before June 2007. The type of applying for German government supportpartnership agreement we intend
to sign is typical in the world of research activities to be conducted in
Germany. The German government offers subsidy programs asbiotechnology: an initial cash payment,
followed by a meansseries of attracting
business investment into partspayments associated with specific milestones and
finally, royalties on any sales of eastern Germany. In particular, Mymetics
Deutschland GmbH was organized to take advantage of (i) an investment matching
program offeredend products, assuming these will have been
approved by the German government, wherebyvarious regulatory authorities involved, such as the German government matches
the amount of certain investments made by companies in eastern Germany and (ii)
a broader program, whereby the German government offers significant amounts of
grant money to companies in eastern Germany that satisfy certain conditions.
Mymetics Deutschland GmbH solicited interest from existing research teams in
eastern Germany, formulated four distinct research programs and applied for
German government grants. In December 2002, Mymetics Deutschland GmbH was
14
informed that two of its programs would be eligible for matching grants.
However, the broader program described above, which may have served as a source
of substantial working capital, was suspended by the German government for
biotechnology companies. Consequently, the former Board of Directors elected to
suspend its planned expansion of research activities into Germany and sold the
German company to MFC Securities (Deutschland) GmbH, an affiliate of our lender,
MFC Merchant Bank S.A., in July 2003.
RECENT INDUSTRY DEVELOPMENTS
During the first quarter of 2003, one of our major competitors received
approval from the United States Food and
Drug AdministrationAdministration. We would not expect this to occur prior to 2009-2010.
LUXEMBOURG 6543 S.A.
Our Luxembourg subsidiary, Luxembourg 6543 S.A., was founded in 2001 within the
context of its fusion
inhibitor candidate drug. Thisthe acquisition of Mymetics S.A. by Mymetics Corporation as a legal
vehicle to allow the former French shareholders of Hippocampe S.A. to defer
2
French taxes due on the exchange of their Hippocampe S.A. shares for Mymetics
Corporation shares. The company presently is dormant and we intend to liquidate
it as soon as the necessary resources to do so will be available. In that case,
the shares of Mymetics S.A. held by Luxembourg 6543 S.A. will be transferred to
Mymetics Corporation.
MYMETICS S.A.
Our French subsidiary, Mymetics S.A. (formerly Hippocampe S.A.), founded in
1990, is a biotechnology research and development combined with advances in ourcompany devoted to fundamental
and applied research activities, served to validate our basic technology in the area of fusion inhibitorsbiology and medicine. The company is the
legal owner of our initial key patents, which were applied for prior to it being
acquired by Mymetics Corporation. At this time, it is not possible to transfer
these patents to any non-French legal entity without the French tax authorities'
approval. This approval implies an assessment of the actual economic value of
the patents, which in particular,turn will only be assessable once the efficacy of gp41-derived peptide
product. Given this validation, as well as (i) advancestechnology protected
by the patents is licensed or sold to a third party in one or more arms-length
transactions. Mymetics S.A. is presently inactive. Its last salaried employee
completed her assignment by, and had her employment contract terminated on
January 31, 2005. We do not intend to hire new staff in France in the
our researchforeseeable future, as all R&D will be carried on under Mymetics Corporation's
responsibility.
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 development efforts, (ii) poor worldwide capital market conditionsa former officer and (iii)
lackdirector, Dr.
Pierre-Francois Serres, who obtained a judgment against Mymetics S.A. in France
(that is now under appeal) in the amount of sufficient long term working capital, we have decidedE173,000 for an alleged wrongful
termination by the Company's prior management during 2003. The court appointed
two judges to re-direct our
business development strategy: rather than independently fundingoversee the completioncase, a lawyer to represent the creditors and a
judicial administrator to manage Mymetics S.A., all of researchwhom are considered
agents of the court. The court further imposed a "two-month observation period"
during which management and development programs priorthe administrator should strive to find a solution
to the sale or licensing of our
technologycrisis. We expect to a major international pharmaceutical or biotechnology firm, we
have opted to accelerate the exploration of potential partnerships with major
international pharmaceutical and biotechnology firms. We have also accelerated
the development of our patent portfolio.
SCIENCE OVERVIEW
Virus. A virus is a non-cellular organism consisting of
deoxyribonucleic acid ("DNA") or ribonucleic acid ("RNA") and a protein coat.
During the free and infectious stage of their life cycle, viruses do not perform
the usual functions of living cells, such as respiration and growth. Rather,
when viruses enter a living plant, animal or bacterial cell, they utilize the
host cell's chemical energy and synthesizing ability to replicate. After the
replication of the viral components by the infected host cell, virus particles
are released and the host cell is often destroyed. The approximately 2,450 viral
species identified to date are divided into about 75 groups. HIV belongs to the
group of retroviruses, so called because they contain the reverse transcriptase
enzyme that copies viral RNA back into DNA (the reverse of what usually occurs:
DNA is copied into RNA). Retroviruses include three main groups: spumaviruses,
oncoviruses that are often associated with cancers and lentiviruses that cause
slow evolving pathologies, e.g. AIDS-associated lentiviruses.
HIV. The human immunodeficiency virus (HIV) is a lentivirus that
belongs to Retroviridae family that has RNA as genetic material. Once inside the
target cells (mostly T cells, monocytes/macrophages and dendritic cells), HIV
uses it's own reverse transcriptase enzyme in combination with the cell's
machinery to copy it's RNA into DNA. Afterward, the HIV DNA can be integrated
into the host chromosomes. If integration happened, it means that after each
cell division, the HIV genome is transmitted to the daughter cell with the host
chromosomes. In other words, HIV can be spread to the next cell generation
forever. HIV infection is characterized by the inability of the host immune
system to mount an efficient immune response capable of neutralizing the HIV.
Therefore, HIV is still replicating and spreading in the infected host,
affecting and killing numerous cells of the immune system, leading to the
life-threatening late stage of the disease called AIDS (Acquired Immuno
Deficiency Syndrome).
15
The global HIV epidemic is composed of multiple subtypes (clades)and
inter-subtypes recombinant forms, eachcome up with a distinct geographic distribution.
Two strainsviable solution before the end of
HIV capable of causing AIDS have been identified, HIV-1 and
HIV-2. The genetic material of these two strains is approximately 60% identical.
HIV-1 is world-wide spread (pandemic), while HIV-2 seems to be more limited to
certain areas of Africa (epidemic). Each strain contains a number of subtypes,
which are slight genetic variations of the virus. These variations result from
the high mutation rate of HIV's genetic material. HIV uses these mutations as a
mechanism to evade the immune system. Indeed, mutationsthis observation period.
TECHNOLOGY
CURRENT APPROACHES
Current drug treatments in HIV genome may
decrease or abolish the recognition of viral proteins by the host antibodies or
cellular immune response toward HIV. Most variations occur in the gene encoding
the GP120 protein, and these mutations can alter the protein's structure and
consequently, the recognition by the host immune system.
AIDS. AIDS is a fatal epidemic disease caused by an infection by HIV
(HIV-1 or HIV-2). In most cases, HIV invades the host and slowly attacks and
destroys the immune system, the body's defense against disease, leaving the
infected individual vulnerable to malignancies and infections that eventually
cause death. The immune system's response (antibodies and cellular immune
response) is usually sufficient to temporarily arrest progress of the infection
and reduce levels of the virus in the blood. Virus replication continues,
however, and gradually destroys the immune system by infecting and destroying
critical white blood cells known as CD4 cells. The main cellular target of HIV
is a special subtype of white blood cells critical to the immune system, known
as helper T lymphocytes, or T4 helper cells. These cells play a central role in
the orchestration of the immune responses by stimulating or activating virtually
all of the other cells involved in immune protection. These cells include B
lymphocytes that produce antibodies needed to fight infection; cytotoxic T
lymphocytes, which destroy cells infected with virus; and macrophages and other
effector cells, which attack invading pathogens. Furthermore, helper T cells are
the main producer of a small molecule named IL-2 cytokine. This IL-2 acts as a
key messenger between helper T cells and other effector cells of the immune
system. Once HIV has entered into the helper T cell, it can impair the
functioning of or destroy the cell. Therefore, it will contribute to lower this
IL-2 messenger concentration present in the HIV-infected host and consequently,
leading to a major defect in cell communication.
A hallmark of the onset of AIDS is a drastic reduction in the number of helper T
cells in the body of HIV-infected subjects. HIV can also infect other cells,
including certain monocytes and macrophages, dendritic cells as well as brain
cells. All these cells express a common protein at their cell surface called
CD4. This CD4 protein serves usually as primary receptor for the HIV surface
envelope glycoprotein called gp160, which explain why HIV preferred target cells
expressing the CD4 molecule. Destruction of CD4+ lymphocytes is the major cause
of the immunodeficiency observed in AIDS, and decreasing CD4+ lymphocyte levels
appear to be the best indicator of morbidity in these patients. As the infection
progresses, the immune system's control of HIV levels weakens, the number of
viruses in the blood rises and the level of critical T cells declines to a
fraction of their normal level.
Viral Envelope of HIV. The viral envelope of HIV is covered with
mushroom-shaped spikes called gp160 that enable the virus to attach itself to
the target cell. The cap of each "mushroom" is comprised of gp120 molecules and
its stem is comprised of gp41 molecules that is anchored into the viral
envelope(gp120+gp41=gp160). Gp120 is a glycoprotein that protrudes from the
surface of HIV and binds to the CD4 receptor of the CD4+ T-cells. In a two-step
process that allows HIV to breach the membrane of T-cells, the gp120-CD4 complex
16
refolds to reveal a second structure that binds to CCR5 or CXCR4, one of several
chemokine co-receptors used by the virus to gain entry into T cells. Gp41 is a
glycoprotein embedded in the outer envelope of HIV and plays a key role in HIV's
infection of cells by carrying out the fusion of the viral and cell membranes.
Immune System. The immune system functions to protect the body against infection
and foreign substances, including viruses and bacteria. This defensive function
is performed by certain body's white blood cells (T cells that belong to
leukocytes) capable of recognizing foreign substances presented by a number of
accessory cells like dentritic cells. When an immunocompetent T cell recognizes
foreign material or a biological invader presented by dendritic cells or
macrophages, it normally induces an immune response. For example, B lymphocytes
may be stimulated to produce and secrete antibodies capable of binding and
neutralizing the pathogene, while cytotoxic T lymphocytes might be activated to
destroy cells infected with viruses. This recognition function relies on the
immune system's ability to recognize specific foreign molecular configurations,
generically referred to as antigens. After specific recognition by T4 helper T
cells, the most central cell of the immune system, interleukine-2 ("IL-2") is
produced by these same T4 helper T cells. IL-2 is a central interleukine that
can activate most of the cells of the immune system, including B cells, NK
cells, CD4+ helper and cytotoxic T lymphocytes.
BUSINESS STRATEGY
Our current objective is to develop a platform of both therapeutic
compounds and vaccines. We have made a series of discoveries about how the
body's immune system responds to retroviruses, specifically HIV. The foundation
of our platform technology and product pipeline is our discovery of a subtle
mimicry between the virus and the host cells. By understanding the precise
dynamics of the virus's GP41 and the host-cell's IL-2, we strongly believe we
have the potential to design and develop specific therapeutic molecules and
antibodies to disrupt or even prevent the disease. In addition to targeting HIV
and AIDS, we plan to apply these findings to the potential treatment or even
prevention of a range of additional diseases, including certain echoviruses
causing leukemia.
Some biotechnology companies are focusingfocus on slowing or impeding the progress of the
virus once it has infected the body's host cells. Other
biotechnology firms are attemptingRecent 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 and reproduce, andthereby
facilitating the successful fight of the body's immune system then succeeds in arrestingagainst the
invasion. OurHowever, fusion process is a late event that likely takes place after
the transcytosis event, which corresponds to the step event that allows the
virus to penetrate into the body generally across the genital-reproductive
mucosal barriers. Therefore, vaccines or therapies for preventing this very
early event of HIV transcytosis 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. Development of non-clade B candidates, having clade C as a
key target became a priority and Mymetics seriously intends to invest all its
research effort in developing its "universal" vaccine, with a primary interest
for the clade C because of its world dominance, especially in countries under
development like Africa, India and Asia..
Generally, HIV transmission occurs through sexual contacts. Indeed, semen and
cervico-vaginal secretions may potentially transmit HIV to the gastrointestinal,
anorectal and genitourinary tracts because they contain cell-free HIV particles
3
and numerous HIV-infected cells. Contracting HIV infection may be subdivided
into two main events. The first event, considered as a very early step,
corresponds to viral transcytosis on mucosal surface that facilitates virus
translocation and spreading into the body (entry into the body across the
mucosal barrier). The second event, which usually takes place after
transcytosis, represents the infection step that leads to virus entry into
target cells (ex. CD4+ T lymphocytes).Therefore, the HIV vaccine should ideally
elicit immune responses not only in the blood but most importantly, also at the
primary entry site, which corresponds to two important anatomically
compartments: genital-reproductive tracts and intestine/rectal mucosal tissues.
MYMETICS' APPROACH
Mymetics proposes an innovative vaccine by combining three important concepts:
1- Minimal mimicry, which consists to remove in part or entirely the human
homologies naturally present in some HIV protein that serve as vaccine
component. To achieve that objective, Mymetics intends to use as candidate
vaccine the smallest engineered viral antigen sequence for two main reasons.
First, the smaller is the protein, the more limited are the homologies with
human proteins. Second, its easier to remove human homologies into a small viral
protein because of their limited distribution. Furthermore, our approach is also based onshould
significantly reduce the conceptrisk of preventing viral fusion. Our scientific strategy
is unique in that its design is baseddeveloping potential autoimmunity on a
serieslong-term following vaccination.
2- Focused immune response on relevant gp41 epitopes that may induce protective
antibodies. Generally, the immune system develops immune responses toward all
possible regions of discoveries involving
mimicry, more specifically betweenthe foreign antigens (peptides, proteins, etc.). However,
antigens are often harbouring 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, itaE(TM)s
frequent to observe an immune response that preferentially recognizes some
areas, 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 be sometimes useless. Mymetics is developing vaccines that
contain antigens expressing limited immunodominant regions, while
immunodistractive regions have been removed or altered without affecting the
immunogenicity of the antigen.
3- Induction of mucosal and blood protection in different anatomical
compartments. Induction of mucosal antibodies (anti-transcytosis) should block
the early event of HIV translocation at the genito-reproductive and intestine
tracts, thus preventing HIV entry and spreading in the body, while blood
(systemic) antibodies will act on a later event that consists to prevent the
infection of target cells (neutralizing antibodies).
Mymetics is developing a "universal" HIV-1 vaccine constituted by at least two
different molecules: a recombinant engineered trimeric gp41 protein and
gp41peptides, both containing key conserved regions and each of them eliciting
potentially two major types of antibodies not mutually exclusive and with a
broad activity spectrum:
1) mucosal antibodies to inhibit transcytosis and cell infections at the
submucosa level;
2) neutralizing antibodies to block HIV fusion with cells for preventing
infection.
By carefully modifying parts of the HIV envelope glycoprotein GP41gp41 molecule, we have obtained peptides
and engineered molecules that:
- - May form stable dimers, trimers or tetramers and the host's IL-2, oneprotein folding is
close to the native protein;
- - Are soluble in the absence of detergent and can be incorporated into an
artificial lipidic membrane, which is more suitable for in vivo work;
4
- - Can be chemically synthesized or easily produced by recombinant bacteria
like E. coli;
- - Have been stripped of an immunodominant area that generates numerous
non-neutralizing antibodies, which may fool the most central cytokineimmune response.
- - Have been stripped of its key IL-2-like sequence, minimizing the important
potential cross-reaction with host proteins that may contribute to the
destruction of the immune system. By
exploiting this mimicry,system seen in HIV has foundpatients;
This type of new engineered trimeric gp41 molecules should be able to elicit
antibodies with a new mechanismbroad spectrum of action (cross-clade neutralization like A, B
and C): blocking virus translocation across the mucosal barrier and/or to
evadeinhibit virus-cell fusion, thus preventing HIV-1 infection.
Based on our recent research results, we believe that our vaccine candidate and
strategies definitely place us amongst the immune
response. Indeed,most advanced teams devoted to AIDS
vaccine research worldwide.
Our findings further apply to a range of additional diseases, including certain
oncoviruses often associated with leukemia.
THE IMMUNE RESPONSE
Normally, the body's immune system responds to the invasion of pathogen. In the
case of HIV, invasion, but fails
to differentiate properly between the viral GP41 and the host's IL-2 cytokine.
As a result, we believe thatfor example, an infected host cell alerts the immune system attacks both of them with equal
vigor. The unfortunate consequence isby
secreting interleukine-2 (IL-2), a special protein (called a cytokine) that the body, in turning on itself,
undercuts its own defenses overtime. By better understanding these precise
dynamics, we believe we will be able to design vaccines and to develop specific
therapeutic molecules to prevent HIV from entering the host cells and the body's
immune system to recognize HIV. Our current scientific strategy is based on the
gp41-IL-2 mimicry to create therapeutic peptides to prevent HIV fusion and
vaccines capable of inducing neutralizing antibodies that recognize strictly the
GP41acts
as a separate and distinct entity from IL-2. If this can be accomplished,
17
the body's immune system should be able to identify and attack the virus instead
of inducing an autoimmune disease directed toward the IL-2 and affecting the
qualitykey messenger for many cells of the immune system.
IL-2 acts as a T cell growth factor, promotes NK proliferation and stimulates B
cell growth (cells that produce antibodies). Together, these "soldier cells"
attack foreign pathogens like viruses, and help to destroy them. From the first
encounter with the invader, the immune system keeps a memory of what happened
and specialized "memory" T and B cells are established as guardians in the
host's body. The Discovered Molecular Mimicry Between Trimeric GP41next time the invaders try to enter, they will be swiftly
attacked and disarmed.
HIV AND IL-2. WeAIDS
The HIV (Human immunodeficiency virus) is a retrovirus that gradually destroys
the immune system and ultimately leads to AIDS, is famously the most genetically
diverse viral pathogen known, specially in Africa where HIV is also 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 dominant HIV (>50%).
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.
5
Once attached, the virus penetrates the cell and commandeers the cell's
machinery. Then it rapidly replicates itself.
What makes HIV-1 so lethal? 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 also too low
for an efficient immune attack orchestration. Consequently, HIV as well as other
pathogens evade the activity of the immune system, leaving the host vulnerable
to disease.
HIV proves itself an elusive target because it:
- - reproduces itself at an extraordinary rate (several billion 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.
MYMETICS AND HIV-AIDS
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. With HIV, this approach backfires. Why?
Mymetics has discovered a peculiar inter-reactivity between part of the virus's
"harpoon" and the host cell's "alarm" (IL-2). We call it "mimicry".
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) arrive to battle the virus, they "confuse" the virus's 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. The result is AIDS, a fatal disease that affects an increasing number
of people worldwide.
WHERE ARE WE AND WHERE ARE WE GOING?
Mymetics has documented the existence of an important three-dimensional
molecular mimicry between the trimeric ectodomaingp41 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 already explored this mimicry over the
last four years as 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 be safer.
Together with Protein'eXpert S.A., we have succeeded in engineering and
producing in bacteria E. Coli the first gp41 generation in September 2003, which
forms soluble and stable gp41 trimers that closely resembles the native gp41
found on HIV-1. This first generation of gp41 immunogen is devoid of the transmembrane proteincluster
I and 2F5/4E10 epitopes, in addition of immunosuppressive lentiviruses (HIV-SIV-FIV) and thebeing mutated in one important IL-2
mimicry area. The design of the infected host species. Our initialfirst 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.
From January to August 2004, the first gp41 generation was tested in rabbits for
it's capacity to elicit neutralizing antibodies toward HIV-1. Such antibodies
were obtained in large quantities and their neutralizing potential was evaluated
6
by our academic collaborators. Thus, a renowned scientist in the field of
transcytosis, Dr. Morgane Bomsel (Cochin Institute, Paris, France), 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
well acclaimed 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 were publishedare
similar to those obtained with the French Academy of Sciences in November 2000.
Autoimmune Consequences for HIV Infected Subjects. We have found some2F5 monoclonal antibody (>90% inhibition),
one of the expected autoimmune consequencesmost potent neutralizing antibodies so far identified. Infection of
primary human macrophages by primary HIV-1 strains was also strongly inhibited
(>90%) with a low antibody concentration (<2ug/ml). These preliminary results
were highly encouraging, considering that the first gp41 generation of immunogen
did not include the 2F5/4E10 epitopes.
A second gp41 generation that has included the 2F5 and 4E10 epitopes was
obtained in August 2004 and produced on a larger scale in September 2004.
However, several technical difficulties were encountered during the production
of this antigen. First, these gp41 proteins formed inclusion bodies in bacteria
that were difficult to solubilize. Gp41 proteins obtained after denaturation and
refolding were forming dimer of trimers instead of the natural trimeric form, as
observed with the gp41 1st generation. Despite of this, these new gp41
immunogens were incorporated into liposomes and were well recognized by the 2F5
and 4E10 monoclonal antibodies kindly provided by Dr Wayne Koff (IAVI), which
suggest the presence of functional epitopes. Rabbit immunizations with
gp41-liposomes have been achieved from Fall 2004 to Winter 2005 and animal sera
were tested. Not surprisingly, this gp41 2nd generation did not elicit
neutralizing antibodies in rabbits, as we initially expected. When mixed with
liposomes, the gp41 2nd generation can form proteo-liposomes that are unstable.
Furthermore, gp41 proteins can bind randomly to liposomes with no preferential
orientation. In such situation, some key epitopes like the 2F5 may not be
properly maintained or presented to the immune system and consequently, these
epitopes are ignored or poorly recognized.
Based on the experience acquired over the past three years, we strongly believe
that orienting the anchorage of gp41 proteins or gp41-derived peptides onto
stable synthetic lipid membranes will better present the antigen to the immune
system. Therefore, a 3rd generation of recombinant gp41 proteins was engineered
during Winter-Spring 2005, which lead to the conclusion that not all epitopes
should be present on the same antigenic structure. In fact, to avoid protein
aggregation and to improve the yield of protein production, some epitopes most
be taken separately from others on different antigens. This approach offers the
main advantage to present key epitopes to the immune system, using different
antigens, which should eliminate the problem of epitope immunodominance.
Furthermore, we intend to better target the mucosal immune system by a more
adequate vaccine delivery: nasal administration and epido-dermis junction using
micro-needles.
In parallel, during Winter-Spring 2005, and in collaboration with Pevion Biotech
Ltd. (Switzerland) and Dr. Bomsel from the Cochin Institute in Paris (France) we
have formulated the second vaccine component that consists of peptides derived
from the conserved proximal membrane region of the gp41 ectodomain. These
peptides were grafted in an oriented manner onto biosynthetic stable spheres.
Rabbit immunizations 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
secretions (diluted 10-fold for the assay) containing antibodies that were able
to prevent translocation (transcytosis) of primary R5 clades B and C with an
efficiency of 80-90%, which is close to what is achieved with human secretions
7
isolated from HIV-resistant women.
Starting in Winter 2006, a pre-clinical trial with the peptide approach on
non-human primates (macaques) is scheduled in Beijing, China. We expect these
macaques to develop specific antibodies at the mucosal levels over the six
months vaccination protocol. Following vaccination, macaques should be
challenged with viruses to measure the level of protection. In parallel, we are
in the process of developing the gp41 4th generation that will combine the best
characteristics of the described virus-host molecular
mimicryfirst three generations of gp41 previously synthesized.
We plan to launch other pre-clinical trials on macaques in HIV infected subjects. As expected, HIV positive sera recognize human
IL-2. The tests included 2,352 HIV+summer 2006 for
testing the combined vaccine components, meaning injecting together gp41-derived
peptides and HIV-sera,recombinant trimeric gp41 proteins, each eliciting different types
of antibodies for different anatomical compartments. Clinical lots of gp41
immunogens are planed for late 2006 for toxicology and phamacokinetics
evaluations. Human tolerance and immunogenicity of the results demonstrated
that 100% of HIV+ patients (stages II, III and IV) were positive for the
presence of anti IL-2 antibodies. Later, antibody cross-reactivities were found
between the structurally and physically antigenic analogous sites of GP41
(HIV-1) and human IL-2. The first results were presented in the Journal of
Autoimmunity in 2001 and were also presentedgp41 immunogens should
thereafter take place in a poster session atphase I clinical trial in 2007.
Visit the Cold
Springs Harbor, New York meetingIAVI web site (www.iavi.org) for more background information on infectious disease in December 2001.AIDS.
VACCINAL USE OF THE MIMICRY DISCOVERY
Our current research modules focus on the following three fields:
- FUNDAMENTAL RESEARCH. We believe that our insight
into the GP41/IL-2 mimicry can help to explain, in
large part, the main AIDS-associated disorders: drop
of peripheral IL-2, decrease of non-infected T helper
lymphocytes, apoptosis of non-infected cells,
lymphoproliferation disorders and (alpha)2
microglobulin increase and hypergammaglobulinemia.
Some of the possible effects of the tridimensional
GP41 (HIV-1)/human IL-2 molecular mimicry on the
AIDS-associated disorders are being evaluated by our
research teams. These teams are also studying
molecular mimicry in FIV, between the viral envelope
protein gp36 and feline IL-2.
- THERAPEUTIC MOLECULES. Based on insights into
mimicry, we have developed a series of synthetic
peptides that might inhibit the fusion between HIV or
FIV and its target cell in an infected host. For the
in vitro work, these synthetic peptides have been
effective for blocking both HIV and FIV infections,
while in vivo experiments with FIV peptides is under
investigation to validate our HIV model. These
therapeutic molecules would prevent the virus entry
into the target cell, inhibiting its attempts to
reproduce. Having demonstrated that the transmission
of HIV depends on the viral load, and that no
transmission has been observed below 1500 viral
copies/ml., treatment with therapeutic agents may
provide a strategy to control AIDS epidemicity. This
application would complement available antiretroviral
drugs, or may even provide a substitute for the
available antiretroviral drugs. In a series of
independent in vitro experiments, our rationally
designed peptide compounds were proven to effectively
block viral fusion. These compounds also showed a
potency that is equivalent to the gp41 compound
recently approved by the United States Food and Drug
18
Administration (FDA). The relative potency of our
compounds were presented in a poster presentation
given at Interscience Conference on Antimicrobal
Agents and Chemotherapy in San Diego CA in September
2002. An additional poster presentation at the
International Feline Retrovirus Research Symposium
conference in December 2002 showed the potency of a
series of our FIV gp36-derived peptides, and in
particular highlighted the surprising potency of a
short compound (consisting of 8 amino acids only).
Results were also recently published in the Journal
of Virology (March 2003) in an article entitled
"Antiviral Activity and Conformational Features of an
Octapeptide Derived from the membrane-Proximal
Ectodomain of the Feline Immunodeficiency Virus
Transmembrane Glycoprotein." An additional poster
presentation at the annual International Conference
on Retroviruses and Opportunistic Infection in Boston
in February 2003 communicated the results of a series
of benchmarking in vitro assays, highlighting the
potency of our HIV gp41 "IL-2 like"-derived peptide
compounds across a wide array of clades or strains of
the virus. These data appear to validate our strategy
of creating compounds from well-conserved,
IL-2-homologous regions, for the greatest possible
application for patients worldwide. Based on the
success of in vitro compounds, we launched our first
in vivo tests in the feline model, collaborating with
well-known research partners at the Retroviral Center
at the University of Pisa, Italy. These tests are
expected to provide valuable insight into the actual
efficacy of the potential peptides, in particular the
shorter peptides, which would offer a number of
practical advantages in terms of commercialization,
including less complexity, lower cost to manufacture,
less immunogenicity, and potential greater
bio-availability.
- PREVENTIVE VACCINES.VACCINES
We believe that our discovery of the host-virus IL-2 mimicry opens the door to
novel therapeutic and HIV-AIDS preventive vaccine strategies for
both humans and animals.strategies. We believe that
properly mutated trimeric gp41 and gp36 represent excellent candidate vaccines because
they are devoid of the "IL-2" like structure and its harmful associated side
effects. Furthermore, these engineered gp41 and gp36 have conserved their antigenic
properties and correspond to the most conserved region of the viral envelope
glycoprotein, which otherwise exhibits considerable genetic diversity. Our
specific preventive vaccine would be "universal" in that it would train the
body's immune system to recognize and defeat a broad array of HIV strains, while
preventing the potential induction of the autoimmune reaction toward IL-2. Our
recent advances in protein engineering and production allowed us to obtain very
good soluble and stable trimeric gp41, and gp36, which has acceleratedkept our vaccine program
competitive.
THERAPEUTIC MOLECULES
Based on insights into mimicry, we have developed a series of synthetic
peptides, based on the preliminary vaccine program. A first roundwell-conserved IL-2 homologous regions, that might
inhibit the fusion between HIV or FIV (the virus causing AIDS in cat) and its
target cell in an infected host. For the in vitro work, these synthetic peptides
have been effective for blocking both HIV and FIV infections, while in vivo
experiments with FIV peptides were investigated until 2003. This application
would complement available antiretroviral drugs, or may even provide a
substitute for the available antiretroviral drugs for FIV and HIV. Meanwhile,
FIV cause a disease with a low mortality incidence and the market for such
peptides is too limited and hardly profitable. Therefore, we have decided to
cease this research activity, especially when our financial situation is
limited. Similarly, research on HIV peptides was stopped because new compounds
were emerging in the market and we could not remain competitive. However, if our
financial situation improves in a short term, we have the possibility to combine
our HIV peptide technology with another one for creating a new type of rabbit immunizations with various protocols testing
different adjuvants, protein doses and route of
administration is already under investigation. A
second round of immunizations is planned for June
2004. Results are expected in November 2004.
19
drug
orally available, which could become highly attractive.
We currently have compound prototypes potentially capable of commercialization,
including:
8
- - Preventive vaccines - administered to healthy subjects (HIV-negative) to
prevent infection by HIV.
- - Therapeutic molecules (pharmacological agents) - administered to infected
subjects to prevent cell infection by HIV and FIV.
- Preventiveslowing down virus spreading.
Visit our web site www.mymetics.com for more detailed information on our
technology platform.
INTERNATIONAL AIDS VACCINE INITIATIVE (IAVI)
Visit the IAVI site (www.iavi.org)for more background information on AIDS or
Download the IAVI Global Report (pdf format) which packs a wealth of useful
information about AIDS, vaccines - administered to healthy subjects to
prevent infection by HIV or FIV.
The Company is exploring both HIV and FIVother related issues in parallel, and gaining insight into
product design through the synergies between these two programs.
KEY STAFF
Our Board of Directors and management team have changed over the pasta few months. As disclosed in our form 10-Q for the quarter ended September 30,
2003, Michael K. Allio, John M. Musacchio and Rober Demers have been replaced as
Directors by Christian J.-F. Rochet, Ernst Luebke and Robert Zimmer. As regards
officers, Michael K. Allio has been replaced as Interim Chief Executive Officer
by Christian J.-F. Rochet, President and Chief Executive Officer, while John M.
Musacchio has been replaced as Chief Financial Officer and Treasurer by Ernst
Luebke.
Research and Development activities have been spearheaded since
November 3, 2003 by our new Chief Scientific Officer, Dr. Sylvain Fleury, Ph.D.,
in replacement of Dr. Pierre-Francois Serres, who was appointed on that same day
Head of Exploratory Research. Dr. Fleury is an experienced research and
development scientist in the fields of biology, virology, immunology and AIDS.easy-to-read
pages at (www.iavi.org/pdf/globalscience.pdf).
RESEARCH AND DEVELOPMENT EXPENSES
For the year ended December 31, 2003, we focused on research and
development and, as a result, did not generate any revenues or engage in any
marketing activities. For the years ended December 31, 2003, December 31, 2002
and December 31, 2001, we spent E 1,263,000, E 1,878,000 and E 482,000
respectively, on research and development activities.
INTELLECTUAL PROPERTY
We are the exclusive owner of intellectual property relating to our core
business which is focused on the development of novel HIVHIV-AIDS preventive
vaccines and FIV
therapeutics and vaccines.therapeutics. Particularly, we own two issued French patents FR99
06528 and FR01 15424 and one USU.S. issued patent US 6,455,265 and its
corresponding national filings and divisional filings in various countries
including US,Europe, the United States, Japan, Canada EP and Israel. We also filed two
Patent Cooperation Treaty, or PCT, applications, WO 03/048187 and WO 03/104262,
with national phases in USthe United States and EP. We have additionally filed
four United States provisional applications related to the field.
On July 24, 2004, we applied for a new PCT which covers our mutated, trimeric,
stable recombinant gp41 protein.
On March 10, 2006, we applied for a new PCT which covers our latest prototype
HIV-AIDS preventive vaccine based on our recombinant modified gp41 protein.
We rely primarily on a combination of patent, copyright, trademark and trade
secret laws, as well as contractual restrictions, to protect our intellectual
property. These legal protections afford limited protection. We generally
require employees, strategic research partners and consultants with access to
our intellectual property to execute confidentiality agreements. Despite our
efforts to protect our intellectual property, unauthorized parties
20
may attempt
to copy the research and research methods that form the basis of our
intellectual property. The laws of many countries do not afford the same level
of protection as those provided by United States intellectual property laws.
Litigation may be necessary to protect and enforce our rights in our
intellectual property.
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 either use such intellectual property to
produce one or more products capable of generating significant revenues or 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 and veterinary biology and medicine all of which could be
considered competitors. While many of these individuals and entities have greater
financial, manufacturing, technical, human resource, marketing and distribution
capabilities, and greater experience in conducting pre-clinical and clinical
trials and in obtaining regulatory and FDA approvals, we believe that our
technologies nonetheless provide us with a competitive advantage.
Further, we may face significant competition in the design and
development of some of our therapeutic compounds and preventive vaccines.
Therapeutic Molecules (pharmacological agents). The biopharmaceutical industry
is intensely competitive, especially in the field of HIV. If we are successful
in developing and proving our therapeutic agents, we will compete with existing
developed and approved therapies. The FDA has approved 16 antiviral drugs to
treat HIV and AIDS, which fall into two categories depending on whether they
target one or two viral enzymes: either HIV protease or reverse transcriptase
("RT"). RT drugs aim to block reverse transcriptases and prevent transcription
of the virus' generic material from RNA to DNA. There are two classes of RT
drugs: nucleoside analogues inhibitors and non-nucleoside inhibitors. The
approved nucleoside analogues inhibitors include drugs such as Retrovir
(ziduvodine; AZT), Videx (didanosine; ddl), Hivid (zalcitabine; ddc), Zerit
(stavudine; d4T), Epivir (larnivudine; 3TC), Combivir (ziduvodine + lamivudine),
Ziagen (abacavir; ABC). These drugs are manufactured by companies such as
GlaxoSmithKline Plc, Bristol-Myers Squibb Company, Roche Holding AG and BioChem
Pharma Inc. The approved non-nucleoside inhibitors include drugs such as
Viramuno (nevlrapine), Rescriptor (delavirdine), Sustiva (efavirenz; EFV) which
are produced by Boehringer Ingelhelm Gmbh, Pharmacia & Upjohn Inc. and E. I. Du
Pont de Nemours and Company. The objective of approved protease inhibitor drugs
is to prevent the assembly of new virus particles. The approved protease
inhibitors include drugs such as Invirase (saquinavir), Fortovase (saquinavir),
Norvir (ritonavir), Crixivan (indinavir), Viracept (nellinavir) and Agenerase
(amprenavir), which are manufactured by companies including Roche Holding AG,
Abbot Laboratories, Merck & Co. Inc., Agouron Pharmaceuticals Inc., Vertex
Pharmaceuticals Incorporated and Glaxo Wellcome Plc.
Both HIV protease and RT drugs have demonstrated their efficacy in
terms of HIV blood concentration and HIV-positive period and are used to slow
the progression of the disease. Furthermore, efficacy has been higher with drug
combinations. None of these drugs are, however, a cure, and mutations of HIV's
envelope produce viral strains resistant to both classes of drugs. These drugs
also produce toxic side effects on the peripheral nervous system and
gastrointestinal tract. Non-compliance on combination therapies and
21
interruptions in dosing could have an effect on, and trigger, accelerated viral
replication.
If successful in developing and validating our therapeutic molecules,
we believe that there are significant existing and future markets for the
treatment of HIV and AIDS. There can be no assurance that currently approved
drugs or products developed in the future for the treatment of HIV/AIDS by our
competitors (which may include Roche Holding AG, Abbot Laboratories, Merck & Co.
Inc., Agouron Pharmaceuticals Inc., Vertex Pharmaceuticals Incorporated, Glaxo
Wellcome Plc, Bristol-Myers Squibb Company, Trimeris, Inc., Progenics, Inc., and
BioChem Pharma Inc.) will not be effectively marketed and sold. We believe,
however, that our unique approach and fundamental understanding of molecular
mimicry will provide an advantage over existing and future competitors.
The progress of Trimeris Inc. in securing FDA approval for its fusion
inhibitor product, "Fuzeon", a gp41-derived peptide comprised of 36 amino acids,
represents excellent proof-of-concept for us by demonstrating, through human
trials, that such a compound is safe and effective in lowering viral load.
Industry experts estimate that the annual revenue generated from this drug may
reach U.S. $500,000,000 - U.S. $750,000,000, which confirms the significant
demand for fusion inhibitor drugs. The media has also, however, published that
Trimeris and its partner Roche face significant challenges and limitations,
including prohibitive cost of goods, a complex manufacturing process involving
106 separate steps in chemical synthesis, an elevated retail price (recent
estimates exceed $20,000 per patient per annum, more than double the cost of
current therapies), significant supply shortages and difficult delivery of the
drug (requiring subcutaneous injection twice/day of 90 mg. of the drug). These
challenges suggest that a drug that can be made less expensively, and delivered
more easily, will have significant competitive advantages.
Preventive Vaccines. We are conducting research aimed at
developing a "universal" preventive vaccine against HIV, with a primary interest
for the HIV-1 virus, whichclade C because of its world dominance. Our vaccine willshall provide
protection against a
9
broad array of viral strains.HIV-1 strains from different clades such as A, B, C and D.
In the field of HIV vaccines, the recent failure in 2003 of the VAXGEN product in Phase
III clinical trials underscores the need for an effective solution to the global
challenge posed by HIV. As this particular candidate was based on technology
unrelated to our technology, we do not feel that the cessation of clinical
trials with respect to VAXGEN negatively impacts our prospects for developing a
viable preventive vaccine.
In the field of FIV vaccines, Ft. Dodge, a division of Wyeth
Pharmaceuticals, launched the industry's first FIV preventive vaccine in late
2002. We consider this development as further validation of the demand and
viability of this product category. Press releases issued by Ft. Dodge cite a
significant potential market for this drug. Like the Trimeris product, the Ft.
Dodge feline vaccine appears to suffer from a range of drawbacks, so we consider
the competitive threat of Ft. Dodge's FIV preventive vaccine to be moderate.
The worldwide vaccine market is dominated by four large multinational companies:
Sanofi Pasteur S.A. (formerly Aventis Pasteur S.A.), Merck & Co.,
SmithKline BeechamGlaxoSmithKline Plc, Wyeth Lederle Vaccines &
Pediatrics (a division of American Home Products Corporation), and Aventis
Pasteur S.A. CompaniesChiron Inc. Other companies such as The Immune Response Corporation, VaxGen Inc.,
Trimeris, Inc., and Progenics
Pharmaceuticals, Inc., are also developing preventive vaccines.
22
We believe that whileWhile many of these companiesindividuals and entities have greater financial manufacturing, technical, human resource, marketing and
distributionscientific capabilities, and greater experience in conducting pre-clinical and
clinical trials, and in obtaining regulatory and FDA approvals,we believe that our technologies,
nonetheless, provide us with a competitive advantage. 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 dimmers, trimers and tetramers that
force the immune system to focus the response only on key 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) on the observed immunological cross-reactivity
(or mimicry) between the well preserved, antigenic and immunodominant domain of
GP41 and IL-2, and relies on the observation of expected autoimmune consequences in HIV
infected subjects. We believe thatOverall, our approach is most promising in comparison with thevaccine candidate will 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 are including:
- - 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) 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.
10
GOVERNMENTAL REGULATION
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 future partner(s).
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 and
foreign countries is a significant factor in the development, manufacture and
marketing of our proposed products by our future partners and intherefore has an
indirect impact on our ongoing research and product development activities.
Any products that we developwill be developed by our future partners(s) 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
23
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. The success of our businessObtaining royalties in the future will depend on our future
partners' ability to obtain and maintain the necessary regulatory approvals.
Pre-clinical studies generally are conducted on laboratory animals to evaluate
the potential safety and the efficacy of a product. 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 has submitted any of
our pre-clinical results to the FDA nor any European or other health regulation
agency. The process which is described below is therefore to be considered as
generic background information which is relevant to the industry as a whole.
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
metabolismmetabolic 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
11
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 several thousand
subjects depending on the specific indication being treated.
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,
reevaluate, 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. We have not yet conducted any clinical trials and are currently
focused on research.
24
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 end points 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.
WeOur 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 our 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 us or our collaborators. A failure to obtain or maintain
the necessary regulatory approvals will have an materially adverse effect on our
business.partner(s).
EMPLOYEES
As of December 31, 2003,2006, neither Mymetics S.A.our Luxembourg nor our French affiliates had
any employees.
Mymetics Corporation had two full-time employees: Mr. Cristian J.-F. Rochet, our
Chief Executive Officer, and Mr. Ernst Luebke, our Chief Financial Officer. Both
officers were employed under informal agreements based on general terms agreed
in 2003 by our Board of Directors. In addition, Mymetics Corporation had two
part-time employees: Dr. Sylvain Fleury, Ph.D., our Chief Scientific Officer,
and his assistant, Dr. Eleonora Simeoni, Ph.D., both employed under a three-way
agreement with the University Hospital (CHUV) in Lausanne. Dr. Simeoni's
contract ended on December 31, 2006. Mymetics Corporation further had one
part-time consultant: Professor Marc Girard, DVM, D. SC., our acting Head of
Vaccine Development.
In consideration of the high quality and value to our shareholder of Dr.
Fleury's
12
work and results, as well as the considerable risks he took in terms of his
career when joining Mymetics, the Board of Directors agreed to compensate him at
a level with the other officers of the Company, deducting from this amount any
full-time employees. Indeed, all formerly reported employment agreements
were either i) of a predetermined duration and not renewed, ii) resigned byamount paid to CHUV on Dr. Fleury's account.
Under their respective holdersemployment or iii) terminatedconsulting agreements, all our officers
have agreed that their credited salaries, fees and out-of-pocket expenses will
only be paid to them from time to time and as the Company's financial position
would allow it. As a result, Mr. Rochet, Mr. Luebke, Dr. Fleury and Prof. Girard
were respectively owed Euro 143,662, Euro 217,606, 83,078 and Euro 90,739 at
December 31, 2006. All officers have also agreed in principle that approximately
50% of their respective claims be converted into Mymetics common restricted
shares at the current market price at the time such conversion would be formally
agreed upon by the former management, as
disclosed in our form 10-Q for the quarter ended September 30, 2003.Board of Directors.
WWW.MYMETICS.COM
News and information about Mymetics Corporation and its subsidiaries wereis
available on our web site, www.mymetics.com, until August 2003, after which
the site was temporarily shut off, as some of its contents had to be
substantially updated. We intend to provide again, free of charge and as soon as
practically feasible, news and other information about the Corporation,
including access to our annual reports on Form 10-K, our quarterly reports on
Form 10-Q, our current reports on Form 8-K and all amendments to those reports
as soon as reasonably practicable after we file or furnish them electronically
with the United States Securities and Exchange Commission.
25
www.mymetics.com.
ITEM 2. PROPERTIES
Until February 2004, Mymetics S.A. leasedWe currently occupy approximately 17060 square meters of office space that houses
our administrative operations in Saint-Genis Laval (Near Lyon, France)Nyon, Switzerland (near Geneva), in which the
Corporation's European administrative activities hadat 14, rue de
la Colombiere.
Our CSO and his assistant have been conducted until July
31, 2003. The all inclusive rent for such facilities was approximately E 1,641
per month, with a lease expiring on January 31, 2006. From March 2004, this
space has been reduced to approximately 45 square meters at an approximate all
inclusive rent of E 500 per month. Thisusing office space is now used exclusively by
Dr. P.-F. Serres, our Head of Exploratory Research. This amended lease still
expires on January 31, 2006. Up until January 31, 2003, we leased approximately
250 square feet of space in Annapolis, Maryland. The rent under our Annapolis
lease was $1,000 per month prior to its termination. From February 2003 until
July 2003, the former management of the Company used a small amount of space at
the office of our former Chairman, Michael K. Allio, as its principal executive
office. This space was being provided by Mr. Allio at no charge, keeping however
in mind that between January 1, 2003 and July 31, 2003, charged Mymetics USD
217,750 for services rendered, USD 8,500 as director's fee and USD 32,528.69 for
travel and other expenses, i.e. a total of USD 250,278.69 or USD 35,754.10 per
month. Following the July 31, 2003 changes in the Company's management, our
executive office was transferred to Nyon (Near Geneva, Switzerland), initially
at our CEO and CFO's respective offices. On February 1, 2004, our European
Executive Office was moved to a new leased office of approximately 60 square
meter in Nyon, at an approximate all inclusive cost of E 1,000 per month. All of
the furniture and office equipment beingfacilities provided
free of charge by the University Hospital (CHUV) in Lausanne.
The lease for our CEO and
CFO. As regardsFrench facilities, previously located at 52, avenue du
Chanoine Cartellier in Saint Genis Laval location, has been cancelled on April
30, 2005.
We also conduct our research activities. these are conductedoperations at the properties of various third
parties, with whom the Corporation contracts to perform research
projects.worldwide.
We believe that our current facilities are adequate for our foreseeable needs,
and no additional space presently is necessary. The lease in Nyon can be
terminated at short notice.
ITEM 3. LEGAL PROCEEDINGS
On December 19, 2000,Our present policy is to defend vigorously only the Swiss Law firm which had been retained bysuits with material amounts
being sought in damages and after considering the Directors ofpotential legal costs
involved. We do not currently maintain any insurance but are planning to
conclude one as soon as our Frenchfinancial resources will allow it.
Neither Mymetics Corporation nor our wholly owned subsidiary Mymetics S.A. (formerly Hippocampe S.A.)6543 Luxembourg SA
are presently involved in any litigation incident to advise them during their loan and reverse merger negotiations with MFC Merchant
Bank S.A. filed a claimour business.
As disclosed in the Court of Geneva (Switzerland) against Mymetics
S.A. following the latter's decision to refuse to pay more than 13.3% of the
firm's invoice for legal services. Following initial hearings, the Court ordered
an amount of CHF 89,188, accruing interest at 5% p.a., to be put in receivership
by MFC Merchant Bank S.A. on that day. The sum claimed in principal, interests
and expenses amounts to approx. CHF 120'000 (E80,000). On December 18, 2003,our Form 8-K dated February 13, 2006, our French subsidiary
Mymetics S.A. was formally notifiedplaced under receivership ("Redressement Judiciaire") on
February 7, 2006 by the Tribunal de Commerce in Lyon, France, as a result of an
ongoing dispute between Mymetics Corporation and a former officer and director,
Dr. Pierre-Francois Serres, who has a judgment against Mymetics S.A. in France
(that is now under appeal) in the amount of E173,000 for an alleged wrongful
termination by the Company's prior management during 2003. The court appointed
two judges to oversee the case, a lawyer to represent the creditors and a
judicial administrator to manage Mymetics S.A., all of whom are considered
agents of the December 2nd, 2003
judgement renderedcourt. The court further imposed a "two-month observation period"
during
13
which management and the administrator should strive to find a solution to the
crisis, which we are attempting to do. On April 4, 2006, the court extended the
observation period until July 18, 2006, based on a favorable report about the
future of Mymetics delivered by the courtjudicial administrator. We are actively
working on a plan which we expect would allow our French subsidiary to emerge
from "Redressement Judiciaire" on or about that date.
By way of Geneva (Switzerland)background, Dr. Serres was terminated by the Company's previous
management and later reinstated by existing management as Chief Scientific
Officer retroactively commencing May 5, 2003. In November 2003 Dr. Serres was
appointed Head of Exploratory Research. Dr. Serres resigned on June 13, 2005 as
director of the Company and as an officer of the Company on December 26, 2005.
Previously, the Lyon Industrial Tribunal had granted Dr. Serres an emergency
injunction on October 14, 2003. In consideration for being reinstated by the
Company's new management, Dr. Serres agreed in August 2003 to forfeit all legal
and punitive compensation for having been terminated by the Company's prior
management. Despite this matter,pledge, Dr. Serres maintained his proceeding and on
November 3, 2005, the Lyon Industrial Tribunal awarded Dr. Serres the full
E173,000 he was seeking, of which approximately E100,000 is payable immediately
despite the fact that we immediately appealed the judgment. We have attempted
without success to negotiate with Dr. Serres regarding the payments immediately
due to him under the judgment. In light of limited financial resources at that
time, we did not have enough funds to both pay Dr. Serres the amount immediately
due for approximately E100,000 and to initiate new rounds of animal preclinical
trials supported by whichthe latest encouraging scientific results. We decided to
allocate existing financial resources to the preclinical trials and to contest
the judgment of the Lyon Industrial Tribunal based upon advice of our French
counsel that the judgment was illegal under French law and that an appeal should
be successful. Dr. Serres pursued a strategy of raising pressure on the Company
to pay his judgment by seeking to have our subsidiary liquidated through the
Tribunal de Commerce in Lyon. We intend, therefore, to raise the money necessary
to pay Dr. Serres and remove Mymetics S.A. was condemnedfrom receivership. At the same time,
we expect to payprevail on the full amount claimedappeal of the decision by the plaintiff (CHF
89,188), plus interest at 5% p.a. from November 24, 2000Lyon Industrial
Tribunal and CHF 10,000 as a
participation to the plaintiff's legal costs.
Although the full amount had been provided for in our financial
statements,should we do notso, we understand that Dr. Serres will have sufficient funds to
meetreimburse us for all monies we have paid to him under the Industrial Tribunal
judgment.
While we expect to prevail in all of these cases, our obligations should the
plaintiff demand immediate paymentmanagement believes that
adverse results in one or more of the amount we now owe him, unless we are
able to raise a sufficient amount of additional capital. Our inability to meet
such obligations wouldthese cases could have a material adverse
effect on our liquidity and could
threaten our business.
On April 21, 2003 our former Vice Presidentresults of Development, Joseph D.
Mosca,filed a claim against usoperations in the Circuit Court of Maryland for Howard
County. Mr. Mosca claims that we breached the employment agreement between him
and us and that we violated the Maryland wage payment and collection law by not
paying him all the amounts he is owed. He was demanding $375,000 in damages as a
result of such claims. On May 22, 2003, this case was moved to the U.S. District
Court in Maryland. Following settlement discussions, we reached an agreement
with Mr. Mosca in October 2003 whereby Mymetics will pay Mr. Joseph D. Mosca, no
later than November 1, 2004, a final settlement of $10,000, in exchange of which
Mr. Mosca is waiving all further charges and claims against the Company.
This amount had previously been provided for in our financial
statements.
26
In late June 2003, Dr. Pierre-Francois Serres, our former chief
scientific officer and a current member of our board, filed a claim against our
French subsidiary, Mymetics S.A., claiming he is entitled to benefits arising
out of his termination from employment. In a judgment passed on October 14,
2003, the court ruled in favor of Dr. Pierre-Francois Serres and consequently,
allowed him a total compensatory amount of E46,735. In a further agreement with
the current Board of Directors, Dr. Serres pledged not to claim payment of this
amount following the Board's decision to reinstate him as Chief Scientific
Officer of the Company.
ITEM 4.future periods.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
2714
PART II
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information. The Corporation's common stock is quoted on the
OTC Bulletin Board under the trading symbol "MYMX". The Corporation's trading symbol changed from ICHR to MYMX in July
2001, pursuant to a corporate name change from ICHOR Corporation to Mymetics
Corporation.
(b) Market Information. The Corporation's common stock was quoted on
the OTC Bulletin Board under the trading symbol "MYMX" until December 30, 2005
when it was moved to the "Pink Sheet" market (trading symbol "MYMX.PK") due to
our inability to file in a timely manner our report on Form 10-Q for the period
ended September 30, 2005 with the Securities and Exchange Commission.
(c) The following table sets forth the quarterly high and low sale
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
- -------------------- ------ ------
20022004
March 31.........................................31............ $0.125 $0.125
June 30............. 0.118 0.10
September 30........ 0.08 0.08
December 31......... 0.30 0.27
2005
March 31............ $ 3.85 $ 2.150.18 $0.31
June 30.......................................... 3.70 2.7030............. 0.045 0.25
September 30..................................... 3.45 0.0630........ 0.045 0.08
December 31...................................... 0.36 0.09
2003
March 31......................................... $ 0.22 $ 0.09
June 30..........................................31......... 0.035 0.14 0.09
September 30..................................... 0.12 0.07
December 31...................................... 0.14 0.04(*)
(*) at December 30, 2005, last day of OTC trading
(b) Stockholders. At March 18, 2004,31, 2006, the Corporation had approximately
640605 holders of record of its common stock, some of which are securities clearing
agencies and intermediaries.
(c) Dividends. The Corporation has not paid any dividends on its
common stock and does not anticipate that it will pay any dividends in the
foreseeable future.
(d) Securities Authorized for Issuance Under Equity Compensation
Plans.
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, 2003.2005.
- ----------------------------------------------------------------------------------------------------------------------
Number of Securities remaining available for
Number of Securities to be Weighted Average Exercise available for issuance under equity
issued upon exercise of Price of Outstanding equity compensation plans
Outstanding Options, Warrants and Options, Warrants and (excluding securities Warrants andreflected
Rights Rights reflected in column (a))
Plan Category (a) (b) (c)
- ----------------------------------------------------------------------------------------------------------------------------------- -------------------------- ------------------------- -------------------------------
Equity Compensation Plans
Approved by Security Holders (1) 606,250455,000 (2) U.S. $0.92$0.97 4,557,500
- ----------------------------------------------------------------------------------------------------------------------
Equity Compensation Plans not
1,500,000 (4) U.S. $0.10
Approved by Security Holders 80,1661,500,000 (3) U.S. $1.725$0.10 N/A
- ------------------------------------------------------------------------------------------------------------------------------- ---------- ---------
Total 2,186,416 U.S. $0.39 4,557,500
- ----------------------------------------------------------------------------------------------------------------------========= ========== =========
2815
(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. Our 1994
Amended and Restated Stock Option Plan and our 1995 Qualified Incentive
Stock Option Plan were both terminated in March 2001, but some options
granted under these plans prior to such termination remain outstanding and
are included in this table.
(2) Includes (i) 442,500 shares of common stock underlying options granted
under our 2001 Stock Option Plan and (ii) 100,000 shares of common stock underlying
options granted under our 1995 Qualified Incentive Stock Option Plan and (iii)
63,75012,500 shares of common stock
underlying options granted under our 1994 Amended and Restated Stock Option
Plan.
(3) From time to time we have granted our lender, MFC Merchant Bank S.A.,
warrants to purchase shares of our common stock. These warrants are granted in
connection with certain credit facilities provided to us by MFC Merchant Bank
S.A., and placement services provided by MFC Merchant Bank S.A. in connection
with a private placement of our securities in June 2001. These warrants were not
granted pursuant to any formal equity compensation plan approved by our board of
directors, but rather, each grant was an individual equity compensation
arrangement, authorized by our board of directors and granted as compensation
for services provided. All of the outstanding warrants were granted pursuant to
similar forms of warrants, and each has an exercise price of U.S. $1.725.
(4) We do not have any formal equity compensation plan that has not been
authorized by our stockholders. These grants are made on an individual
basis and are approved by our board of directors. Accordingly, there are no
shares of common stock reserved for issuance under these arrangements.
ISSUANCES OF UNREGISTERED SECURITIES
Set forth below is information regarding our sales of unregistered
securities during the period commencing on January 1, 20032005 and ending on JanuaryMarch
31, 2004.2006. These issuances were made in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as
transactions by an issuer not involving any public offering.
The present- - On March 7, 2005, we issued MFC Merchant Bank SA 500,000 shares as fee for
the restructuring of its E3.4 million loan.
- - On March 15, 2005, we issued Professor Stanley A. Plotkin 200,000 shares as
initial fee for joining our Board of directors believes that until such time as the
Company has fully recovered from its present difficult situation, it should be
managed exclusively by major shareholders to ensure that stakeholders' long term
interests would prevail over short term mercenary considerations.
The present Board of directors further believes that the Company needs
to have rapid access to the inner circle of world opinion leaders in matters of
HIV-AIDS if it wants to have its ideas, work and results peer recognized and
accepted to qualify for grants and other donations. With this in mind, we have
been able to attract world class personalities such as Mr. Jacques-Francois
Martin, former CEO of Laboratoires Merieux, member of the Board of the IAVI and
CEO of the vaccine Fund chaired by Mr. Nelson Mandela, and Professor Marc
Girard, DVM, D. Sc., former Head of the Laboratory of Molecular Virology at the
Pasteur Institute in Paris (France), former Director, European Research Center
29
for Virology and Immunology (CERVI) in Lyon (France), former Head of the HIV
Task Force at the French National Agency for AIDS Research (ANRS), Paris, former
Director General of the Merieux Foundation in Lyon (France), former Chairman of
the European Consortium for an HIV Vaccine (EuroVac), Brussels. But one doesn't
attract bees with vinegar, thus:Directors.
- - In September 2003,On March 15, 2005, we issued Dr. Robert Zimmer, our only director which
was not also a major shareholder of the Company, 400,000 commonNorthern Light International 1,500,000 shares
as a one-off remuneration as outside director and in recognition of the
fact that he had accepted to serve the Company despite the absence of
D&O insurance coverage.fee for consulting services.
- - In November 2003,On April 21, 2005, we issued Dr. Sylvain Fleury, Ph. D., 500,000 commonour French animal farm 60,000 shares as
settlement of Mymetics Corporation in recognition of his support of the
Company since 1997 (he was instrumental in having Aralis Participations
S.A., still a major shareholder of Mymetics Corporation, support
Hippocampe S.A. - now Mymetics S.A. - between 1997 and 2000) and in
compensation for his modest remuneration as CSO of Mymetics.invoices totaling E11,680, or approximately $.23 per share.
- - In November 2003,On May 5, 2005, we issued Mr. Jacques-Francois Martin 1,000,000
common shares of Mymetics Corporation in recognition of his support of
the Company and more specifically, for his early introduction to the
inner circle of world class experts and opinion makers in matter of
HIV-AIDS.
- - In November 2003, we agreed to issue Mr. Jacques-Francois Martin an
additional 2,000,000 common shares of Mymetics Corporation, contingent
upon his accepting to be elected Chairman of Mymetics Corporation.
- - In December 2003, we issued two investors 1,500,000one investor 52,000 common shares of Mymetics
Corporation for E124,800,E5,000, or approximately $.10$.125 per share.
- - In December 2003, we issued the same two investors warrants to acquire,
before July 31, 2004, an additional 1,500,000 common shares of Mymetics
Corporation at $.10 per share.
- - In January 2004,On June 16, 2005, we issued two investors 2,000,00050,000 common shares of Mymetics
Corporation for E166,400,$4,000 each, or approximately $.10$.08 per share.
- - In January 2004, we issued the same two investors warrants to acquire,
before July 31, 2004, an additional 2,000,000 common shares of Mymetics
Corporation at $.10 per share.
- - In January 2004, we issued Professor Marc Girard, DVM, D. Sc., 500,000
common shares of Mymetics Corporation in recognition of his support of
the Company and in compensation for his modest remuneration as Head of
our Vaccines Development.
- - In February 2004,On June 20, 2005, we issued one investors 2,500,000investor 343,500 common shares of Mymetics
Corporation for $250,000,E5,000, or $.10approximately $.063 per share.
- - In February 2004,On June 22, 2005, we issued the same investor a warrant to acquire,
before July 31, 2004, an additional 2,500,00083,300 common shares of
Mymetics Corporation for $4,998, or $.06 per share.
- - On June 24, 2005, we issued another investor 100,000 common shares of
Mymetics Corporation for $6,000, or $.06 per share.
- - On July 7, 2005, we issued another investor 144,516 common shares of
Mymetics Corporation for E7,000, or approximately $.06 per share.
16
- - On July 8, 2005, we issued the same investor 144,516 common shares of
Mymetics Corporation for E7,000, or approximately $.06 per share.
- - On July 11, 2005, we issued the same investor 144,516 common shares of
Mymetics Corporation for E7,000, or approximately $.06 per share.
- - On August 2, 2005, we issued the same investor 206,452 common shares of
Mymetics Corporation for E10,000, or approximately $.06 per share.
- - On August 16, 2005, we issued another investor 50,000 common shares of
Mymetics Corporation for $2,500, or $.05 per share.
- - On September 27, 2005, we issued six individuals a total of 2,041,200
shares as fee for various services in lieu of cash at $.10$.03 per share.
- - On October 19, 2005, we issued a previous investor 87,459 common shares of
Mymetics Corporation for E3,000, or approximately $.03 per share.
- - On October 20, 2005, we issued the same investor 174,918 common shares of
Mymetics Corporation for E6,000, or approximately $.03 per share.
- - On October 20, 2005, we issued our CEO's free-lance secretary 185,000
shares as settlement of invoices totaling CHF 12,000, or approximately $.05
per share.
- - On October 21, 2005, we issued a previous investor 116,612 common shares of
Mymetics Corporation for E4,000, or approximately $.03 per share.
- - On October 28, 2005, we issued the same investor 116,612 common shares of
Mymetics Corporation for E4,000, or approximately $.03 per share.
- - On November 24, 2005, we issued the same investor 390,667 common shares of
Mymetics Corporation for E6,000, or approximately $.03 per share.
- - On December 12, 2005, we issued the same investor 781,337 common shares of
Mymetics Corporation for E12,000, or approximately $.03 per share.
- - On December 20, 2005, we issued another investor 6,000,000 common shares of
Mymetics Corporation for $300,000, or $.05 per share.
- - On January 12, 2006, we issued MFC Merchant Bank SA 2,500,000 shares as fee
for the restructuring of its E3.7 million loan.
- - On January 30, 2006, we issued one bank and one individual 50,000 shares
each as fee for introduction services at $.035 per share.
- - On January 30, 2006, we issued a previous investor 4,000,000 common shares
of Mymetics Corporation for $200,000, or $.04 per share.
- - On March 3, 2006, we issued another previous investor 3,000,000 common
shares of Mymetics Corporation for E100,000, or $.04 per share.
- - On March 7, 2006, we issued another previous investor 2,750,000 common
shares of Mymetics Corporation for $110,000, or $.04 per share.
All such issues of shares and warrants were made under an informal Equity
Compensation Plan not approved by Security holders. These grants were made on an
individual basis and were approved by our Board of directors.
In addition, the Board has offered 2,000,000 common shares to Mr. J.-F. Martin
upon acceptance of an offer as board chairman. The fair value of these shares
was approximately E33 at December 31, 2003. These shares have not been
considered issued for purposes of these financial statements.
30
ITEM 6. SELECTED FINANCIAL DATA
The following table reflects selected consolidated financial data for the
Corporation for the fiscal years ended December 31, 2003,2006, 2005, 2002, 2001 and
2000, and 1999, respectively.
17
ForFOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBERDEC 31, DECEMBERDEC 31, DECEMBERDEC 31, DECEMBERDEC 31, DECEMBERDEC 31,
2005, 2004 2003 2002 2001
2000 1999
---- ---- ---- ---- ----------- ------- ------- ------- -------
(EUROS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA
Operating revenues .....................0 0 0 8 26 13 47
Research & Development
Expenses ........489 612 1,263 1,878 482 101 94
General & Administrative
Expenses ......1,138 1,264 1,090 1,293 1,034
351 37
Loss from continuing
operations ........Operations 1,939 2,202 2,786 (3,622) (15,701) (1,314) (99)(1,848)
COMMON SHARE DATA(1)
Loss from continuing
operations per
common share ........................(0.03) (0.04) (0.05) (0.07) (0.37) (0.04) (0.00)
Weighted average common
shares outstanding
(in thousands) ..........71,972 62,145 51,285 50,046 42,460 33,311 33,311
BALANCE SHEET DATA
Working capital ........................(6,051) (2,035) (4,294) (2,306) 565 (652) (24)504
Total assets ...........................166 192 367 477 1,692
625 146
Long-term obligations .................. 242 242281 3,110 242 242 242
Total stockholders'
equity .............(6,280) (5,065) (4,400) (2,349) 693 (765) (257)
- ----------------
(1) Basic and diluted common share data is the same.
18
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, 2002, 20012005, 2004
and 20002002 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.
RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 20032005 COMPARED TO YEARS ENDED
DECEMBER 31, 20022004 AND DECEMBER 31, 2001
Revenues of2003
We did not achieve any revenue for the yearyears ended December 31, 2003 were nil compared2005 or December
31, 2004. Our lack of revenue is directly attributable to E8,000our 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 E1,939,000 for the year ended December 31, 2002 and E26,0002005
from E2,202,000 for the year ended December 31, 2001.2004, a decline of 11.9%. Costs
and expenses decreased to E2,202,000 for the year ended December 31, 2004 from
E2,786,000 for the year ended December 31, 2003, from E3,630,000 for year ended December 31, 2002 (-23.3%) and E15,727,000 for
the year ended December 31, 2001, in this particular case as a resultdecline of a
decrease in bank fees to E63,000 for the year ended December 31, 2002 from
E14,063,000 in the comparative period in 2001 (-99.6%)20.9%.
31
Research and development expenses decreased to E1,263,000E489,000 in the current yearperiod
from E1,878,000E612,000 in the comparative period of 2002 (-32.7%) as2004, a resultdecline of our
current cash shortfall, this after having increased from E482,000 during20.1%. Research
and development expenses decreased to E612,000 in the yearperiod ended December 31,
2001 to E1,878,000 (+290%)2004 from E1,263,000 in the comparative period of 2003, a decline of 51.5%.
The successive decreases of R&D expenses during the year ended
December 31, 2002 asyears 2004 and 2005 were
mostly due to our decision taken in 2003 to adapt our R&D efforts to our present
financial capabilities by i) focusing our efforts on the development of a
resultpreventive human vaccine against HIV-AIDS, an area in which we believe to have a
competitive advantage and which addresses a world crisis of catastrophic
proportion, ii) temporarily suspending our development efforts of therapeutic
human antiviral peptides which, despite showing very encouraging results, would
be facing strong existing competition, iii) suspending the development of a
feline preventive vaccine which, despite being an excellent model for our
mimicry based technology would have only limited commercial potential and iv)
abandoning all development of our increase in research activities.feline therapeutic peptides due to our
perception of a weak or non existent commercial potential.
In addition, it is worth noting that 2004 was a year of development of our key
recombinant gp41 vaccine protein, which induced sizeable expenses, while 2005
was a consolidation year during which our latest vaccine prototype was tested on
rabbits, which implies limited costs but requires more time to complete, such
time depending on biological factors and not on the amount of money invested.
General and administrative expenses decreased to E1,090,000E1,138,000 in the year ended
December 31, 20032005 from E1,293,000E1,264,000 in the comparativecomparable period of 2002 (-15.7%)2004, or 10.0%.
This was mostly due to our continuing efforts at limiting G&A expenses wherever
and whenever possible. While this may sound like a wise move, its effect has
been to severely hamper our ability to operate under normal business conditions.
It has also increased the level of risks under which we operate, as none of our
critical employee or officer has a resultbackup ready to step in should a critical
need arise. We expect to return to normal operating conditions, and in
particular to
19
backup our critical employees and officers, as soon as our financial conditions
will allow us to do so. This decrease in G&A expenses was achieved despite an
increase in our officers' credited (but mostly unpaid) annual salary, from
E96,000 in 2004 to E144,000 in 2005, a decision taken to i) compensate our CEO
and CFO for the high level of cuts initiatedpersonal risks taken by the new management since July 31, 2003, mostly in
managementaccepting to operate
without D&O insurance coverage and ii) to bring their salaries and/or fees and travel expenses.closer to
prevailing market conditions.
General and administrative expenses had previously increased to E1, 293,000E1,264,000 in the year ended
December 31, 20022004 from E1,034,000E1,090,000 in the comparativecomparable period of 2001 (+25.0%), mostly due to
increases in said management salaries, fees and travel expenses.
The Corporation reported2003, a net
lossincrease of 2,786,00016.0% resulting from i) a decrease in salaries and fees paid to
former well paid officers having left the Company in 2003, partially replaced in
August 2003 by shareholder officers drawing moderate salaries and incurring
limited travel expenses, in particular a marked reduction of transatlantic
flights and ii) a general decrease of E62,000 in operating expenses such as
rent, lawyers fees, etc. and iii) E207,000 as cost of shares issued for
services, such as the initial grant of 500,000 shares to Professor Girard, our
Head of vaccines development (E29,000), or E0.05 per share, for the year endedcost of shares issued in addition
to cash, either to "buy time" from critical creditors inherited from the former
management or to "buy fidelity" from critical suppliers of services.
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 the Company 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, 2003, compared2005
and 2004 are sufficient. The Company charges off receivables to E3,622,000the allowance
when management determines that a receivable is not collectible. The Company may
retain a security interest in the products sold.
The Company makes estimates of the uncollectibility of its accounts receivable.
The Company analyzes accounts receivable and historical bad debt levels,
customer
20
credit worthiness, and current economic trends when evaluating the adequacy of
the allowance for doubtful accounts. In addition, customers in bankruptcy are
analyzed and estimates are made in connection with the expected recovery of
pre-petition and post-petition claims. The Company's net income is directly
affected by management's estimate of the collectibility of accounts receivable.
Management believes that adequate controls are in place to ensure compliance
with contractual product specifications, a substantial history of such
performance has been established, and historical returns and allowances have not
been significant. If actual sales returns and allowances exceed historical
amounts, the Company's sales would be adversely affected.
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
During the next 12 months, we intend to continue development and
commercialization activities currently underway and to explore new activities.
With respect to our gp41 research activities, we intend to continue the
activities currently ongoing. In this regard:
- - We completed the testing in rabbits for capacity to elicit neutralizing
antibodies from our second generation of recombinant, mutated, trimeric
gp41 proteins, and we have conducted the production, purification and
characterization of the third generation of gp41, involving four
laboratories in France. Despite the no or E0.07,low induction of neutralizing
antibodies with the gp41 second generation, these results were extremely
important and crucial for a better understanding of our vaccine candidate.
These results lead us to a third generation of gp41, still not optimal, for
testing certain protein properties and behaviors. Step by step, we conluded
that the year
ended December 31, 2002the best trimeric gp41 protein folding and E15,701,000oriented epitope
presentation should be optimal if a vaccine candidate is constituted not by
one single gp41 protein harboring all the immunogenic regions (epitopes),
but rather by two gp41 proteins presenting various protein subregions, each
targeting a different anatomical compartment (blood or mucosal protection).
We have hypothesized that this approach would offer the main advantage of
presenting key epitopes to the immune system, using different antigens, to
avoid the problem of epitope immunodominance. For testing our hypothesis,
we have initiated in Spring 2005 rabbit immunizations with a gp41 peptide,
one of the two potential gp41 subunits that will constitute our final
vaccine candidate. Our results obtained at the end of 2005 were extremely
encouraging. Most of our rabbits have produced specific antibodies and
vaginal protection is likely possible because vaginal seretions were
containing antibodies capable of bloking up to 90% of the virus
translocation (transcytosis) of primary HIV strains from clades B and C. To
evaluate if there is a real level of protection at the mucosa level
(preventing HIV to cross the vaginal epithelium), only macaque study will
allow to answer this question.
- - We plan to continue to engage in the designing of a fourth generation of
gp41 protein and testing its ability to elicit neutralizing antibodies. We
intend also to initiate at the beginning of 2006 immunizations in non-human
primates with gp41 peptides and later in 2006 with recombinant gp41
proteins for eliciting protective antibodies in blood and at the year ended December 31, 2001.mucosa
level. Depending on the pre-clinical trial results on macaques, a phase I
clinical trial for human tolerance and immunogenicity could take place in
2007.
The precise timing of the gp41 (and any related) activities over the next 12
months and beyond cannot be predicted with certainty, as they are dependent upon
21
the timing of completion of research and development milestones and the
requirements of our testing laboratories. For a description of the activities
proposed to be conducted in relation to gp41, see "Description of Business -
Where Are We and Where Are We Going?"
Along with our gp41 research, we continue to explore other complementary
research studies conducive to the further research and development of an HIV-1
vaccine.
As discussed in the section entitled "Description of Business - Mymetics
Corporation," 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 sign
partnership agreements with companies offering technologies that can enhance our
products.
As discussed in the section entitled "Description of Business - Government
Regulation," we will contract with third parties to develop future products
based upon our technology, and the process for that product development is
highly regulated.
The first phase involves closely monitored clinical trials and the initial
introduction of an investigational new drug into human patients. We expect to
complete these human clinical phase I trials by the end of 2007 and then to sign
a partnership agreement with a major pharmaceutical company. The agreement most
likely would involve an initial cash payment, followed by a series of payments
associated with specific milestones and, finally, royalties on any sales of end
products.
We have initiated discussions under Non Disclosure Agreements with three of the
five major pharmaceutical companies targeted as potential development partners.
We do not expect to generate any revenues from any of our product development
activities or licensing until 2009.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation had E70m000 cash at December 31, 2005, compared to no/immaterial
cash at December 31, 2004 and E125,000 at December 31, 2003, compared2003.
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 E183,000 at
December 31, 2002 and E888,000 at December 31, 2001.
Net cash used by operating activities was E1,773,000 for the year ended December
31, 2003, compared to E3,235,000 for the year ended December 31, 2002 and
E2,000,000 for the year ended December 31, 2001. The major factor was successive
increases in accounts payable, which provided cash of E780,000 and E16,000 for
the years ended December 31, 2003 and 2002 respectively, compared to a decrease
of accounts payable of E508,000 for the year ended December 31, 2001.
Investing activities provided no/immaterial cash for the year ended December 31,
2003 compared to E252,000 for the year ended December 31, 2002 and used cash of
E237,000 for 2001.
Financing activities provided cash of E1,263,000 for the year ended December 31,
2003 compared to E2,181,000 in the same period last year.
Proceeds from issuance of common stock provided cash of E125,000 for the year
ended December 31, 2003 compared to E8,000 in the same period in 2002 and
E2,724,000 during the year 2001.our technology.
Increases in borrowing pursuant to a non-revolving term facility and other short
term advances provided cash of E1,138,000E425,000 in current year, E2,173,000E241,000 in the
comparative period last year and E116,000E1,138,000 in 2001.2003. The non-revolving term
facility is in the principal amount of up to E3.150E3.8 million and matures on
December 31, 2006, with partial repayments of E900,000 on June 30, 2004.2006. In
addition, any amount repaid under this facility can be converted at the lender's
option into "rule 144" restricted common shares of Mymetics Corporation at $0.30
per share. At December 31, 2003,2005, Mymetics had borrowed an aggregate of
E3,127,000E3,754,000 pursuant to this non-revolving term facility.
The Corporation expects that it will require substantial additional capitalAs of December 31, 2005, we had an accumulated deficit of approximately E14
million and we incurred losses of E1,939,000 in the twelve-month period ending
December 31, 2005. These losses are principally associated with the research and
development of our HIV vaccine technologies, research into potential animal AIDS
treatments, and other related research activity. We expect to continue to incur
expenses in the future for research, development and activities related to the
future licensing of our technologies. These losses also include E0 of stock
based
22
compensation and approximately E34,000 directors' fees. For further information
regarding stock-based compensation and other amounts paid to officers,
directors, affiliates and their immediate family members, see the section of
this report entitled "Executive Compensation."
Accounts payable of E2,095,000 at December 31, 2005, include E535,000 due to our
officers as unpaid salaries, fees and out-of-pocket expenses and E1,560,000
representing various monthly bills for operating expenses paid to unrelated
third parties, including utility bills, equipment servicing, laboratory
expenses, plant and office expenses, and professional fees. Payable to
Shareholders of E242,000 at December 31, 2005, represents various amounts
advanced by our founder, Dr. P.-F. Serres, to Hippocampe S.A. (now Mymetics
S.A., our French affiliate) between 1990 and 1999. These advances are
reimbursable subject to the French legal concept of "retour a meilleure fortune"
or "return to better times". This ambiguous concept has been contractually
defined in november 1998 between Dr. Serres and Aralis Participations S.A., then
a major shareholder of Hippocampe S.A., as essentially a positive working
capital ratio of 1.2 during four consecutive quarters, said ratio to be computed
exclusively on the basis of commercial revenues for Hippocampe S.A., i.e. to the
exclusion of subsidies, whether from related or unrelated parties. Considering
the present status of Mymetics S.A., it is impossible to predict when such
amounts will be reimbursed to Dr. Serres. Consequently, they are classified as
long term debts. As a result of having put our French subsidiary in receivership
(see Item 3. Legal Proceedings), Dr. Serres has made it impossible for Mymetics
SA to ever returning to "better times". Consequently, this amount will never
have to be repaid and we shall have to reverse this amount due as soon as the
French courts close the Mymetics SA file.
Net cash used by operating activities was E561,000 for the year ended December
31, 2005, compared to E1,241,000 for the year ended December 31, 2004 and
E1,773,000 for the year ended December 31, 2003. The major factor were
successive increases in accounts payable, which provided cash of E604,000,
E259,000 and E780,000 for the years ended December 31, 2005, 2004 and 2003
respectively.
Investing activities provided immaterial cash for the years ended December 31,
2005 and 2004, and 2003.
Financing activities provided cash of E781,000 for the year ended December 31,
2005 compared to E928,000 in the same period last year and E1,263,000 in 2003.
Proceeds from issuance of common stock provided cash of E356,000 for the year
ended December 31, 2005 compared to E687,000 in the same period in 2004 and
E125,000 during the year 2003.
Our budgeted monthly cash outflow, or cash burn rate, for 2006 is
approximately 320,000 per month for fixed and normal recurring expenses, as
follows, assuming we will be able to obtain the necessary financing:
23
Monthly 12 Months
-------- ---------
2006 budget
Management salaries, social costs and fees E 60,000 720,000
Travelling expenses 20,000 240,000
Property leases and operating expenses 2,000 24,000
Administration (accounting and 1 secretary) 13,000 156,000
Professional fees 20,000 240,000
Interest expenses 14,000 168,000
-------- ---------
Total General and Administrative expenses E129,000 1,548,000
-------- ---------
Internal R&D (salaries and Laboratory reagents) 18,000 216,000
Pre-clinical trials (not financed by the US NIH
or other donors) 105,000 1,260,000
External collaborators 68,000 816,000
-------- ---------
Total Research and Development expenses 191,000 2,292,000
-------- ---------
Total E320,000 3,840,000
======== =========
24
We expect that the monthly cash outflow may increase significantly in 2006 over
2005 as the Company increases its research and development clinical studiesactivities, and
regulatory
activities necessaryprepares for additional research and compliance duties associated with the
signing of a partnership agreement with a major pharmaceutical company.
Salaries and related payroll costs represents fees for all of our directors
other than our employee directors, gross salaries for two of our executive
officers, and payments under consulting contracts with two of our officers. We
do not pay our non-employee directors, and we credit our two salaried executive
officers a combined amount of E24,000 per month. Since January 1, 2004 and until
November 30 of that year, payments of $CHF 9,000 (approx. E6,000) per month for
Dr. Sylvain Fleury's services as our Chief Scientific Officer have been made
pursuant to bring its potential productsa three-way consulting agreement with Centre Hospitalier
Universitaire Vaudois (CHUV), a Swiss University Hospital located in Lausanne,
where Dr. Fleury is employed to marketallow him to supervise a research project funded
by the Swiss FNRS (Swiss National Research Foundation) which he had initiated
before joining Mymetics. In April 2005, this agreement was extended to include
the services of a qualified virologist under Dr. Fleury's supervision in order
to reduce the cost and turn-around time of certain scientific work previously
outsourced by the Company to third parties. Payments under this agreement were
suspended in December 2004 due to lack of funds. CHUV accepted nevertheless to
maintain the agreement in force and to establish
production, marketingfinance the resulting expenses until such
time as additional funds could be raised by the Company. The debt owed CHUV
peaked at over CHF 200,000 (E129,000) in December 2005, when CHUV threatened to
terminate the agreement unless a significant portion of the outstanding amount
was repaid, which would have meant the loss of a major Company resource. On
December 20, 2005 and sales capabilities.March 8, 2006 the Company was able to pay CHUV CHF 50,000
(E32,000) and CHF 100,000 (USD 77,000) respectively, a total amount considered
sufficient by CHUV in the light of our latest scientific achievements to suspend
all threats of termination.
Since January 15, 2004, payments of E4,000 per month for Professor Marc Girard's
services as our Head of Vaccines Development were due pursuant to a consulting
agreement dated June 10, 2004, as disclosed in our filing on Form 10-Q for the
period ended June 30, 2004 to the Securities and Exchange Commission. We have
not been able to make the payments due under the agreement on a regular basis
and we owed Professor Girard approximately E91,000 at December 31, 2005. We have
been able to make a significant payment recently to Professor Girard and expect
that the matter of payments owed will soon be settled amicably.
Monthly fixed and recurring expenses for "Property leases" of E1,000 represents
the monthly lease and maintenance payments to unaffiliated third parties for our
executive offices located at 14, rue de la Colombiere in Nyon (Switzerland) (600
square feet), which can be cancelled on one month notice. Despite the fact that
the lease of our French facility expired in January 2006, we have been able to
cancel it at no additional cost as of April 30, 2005 as no more company work is
performed in France since that date. We do not lease any research facilities
since Dr. Fleury's facilities are provided free of charge by CHUV as part of his
FNRS project. We will eventually have to lease our own minimal laboratory
facilities to conduct quality checks and to verify scientific results now that
Dr. Fleury's FNRS project has ended. We are planning to lease in the next few
months facilities on the campus of the Swiss Federal Institute of Technology
(EPFL) in Lausanne (Switzerland), located 15 miles from our Nyon office.
Included in professional fees are estimated recurring legal fees paid to outside
corporate counsel and ongoing litigation expenses, audit and review fees paid to
our independent accountants, and fees paid for investor relations.
Interest expense represents interest paid to MFC Merchant Bank S.A. for a note
payable. This note payable in the maximum amount of E3.7 million carries an
interest rate of Libor + 4% which is accrued on a quarterly basis.
25
As of March 31, 2006, we had two full-time salaried executives, exclusive of our
contracts for the consulting services of our Chief Scientific Officer, his
assistant and our Head of Vaccines Development. Certain secretarial work for our
CEO is outsourced to self-employed secretaries who accept being partially paid
in common stock of Mymetics at the current market price.
We anticipate hiring an assistant to our CFO as well as a part-time laboratory
technician in the first half of 2006, and may need to hire additional personnel
in order to meet the needs and demands of any future workload.
We intend to continue to incur additional expenditures during the next 12 months
for additional research and development of our HIV vaccines. These expenditures
will relate to the continued gp41 testing and are included in the monthly cash
outflow described above. Additional funding requirements during the next 12
months may arise upon the commencement of a phase I clinical trial. We expect
that funding for the cost of any clinical trials would be available either from
debt or equity financings, donors and/or potential pharmaceutical partners
before we commence the human trials.
In the past we have financed our research and development activities primarily
through debt and equity financings from various parties.
The Corporation anticipates its operations will require approximately E1.5E3.8
million in the year ending December 31, 2004.2006. The Corporation will seek to raise
the required capital from lenders,
equity or debt issuances,financings, donors and/or potential
partnerships with major international pharmaceutical and biotechnology firms.
However, there can be no
32
assurance that the Corporation will be able to raise
additional capital on terms satisfactory to the Corporation, or at all, to
finance its operations. In the event that the Corporation is not able to obtain
such additional capital, it would be required to further restrict or even halt
its operations.
RECENT FINANCING ACTIVITIES
In May 2005, our share price decreased suddenly from USD 0.30 to USD 0.05,
making it extremely difficult to attract new investors under Regulation S. In
June 2005, the animal farm hosting our rabbit tests threatened to destroy the
animals unless their invoices were paid on a continuous basis. This could only
be done if we allocated all our remaining financial resources to our ongoing
scientific work while stopping all payment to corporate service providers such
as auditors, lawyers, tenant, etc. Considering that losing our test animals at
this time would have meant in practice the end of Mymetics, our Management
decided to "go for broke" by allocating all our remaining cash to the ongoing
animal test, accepting the consequences of this strategic decision, notably that
we could not keep current on our filings with the Securities and Exchange
Commission and that we would probably be "Pink Sheeted" as a result. We did
indeed miss the deadline for filing our Form 10-Q at September 30, 2005 and were
subsequently demoted from the Bulletin Board to the Pink Sheet market on
December 30, 2005. We expect to return to the Bulletin Board in the near future.
Our decision to maintain our scientific work at all cost was finally vindicated
in late 2005, when our scientific results turned out to be largely beyond our
best expectations. New investors could be convinced, critical debts could be
repaid, our overdue filing could be filed and above all, our results could be
presented to the US National Institutes of Health (NIH), who decided to test our
prototype vaccine at their own US facilities, and finally to the world
scientific and pharmaceutical business community at the March 2006 Keystone
Meeting in Colorado, where they attracted considerable attention.
26
We anticipate using our current funds and those we receive in the future both to
meet our working capital needs and for funding the ongoing research costs
associated with our gp41 testing. Provided we can obtain sufficient financing
resources, we expect to begin phase I clinical trials in 2007. As in the past
and to the extent this research work will not be conducted by institutions such
as the US National Institutes of Health (NIH), the International AIDS Vaccine
Initiative (IAVI) or the Center for HIV/AIDS Vaccine Immunology (CHAVI), we will
subcontract such work to "best of class" research teams.
We do not anticipate that our existing capital resources will be sufficient to
fund our cash requirements through the next three months. We do not have enough
cash presently on hand, based upon our current levels of expenditures and
anticipated needs during this period, and we will need additional proceeds from
the exercise of warrants and options and other sources such as private
placements under Regulation D and Regulation S under the Securities Act of 1933.
The extent and timing of our future capital requirements will depend primarily
upon the rate of our progress in the research and development of our
technologies, our ability to enter into a partnership agreement with a major
pharmaceutical company, and the results of future clinical trials.
To date we have generated no material revenues from our business operations. We
are unable to predict when or if we will be able to generate revenues from
licensing our technology or the amounts expected from such activities. These
revenue streams may be generated by us or in conjunction with collaborative
partners or third party licensing arrangements, and may include provisions for
one-time, lump sum payments in addition to ongoing royalty payments or other
revenue sharing arrangements. However, we presently have no commitments for any
such payments.
Sources of additional capital include funding through future collaborative
arrangements, licensing arrangements, and debt and equity financings. We do not
know whether additional financing will be available on commercially acceptable
terms when needed. If we cannot raise funds on acceptable terms when needed, we
may not be able to successfully commercialize our technologies, take advantage
of future opportunities, or respond to unanticipated requirements. If we are
unable to secure such additional financing when needed, we will have to curtail
or suspend all or a portion of our business activities and we could be required
to cease operations entirely. Further, if we issue equity securities, our
shareholders may experience severe dilution of their ownership percentage.
OFF-BALANCE SHEET ARRANGEMENTSARRANGMENTS
The Corporation does not have any off-balance sheet arrangements.
27
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
PAYMENTS DUE BY PERIOD (THOUSANDS OF EUROS)
-------------------------------------------
LESS MORE
THAN 1 - ------------------------------------------------------------------------------------------------------------------
Payment due by period3 3 - ------------------------------------------------------------------------------------------------------------------
Less than5 THAN
CONTRACTUAL OBLIGATION TOTAL 1 1-3 Years 3-5 Years More thanYEAR YEARS YEARS 5 Contractual Obligations Total Year yearsYEARS
- ---------------------------------------------------------------------------------------------------------------------------------------- ----- ------ ----- ----- -------
Long-term Debt Obligations - - - - -
- ------------------------------------------------------------------------------------------------------------------debt E 0 E 0 E 0 E 0 E0
Capital (Finance) Lease Obligations - - - - -
- ------------------------------------------------------------------------------------------------------------------E 0 E 0 E 0 E 0 E0
Operating Lease Obligations E12,500 E6,000 (2) E6,500 (2) - -
- ------------------------------------------------------------------------------------------------------------------E 0 E 0 E 0 E 0 E0
Purchase Obligations E162,000 E72,000 (1) E45,000 (3) E45,000(3) -
- ------------------------------------------------------------------------------------------------------------------E175(1,2) E115 E30 E 30 E0
Other Long-termLong-Term Liabilities Reflected on
E242,000 - - E242,000(4) -
the Registrant'sMymetics Balance Sheet under U.S.
GAAP - ------------------------------------------------------------------------------------------------------------------
Total E416,500 E78,000 E51,500 E287,000 -
- ------------------------------------------------------------------------------------------------------------------E242(3) E 0 E 0 E242 E0
---- ---- --- ---- ---
TOTAL E417 E115 E30 E272 E0
==== ==== === ==== ===
(1) Includes E62,000 with our supplierRepresents various amounts due to suppliers and partners in respect of gp41 proteins and E10,000 forthe
neutralizing antibodies tests currently under way.
(2) Office lease rent in France.
(3) French auditors ("Commissaire aux Comptes") are elected for 6 years and
cannot be terminated. Our French auditor has just been reelected.re-elected in 2003. Based
on current budget and cost estimates, we posted E15,000 per year from 2004for the
audits 2005 until 2009.
(4)(3) Due to a shareholder,P.-F. Serres, one of our former directors, repayable only after
certain conditions related to our French subsidiary's financial situation
hashave been stable and its equity reconstituted.met. We hopedo not expect having to achieverepay this condition within 3 years.amount at any time in
the future.
28
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates which could affect
our financial condition and results of operations. We have not entered into
derivative contracts for our own account to hedge against such risk.
33
INTEREST RATE RISK
Fluctuations in interest rates may affect the fair value of financial
instruments. An increase in market interest rates may increase interest payments
and a decrease in market interest rates may decrease interest payments of such
financial instruments. We have debt obligations which are sensitive to interest
rate fluctuations. The following tables provide information about our exposure
to interest rate fluctuations for the carrying amount of such debt obligations
as of December 31, 20032005 and 20022004 and expected cash flows from these debt
obligations.
29
EXPECTED FUTURE CASH FLOW
YEAR ENDING DECEMBER 31, 20032005
(IN THOUSANDS)
---------------------------------------------------------------------------------
CARRYING FAIR
VALUE VALUE 2004 2005 2006 2007 2008 2009 2010 THEREAFTER
----- ----- ------------ ------ ------ ---- ---- ---- ---- ----------
Debt obligations...... E3,127 E3,127 E3,221E3,754 E3,754 E3,754 E-- E-- E-- E-- E--
YEAR ENDING DECEMBER 31, 20022004
(IN THOUSANDS)
---------------------------------------------------------------------------------
CARRYING FAIR
VALUE VALUE 2003 2004 2005 2006 2007 2008 2009 THEREAFTER
----- ----- ------------ ------ ------ ---- ---- ---- ---- ----------
Debt obligations...... E1,989 E1,989 E2,082E3,368 E3,368 E3,060 E-- E-- E-- E-- E--
30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary data required with
respect to this Item 8, 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. CONTROLS AND PROCEDURES.
(a) Disclosure Controls and Procedures. As of the end of the registrant's fiscal
year ended December 31, 2003,2005, an evaluation of the effectiveness of the
registrant's "disclosure controls and procedures" (as such term is defined in
Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) was carried out by the registrant's principal executive
officer and principal financial officer. Based upon that evaluation, the
registrant's principal executive officer and principal financial officer have
concluded that as of the end of that fiscal year, the registrant's disclosure
controls and procedures are effective to ensure that information required to be
disclosed by the registrant in reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms.
It should be noted that while the registrant's principal executive officer and
principal financial officer believe that the registrant's disclosure controls
and procedures provide a reasonable level of assurance that they are effective,
they do not expect that the registrant's disclosure controls and procedures or
internal control over financial reporting will prevent all errors and fraud. A
control system, no matter how well conceived or operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met.
(b) Changes in Internal Control Over Financial Reporting. During the fiscal year
ended December 31, 2003,2005, there were no changes in the registrant's internal
control over financial reporting that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
3431
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
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 20042007
annual meeting of stockholders, the term of the Class II directors will expire
at our 20052008 annual meeting of stockholders, and the term of the Class III
directors will expire at our 20032006 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.
There currently are twothree vacancies on the Board caused by the resignation of
Peter P. McCann, Ph.D.,Dr. Pierre-Francois Serres, who was a Class III director whose term would have
expired at our 20032006 annual meeting of stockholders, and Patrice Pactol,Dr. Robert Zimmer, who was a
Class II director whose term would have expired at our 20052008 annual meeting of
stockholders and Professor Stanley A. Plotkin, who was a Class I director, whose
term would have expired at our 2007 annual meeting of stockholders.
We intend to haveOn January 11, 2006, Dr. Sylvain Fleury, Ph. D., our current Chief Scientific
Officer, was elected to fill the vacancy caused by the resignation of Mr.
Patrice Pactol.Dr.
Serres. The positionpositions left vacant by the resignation of Dr. Peter McCannRobert Zimmer and
Professor Plotkin will be reserved for a potential candidateinvestors and/or candidates
related to the securing of a strategic partner.
3532
The following table sets forth information regarding each of our current
directors and executive officers.
EXPIRATION OF TERM
NAME CURRENT POSITION WITH THE COMPANY AGE AS A DIRECTOR
- ---- ----------------------------------------------------------------------- --- ---------------------------------
Pierre-Francois Serres Head of Exploratory Research, Founder 54 2003 (Class III)
and Director (appointed November 3, 2003)
Christian Rochet Chief Executive Officer, President 55 200557 2008 (Class II)
And Director (appointed July 31, 2003)
Ernst LubkeLuebke Chief Financial Officer, Treasurer, 58 200460 2007 (Class I)
And Secretary (appointed July 31, 2003)
Robert Zimmerand Director (appointed
July 31, 2003) 57 2005 (Class II)
Sylvain Fleury, Ph. D. Chief Scientific Officer 41(appointed 43 2006 (Class III)
November 3, 2003) and Director
(appointed January 11, 2006)
Marc Girard, DVM, D. Sc. Head of Vaccine Development 69 n/a
(appointed November 3, 2003)January 15, 2004)
Dr. Pierre-Francois Serres first became our Chief Scientific Officer on February
7, 2002 and has been a Director since March 28, 2001. On May 2, 2003, Dr.
Serres' position as Chief Scientific Officer was terminated by33
CHRISTIAN ROCHET
Mr. Rochet is the former Board
of Directors. As a result of the changes in the Company's Board of July 31,
2003, Dr. Serres was reinstated in his former office of Chief Scientific
Officer. He was then promoted as Head of our Exploratory Research efforts on
November 3, 2003, and replaced as Chief Scientific Officer by Dr. Sylvain
Fleury, Ph. D. Dr. Serres previously served as the Company's Chief Executive Officer and President and was the founder, Chief Executive Officer and Presidenta Director of our subsidiary,Mymetics. Prior to
joining Mymetics S.A. (formerly, Hippocampe S.A.), a French human and
veterinary research and development company.
Christian Jean-Francois Rochet isin July 2003, he had been an independent business consultant on
development and diversification strategies.strategies for over 21 years. He became a
shareholder of Hippocampe S.A. (now our subsidiary Mymetics 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. Between March 2003 and July 31, 2003, Mr. Rochet,
in his capacity as a shareholder of Mymetics, shareholder, initiated and spearheaded the
efforts of a group of nine dissatisfied shareholders representing a majority of
shares, which led to the resignation of the former Company directors and
officers (with the exception of Dr. Serres) on July 30, 2003. On July 31, 2003,
Mr. Rochet was elected as President and Director, and appointed as Chief
Executive Officer of the Company.
Ernst Lubke isERNST 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. AlongTogether with Christian J.-F.Mr. Rochet,
he became a major shareholder of Hippocampe S.A. (now our subsidiary Mymetics
S.A.) in 1997, and was a director of that company between 1999 and 2001. On July
31, 2003, Mr. Lubke,Luebke, one of the nine dissatisfied shareholders of Mymetics
referred to above, was elected as Director and appointed as Chief Financial
Officer and Treasurer of the Company. Mr. LubkeLuebke was further appointed Secretary
of the Company on August 29, 2003.
36
Robert Zimmer isSYLVAIN FLEURY, Ph.D.
Dr. Fleury was appointed as our Chief Scientific Officer in November 2003 and as
a graduate of the prestigious Ecole Centrale de Paris, M.D.,
Sc.D., a former: (i) assistant-professorDirector on January 11, 2006. In addition to serving as our Chief Scientific
Officer, Dr. Fleury has maintained his academic research activity on lentiviral
gene therapy in heart transplantation at the FacultyDepartment of MedicineExperimental 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 Strasbourg (France)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 was transferred to the
Department of Experimental Surgery directed by Professor Yann Barrandon, a world
leader on stem cells. The agreement between the CHUV and Mymetics has allowed
Dr. Fleury to maintain an office and access to all the research facilities from
the hospital, in addition to conducting research for Mymetics in other
laboratories. Dr. Fleury obtained his B.Sc. in Microbiology in 1985 from the
University of Montreal (Canada), (ii) department head athis M.Sc. in Virology in 1988 from the Foundation for hormonology
researchInstitut
Armand-Frappier (Laval, Canada) and his Ph.D. in Paris, (iii) responsible for the coordination of1992 from the Clinical Pharmacology department at Hoffmann La Roche in Basle (Switzerland), (iv) Senior
Executive President and CSOResearch
Institute of Jago Pharma AG, a drug delivery specialist later
acquired by Skyepharma. Dr. Zimmer is currently Managing Director of Bio
Delivery Systems S.A. (BDS), a French company specializing in drug delivery
technologies, and Chairman of Zimmer & Associates, a Swiss consulting firm
specialized in strategic development of pharmaceutical products. On July 30,
2003, Dr. Zimmer was elected as Director, and appointed as Vice President, Head
of Business development of Mymetics Corporation. Owing however to unexpected but
positive developments at BDS which interfered with his capacity to effectively
discharge his duties as an officer of Mymetics, Dr. Zimmer resigned his officer
position on September 1, 2003, while accepting to remain as an outside director
of the Company.
Dr. Sylvain Fleury, Ph. D., obtained his B. Sc. in microbiology, his M. Sc. In
Virology and his Ph. D. in immunology from various prestigious institutionsMontreal in Canada between 1982 and 1992. A recipient of several awards and prizes,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 post graduatepostgraduate studies on HIV-AIDSin Bethesda (USA) at
the NIAID, National Institutes of Health (NIH), in Bethesda, Maryland, USA, before moving in 1997 to
Lausanne (Switzerland), first as Assistant to Professor Giuseppe Pantaleo,with Dr. Ronald N. Germain, a
leading expert on AIDS at the Centre Hospitalier Universitaire Vaudois (CHUV)
until 2000, then as Project Leader at said CHUV's Division of cardiology and,
currently, at its Department of Experimental Surgery.world renowned Immunologist. Dr. Fleury wasis the first
expert Christian Rochetrecipient of several awards and
Ernst Lubke consulted before they decided to investprizes and has published articles in Hippocampe S.A.his field of study in 1997. Dr. Fleury was also consulted by the former
management of Mymetics. Hescientific journals
with a high impact such as Science, Cell, Nature, Nature Medicine, Circulation.
34
MARC GIRARD, DVM, D. SC.
Professor Girard was appointed as our New Chief Scientific Officer on
November 3, 2003,Head of Vaccine Development in replacementJanuary
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 Dr. Serres, then promotedLaboratory 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 Exploratory Research. Dr. Fleury has been sharingVirology, 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 time between CHUVD.V.M. (Alfort Veterinary
College) in 1960, his D. Sc. (University of Paris) in 1967 and Mymetics since that date. We intend to elect Dr. Fleury ascompleted a Directorpost
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 Company withinSalk Institute. Professor Girard is also the next foreseeable future.published author of
several articles in his field of study.
AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has notappointed two of our directors as members of our
Audit Committee, i.e. Mr. Christian Rochet and Mr. Ernst Luebke and determined
that we have anMr. Ernst Luebke, who further serves as Mymetics' CFO, qualifies as our
"audit committee financial expert" sitting on the board. Given the recent turmoil our company has
faced, our directors and management believe that their time and our resources
would be better spent focusing on our operations than on searching for an audit
committee financial expert..
CODE OF ETHICS
We have not adopted a formal "code of ethics" that applies to our principal
executive officer, principal financial officer, principal accounting officer or
controller, and persons performing similar functions. Given the very small
number of our company's employees and the recent turmoil our company has faced,
our directors and management believe that adopting a written code of ethics is
not necessary at this time, and that their time and our resources would be
better spent focusing on our operations.
37
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, 2003,2005, all of
our executive officers, directors and 10% stockholders filed all required
reports under Section 16(a) in a timely manner, except as follows: the Company,Dr. Serres,
Dr Fleury, Professor Girard, Ms. Reindle and a Swiss bank acting on behalf of
Mr. Allio, Mr. Demers, Dr. McCann, Mr. Musacchio, Mr. Pactol,
Professor Girard, Dr. Fleury, Dr. Serres and Dr. Zimmer individually, did not
timely report grantsseveral of stock options or stock such persons received in 2002 and
2003.its clients.
35
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth for the last three fiscal years information on
the annual compensation earned by Dr. Peter P. McCann, who served
as our Presidentdirectors and Chief Executive Officer from February 7, 2002 until January
31, 2003, and Dr. Pierre-Francois Serres, who served as our President and Chief
Executive Officer from March 28, 2001 until February 7, 2002. No named executive
officer received an aggregate annual consideration (salary and bonus) from the
Company in excess of $100,000 during the fiscal year ended December 31, 2003.officers.
Annual Compensation
Long Term Compensation
---------------------------
Awards Payouts
Annual Compensation Securities All
------------------------------- Underlying Other
Name and Principal Position Year Salary Bonus Options/SARs Compensation
- --------------------------- ---- ------------------ ----- ------------ ------------
Peter P. McCann, Ph.D. (1) 2005 -- -- -- --
2004 -- -- -- --
2003 $ 16,164 -- 75,000 --
2002 $ 144,667 -- 11,250 --
2001Pierre-Francois Serres (2) 2005 -- -- -- --
Pierre-Francois Serres (2) 2003 Euro 82,317 (3) -- -- --
2002 Euro 91,464 (4) -- 1,250 --
2001 Euro 86,181 (4) -- 10,000 Euro 1,630 (5)
Michael K. Allio (6) 2003 -- (7) -- -- $ 8,500 (8)
2002 -- (7) -- 101,250 $ 26,000 (8)
2001 -- (7) -- 60,000 $ 5,750 (8)
Christian J.-F. Rochet (9) 2003 Euro 40'000 (11) -- -- --
20022004 -- -- -- --
20012003 -- -- -- --
Ernst Lubke (10) 2003 Euro 40'000 (11) -- -- --
2002Michael K. Allio (3) 2005 -- -- -- --
20012004 -- -- -- --
2003 -- (4) -- -- $8,500 (5)
Christian J.-F. Rochet (6) 2005 Euro 144,000 (8) -- -- --
2004 Euro 96,000 (8) -- -- --
2003 Euro 40,000 (8) -- -- --
Ernst Luebke (7) 2005 Euro 144,000 (8) -- -- --
2004 Euro 96,000 (8) -- -- --
2003 Euro 40,000 (8) -- -- --
Robert Zimmer, M.D. (12) 2003 0 (13)(9) 2005 -- (10) -- -- --
20022004 -- (10) -- -- --
2003 -- 2001 --(10) -- -- --
Sylvain Fleury, Ph. D. (14) 2003 0 (15)(11) 2005 Euro 144,000 (12) -- -- --
20022004 Euro 96,000 (12) -- -- --
2003 -- 2001(11) -- -- --
Marc Girard, DVM, D.Sc. (13) 2005 Euro 48,000 (8) -- -- --
2004 Euro 46,000 (8) -- -- --
2003 -- (8) -- -- --
36
- ----------
(1) Dr. McCann was our President and Chief Executive Officer from February 7,
2002 to January 31, 2003.
(2) Dr. Serres was our President and Chief Executive Officer from March 28,
2001 until February 7, 2002. He was our Chief Scientific Officer from March
28, 2001 until terminated by the former Board of directors on May 5, 2003.
Dr. Serres was reinstated as Chief Scientific Officer by the new Board of
directors in August 2003 retroactively from May 5, 2003 until November 3,
2003, when he was promoted as Head of Exploratory Research, a position he
resigned on December 26, 2005, following his current positionearlier resignation as a
director on June 13, 2005. Considering Dr. Serres' behavior after his
reinstatement (see Part I, Item 3 LEGAL PROCEEDINGS) and the facts that he
had (i) not contributed any useful work to the Company, (ii) not negotiated
in good faith an employment agreement with the Company. In exchange
for being reinstated retroactively, Dr Serres acceptedCompany and (iii) reneged on
his pledge not to forfeit all legal and
punitiveclaim compensation for having been terminated without cause. The French
Industrial Tribunal ("Prud'hommes") has indeed granted Dr. Serres Euro 45,735by the
previous Board of directors in May 2003, the directors have decided to
that effect in its emergency injunction of October 14, 2003. The final amount
which Mymetics would most probably be ordered to pay Dr. Serres in terms of
legal and punitive compensation if the case had been allowed to run its full
course would have been in excess of Euro 91,000. This agreement between Dr.
Serres and the Company has yet to be finalized in writing by our respective
lawyers.
(3) This amount includes Euro 46,317 credited as compensation to Dr. Serres
under his former status by our subsidiary Mymetics S.A. from January 1, 2003
until August 15, 2003 and Euro 36,000 (i.e. Euro 8,000 per month)reverse all unpaid amounts previously credited to Dr. Serres since August 16, 2003 as compensation for his reinstated positions,
as disclosed under (2) above. No payments in relation to this amount have
actually been made in 2003 to Dr. Serres who, in(see note (8)
hereafter). In accordance with prudent accounting principles, we have
instead provided a full allowance to cover the temporary
policy set byrisk of not prevailing in
our appeal against the new Board, has accepted that the actual of any compensation
due to him be deferred, either totally or partially, until the Company's
financial position would allow such payments to be made without jeopardizing the
Company's prospects.
(4) These represent amounts paidjudgment awarded to Dr. Serres by our subsidiary, Mymetics S.A.
(5) Dr. Serres received Euro 1,630 for his participation on the Board of
Directors of our subsidiary, Mymetics S.A.
(6)Industrial
Tribunal.
(3) Mr. Allio was our Interim Chief Executive Officer from January 1, 2003
until July 30, 2003.
(7)(4) Mr. Allio received $ 73,176 in 2001, $ 260,302 in 2002 and $ 217,500 in 2003 under thea consulting agreement referred to below. We believe thatwhich, in
our opinion and on account of the context of a small start up company like ours,and the services Mr. Allio was to
provide usMymetics under his consulting agreement, makemade him a de facto
executive of the Company.
(8)(5) Mr. Allio received $ 5,750 in 2001, $ 26,000 in 2002 and $ 8,500 in 2003 for his participation on the Board of
Directors of Mymetics Corporation.
(9)(6) Mr. Rochet has been our President and Chief Executive Officer since July
31, 2003.
(10)(7) Mr. LubkeLuebke has been our Chief Financial Officer and Treasurer since July
31, 2003 and our Secretary since August 29, 2003.
38
(11) As explained under (3) above, the(8) The temporary policy set by the new Board statesof directors in August 2003 stated
that the actual payment of any compensation due to directors and officers
of Mymetics be deferred, either totally or partially, until the Company's
financial position would allow such payments to be made without
jeopardizing the Company's prospects. As a result, these amounts have remained unpaid at December
31, 2003. In addition, the Company owed Mr.
Rochet, Mr. Luebke, Dr. Fleury and Mr. LubkeProfessor Girard at year end
respectively Euro 21,325143,662, Euro 217,606, Euro 83,078 and Euro 12,04690,739 as
salary and reimbursement of actual travel and other expenses disbursed by
them on account of Mymetics.
(12)(9) Dr. Zimmer has been our VP, Business Development from July 31, 2003 until
September 1, 2003.
(13)(10) Dr. Zimmer has given up any direct compensation for his short tenure as VP,
Business Development. As outside director sincefrom September 1, 2003 until June
7, 2005, Dr Zimmer receivesreceived no compensation other than the 400,000 common
shares of Mymetics the Board has decided to issue him in 2003, as disclosed
elsewhere in thisour Form 10-K.
(14)10-K for that year.
(11) Dr. Fleury has been appointed as our Chief Scientific Officer on November
3, 2003.
(15) Dr. Fleury has given up any direct compensation for the interim
period between his formal appointment as our Chief Scientific Officer on
November 3, 2003 and January 1, 2004, the reference date of the part time
Consulting Agreement signed by Dr. Fleury, Mymetics and the Centre
Hospitalier Universitaire Vaudois (CHUV), with which Dr. Fleury shares his
time. The Board has decided to
37
issue Dr. Fleury 500,000 common shares of Mymetics in appreciation of his
past services and as partial compensation for the sacrifices Dr. Fleury has
accepted in terms of compensation and career when he accepted to join the
Company.
(12) In acknowledgement of the exceptional quality of the work done and the
unique results obtained by Dr. Fleury, the Board has decided that Dr.
Fleury's compensation should be on a par with the compensation of full time
officers of the Company despite the fact that under the three-way agreement
referred to under (11) above, Dr. Fleury devotes only 30% of his legal work
time to Mymetics (and 70% to CHUV), as ideas and insights are indeed
independent of the amount of time spent on solving a problem. Accordingly,
Dr. Fleury's current account with the Company is credited with the gross
amounts indicated here and debited with all amounts paid to CHUV under said
Agreement. As all Company officers, Dr. Fleury has accepted that the
payment of the balance owed to him be deferred until the Company's
financial position will allow it (see (8) above).
(13) Professor Girard has been appointed on January 9, 2004 by our Board of
Directors as Head of Vaccine Development, effective January 15, 2004, under
a part time consulting agreement formally signed on June 9, 2004.
OPTION GRANTS IN LAST FISCAL YEAR
On January 31, 2003, Dr. McCann resigned from our Board and as our
Chief Executive Officer and President. In connection with Dr. McCann's
resignation, the former Board granted him options to purchase 75,000 shares of
our common stock at an exercise price of $0.14 per share.
On May 1, 2003, the former Board granted one of the members of our
scientific advisory board, Prabhavathi B. Fernandes, Ph.D., stock options to
purchase 150,000 shares of our common stock at an exercise price of U.S. $0.12
per share.None.
COMPENSATION OF DIRECTORS
Employee directors are not compensated for their role as directors.
Until July 30, 2003, our outside directors received an annual fee of $7,500, a
fee of $750 for each meeting they attended and a fee of $250 for each committee
meeting they attended. This policy has been temporarily suspended by the new
Board, all of the new members, as well as Dr. Serres, having accepted to serve
without receiving any direct remuneration until the Company's financial position
allows it to resume past practice. As all meetings are now either held by
telephone or whenever the directors meet on other business matters, no
reimbursement for expenses incurred in attending such meetings are necessary any
more.
Pursuant to our 2001 Stock Option Plan, all directors are entitled to receive
stock options pursuant to the terms and provisions of such plan. Until July 30,
2003, the Company practice had been to grant each director (i) 10,000 stock
options upon initial election as a director and (ii) 1,250 additional stock
options for each subsequent year of service after the initial year. During the
fiscal year ended December 31, 2003, 225,000 stock2005, no options were granted by
the former board to our directors
under our 2001 Stock Option Plan. We do not expect
to grant any such options in the near future. As disclosed elsewhere in this
Form
39
10-K, we have instead issued common shares to certain persons, the involvement
of which we consider as crucial to save the Company from its present difficult
financial situation.
CONSULTING AGREEMENT WITH MICHAEL ALLIO
In August, 2001, the former Board entered into a Consulting Agreement
with Michael Allio, one of the Company's Directors. Pursuant to this agreement,
which was amended by the First Amendment to Consulting Agreement dated August
21, 2002, and the Second Amendment to Consulting Agreement dated April 14, 2003,
Mr. Allio agreed to provide Mymetics with strategic management consulting
services. Mr. Allio's engagement under this agreement included, without
limitation, (i) developing the scope of the business, (ii) establishing a
European-North American operations team, (iii) directing and coordinating
initial corporate identity and branding efforts, (iv) crafting a coherent
business plan, (v) assisting the Company in establishing a viable U.S. identity
and (vi) exploring strategic partnerships in the U.S., Europe and possibly
elsewhere. In consideration for those services, Mr. Allio was to receive $25,000
per month, plus reimbursement of reasonable business expenses. In addition and
pursuant to the Consulting Agreement, as amended, Mr. Allio was granted options
to purchase (i) 50,000 shares of our common stock at an exercise price of $2.50
per share (granted as of August 31, 2001) and (ii) 100,000 shares of our common
stock at an exercise price of $0.55 per share (granted as of August 21, 2002),
all of which are currently vested. The Consulting Agreement could be terminated
by either party on 15 days' prior written notice. One of the first decisions
made by the new Board of directors was to terminate this Agreement in August
2003.
SERVICES AGREEMENT WITH MFC MERCHANT BANK, S.A.
In May 2001, the former Board entered into a Services Agreement with
MFC Merchant Bank, S.A. ("MFC Bank"), which previously beneficially owned more
than 5% of our outstanding common stock. Pursuant to the Services Agreement, MFC
Bank agreed to provide Mymetics with the services of Mr. Musacchio, the
Company's Secretary, Chief Operating Officer, Chief Financial Officer and a
Director. In consideration for such services, MFC Bank was paid Euro 5,000 per
month until Mr. Musacchio resigned on July 30, 2003.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES AT DECEMBER
31, 20032005
None of our named former executive officers exercised any stock options during
2003.2004. The following table provides information concerning the number and value
of unexercised options held by our named executive officer(s) at December 31,
2003.
402005.
38
Name Shares Value
Number of Securities Value of Acquired RealizedUnexercised
Underlying Unexercised In-the-Money Options Unexercised
on Exercise at
December 31, 2003 In-the-MoneyShares Options at December 31, 2003(3)2005 December 31, 2005(3)
Acquired Value ---------------------------- ---------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ------------ ------------- ----------- -------------
Dr. Pierre- - - - --- -- 10,000(1) - - - -(4) - -(4)-- --(4) --(4)
Francois
Serres
- - - --- -- 1,250(2) - - - -(4) - -(4)-- --(4) --(4)
39
- ----------
(1) These options are fully vested and exercisable at $3.15 per share.
(2) These options are fully vested and exercisable at $3.50 per share.
(3) The value of unexercised in-the-money options held at December 31, 20032005
represents the total gain which an option holder would realize if he or she
exercised all of the in-the-money options held at December 31, 2003,2005, and is
determined by multiplying the number of shares of common stock underlying
the options by the difference between an assumed fair market value per
share and the per share option exercise price. An option is in-the-money if
the exercise price per share of the option is below the assumed fair market
value per share.
(4) The fair market value of the stock underlying these options was $0.05$0.035 per
share on December 31, 2003,2005, based on the closing market price of our common
stock on such date. The exercise price of these options exceeds the fair
market value on December 31, 2003.2005. Accordingly, these options were not
in-the-money on December 31, 2003.2005.
EMPLOYMENT AGREEMENTS
On May 3, 2001, Mymetics entered into an employment agreement with Dr.
Serres pursuant to which he received a monthly salary of Euro 7,622 (paid by our
subsidiary Mymetics S.A.) and normal benefits. In addition, Dr. Serres was
permitted to participate in our 2001 Stock Option Plan, as well as receive
discretionary bonuses as approved by the Board. On May 5, 2003, Dr. Serres'
employment agreement was terminated by the former Board. On July 31, 2003, Dr.
Serres was reinstated by the new Board, however on different terms as explained
below.
On March 18, 2002, Mymetics entered into an employment agreement with
Dr. McCann, pursuant to which he received an annual salary of one hundred
seventy thousand U.S. Dollars ($170,000) and normal benefits. In addition, Dr.
McCann was permitted to participate in our 2001 Stock Option Plan, as well as
receive discretionary bonuses as approved by the Board. Effective January 31,
2003, Dr. McCann resigned from our Board and as our Chief Executive Officer and
President. In connection with Dr. McCann's resignation, the former Board granted
him options to purchase 75,000 shares of our common stock at an exercise price
of $0.14 per share.
41
The new directors and officers elected and/or appointed since July 31, 2003 have
agreed to work without the benefit of a written agreement, relying only on
general terms agreed by the Board of directors in the matter of compensation,
which was set at nil for directors, and at E8,000 per month on a full time basis
for officers, plus reimbursement of reasonable travel and other expenses. This
amount was subsequently increased to E12,000 per month effective January 1,
2005. The actual payment of such amounts shall be deferred until the Company's
financial position has been stabilized. The directors and officers have further
agreed to work without the benefit of D&O insurance coverage, no insurance
company having accepted so far to cover such risks.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All executive officer compensation decisions are made by the Compensation
Committee of the Board. The Compensation Committee reviews and recommends the
compensation arrangements for officers and other senior level employees, and
takes such other action as may be required in connection with the Company's
compensation and incentive plans. From January 1, 2003 until July 30, 2003, the
members of the Compensation Committee were Mr. Allio, Mr. Demers and Dr. McCann.
For part of 2002 and 2003, Dr. McCann served as our chief executive officer.
From July 31, 2003, the members of the Compensation Committee were Mr. Rochet,
Mr. Lubke,Luebke, Dr. Serres and Dr. Zimmer.Zimmer, the latter two until their resignation
only, i.e. June 7 and June 13, 2005 respectively.
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 18, 2004,31, 2006, 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 59,394,45495,020,464 shares of our common stock outstanding on March 18, 2003.31, 2006.
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
40
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 29, 2004,31, 2005, 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.
4241
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER TITLE OF CLASS BENEFICIAL OWNERSHIP PERCENT OF CLASS
----------------------------------- -------------- -------------------- ----------------
Martine Reindle Common 10,819,874 (2) 7.42%9,022,653 9.50%
CP 18
CH - 1295 Mies, Switzerland
Anglo Irish Bank (Suisse) SA Common 13,450,000 14.15%
7, place des Alpes
CH - 1201 Geneva, Switzerland
Ernst LubkeLuebke (1) Common 5,881,638 (2) 4.03%4,079,418(3) 4.29%
Chief Financial Officer, Secretary and Director
Christian Rochet (1) Common 377,138 (3) 0.25%
Chief Executive Officer, President and Director
Dr. Sylvain Fleury (1) Common 500,000 (4) 0.34%500,000(2) 0.53%
Chief Scientific Officer
Prof. Marc Girard (1) Common 400,000 (4) 0.27%500,000(2) 0.53%
Head of Vaccine Development and member of the SAB
Dr. Robert ZimmerChristian Rochet (1) Common 400,000 (4) 0.27%
Dr. Pierre-Francois Serres (1) Common 6,585,618 (5) 4.51%
Head of Exploratory Research377,138(3) 0.40%
Chief Executive Officer, President and Director
All current executive officers and Common 14,144,394 9.70%5,456,556 5.75%
directors as a group (3(4 persons)
42
- ----------
(1) Address is Mymetics Corporation, European Executive Office, 14, rue de la
Colombiere, CH-1260 Nyon (Switzerland).
(2) Includes 1,797,221 shares of our common stock owned by Aralis Participations
S.A. Martine Reindle is the Chairperson, a substantial equity holder and a
member of the Board of Directors of Aralis Participations S.A. Ernest Lubke is
an officer, a substantial equity holder and a member of the Board of Directors
of Aralis Participations S.A. Accordingly, Ms. Reindle and Mr. Lubke may be
deemed to have or share voting and/or investment power over the shares of our
common stock owned by Aralis Participations S.A.Granted for services.
(3) Acquired prior to being elected as director and appointed as officer.
(4) Granted for services.
(5) Includes 11,250 shares of common stock which Dr. Serres presently has the
right to acquire pursuant to vested stock options granted under our 2001 Stock
Option Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
During 2003,2005, there were no transactions (or series of similar transactions), and
there are currently no proposed transactions (or series of similar
transactions), to which we were, are or will be a party in which the amount
involved exceeds $60,000 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,
other than the transactions described below.
43
With the exception noted hereafter (already reported on our Form 10-Q
for the quarter ended September 30, 2003), we believe that all of the
transactions set forth below were executed on terms no less favorable to us than
we could have obtained from unaffiliated third parties. Itinterest.
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.
CREDIT FACILITY AND RELATIONSHIP WITH MFC MERCHANT BANK S.A.
MFC Merchant Bank S.A. ("MFC Bank") is a wholly-owned Swiss banking subsidiary
of KHD Humbold Wedag Ltd. (formerly MFC Bancorp Ltd.), a Canadian company
currently listed on the NASDAQ. MFC Bank has been instrumental in arranging in
December 2000: (i) the acquisition of a French biotech company, Hippocampe S.A.
(later renamed Mymetics S.A.), and (ii) a credit facility in the amount of Euro
1.3 million. As
compensation for its decisive role in this material transaction, MFC Bank
received various fees and warrants which allowed it, duringBetween 2001 and 2002, to
acquire substantially in excess2003, the credit facility was amended and restated
a number of 5% of the outstanding shares of our common
stock. MFC Bank and its parent company MFC Bancorp Ltd., have effectively
controlled Mymetics from December 2000 untiltimes, last on July 2003. During this period, Mr.
Musacchio, the second highest paid officer of MFC Bancorp Ltd. according to that
company's filings with the Securities and Exchange Commission, was Mymetics'
chief operating officer, chief financial officer, secretary and a member of its
Board of directors. During that same period, key Company functions such as
budgeting, authorization of vendor agreements and/or payments, accounting and
reporting, were either conducted by service companies close to, or by officers
provided on a temporary basis by MFC Bancorp Ltd.
This state of affairs was completely modified in July30, 2003, when a group of 9 shareholders took control of the Company and replaced all of its
directors and officers (with the exception of Dr. Pierre-Francois Serres, the
founder of Hippocampe S.A.) with shareholders of the Company. Owing to the
materiality of this change, we quote hereafter certain material facts and events
that were previously disclosed in our Form 10-Q for the quarter ended September
30, 2003 to the Securities and Exchange Commission, indicating in square
brackets and full capitals any material subsequent events or results.
Quote ------------
On July 20, 2003, Messrs. Christian Rochet and Ernst Lubke (now
President and Chief Executive Officer and Chief Financial Officer of the
Company) then representing a group of 9 Swiss and French shareholders (including
the Founder of Mymetics, Dr. Pierre-Francois Serres) holding at that time over
55% of the Company's share capital, met with Mr. John M. Musacchio, then Chief
Operating Officer and Chief Financial Officer of the Company, to inform him of
the decision of said group of shareholders to request the resignation of all the
Directors and Officers of the Company (except Dr. Serres) and their intent to
have some of the Company's major shareholders appointed as new Directors and
officers. Mr. Musacchio acknowledged this decision and pledged an orderly
transfer of responsibilities.
The reasons for this group of shareholders' decision were the alarming
Company disclosures (or absence of disclosures), and in particular:
44
> the continuously high ratio of general and administrative expenses
compared to R&D expenses,
> the scarcity of significant, published scientific results,
> the refusal of the Board of Directors to acknowledge and act on
nominations to the Board of Mymetics of prestigious and well connected
personalities, made in August 2001 by Messrs. Rochet and Lubke,
> the apparent inability of the Company to attract new capital following
the significant decline of the Company's share price in August 2002,
> the resignation of key executives (the CEO and the VP of development)in
February 2003,
> and finally, the unfriendly removal of Dr. Serres, the Company's
Founder and Chief Scientific Officer in May 2003.
The aforementioned shareholders intend to redress the situation by
severely limiting G&A expenses, in particular salaries, consulting fees and
travel expenses, and to devote a higher proportion of funds to the Company's
core business, i.e. R&D related to AIDS and other autoimmune related
pathologies. [THE NEW DIRECTORS AND OFFICERS HAVE ACCEPTED COMPENSATIONS WHICH
REPRESENT APPROXIMATELY ONE THIRD OF WHAT OUR FORMER DIRECTOR AND INTERIM CEO
HAD RECEIVED AS FEES UP UNTIL HIS LAST DAY IN OFFICE. THEY HAVE ALSO ACCEPTED
THE DEFERRAL OF ACTUAL PAYMENT OF THEIR COMPENSATION UNTIL THE COMPANY CAN
SAFELY PAY THEM AND FURTHER ACCEPTED TO WORK WITHOUT THE BENEFIT OF D&O
INSURANCE. TRAVEL EXPENSES HAVE BEEN REDUCED TO THE BAREST MINIMUM, IN
PARTICULAR AS REGARDS TRANSATLANTIC TRAVEL. ALL BOARD MEETINGS ARE NOW HELD BY
TELEPHONE. OFFICE EXPENSES HAVE BEEN DRATICALLY REDUCED. RECOURSE TO OUTSIDE
SERVICE PROVIDERS HAS BEEN LIMITED TO THE BARE MINIMUM, WITH MORE WORK DONE
IN-HOUSE RATHER THAN BEING OUTSOURCED TO EXPENSIVE SERVICE PROVIDERS. WE EXPECT
TO OPERATE IN THIS MODE UNTIL THE COMPANY HAS FULLY RECOVERED, AND MAINTAIN A
MODEST WAY OF LIFE BEYOND THAT, IN RESPECT OF OUR STAKEHOLDERS].
To achieve this goal, we can rely on the backing of some prominent
personalities in matters of AIDS, such as Mr. Jacques Martin, former CEO of
Laboratoires Merieux, member of the Board of the IAVI and CEO of the vaccine
Fund chaired by Mr. Nelson Mandela, and Professor Marc Girard, former CSO of
Laboratoires Merieux, present CEO of the Merieux Foundation, a most respected
expert on vaccines. [MR. MARTIN HAS BEEN INSTRUMENTAL IN OUR ABILITY TO GAIN
ACCESS TO KEY PLAYERS IN THE WORLD OF HIV-AIDS. THE APPOINTMENT OF PROFESSOR
MARC GIRARD AS HEAD OF OUR VACCINE DEVELOPMENT AND MEMBER OF OUR SCIENTIFIC
BOARD AS BEEN REPORTED IN OUR FORM 8-K DATED FEBRUARY 20, 2004]
On July 24, 2003, a letter formally requesting the resignation of the
Company Directors and Officers (except Dr. Serres) was sent by said group of
shareholders to the Company Counsel, following which new Directors were elected
and new Officers appointed on July 30 and 31, 2003. A management audit of the
Company's position, procedures, operations and material transactions since July
20, 2003 was immediately performed. Critical findings and subsequent, related
events since our takeover are listed hereafter.
45
> On July 28, 2003, Messrs. Michael K. Allio (Director, interim President
and CEO) and John M. Musacchio (Director, COO, CFO and Secretary of the
Mymetics) closed all the "Non MFC" bank accounts of Mymetics
Corporation and transferred their remaining cash balances to the
Company's account with MFC Merchant Bank SA. It is worth noting that
according to various filings of MFC Bancorp, a US publicly traded
Canadian company and the dominant shareholder of MFC Merchant Bank SA,
Mr. John M. Musacchio, is also a Vice president of MFC Bancorp Ltd., in
fact its second highest paid officer as of December 31, 2002.
> On July 30, Messrs. Michael K. Allio and John M. Musacchio executed on
behalf of the Company (the Borrower) a second amendment to the existing
credit facility agreement with MFC Merchant Bank SA (the Lender) and
MFC Bancorp Ltd. (Guarantor). Purpose of this amendment was essentiallyexecuted
to: (i) increase the principal amount from E3,000,000 to E3,150,000,E3,15 million, (ii) convert the credit
facility from "Term Credit" to "On Demand Credit" and (iii) reaffirm and
strengthen the bank's lien on substantially all of the Company's Intellectual
Property. We believe
that this so-called second amendmentThe Lender later agreed twice to postpone the credit facility agreement,
which considerably increases the dominationrepayment date of the
MFC group overloan, first to June 30, 2004, then to December 31, 2005. On that date, the
Company, could not have been negotiated and executed on such short
notice if Mr. John M. Musacchio had not been a party to both sides of
the amendment, or in other words, we do not consider this amendment as
having been negotiated and concluded at arm's length by the former
management of Mymetics Corporation.
> On September 19, 2003, MFC Merchant Bank SA formally cancelled its 3.2
ME credit facility.
> On October 8, 2003, Messrs. Christian Rochet(the Lender) and Ernst Lubke met with
the management of MFC Merchant Bank SA to discuss the latest
developments and in particular, to draw the bank's attentionBancorp Ltd. (Guarantor)
executed a third Amendment to the fact thatLoan Agreement which i) increased the Company was in immediate dangeramount
to Euro 3.7 million, ii) set a new repayment date to December 31, 2005 and iii)
provided for partial repayments of losing its key
Intellectual Property as a result of its inability to pay certain
creditors following the bank's decision to cancel its recently amended
credit facility. Indeed, The Intellectual Property counsel was denying
any further services to the Company, which faced the risk of losing
certain key US patent applications. In addition, former unpaid staff
members of our French subsidiary had initiated legal action against
their former employer, who could be put into forced receivership as a
result of its inability to pay what was legally due to them. Such a
development would represent a real threat to the Company's ability to
continue as a going concern because Mymetics SA, our French subsidiary,
is the legal owner of certain key Mymetics patents. Despite these
pressing facts, Messrs. Rochet and Libke were informed that the banks'
decision to cancel the credit facility was final. However, after a
personal plea by Mr. Jacques-Francois Martin, the bank agreed that
repayment of the cancelled loan would not be requested beforeEuro 200,000 on March 31, 2005, Euro 300,000
on June 30, 2004. [ALL IMMEDIATE THREATS TO THE FRENCH SUBSIDIARY'S SURVIVAL HAVE
BEEN REMOVED].
> On November 4, 2003, MFC Merchant Bank SA confirmed its decision not2005 and Euro 400,000 on September 30, 2005. Finally, the Loan
Agreement was amended a fourth time on February 16, 2005 to requesti) set a new
repayment date to December 31, 2006, ii) provide for partial repayments of the outstanding cancelled credit facility amount
beforeEuro
200,000 on June 30, 2004.
46
> On November 13, 2003, MFC Merchant Bank SA also accepted our analysis
that our IP portfolio was being jeopardized due2005, Euro 300,000 on December 31, 2005 and Euro 400,000 on
June 30, 2006, and iii) allow the Lender, at its sole discretion, to our inability to
make paymentsconvert all
or part of patent registration and/or renewal fees as well as our
inability to meetany repayment made under the expenses of prosecution of critical outstanding
patent application. As a result, MFC Merchant Bank SA, which holds a
lien on substantially all our IP portfolio as explained above, has
instructed our IP counsel to prepare a docket of actions needed to
maintain our portfolio and confirmed that it would make all payments
required to that effect, such sumsLoan Agreement to be added to the balance of the
cancelled credit line previously mentioned. The bank however refused to
consider any rescue plan for our French subsidiary, claiming it did not
own any significant assets any more and could therefore be left to
become bankrupt. We took issue with this analysis and pleaded in vain
that the bank reconsiders its position on this account, but to no
avail.
On December 8, 2003, we learned from our IP counsel that on June 25,
2003, a key US patent owned by our French subsidiary had been sold and assigned
toconverted into
Mymetics Corporation "for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged". It appears so far that this
transfer was only authorized by the former CEO of our French subsidiary, without
authority being granted to her by the company Boardcommon shares ("Conseil de Surveillance"rule 144 restricted"),
as required by French law. As regards adequate consideration, no traces of
either a reasonable contract nor any other evidence have been found so far in
the records of either companies. The auditor of our French subsidiary
("Commissaires aux Comptes"), who enjoys a wide and compelling role of whistle
blower under French Law, believes that such patent transfer is likely to be
interpreted by French tax authorities as criminal misuse of Company property and
tax evasion. In a formal letter dated December 9, 2003 and addressed to the
French company's management, he demands that all details of this transaction be
made available to him no later than December 31, 2003, failing which he would be
compelled to submit the case to the Attorney General ("Procureur General de la
Republique"). We intend of course to heed to that request and to cooperate fully
with any investigation that might follow. [WE HAVE MEANWHILE COMPLIED WITH OUR
FRENCH AUDITOR'S DEMANDS].
> Last but not least, the late filing of this Form 10-Q was due to the
difficulties we faced in assembling all the required data under the
hardship described above, but also to the fact that critical service
firms needed to do so in accordance with US regulations were denying us
their services until their outstanding invoices were settled. [NORMAL
RELATIONS WITH OUR KEY SERVICE PROVIDERS HAVE SINCE BEEN RESUMED]
Now, despite all of the above and the fact that several key scientific
partners of the Company have not been paid, some of them since early 2003,
Mymetics has been able to show significant results based on Dr. Pierre-Francois
Serres hypothesis, and most notably:
> A "world's first" in the pursuit of a universal vaccine against AIDS:
the successful synthesis, in an economically sustainable and scalable
fashion, of a stable trimeric form of gp41, the HIV's membrane protein
now regarded by several key scientists as having the highest potential
as a base for a successful AIDS vaccine.
47
> The successful synthesis of short and economically feasible therapeutic
anti-HIV peptides, having the potential to become serious competitors
to some of today's most successful, but problems beset, antiviral
drugs. [WE HAVE INITIATED DISCUSSIONS WITH A MAJOR LEADER IN SUCH
ANTIVIRAL THERAPY WHO IS CURRENTLY FACING SERIOUS PROBLEMS WITH SAID
PRODUCT].
Since taking office on July 31, 2003, the new Directors and Officers of
the Company have achieved some significant results despite the absence of cash
and/or credit facilities, and in particular:
> Presentation during the "AIDS Vaccine 2003" venue in New York of our
scientific results to several key scientists of the US National
Institute of Health (NIH) and other public and private AIDS research
institutes. As a result of such presentations, we have been offered to
cooperate with certain key institutes such as SCRIPPS and been invited
to apply for initial NIH AIDS related grants. [WE HAVE SINCE SIGNED AN
INITIAL AGREEMENT WITH SCRIPPS AND APPLIED FOR A FIRST NIAID GRANT
AIMED AT OBTAINING DECISIVE SCIENTIFIC PROOFS OF CONCEPT WITHIN A
LIMITED TIME FRAME].
> Successful discussions with several outstanding and high profile
scientists and managers who accepted to join the Company as soon as its
current cash crisis is resolved. [THE APPOINTMENT OF PROFESSOR MARC
GIRARD AS HEAD OF OUR VACCINE DEVELOPMENT AND MEMBER OF OUR SCIENTIFIC
BOARD AS BEEN REPORTED IN OUR FORM 8-K DATED FEBRUARY 20, 2004]
> Initiation of partnership discussion with pharmaceutical companies, all
world leaders in the respective human or veterinary vaccine related
(AIDS) fields. [DISCUSSIONS WITH THREE SUCH POTENTIAL PARTNERS WILL BE
CONDITIONNED BY THE INITIAL RESULTS FROM OUR RECENTLY INITIATED
SCIENTIFIC TRIALS, SOME OF WHICH COULD HAVE BEEN COMPLETED LONG BEFORE
JULY 31, 2003]
> Initiation of discussions with three potential new investors willing in
principle to acquire from the Company 1 million shares at USD 0.10$0.30 per share. Such discussions are nevertheless hampered by the fact that only
publicly available data such as past Company filings, published
scientific papers and patents, could be produced and used to convince
said potential investors. In addition, critical partners needed to
execute such transactions such as legal counsel, were unwilling to
provide the services needed to perform such transactions in accordance
with US regulations. We are nevertheless hopeful that such discussions
will proceed and be successful after this 10-Q filing has been made.
[FOUR NEW INVESTORS HAVE SINCE ACQUIRED 6 MILLION COMMON SHARES OF THE
COMPANY AT APPROXIMATELY $.10 PER SHARE, PLUS WARRANTS FOR THE SAME
NUMBER OF SHARES AT THE SAME PRICE TO BE EXERCIZED BEFORE JULY 31,
2004, AS REPORTED IN OUR FORMS 8-K DATED FEBRUARY 20 AND MARCH 22,
2004]
- --------- Unquote
48
Despite limited means and impressive hurdles to overcome,On August 30,
2005, we have been able
since July 31, 2003 to graduate from an assured crash to a (still) bumpy ride.
In more practical terms, we have been able to (i) attract four new investors,
(ii) remove all immediate threats of bankruptcy or forced liquidation, (iii)
normalize our relations with our critical suppliers of scientific or corporate
services, (iv) launch critical scientific tests aimed at reinforcing our
position in the discussions we have initiated with certain pharmaceutical
companies, (v) gain reasonable assurance that results will be encouraging, never
forgetting however that biology remains a complex and largely unpredictable
science, and (vi) applied for grants from public and private donors.
We intend to devote in the future more time and efforts to grant applications
(which are very time consuming), as such sources of funds are non dilutive by
essence. We believe that our chances of obtaining such funds in a reasonable
time span are high enough to continue justifying our directors' and officers'
efforts and personal sacrifices.
Despite our efforts and achievements, we have no reasonable hope to be able to
reimburse the Euro 3.2 million credit facility due to MFC Bank on or before its
present due date of June 30, 2004, and have no assurance that MFC Bank will
accept to renegotiate it on terms acceptable to us.
COMPENSATION AND SERVICES AGREEMENTS
In May 2001, Mymetics entered into a services agreement with MFC
Merchant Bank S.A. pursuantFifth Amendment Agreement to the Loan Agreement, dated
for reference August 21, 2005, which MFC Merchant Bank S.A. agreedprovided for an extension of the first
repayment of Euro 200,000, initially due on June 30, 2005, to provideDecember 31, 2005,
all other clauses of the Company withCredit Facility as previously amended remaining
identical. On January 11, 2006, we entered into a sixth Amendment Agreement to
the servicesLoan Agreement, dated for reference December 21, 2005, which provided for an
extension of Mr. Musacchiothe first repayment of Euro 200,000, initially due on December 31,
2005, to actJune 30, 2006, for a total amount due on that date of E900,000, all
other clauses of the Credit Facility as Chief Operating
Officer, Chief Financial Officer, Secretarypreviously amended remaining identical.
43
The third, fourth and a memberfifth Amendments were duly reported on Form 8-K dated
February 19and August 30, 2005 respectively to the Securities and Exchange
Commission. Copy of our board of
directors. As explained above, Mr. Musacchio resigned all his positions with the Company and its affiliatessixth Amendment is included in this report on July 30, 2003, effectively terminating the service
agreement between Mymetics and MFC Merchant Bank S.A.Form 10-K
as Exhibit 10.45.
COMPENSATION AGREEMENTS
We have entered into compensation arrangements with certain of our directors.
The terms of these arrangements are described in more detail under "Compensation
of Directors"
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table provides information about the fees billed to the registrant
for professional services rendered by Peterson Sullivan PLLC during fiscal 20032005
and 2002:2004:
2003 2002
-------- --------2005 2004
------- -------
Audit Fees $ 30,461 $ 34,030$43,027 $38,256
Audit-Related Fees - -
Tax Fees $ 20,547 22,5721,649 8,829
All Other Fees - -
-------- --------------- -------
Total $ 51,008 $ 56,602
======== ========$44,676 $47,085
======= =======
49
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 20032005 and 2002,2004, the services provided in this category included due
diligence reviews, audits of employee benefit funds, and consulting on
accounting standards and transactions.
Tax Fees. Tax fees consist of fees for tax compliance services, tax advice and
tax planning. During fiscal 20032005 and 2002,2004, 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.
Prior to February 14, 2006, Our Board of Directors pre-approvespre-approved all services to
be provided by Peterson Sullivan Peterson PLLC.
5044
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Index to Financial Statements
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Changes in Shareholders' Equity
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
Corporation and the stockholders of Mymetics S.A. listed on the
signature page thereto (1)
2.3 Purchase Agreement dated October 17, 1998 between the
Corporation and the majority stockholders of Nazca Holdings
Ltd. (2)
2.4 Amendment to the Purchase Agreement dated October 17, 1998
between the Corporation and the majority stockholders of Nazca
Holdings Ltd. (3)
2.5 Revised Purchase Agreement dated July 28, 1999 between the
Corporation and the majority stockholders of Nazca Holdings
Ltd. (4)
2.6 Share Exchange Agreement dated July 30, 2002 between the
Corporation and the stockholders of Mymetics S.A. listed on the
45
signature page thereto (5)
3(i) Articles of Incorporation of the Corporation (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
4.3 Form of Share Exchange Agreement
9.1 Voting and Exchange Trust Agreement dated March 28, 2001, Among
the Corporation, 6543 Luxembourg S.A. and MFC Merchant Bank
S.A. (8)
51
10.1 Services Agreement dated May 31, 2001, between the Corporation
and MFC Merchant Bank, S.A.(7)
10.2 Employment Agreement dated May 3, 2001, between Pierre-Francois
Serres and the Corporation (7)
10.3 Indemnification Agreement dated March 28, 2001, between the
Corporation and MFC Bancorp Ltd. (7)
10.4 Agreement dated for reference May 15, 2000, between the
Corporation and Maarten Reidel (7)
10.5 Preferred Stock Redemption and Conversion Agreement dated for
reference December 21, 2000, between the Corporation and Sutton
Park International Ltd. (10)
10.6 Preferred Stock Conversion Agreement dated for reference
December 21, 2000, between the Corporation and Med Net
International Ltd. (11)
10.7 Preferred Stock Conversion Agreement dated December 21, 2000,
between the Corporation and Dresden Papier GmbH (11)
10.8 Assignment Agreement dated December 29, 2000, among the
Corporation, Mymetics S.A. and MFC Merchant Bank S.A. (1)
46
10.9 Credit Facility Agreement dated July 27, 2000, between MFC
Merchant Bank, S.A. and the Corporation (1)
10.10 Amended Credit Facility Agreement dated for reference August
13, 2001, between MFC Merchant Bank, S.A. and the Corporation
(16)
10.11 Second Amended Credit Facility Agreement dated for reference
February 27, 2002, between MFC Merchant Bank, S.A. and the
Corporation (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 Corporation (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 28, 2001, among the
Corporation, 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 28, 2001, between the Corporation
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 Corporation Stock Option Plan (7)
52
10.19 Employment Agreement dated March 18, 2002, between the
Corporation and Peter P. McCann (14)
10.20 Consulting Agreement dated August 31, 2001, between the
Corporation and Michael K. Allio (8)
10.21 Amendment to Consulting Agreement dated August 21, 2002,
between the Corporation and Michael K. Allio (16)
47
10.22 Employment Agreement dated March 18, 2002, between the
Corporation and Dr. Joseph D. Mosca (15)
10.23 Separation Agreement and Release dated January 31, 2003,
between the Corporation and Peter P. McCann (16)
10.24 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Corporation and Robert Demers (8)
10.25 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Corporation and Michael K. Allio (8)
10.26 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Corporation and John M. Musacchio (8)
10.27 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Corporation and Patrice Pactol (8)
10.28 Director and Non-Employee Stock Option Agreement dated July 19,
2001, between the Corporation and Pierre-Francois Serres (8)
10.29 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and Pierre-Francois Serres (16)
10.30 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and Patrice Pactol (16)
10.31 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and Robert Demers (16)
10.32 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and John M. Musacchio (16)
10.33 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and Michael K. Allio (16)
10.34 Director and Non-Employee Stock Option Agreement dated August
21, 2002, between the Corporation and Michael K. Allio (16)
10.35 Director and Non-Employee Stock Option Agreement dated June 20,
2002, between the Corporation and Peter P. McCann (16)
48
10.36 Director and Non-Employee Stock Option Agreement dated July 23,
2002, between the Corporation and Peter P. McCann (16)
10.37 Director and Non-Employee Stock Option Agreement dated February
6, 2003, between the Corporation and Peter P. McCann (16)
53
10.38 Patent Pledge Agreement dated November __, 2002 among Mymetics
S.A., Mymetics Deutschland GmbH, the Corporation and MFC
Merchant Bank S.A. (16)
11.1 Statement Regarding Calculation of Per Share Earnings.
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 Corporation's Schedule 14C filed with the
Securities and Exchange Commission on April 26, 2001.
(2) Incorporated by reference to the Corporation's report on Form 8-K filed
with the Securities and Exchange Commission on October 22, 1998.
(3) Incorporated by reference to the Corporation's report on Form 8-K/A filed
with the Securities and Exchange Commission on April 15, 1999.
(4) Incorporated by reference to the Corporation's report on Form 8-K/A filed
with the Securities and Exchange Commission on August 13, 1999.
(5) Incorporated by reference to the Corporation's Amendment No. 1 to Form
49
S-1 filed with the Securities and Exchange Commission on August 8, 2002.
(6) Incorporated by reference to the Corporation'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 Corporation'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 Corporations 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 Corporation'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.
54
(11) Incorporated by reference to the Corporation'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 Corporation'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 Corporation's Registration Statement on
Form S-8, File No. 333-15829, filed with the Securities and Exchange
Commission on November 8, 1996.
(14) Incorporated by reference to the Corporation's report on Form 10-K for the
fiscal year ended December 31, 2001,2003, and filed with the Securities and
Exchange Commission on March 29, 2002.
(15) Incorporated by reference to the Corporation'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 Corporation's report on Form 10-K for the
fiscal year ended December 31, 2002,2004, and filed with the Securities and
Exchange Commission on March 27, 2003.
(b) Reports on Form 8-K
None.
55During our fourth quarter ended December 31, 2005, we did not file any
reports on Form 8-K with the Securities and Exchange Commission.
50
PETERSON SULLIVAN PLLC
601 UNION STREET SUITE 2300
SEATTLE WA 98101
(206) 382-7777 FAX 382-7700
CERTIFIED PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT AUDITORS' REPORTREGISTERED
PUBLIC ACCOUNTING FIRM
To the Shareholders
Mymetics Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of Mymetics
Corporation (a development stage company) and Subsidiaries as of December 31,
20032005 and 2002,2004, and the related consolidated statements of operations and
comprehensive loss, changes in shareholders' equity (deficit), and cash flows
for the years ended December 31, 2003, 20022005, 2004, and 2001,2003, and for the period from
May 2, 1990 (inception) to December 31, 2003.2005. 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 auditingthe standards generally accepted
inof the United States.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, 20032005 and 2002,2004,
and the results of their operations and their cash flows for the years ended
December 31, 2003, 20022005, 2004, and 2001,2003, and for the period from May 2, 1990
(inception) to December 31, 2003,2005, in conformity with accounting principles
generally accepted in the United States.
The accompanying 2003 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 revenues, which has
resulted in significant losses being incurred. Further, the Company has a note payable amounting to E3,127 which is due June 30, 2004, whereCompany's current
liabilities exceed its current assets by E6,051 as of December 31, 2005,
and there is no assurance that cash will become available to pay current
liabilities in the note may be paid, extended, restructured or
refinanced.near term. 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 PLLC
- -------------------------------------
Peterson Sullivan PLLC
Seattle, Washington
March 18, 2004
56April 1, 2006
51
MYMETICS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31, 20032005 and 20022004
(In Thousands of Euros)
ASSETS 2003 2002
--------- ---------2005 2004
-------- --------
ASSETS
Current Assets
Cash E 12570 E 183--
Receivables 100 5942 110
Prepaid expenses 6 36
--------- ---------2 2
-------- --------
Total current assets 231 278114 112
Patents 136 199
--------- ---------52 80
-------- --------
E 367166 E 477
========= =========192
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable E 1,2322,095 E 4521,491
Taxes and social costs payable 53 119
Note15 40
Current portion of note payable 3,127 1,9893,754 500
Other 113 24
--------- ---------301 116
-------- --------
Total current liabilities 4,525 2,5846,165 2,147
Payable to Shareholders 242 242
--------- ---------Note Payable, less current portion 39 2,868
-------- --------
Total liabilities 4,767 2,8266,446 5,257
Shareholders' Equity (Deficit)
Common stock, U.S. $.01 par value;
80,000,000495,000,000 shares authorized; issued and outstanding 54,344,45482,670,464
at December 31, 20032005 and 50,944,50568,447,864 at December 31, 2002 607 5792004 778 720
Common stock issuable 59
Preferred stock, U.S. $.01 par value;
5,000,000 shares authorized; none issued or outstanding -- --
Additional paid-in capital 18,142 17,8886,227 5,522
Deficit accumulated during the development stage (23,799) (21,013)(14,087) (12,148)
Accumulated other comprehensive income 650 197
--------- ---------
(4,400) (2,349)
--------- ---------743 841
-------- --------
(6,280) (5,065)
-------- --------
E 367166 E 477
========= =========192
======== ========
The accompanying notes are an integral part of these financial statements.
5752
MYMETICS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Years Ended December 31, 2003, 20022005, 2004 and 2001,2003,
and the Period from May 2, 1990 (Inception) to December 31, 20032005
(In Thousands of Euros, Except Per Share Data)
Total
Accumulated
During
Development
Stage
(May 2, 1990 to
December 31,
2005 2004 2003 2002 2001 2003)
--------- --------- --------- ----------2005)
------- ------- ------- ---------------
Revenues
Sales E --- E --- E --- E 224
Interest - 8 26-- -- -- 34
--------- --------- --------- ----------
- 8 26------- ------- ------- --------
-- -- -- 258
Expenses
Research and development 489 612 1,263 1,878 482 3,9855,086
General and administrative 1,138 1,264 1,090 1,293 1,034 3,9986,400
Bank fee - 63 14,063 14,932-- 66 -- 935
Interest 222 201 176 60 79 331964
Goodwill impairment - 209 --- -- -- 209
Amortization 80 59 64 64 51 322461
Directors' fees -- -- 193 63 18 274
--------- --------- --------- ----------Other 10 -- -- 10
------- ------- ------- --------
1,939 2,202 2,786 3,630 15,727 24,051
--------- --------- --------- ----------14,339
------- ------- ------- --------
Loss before income tax provision (1,939) (2,202) (2,786) (3,622) (15,701) (23,793)(14,081)
Income tax provision - - --- -- -- 6
--------- --------- --------- ----------------- ------- ------- --------
Net loss (1,939) (2,202) (2,786) (3,622) (15,701) (23,799)(14,087)
Other comprehensive income
Foreign currency translation
adjustment (98) 191 453 97 100 650
--------- --------- --------- ----------743
------- ------- ------- --------
Comprehensive loss E (2,333) E (3,525) E (15,601) E (23,149)
========= ========= ========= ==========E(2,037) E(2,011) E(2,333) E(13,344)
======= ======= ======= ========
Basic and diluted loss per share E (0.03) E (0.04) E (0.05)
E (0.07) E (0.37) E (0.65)
========= ========= ========= ================= ======= =======
The accompanying notes are an integral part of these financial statements.
5853
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, 20032005
(In Thousands of Euros)
Date of Number of
Transaction Shares Par Value
------------- ------------ ----------
Balance at May 2, 1990 E -
Shares issued for cash June 1990 33,311,361 119
Net losses to December 31, 1999 - -
------------ -------
Balance at December 31, 1999 33,311,361 119
Bank fee - -
Net loss for the year - -
------------ -------
Balance at December 31, 2000 33,311,361 119
Effect on capital structure resulting from a business combination March 2001 8,165,830 354
Issuance of stock purchase warrants for bank fee March 2001 - -
Issuance of shares for bank fee March 2001 1,800,000 21
Issuance of shares for bank fee June 2001 225,144 3
Issuance of shares for cash June 2001 1,333,333 15
Exercise of stock purchase warrants in repayment of debt June 2001 1,176,294 13
Exercise of stock purchase warrants for cash December 2001 3,250,000 37
Net loss for the year - -
Translation adjustment - -
------------ -------
Balance at December 31, 2001 49,261,962 562
Exercise of stock options March 2002 10,000 -
Issuance of stock purchase warrants for bank fee June 2002 - -
Exercise of stock purchase warrants in repayment of debt and
for cash July 2002 1,625,567 16
Issuance of remaining shares from 2001 business combination August 2002 46,976 1
Net loss for the year - -
Translation adjustment - -
------------ -------
Balance at December 31, 2002 50,944,505 579
Issuance of shares for services September 2003 400,000 4
Shares retired October 2003 (51) -
Issuance of shares for services November 2003 1,500,000 12
Issuance of shares for cash December 2003 1,500,000 12
Issuance of stock purchase warrants for financing fee December 2003 - -
Net loss for the year - -
Translation adjustment - -
------------ -------
Balance at December 31, 2003 54,344,454 E 607
============ =======
59
Accumulated
Other
Deficit Comprehensive
Accumulated Income - Foreign
Additional During the Currency
Date of Number of Par Paid-in Development Translation
Transaction Shares Value Capital Stage Adjustment Total
-------------- ---------- ----- ---------- ----------- --------------- ---------------- -------
Balance at May 2, 1990
E - E - E -
Shares issued for cash - - -
Net losses to December 31, 1999 - (376) -
----------- ------------ -------
Balance at December 31, 1999 - (376) -
Bank fee 806 - -
Net loss for the year - (1,314) -
----------- ------------ -------
Balance at December 31, 2000 806 (1,690) -
Effect on capital structure resulting from a business combination (354) - -
Issuance of stock purchase warrants for bank fee 14,063 - -
Issuance of shares for bank fee (21) - -
Issuance of shares for bank fee (3) - -
Issuance of shares for cash 2,109 - -
Exercise of stock purchase warrants in repayment of debt 259 - -
Exercise of stock purchase warrants for cash 563 - -
Net loss for the year - (15,701) -
Translation adjustment - - 100
----------- ------------ -------
Balance at December 31, 2001 17,422 (17,391) 100
Exercise of stock options 8 - -
Issuance of stock purchase warrants for bank fee 63 - -
Exercise of stock purchase warrants in repayment of debt 396 - -
Issuance of remaining shares from 2001 business combination (1) - -
Net loss for the year - (3,622) -
Translation adjustment - - 97
----------- ------------ -------
Balance at December 31, 2002 17,888 (21,013) 197
Issuance of shares for services 29 - -
Shares retired - - -
Issuance of shares for services 100 - -
Issuance of shares for cash 113 - -
Issuance of stock purchase warrants for financing fee 12 - -
Net loss for the year - (2,786) -
Translation adjustment - - 453
----------- ------------ -------
Balance at December 31, 2003June 1990 33,311,361 E119 E 18,142-- E (23,799)-- E 650
=========== ============ =======
60
Total
------------
Balance at May 2, 1990-- E -
Shares issued for cash 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 for bank fee 14,063in
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 (15,701)(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 E54,344,454 607 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) E841 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)
========== ==== ====== ======== ==== =======
The accompanying notes are an integral part of these financial statements.
6154
MYMETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2003, 20022005, 2004 and 20012003
and the Period from May 2, 1990 (Inception) to December 31, 20032005
(In Thousands of Euros)
Total
Accumulated
During
Development
Stage
(May 2, 1990 to
December 31,
2005 2004 2003 2002 2001 2003)
---------- ---------- ----------2005)
------- ------- ------- ---------------
Cash Flows from Operating Activities
Net loss E (2,786) E (3,622) E (15,701) E (23,799)E(1,939) E(2,202) E(2,786) E(14,087)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization 80 59 64 64 51 322461
Goodwill impairment - 209 --- -- -- 209
Fees paid in warrants -- 148 12 63 14,063 14,138223
Services and fees paid in common stock 466 511 145 - - 9511,928
Amortization of debt discount -- -- -- 210
Changes in current assets and liabilities
net of effects from reverse purchase
Receivables 68 (10) (41) (10) 53 (62)(4)
Accounts payable 604 259 780 16 (508) 9341,797
Taxes and social costs payable (25) (13) (66) 36 (26) 5315
Other 185 7 119 9 68 155
---------- ---------- ---------- ---------347
------- ------- ------- --------
Net cash used in operating activities (561) (1,241) (1,773) (3,235) (2,000) (7,099)(8,901)
Cash Flows from Investing Activities
Patents and other (52) (3) (1) (102) (45) (338)
Short-term investments - 354 (205) -(393)
Cash acquired in reverse purchase - --- -- -- 13
13
---------- ---------- ---------- ---------------- ------- ------- --------
Net cash provided by (used in)
investing activities (52) (3) (1) 252 (237) (325)(380)
Cash Flows from Financing Activities
Proceeds from the issuance of
common stock and warrants 356 687 125 8 2,724 2,9764,019
Borrowings from shareholders - - --- -- -- 242
Increase in note payable and other
short-term advances 425 241 1,138 2,173 116 3,8114,477
Loan fees - - --- -- -- (130)
---------- ---------- ---------- ---------------- ------- ------- --------
Net cash provided by financing activities 781 928 1,263 2,181 2,840 6,8998,608
Effect of exchange rate changes on cash (98) 191 453 97 100 650
---------- ---------- ---------- ---------743
------- ------- ------- --------
Net increase (decrease) in cash 70 (125) (58) (705) 703 12570
Cash, beginning of period -- 125 183 888 185 -
---------- ---------- ---------- -----------
------- ------- ------- --------
Cash, end of period E 70 E -- E 125 E 183 E 888 E 125
========== ========== ========== =========70
======= ======= ======= ========
The accompanying notes are an integral part of these financial statements.
6255
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 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.
These financial statements have been prepared treating the Company as a
development stage company. As of December 31, 2003,2005, 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
revenues. Revenues reported by the Company consist of incidental serum
by-products of the Company's research and development activities and interest
income. For the purpose of these financial statements, the development stage
started May 2, 1990.
These financial statements have also been prepared assuming the Company will
continue as a going concern. The Company has experienced significant losses
since inception resulting in a deficit in shareholders' equity (deficit) of
E4,400E6,280 at December 31, 2003.2005. 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 has a note
payable amounting to E3,127 which is due June 30, 2004, whereCompany's current
liabilities exceed its current assets by E6,051 as of December 31, 2005, and
there is no current source ofassurance that cash will become available to pay it when due.current liabilities
in the near term. Management is planning to negociate a
further extension of the due date, restructure the note terms or refinance it.
Butseeking additional financing but there can be no
assurance that management will be successful in any of thesethose efforts.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Significant intercompany accounts and transactions have been
eliminated.
Foreign Currency Translation
The Company translates non-Euro assets and liabilities of its subsidiaries at
the rate of exchange at the balance sheet date. Revenues and expenses are
translated at the average rate of exchange throughout the year. Unrealized gains
or losses from these translations are reported as a separate component of
comprehensive income. Transaction gains or losses are included in general and
administrative expenses in the consolidated statements of operations. The
translation adjustments do not recognize the effect of income tax because the
Company expects to reinvest the amounts indefinitely in operations. The
Company's reporting currency is the Euro because a substantial portionsubstantially all of the
Company's activities have beenare conducted in Europe.
63
Cash
Cash deposits are occasionally in excess of insured amounts. Interest paid was
E164 in 2005, E201 in 2004, E176 and in 2003, E60 in 2002 and E42 in 2001.2003. The Company has paid no income tax
since its inception.
56
Revenue Recognition
The Company recordsRevenue related to the sale of products is recognized when all of the productsfollowing
conditions are deliveredmet: persuasive evidence of an arrangement exists, delivery has
occurred, the price is fixed or determinable, and the
Company has only a security interest in the products should a customer default
on payment.collectibility is reasonably
assured.
Receivables
Receivables are stated at their outstanding principal balances. Management
reviews the collectibility of receivables on a periodic basis and determines the
appropriate amount of any allowance. Based on this review procedure, management
has determined that the allowances at December 31, 20032005 and 2002,2004, 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.
Goodwill and Other Intangibles
As required, the Company adopted Statement of Financial Standards ("SFAS") No.
142, "Goodwill and Other Intangible Assets," beginning January 1, 2002. Under
this standard, goodwill of a reporting unit and intangible assets that have
indefinite useful lives are not amortized but are tested annually for
impairment. Intangible assets with a finite life are amortized over their
estimated useful lives.
Research and Development
Research and development costs are expensed as incurred.
Taxes on Income
The Company accounts for income taxes under an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax consequences, the
Company generally considers all expected future events other than enactments of
changes in the tax laws or rates.
Earnings per Share
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding in the
period. The weighted average number of shares was 71,972,491 for the year ended
December 31, 2005, 62,177,629 for the year ended December 31, 2004, and
51,285,044 for the year ended December 31, 2003, 50,045,658 for the year ended December 31, 2002, and
42,459,784 for the year ended December 31, 2001. The weighted average number of
shares for the period May 2, 1990 through December 31, 2003, was 36,520,581.2003. Diluted earnings per share
takes into consideration common shares outstanding (computed under basic
earnings per share) and potentially dilutive securities. Warrants and options
were not included in the computation of diluted earnings per share because their
effect would be anti-dilutive due to net losses incurred.
64
Preferred Stock
The Company has authorized 5,000,000 shares of preferred stock. No shares are
issued or outstanding at December 31, 2005. 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
57
The Company has a stock-based employee compensation plan, which is described
more fully in Note 6.7. The Company accounts for the planoptions and other stock-based
compensation under the recognition and measurement principles of APBAccounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. No stock-based employee compensation cost is reflected
in net income, as all options granted under the plan had an exercise price equal
to or greater than the market value of the underlying common stock on the date
of grant. Compensation costThe expense for stock options and warrants to purchase stock granted
to non-employees is measured using the
Black-Scholesa fair value valuation model at the date of
grant multiplied by the number of options granted, amortized over the estimated life of the option or warrant.
This compensation cost is recognized ratably over the vesting period. In
accordance with APB No. 25, the Company records compensation costs only for
stock options issued to non-employees.granted. The following table
illustrates the effect on net income and earnings per share if the Company had
applied the fair value recognition provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation," to stock-based employee compensation.
58
Total Accumulated
During Development
Stage (May 2, 1990
2005 2004 2003 2002 2001 to December 31, 2003)
---------- ---------- ----------2005)
------- ------- ------- ---------------------
Net Income (Loss)
- -----------------
As reported E (2,786) E (3,622) E (15,701) E (23,799)E(1,939) E(2,202) E(2,786) E(14,087)
Deduct: Total stock-based employee
compensation expense determined under
fair value based methods for all
awards, net of any related tax effects -- -- (27) (72) (221) (320)
---------- ---------- ---------- -------------------- ------- ------- --------
Pro forma E (2,813) (3,694) E (15,922) E (24,119)
========== ========== ========== =============E(1,939) (2,202) E(2,813) E(14,407)
======= ======= ======= ========
Basic and Diluted Earnings (Loss) Per Share
- -------------------------------------------
As reported E (.05)(.03) E (.07)(.04) E (.37) E (.65)(.05)
Pro forma E (.05)(.03) E (.07)(.04) E (.38) E (.66)(.05)
For purposes of proforma disclosures, the estimated fair value of the options is
amortized to expense over the options' vesting period.
The fair value of each option granted was estimated for proforma purposes on the
grant date using the Black-Scholes model (use of this model for proforma
purposes is not intended to indicate the value of the Company as a whole). There
were no options issued in 2005 and 2004. The assumptions used in calculating
fair value for 2003 are as follows:
59
2003 2002 2001
--------------- ---------------- ----------------
Risk-free interest rate 4.00% 4.75% 4.5%
Expected life of the options 7 years
7 years 8 years
Expected volatility 164.02%-206.16% 71.10% - 243.12% 63.91% - 160.97%206.16%
Expected dividend yield 0% 0% 0%
The issuance of common shares for services is recorded at the quoted price of
the shares on the date the services are rendered.
The Company has offered 2,000,000 common shares to an individual upon acceptance
of an offer as board chairman. The fair value of these shares was approximately
E33 at December 31, 2003. These shares have not been considered issued for
purposes of these financial statements.
65
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.
Reclassifications
Certain reclassifications have been made to the 2002 financial statement
amounts in order for them to conform to current year presentation.
New Accounting Standards
SFAS No. 151, "Inventory Costs," is effective for fiscal years beginning after
June 15, 2005. This statement amends the guidance in APB No. 43, Chapter 4,
"Inventory Pricing," to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material (spoilage). The
adoption of SFAS No. 151 is expected to have no impact on the Company's
consolidated financial statements.
SFAS No. 152, "Accounting for Real Estate Time-Sharing Transactions," is
effective for fiscal years beginning after June 15, 2005. This Statement amends
SFAS No. 66, "Accounting for Sales of Real Estate," to reference the financial
accounting and reporting guidance for real estate time-sharing transactions that
is provided in AICPA Statement of Position 04-2, "Accounting for Real Estate
Time-Sharing Transactions." The adoption of SFAS No. 152 is expected to have no
impact on the Company's consolidated financial statements.
SFAS No. 123(R), "Share-Based Payment," replaces SFAS No. 123, "Accounting for
Stock-Based Compensation," and supersedes APB Opinion No. 25, "Accounting for
Stock Issued to Employees." This statement requires that the compensation cost
relating to share-based payment transactions be recognized at fair value in the
financial statements. The Company is required to apply this statement in the
first interim period that begins after December 15, 2005. The Company is
currently analyzing the requirements of the adoption of SFAS No. 123(R).
SFAS No. 153, "Exchanges of Nonmonetary Assets - an amendment of APB Opinion No.
29," is effective for fiscal years beginning after June 15, 2005. This Statement
addresses the measurement of exchange of nonmonetary assets and eliminates the
exception from fair value measurement for nonmonetary exchanges of similar
productive assets in paragraph 21(b) of APB Opinion No. 29, "Accounting for
Nonmonetary Transactions," and replaces it with an exception for exchanges that
do not have commercial substance. The adoption of SFAS No. 153 is expected to
have no impact on the Company's consolidated financial statements.
The EITF reached consensus on Issue No. 03-1, "The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments,"
which provides guidance on determining when an investment is considered
impaired, whether that impairment is other than temporary, and the measurement
of an impairment loss.
60
The FASB issued FSP EITF 03-1-1, "Effective Date of Paragraphs 10-20 of EITF
Issue No. 03-1," "The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments," which delays the effective date for the
measurement and recognition criteria contained in EITF 03-1 until final
application guidance is issued. The adoption of this consensus or FSP is
expected to have no impact on the Company's consolidated financial statements.
Financial Accounting Standards Board Interpretation ("SFAS"FIN") No. 147 gives guidance47, "Accounting
for Conditional Asset Retirement Obligations," ("FIN 47"), was issued in March
2005. FIN 47 clarifies that an entity must record a liability for a conditional
asset retirement obligation if the fair value of the obligation can be
reasonably estimated. Asset retirement obligations covered by FIN 47 are those
for which an entity has a legal obligation to perform an asset retirement
activity, even if the timing and method of settling the obligation are
conditional on accounting fora future event that may or may not be within the acquisitioncontrol of financial institutions (effective for
acquisitions on or after October 1, 2002). SFAS No. 148the
entity. FIN 47 also clarifies treatmentwhen an entity would have sufficient information
to reasonably estimate the fair value of stock-based compensation (effective foran asset retirement obligation. FIN 47
is effective no later than the end of fiscal years ending after December 15,
2002).2005. The adoption of FIN 47 is expected to have no impact on the Company's
consolidated financials statements.
SFAS No. 149 amends existing standards on derivatives (effective for
derivatives entered into or modified after June 30, 2003).154, "Accounting Changes and Error Corrections," a replacement of APB
No. 20, "Accounting Changes," and SFAS No. 150 gives
guidance on3, "Reporting Accounting Changes in
Interim Financial Statements." SFAS No. 154 changes the requirements for the
accounting for certainand reporting of a change in accounting principle. Previously,
most voluntary changes in accounting principles required recognition via a
cumulative effect adjustment within net income of the period of the change. SFAS
No. 154 requires retrospective application to prior periods' financial
instruments with
characteristicsstatements, unless it is impracticable to determine either the period-specific
effects or the cumulative effect of both liabilities and equity (effectivethe change. SFAS No. 154 is effective for
financial
instruments entered into after May 31, 2003). Financial Accounting Standards
Board Interpretation No. 46 requires consolidation of certain variable interest
entities (effective foraccounting changes made in fiscal years endingbeginning after December 15, 2003). These new
standards do2005;
however, this statement does not change the transition provisions of any
existing accounting pronouncements. The adoption of SFAS No. 154 is expected to
have an effectno impact on the Company's consolidated financial statements.
In September 2005, the EITF reached consensus on Issue No. 05-08, "Income Tax
Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature."
EITF 05-08 is effective for financial statements beginning in the first interim
or annual reporting period beginning after December 15, 2005. The adoption of
EITF 05-08 is expected to have no impact on the Company's consolidated financial
statements.
In September 2005, the EITF reached consensus on Issue No. 05-02, "The Meaning
of 'Conventional Convertible Debt Instrument' in EITF Issue No. 00-19,
'Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company's Own Stock.'" EITF 05-02 is effective for new instruments
entered into and instruments modified in reporting periods beginning after June
29, 2005. The adoption of EITF 05-02 is expected to have no impact on the
Company's consolidated financial statements.
In September 2005, the EITF reached consensus on Issue No. 05-07, "Accounting
for Modifications to Conversion Options Embedded in Debt Instruments and Related
Issues." EITF 05-07 is effective for future modifications of debt instruments
beginning in the first interim or annual reporting period beginning after
December 15, 2005. The adoption of EITF 05-07 is expected to have no impact on
the Company's consolidated financial instruments.
61
Note 2. Receivables
2003 2002
--------- ----------2005 2004
---- ----
Trade receivables (including E23 from a
shareholder in 2003 and 2002)E-- E 37 E 3731
Value added tax 72 41refund 42 101
Other 20 15
-------- ----------
129 93-- 7
--- ----
42 139
Allowance for doubtful accounts (including
E23 from a shareholder in 2003 and 2002)-- (29)
(34)
-------- ----------
E 100 E 59
======== ==========--- ----
E42 E110
=== ====
Note 3. Goodwill and Other Intangible Assets
Prior to January 1, 2002, the Company was amortizing goodwill over a five-year
period. In accordance with current accounting standards, goodwill is not to be
amortized beginning January 1, 2002. Goodwill was acquired during 2001 at a cost
of E247 and amortization amounted to E38 for the year ended December 31, 2001.
Had goodwill not been amortized in 2001, net loss would have amounted to
E(15,663) and basic and diluted loss per share would not have changed. No
additional acquisitions have occurred. Based on a review of the fair value of the
Company's only reporting unit at December 31, 2002,2003, management has determined that
the recorded goodwill iswas fully impaired. Accordingly, an impairment loss of
E209 was recorded in the 2002 statement of operations.
Other intangible assets consist of patents which are stated at cost of the fees
paid to the French and US patent office.offices. At December 31, 20032005 and 2002,2004, the
carrying amount of patents was E136E52 and E199E80 net of accumulated amortization of
E189E328 and E125,E248, respectively. Amortization expense relating to patents was E80,
E59, and E64 E64for 2005, 2004 and E13 for 2003, 2002 and 2001, respectively. Amortization expense is
expected to amount to E64 during each of the next two years and E8E52 during 2006, which will completely amortize this asset.
66
asset
unless new patents are filed during that year.
Note 4. Transactions With Affiliates
During 2000, the Company agreed to pay a fee in common stock to MFC Merchant
Bank SA ("MFC Bank") for
services provided in a business combination transaction. The parent of MFC Bank
is a shareholder of the Company. The common shares were not issued in 2000. The
fair value of the shares at the measurement date, amounting to E806 (which may
not be indicative of the value of the Company as a whole), was included in
additional paid-in capital at December 31, 2000. In 2001, a total of 2,025,144
common shares were issued to MFC Bank which resulted in E24 being reclassified
to common stock based on the par value of the shares.
The Company has a non-revolving term credit facility with MFC Bank which allowed
the Company to borrow up to E3,150E3,700 at LIBOR plus 4% (approximately 6.1 %6.40% at
December 31, 2003)2005), with an installment of E900 repayable on June 30, 2004, as extended,2006 and
the balance due December 31, 2006, collateralized by all of the Company's assets
plus any future patents. The Company owed E3,127E3,754 and E1,989E3,368 under this facility
as of December 31, 20032005 and 2002,2004, respectively. The fair value of this note
approximates carrying value because the note is short-term and has a market rate
of interest.
The agreement allows MFC Bank to convert the loan balance into common stock at
U.S.$0.30 per share. Accordingly, 14,765,733 shares have been reserved at
December 31, 2005, for potential issuance.
The Company incurred fees of E37E87 and E155E66(paid with shares of the Company)
to MFC Bank in 20032005 and 2002,2004, respectively, related to management and financing
services.
62
In March 2001, the Company granted warrants under the agreements with MFC Bank
which entitled MFC Bank to purchase 6,001,693 of the Company's common shares.
The warrants allowed MFC Bank to convert to shares an amount equal to the
maximum of the credit facility including unpaid interest plus the arrangement
and retainer fees. The warrants arewere exercisable within a three-year period
beginning August 2000 at approximately E.2319E0.2319 per common share. TheProceeds from
the credit facility were allocated pro-rata based on the relative fair valuevalues of
the beneficial conversion feature amountingcredit facility and related warrants as the proceeds were received up to E14,063 (which may not be
indicativethe
maximum proceeds available under the credit facility. The maximum limit of the
valuecredit facility was E1,300 and the balance outstanding representing proceeds
received under the credit facility was E228. The amount attributable to the
warrants of the Company as a whole) was calculated on March 28,
2001, the grant date, using the Black-Scholes model. This amountE210 was recorded as paid-in capitala discount against the carrying amount of E14,063the
credit facility and allocateda credit to bank fee expense inadditional paid-in-capital. The discount was
amortized using the effective interest method over the original term of the
credit facility, which was due August 31, 2001.
During 2001, MFC Bank exercised warrants to acquire 1,176,294 common shares in
exchange for the arrangement fee and the retainer fee plus E52 in accrued
interest. MFC also exercised warrants to acquire 3,250,000 common shares for
cash in 2001. In 2002, the Company granted 26,775 additional warrants under the
original agreements with MFC Bank. The fair value of the beneficial conversion
feature on these warrants was calculated using the Black-Scholes model which
amounted to E63. This amount was recorded as paid-in capital of E63 and
allocated to bank fee expense in 2002. During 2002, MFC Bank exercised the
remaining warrants to acquire 1,602,174 common shares. This resulted in a
decrease of E372 due on the revolving term credit facility with MFC Bank. This
is a non-cash transaction for purposes of the statement of cash flows.
In June 2001, the Company issued additional warrants to MFC Bank to purchase
103,559 common shares at U.S. $1.725 per share exercisable during a three-year
period. These warrants were issued in connection with MFC Bank's placement of
1,333,333 of the Company's common shares. The warrants were valued at E118 based
on the fair value of the placement fees rendered and was a cost of the
placement. In 2002, MFC Bank exercised warrants to acquire 23,393 common shares.
This resulted in a decrease of E40 due on the revolving term credit facility
with MFC Bank. This is a non-cash transaction for purposes of the statement of
cash flows.
In July 2003, the Company sold a nonoperating subsidiary to an affiliate of MFC
Bank for cash of E25, resulting in no gain or loss.
In May 2004, the Company issued 500,000 shares of common stock to MFC Bank as
consideration for the bank's extension of the due date of the note payable to
the bank. The Company recorded a bank fee for E66 as a result of this issuance.
The amounts payable to shareholders bear no interest, have no collateral, and
are repayable upon the Company becoming profitable. Since the timing of the
Company becoming profitable cannot be determined, the fair value of the amounts
payable to shareholders cannot be determined. The Company is not expected to
become profitable in the near-term, therefore, the amounts payable to
shareholders have been classified as long-term.
During 2003The Company owes officers and 2002, the Company incurreddirectors approximately E529 at December 31, 2005,
for salaries and fees to its Chairman of E239 and E275also for consulting from a company owned by him, and E27 in 2001 from a company owned
by the former Chief Financial Officerexpenses paid on behalf of the Company. Accounts payable at
December 31, 2002, includes E23 of these fees.
67These
amounts are unsecured, do not bear interest and are included in accounts
payable.
63
Note 5. Income Taxes
The reconciliation of income tax on income computed at the federal statutory
rates to income tax expense is as follows:
2005 2004 2003
2002 2001
--------- ---------- --------------- ----- -----
U.S. Federal statutory rates on loss from
operations E (947) E (1,231) E (5,338)E(659) E(749) E(947)
Nondeductible fee paid in warrants and common
stock -- 224 50 21 4,781
Effect of exchange rate changes on
U.S. net operating loss carryforward (235) 103 242 101 -
Change in valuation allowance 894 423 582
1,114 514
Other -- (1) 73
(5) 43
--------- ---------- --------------- ----- -----
Income tax expenseprovision E --- E --- E -
========= ========== ==========--
===== ===== =====
Deferred tax asset is composed of the following:
2003 2002
----------- ----------2005 2004
------- -------
Difference in book and tax basis of amounts payable to shareholder E 82 E 82
Net operating loss carryforwards
United States 1,373 1,0632,224 1,357
France 787 515
----------- ----------
2,242 1,6601,253 1,226
------- -------
3,559 2,665
Less valuation allowance for deferred tax asset (2,242) (1,660)
----------- ----------(3,559) (2,665)
------- -------
Net deferred tax asset E --- E -
=========== ==========--
======= =======
64
The Company's provision for income taxes was derived from U.S. and French
operations. At December 31, 2003,2005, the Company had estimated net operating loss
carryforwards which expire as follows:
United States France
------------- -----------
2004 E - E -
2005 - 94
2006 - 381
2007 - 1,039
2008 - 801
2021-2023 4,038 -
--------- ----------
E 4,038 E 2,315
========== ==========
68
United
States France
------ ------
2005 E -- E 94
2006 -- 381
2007 -- 1,039
2008 -- 801
2009 -- 1,290
2010 -- 80
2011-2025 6,542 --
------ ------
E6,542 E3,685
====== ======
Note 6.7. Stock Option Plans
1994 Amended Stock Option Plan
The Company's 1994 stock option plan provided for the issuance of up to 350,000
shares of the Company's common stock to employees and non-employee directors.
The plan was terminated during 2002. The following table summarizes information
with respect to this plan:
Weighted
Number Average
Number of Exercise
Shares Exercise Price
---------------- ----------------------- ----------
Outstanding and exercisable
at December 31, 2001 73,7502003 63,750 U.S. $ .82
======
Exercised.83
Expired in 2002 (10,000)
--------2004 (50,000) .75
Outstanding and exercisable
at December 31, 20032004 13,750 U.S. $1.11
Expired in 2005 (1,250) .75
-------
Outstanding and 2002 63,750exercisable
at December 31, 2005 12,500 U.S. $ .83
========$1.15
======= ==========
Reserved for future grants at
December 31, 2003 -
========2005 --
=======
At December 31, 2005, exercise prices ranged from $0.75 to $1.1875.
1995 Qualified Incentive Stock Option Plan
65
The Company's board of directors approved a stock option plan on August 15,
1996, which provided for the issuance of up to 150,000 shares of the Company's
common stock to key employees. The plan was terminated during 2002. The
following table summarizes information with respect to this plan:
Weighted
Number Average
Number of Exercise
Shares Exercise Price
---------------- ------------------------ ----------
Outstanding and exercisable
at December 31, 2003, 20022004 and 20012003 100,000 U.S. $$.75
Expired in 2005 (100,000) .75
Outstanding and exercisable
At December 31, 2005 -- --
======== ================
Reserved for future grants
at December 31, 2003 -2005 --
========
69
The exercise price on these options is $0.75.
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
2004 and 2005. The weighted average fair value of these options at the grant
dates were E.12, E.62E0.12 and E2.24E0.62 per option in 2003 2002 and 2001,2002, respectively. The
following table summarizes information with respect to this plan:
Weighted
Number Average
Number of Exercise
Shares Exercise Price
----------------- ------------------------- ---------
Granted in 2001 100,000 U.S. $ 2.86
----------
Outstanding and exercisable
at December 31, 2001 100,000 U.S. $ 2.86
========
Granted in 2002 117,500 U.S. $ .99
----------
Outstanding and exercisable at December 31, 20022003 217,500 U.S. $ 1.83$1.83
========== ========
Granted in 2003 225,000 U.S. $ .14
-------------------
Outstanding and exercisable
at December 31, 2003, 2004
and 2005 442,500 U.S. $ .97
========= ==========
Reserved for future grants
at December 31, 20032005 4,557,500
===================
66
Almost all options have an expiration date ten and a half years after issuance.
At December 31, 2005, exercise prices range from $0.12 to $3.50.
Note 7.8. Commitments and Contingencies
The Company leasesleased property under noncancelable operating leases through January
2006. Future minimum lease payments under noncancelable operating leases are as
follows:
2004 E 7
2005 7
2006 1
------
E 15
======
This could however be cancelled without penalty in March 2005.
Total rent expense per year was E15 for 2005, E32 for 2004, and E24 for 2003, E30 for 2002 and E7 for 2001.2003.
The Company was party to a second case in which a creditor claims that the
Company owes it approximately E30. The claim was filed before a court in Lyon
("Tribunal de Grande Instance") on June 29, 2004.
The Company is involvedsubject to a proceeding brought by Dr. Serres, a current director
and former officer, for alleged wrongful termination of Dr. Serres by the
Company's previous management. Dr. Serres was reinstated as Chief Scientific
Officer by the new Board of Directors retroactively from May 5, 2003 until
November 3, 2003, when he was promoted as Head of Exploratory Research, his
current position with the Company. In exchange for being reinstated
retroactively, Dr. Serres agreed to forfeit all legal and punitive compensation
for having been terminated without cause. The French Industrial Tribunal granted
Dr. Serres E46 in various mattersan emergency injunction on October 14, 2003. The final amount
which Dr. Serres has claimed in terms of litigation arisinglegal and punitive compensation if the
case had been allowed to run its full course is in excess of E175. The Company's
French legal counsel believes however that this claim is without merit as under
French law, salaried company directors and officers are only eligible for
severance pay and other compensation if certain, very stringent, conditions are
met which, in the ordinary
course of business. InCompany's counsel's opinion, is evidently not the opinion of management,case for Dr.
Serres. The agreement between Dr. Serres and the estimated outcome of such
issues will not have a material effect on the Company's financial statements.Company has yet to be
finalized.
Note 8.9. Subsequent eventsEvents
In January 2004, the Company issued a total of 2,000,000 common shares to two
investors for cash of E166. In February 2004,2006, the Company issued 2,500,000 common shares to MFC Merchant Bank
S.A. as a fee for postponing the partial repayment due on December 31, 2005 to
June 30, 2006, 4,000,000 common shares to an investor for cash of E208. As part of this new financing,
the Company also issued warrants entitling the investors to acquire an
additional 4,500,000$200,000 and 50,000
common shares atto a price of $.10 per share. The total fair
value of these warrants at the grant dates was E102. All warrants expire July
31, 2004.
70bank as introduction fee. In March 2006, 200,000 shares were
issued to an individual as introduction fee and 5,750,000 common shares to two
investors for $230,000.
67
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 on March 30, 2004.April 14, 2006.
Mymetics Corporation
By: /s/ Christian J. F. Rochet
-------------------------------------------------------------------
Name: Christian J. F.J.F. Rochet
Title: Chief Executive Officer
68
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 capacity and on March 29, 2004.
Signature Title
--------- -----
/s/ Christian J.F. Rochet Chief Executive Officer and
--------------------------- Director (Principal Executive
Christian J.F. Rochet Officer)
/s/ Ernst Luebke Chief Financial Officer and
--------------------------- Director (Principal Financial and
Ernst Luebke Accounting Officer)
/s/ Pierre-Francois Serres Director
---------------------------
Pierre-Francois Serres
/s/ Robert Zimmer Director
---------------------------
Robert Zimmer
71April 14, 2006.
Signature Title
- --------- -----
/s/ Christian J.F. Rochet Chief Executive Officer and Director
- ------------------------------------- (Principal Executive Officer)
Christian J.F. Rochet
/s/ Ernst Luebke Chief Financial Officer and Director
- ------------------------------------- (Principal Financial and Accounting Officer)
Ernst Luebke
/s/ Sylvain Fleury Chief Scientific Officer and
- ------------------------------------- Director
Sylvain Fleury, Ph. D.
69
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
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
Corporation and the stockholders of Mymetics S.A. listed on the
signature page thereto (1)
2.3 Purchase Agreement dated October 17, 1998 between the Corporation and
the majority stockholders of Nazca Holdings Ltd. (2)
2.4 Amendment to the Agreement dated October 17, 1998 between the
Corporation and the majority stockholders of Nazca Holdings Ltd. (3)
2.5 Revised Purchase Agreement dated July 28, 1999 between the Corporation
and the majority stockholders of Nazca Holdings Ltd. (4)
2.6 Share Exchange Agreement dated July 30, 2002 between the Corporation
and the stockholders of Mymetics S.A. listed on the signature page
thereto (5)
3(i) Articles of Incorporation of the Corporation (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
4.3 Form of Share Exchange Agreement
9.1 Voting and Exchange Trust Agreement dated March 28, 2001, among the
Corporation, 6543 Luxembourg S.A. and MFC Merchant Bank S.A. (8)
10.1 Services Agreement dated May 31, 2001, between the Corporation and MFC
Merchant Bank, S.A.(7)
10.2 Employment Agreement dated May 3, 2001, between Pierre-Francois Serres
and the Corporation (7)
10.3 Indemnification Agreement dated March 28, 2001, between the
Corporation and MFC Bancorp Ltd. (7)
10.4 Agreement dated for reference May 15, 2000, between the Corporation
and Maarten Reidel (7)
72
10.5 Preferred Stock Redemption and Conversion Agreement dated for
reference December 21, 2000, between the Corporation and Sutton Park
International Ltd. (10)
70
10.6 Preferred Stock Conversion Agreement dated for reference December 21,
2000, between the Corporation and Med Net International Ltd. (11)
10.7 Preferred Stock Conversion Agreement dated December 21, 2000, between
the Corporation and Dresden Papier GmbH (11)
10.8 Assignment Agreement dated December 29, 2000, among the Corporation,
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 Corporation (1)
10.10 Amended Credit Facility Agreement dated for reference August 13, 2001,
between MFC Merchant Bank, S.A. and the Corporation (16)
10.11 Second Amended Credit Facility Agreement dated for reference February
27, 2002, between MFC Merchant Bank, S.A. and the Corporation (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 Corporation (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 28, 2001, among the Corporation, 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 28, 2001, between the Corporation 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 Corporation Stock Option Plan (7)
10.19 Employment Agreement dated March 18, 2002, between the Corporation and
Peter P. McCann (14)
10.20 Consulting Agreement dated August 31, 2001, between the Corporation
and Michael K. Allio (8)
10.21 Amendment to Consulting Agreement dated August 21, 2002, between the
Corporation and Michael K. Allio (16)
10.22 Employment Agreement dated March 18, 2002, between the Corporation and
Dr. Joseph D. Mosca (15)
73
10.23 Separation Agreement and Release dated January 31, 2003, between the
Corporation and Peter P. McCann (16)
10.24 Director and Non-Employee Stock Option Agreement dated July 19, 2001,
between the Corporation and Robert Demers (8)
10.25 Director and Non-Employee Stock Option Agreement dated July 19,
71
2001, between the Corporation and Michael K. Allio (8)
10.26 Director and Non-Employee Stock Option Agreement dated July 19, 2001,
between the Corporation and John M. Musacchio (8)
10.27 Director and Non-Employee Stock Option Agreement dated July 19, 2001,
between the Corporation and Patrice Pactol (8)
10.28 Director and Non-Employee Stock Option Agreement dated July 19, 2001,
between the Corporation and Pierre-Francois Serres (8)
10.29 Director and Non-Employee Stock Option Agreement dated July 23, 2002,
between the Corporation and Pierre-Francois Serres (16)
10.30 Director and Non-Employee Stock Option Agreement dated July 23, 2002,
between the Corporation and Patrice Pactol (16)
10.31 Director and Non-Employee Stock Option Agreement dated July 23, 2002,
between the Corporation and Robert Demers (16)
10.32 Director and Non-Employee Stock Option Agreement dated July 23, 2002,
between the Corporation and John M. Musacchio (16)
10.33 Director and Non-Employee Stock Option Agreement dated July 23, 2002,
between the Corporation and Michael K. Allio (16)
10.34 Director and Non-Employee Stock Option Agreement dated August 21,
2002, between the Corporation and Michael K. Allio (16)
10.35 Director and Non-Employee Stock Option Agreement dated June 20, 2002,
between the Corporation and Peter P. McCann (16)
10.36 Director and Non-Employee Stock Option Agreement dated July 23, 2002,
between the Corporation and Peter P. McCann (16)
10.37 Director and Non-Employee Stock Option Agreement dated February 6,
2003, between the Corporation and Peter P. McCann (16)
10.38 Patent Pledge Agreement dated November __, 2002 among Mymetics S.A.,
Mymetics Deutschland GmbH, the Corporation and MFC Merchant Bank S.A.
(16)
10.39 Third Amendment to the Credit Facility Agreement dated for reference
December 31, 2005, between MFC Merchant Bank, S.A. and the Corporation
(17)
10.40 Fourth Amendment to the Credit Facility Agreement dated for reference
February 16, 2005, between MFC Merchant Bank, S.A. and the Corporation
(17)
10.41 Consulting Agreement dated for reference January 1, 2004, between the
Centre Hospitalier Universitaire Vaudois (CHUV), the Corporation and
Dr. Sylvain Fleury, Ph.D. (18)
10.42 Consulting Agreement dated for reference January 1, 2004, between the
Corporation and Professor Marc Girard, DVM, D.Sc. (18)
10.43 Cooperation and Option Agreement dated March 10, 2005, between the
Corporation and Pevion A.G. (18)
10.44 Consulting Agreement dated March 23, 2005, between the
72
Corporation 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 Corporation
11.1 Statement Regarding Calculation of Per Share Earnings.
21.1 List of Subsidiaries
74
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 Corporation's Schedule 14C filed with the
Securities and Exchange Commission on April 26, 2001.
(2) Incorporated by reference to the Corporation's report on Form 8-K filed
with the Securities and Exchange Commission on October 22, 1998.
(3) Incorporated by reference to the Corporation's report on Form 8-K/A filed
with the Securities and Exchange Commission on April 15, 1999.
(4) Incorporated by reference to the Corporation's report on Form 8-K/A filed
with the Securities and Exchange Commission on August 13, 1999.
(5) Incorporated by reference to the Corporation'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 Corporation'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 Corporation'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 Corporations 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 Corporation'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 Corporation'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 Corporation's Registration Statement on
73
Form S-8, File No. 333-15831, filed with the Securities and Exchange
Commission on November 8, 1996.
(13) Incorporated by reference to the Corporation's Registration Statement on
Form S-8, File No. 333-15829, filed with the Securities and Exchange
Commission on November 8, 1996.
75
(14) Incorporated by reference to the Corporation's report on Form 10-K for the
fiscal year ended December 31, 2001,2003, and filed with the Securities and
Exchange Commission on March 29, 2002.
(15) Incorporated by reference to the Corporation'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 Corporation's report on Form 10-K for the
fiscal year ended December 31, 2002,2004, filed with the Securities and Exchange
Commission on March 27, 2003.
76
(17) Incorporated by reference to the Corporation's report on Form 8-K filed
With the Securities and Exchange Commission on February 18, 2005.
(18) Incorporated by reference to the Corporation's report on Form 10-K for the
fiscal year ended December 31, 2004, filed with the Securities and Exchange
Commission on March 30, 2004.
74