10-K 1 l24088ae10vk.txt MYMETICS CORPORATION 10-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- 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, 2006 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ ---------- COMMISSION FILE NUMBER 000-25132 MYMETICS CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 25-1741849 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
European Executive Office 14, rue de la Colombiere CH-1260 Nyon (Switzerland) (Address of principal executive offices) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 011 41 22 363 13 10 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, $0.01 PAR VALUE (Title of Class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X] 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 (1) has filed all reports required to be filed be Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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. $1,454,563 as of June 30, 2006, 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 19, 2007, there were 135,627,464 shares of the Registrant's Common Stock outstanding. ================================================================================ 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 17, 2007, 1 Euro was convertible into 1.33 United States Dollars. FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements, which are identified by the words "believe," "expect," "anticipate," "intend," "plan" and similar expressions. The statements contained herein which are not based on historical facts are forward-looking statements that involve known and unknown risks and uncertainties that could significantly affect our actual results, performance or achievements in the future and, accordingly, such actual results, performance or achievements may materially differ from those expressed or implied in any forward-looking statements made by or on our behalf. These risks and uncertainties include, but are not limited to, risks associated with our ability to successfully develop and protect our intellectual property, our ability to raise additional capital to fund future operations and compliance with applicable laws and changes in such laws and the administration of such laws. These risks are described below and in "Item 1. Business," "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" included in this Form 10-K. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date the statements were made. i TABLE OF CONTENTS PART I ITEM 1. BUSINESS.......................................................... 1 ITEM 1A. RISK FACTORS...................................................... 13 ITEM 1B. UNRESOLVED STAFF COMMENTS......................................... 19 ITEM 2. PROPERTIES........................................................ 19 ITEM 3. LEGAL PROCEEDINGS................................................. 19 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............... 20 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES................. 21 ITEM 6. SELECTED FINANCIAL DATA........................................... 25 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................................. 25 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........ 32 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 ITEM 9B. OTHER INFORMATION................................................. 34 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERANCE............. 35 ITEM 11. EXECUTIVE COMPENSATION............................................ 38 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS................................... 40 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE...................................................... 42 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES............................ 42 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES........................... 43 SIGNATURES................................................................. 67
ii PART I ITEM 1. BUSINESS THE CORPORATION OVERVIEW We are a biotechnology research and development company devoted to fundamental and applied research in the area of human biology and medicine conducting our business from our European offices located in Lausanne and Nyon (near Geneva), 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 6543 Luxembourg S.A., a joint stock company organized in 2001 under the laws of Luxembourg, and 99.9% of Mymetics S.A. (formerly Hippocampe S.A.), a company organized in 1990 under the laws of France ("Mymetics S.A."), which is a subsidiary of 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 will result in strong intellectual property that can generate revenues for us in the future. Our business model is to conduct our research and development far enough to sign a partnership agreement with one or more major pharmaceutical companies active in either or both the fields of HIV-AIDS preventive vaccines and therapies. DEVELOPMENT OF THE COMPANY From our inception in 1990 to December 1997, we operated in the environmental services industry, focusing on thermal treatment, remediation services and waste oil recycling. In February 1995, we completed an initial public offering. In 1998 and 1999, after disposing of our environmental services businesses, we provided consulting services to an industrial customer in Europe. In June 1999, we acquired a majority interest in Nazca Holdings Ltd., whose business involved the exploration for and development of groundwater resources in Chile. Following the disposal of our interest in Nazca in July 2000, we did not have an operating business. In March 2001, we acquired 99.9% of the outstanding shares of Mymetics S.A. in consideration for shares of our common stock and shares of Class B Exchangeable Preferential Non-Voting Stock of 6543 Luxembourg S.A., or Preferential Shares, which are convertible into shares of our common stock. In 2002, we acquired all but 0.01% of the remaining outstanding common stock of Mymetics S.A. pursuant to share exchanges with the remaining stockholders of Mymetics S.A. The terms of these share exchanges were substantially similar to the terms of the share exchange that occurred in March 2001. In 2004, all the remaining convertible shares of 6543 Luxembourg S.A. not already held by Mymetics Corporation were converted into shares of Mymetics Corporation. MYMETICS CORPORATION Mymetics's primary objective is to develop vaccines and therapies to prevent and treat the effects of certain retroviruses, including the human immunodeficiency virus, or HIV, the virus that leads to acquired immunodeficiency syndrome, or AIDS. Additional applications of Mymetics's research include potential treatments and/or vaccines for human oncoviral leukemias, multiple sclerosis, and organ transplantation. Prior to 2002, our activities such as design of the prototype molecules, synthesis, and in vitro testing, had been conducted exclusively in Europe. During the second quarter of 2002, we launched programs in the United States in an attempt to reinforce our intellectual property portfolio and to accelerate the commercialization of our technology. Our previous management believed that expanding 1 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, it decided to limit these activities in January 2003. Following the management changes of July 2003, our activities have again been conducted exclusively in Europe, with certain pre-clinical tests being performed in the United States by the National Institutes of Health (NIH). Under our "best of class" R&D model, the overall research strategy, as well as most original ideas, are defined and contributed by our own scientific team, including Dr. Sylvain Fleury, Ph.D. (Chief Scientific Officer) and Professor Marc Girard, DVM, D.Sc. (Head of Vaccine Development). Any given project is first subdivided into "technology modules" which are then subcontracted to "best of class" teams from academia, public or private laboratories or industry, all chosen for their high standards and specific knowledge. 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 available through other vendors and to date there have not been any providers that are the only source of expertise that we require. We believe that having such specialized expertise in-house would make us dependent on the staff required to carry out such tasks. We believe we benefit from the established relationships with our partners and that it is a cost effective approach to achieving our business plan. Mymetics pays for and coordinates the work, consolidates the results and retains all intellectual property associated with it. In certain limited cases, we will sign partnership agreements with companies offering technologies that can enhance or add value to our own products under development. An example of this approach is the scientific collaboration agreement with Pevion AG, a small Swiss company that granted us an exclusive license to use their Virosome vaccine delivery technology in conjunction with our AIDS preventive vaccine under development. Under this model, Mymetics retains all intellectual property rights in the combined research and applies for domestic and international patents whenever justified. In limited cases, the patent ownership is shared with certain partners such as the French INSERM (Institut National de la Sante Et de la Recherche Medicale). In this case, Mymetics nevertheless received an exclusive license for the eventual exploitation of the shared patents. Our business model is to sign a partnership agreement with at least one of the few major pharmaceutical companies presently active in the preventive vaccine against HIV-AIDS as soon as our human clinical Phase I trials are completed. We are trying to achieve this by June 2008. We expect that partnership agreement to be typical in the world of biotechnology: an initial cash payment, followed by a series of payments associated with specific milestones and finally, royalties on any sales of end products, assuming these will have been approved by the various regulatory authorities involved, such as the Food and Drug Administration. We would not expect this to occur prior to 2010-2011. LUXEMBOURG 6543 S.A. Our Luxembourg subsidiary, Luxembourg 6543 S.A., was founded in 2001 in connection with the acquisition of Mymetics S.A. by Mymetics Corporation as a vehicle to allow the former French shareholders of Hippocampe S.A. to defer French taxes due on the exchange of their Hippocampe S.A. shares for Mymetics Corporation shares. Luxembourg 6543 S.A. is dormant. We intend to liquidate it as soon as Mymetics S.A. is dissolved following its emergence from its receivership status discussed below. MYMETICS S.A. Our French subsidiary, Mymetics S.A. (formerly, Hippocampe S.A.), founded in 1990, is a biotechnology research and development company devoted to fundamental and applied research in the area of biology 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 requires an assessment of the actual economic value of the patents, which the French tax authorities will only accept as resulting from one or more arms-length transactions in which the technology protected by the patents is licensed or sold to one or more third parties. Mymetics S.A. is presently inactive. Its last salaried employee completed her assignment and had her employment contract terminated on January 31, 2005. We do not intend to hire new staff in France in the 2 foreseeable future, and all R&D will be conducted by Mymetics Corporation. We intend to liquidate Mymetics S.A. as soon as it emerges from receivership, discussed below. On February 7, 2006, the Tribunal de Commerce in Lyon, France placed Mymetics S.A., under receivership ("Redressement Judiciaire") as a result of an ongoing dispute between Mymetics Corporation and a former officer and director, Dr. Pierre-Francois Serres, who obtained an initial judgment against Mymetics S.A. in France in the amount of E173,000 for an alleged wrongful termination by the Company's prior management during 2003, which judgment was reversed on appeal. The court appointed two judges to oversee the case, a lawyer to represent the creditors and a judicial administrator to manage Mymetics S.A., all of whom are considered agents of the court. The court further imposed a two-month "observation period" during which management and the administrator should strive to find a solution to the crisis. This period has been extended several times, the last time until May 7, 2007. We expect to arrive at a viable solution before the end of this observation period. Under the order of the French court, Mymetics S.A. recently sold its patents to Lomastar Technologies for E80,000 in order to pay its creditors and the administration costs of the case. We do not believe that the sale of the patents is significant to us since they expire in 2017 and 2018, the dates we first expect to be selling the vaccine. To protect the value of our intellectual property, however, we are negotiating an exclusive worldwide perpetual license with Lomastar Technologies with respect to these patents that we hope to conclude in the next several weeks. There can be no assurance, however, that we will be successful in achieving this result, which could limit the value of our intellectual property and the potential value of our company to a prospective purchaser. TECHNOLOGY CURRENT APPROACHES Current drug treatments in HIV focus on slowing or impeding the progress of the virus once it has infected the body's host cells. Recent approaches seek to develop therapies that prevent the virus from fusing with host cells. If the virus cannot fuse, it cannot enter inside the cell(infect) and reproduce, thereby facilitating the successful fight of the body's immune system against the invasion. HIV transmission generally occurs through sexual contact. Indeed, semen and cervico-vaginal secretions may potentially transmit HIV to the gastrointestinal, anorectal and genitourinary tracts because these fluids contain cell-free HIV particles and numerous HIV-infected cells. Contracting HIV infection may be subdivided into two main events. The first event, considered as a very early step, corresponds to viral translocation across mucosal surfaces that facilitates virus penetration and spreading into the body. The second event, which usually takes place after virus translocation such as by 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. Therefore, vaccines or therapies for preventing this very early event of HIV translocation at the mucosa levels (ex. 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. MYMETICS'S APPROACH Mymetics proposes an innovative AIDS vaccine that could prevent or reduce HIV entry at the mucosal level (primary entry: early event) as well as preventing cell infection by HIV (late event). To achieve this goal, Mymetics has combined three important concepts in the vaccine design for eliciting different sets of antibodies: 3 1- Preferential induction of mucosal antibodies for protecting various anatomical compartments Mymetics postulates that the induction of protective mucosal antibodies such as IgA and secretory IgA might block the early event of HIV entry across the genito-reproductive and intestinal tracts. These mucosal antibodies could also contribute to prevent the HIV infection of target cells located just under the mucosal epithelium, thus preventing HIV entry and spreading in the body. Neutralizing blood antibodies (systemic) such as IgG will also be elicited by Mymetics's vaccine candidate. These blood antibodies will likely act on later events that may take place into secondary lymphoid organs, which consist to prevent the infection of target cells in the periphery, outside of the mucosal system. These mucosal (mostly IgA) and blood (mostly IgG) antibodies should act synergistically for optimal protection against HIV transmission and they may circulate from one compartment to another one, especially blood antibodies migrating to the mucosa levels. 2- Focused antibody response against relevant conserved gp41 regions To achieve this objective, Mymetics's HIV vaccine candidate is constituted of gp41 peptides and recombinant proteins that are devoid of immunodistractive and useless areas. Generally, the immune system develops immune responses toward all possible regions of the foreign antigens (peptides, proteins, etc.). However, antigens are often 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, it is common to observe an immune response that preferentially recognizes some protein areas (immunodominant), while others are neglected. Furthermore, viruses have developed antigens that contain often immunodominant regions for distracting the immune system. These immunodistractive regions may have little or no function for the pathogen protein but may blind the immune system. Consequently, immune responses against the pathogen might be sometimes useless. Mymetics is developing vaccines that contain different antigens expressing limited and useful immunodominant regions, while useless immunodistractive regions have been removed or altered with minimal effect on the immunogenicity of the viral antigen. Using this approach, it forces the antibody response to focus on relevant viral protein regions. 3- Minimal mimicry This concept is intended to remove in part or entirely the human protein homologies naturally present in many HIV proteins that serve as a vaccine component. To achieve that objective, Mymetics intends to use as a candidate vaccine the smallest engineered viral antigen sequence for two main reasons. First, the smaller the protein, the more limited are the homologies with human proteins. Second, it is easier to remove human homologies into a small viral protein or peptide because of their limited distribution. Using this approach, Mymetics believes that an HIV vaccine constituted of viral antigens or genes encoding viral antigens with minimal human homologies should reduce the risk of developing potential long-term autoimmunity side-effects after HIV vaccination. How to trigger the protective immune response? Mymetics's vaccine uses the technology of Virosomes(R), a lipid-like structure highly efficient for delivering the vaccine's active ingredients. The virosome-based vaccine is constituted of two types of virosomes, each with surface anchored gp41-derived conserved antigens, each eliciting different antibodies not mutually exclusive with a broad activity spectrum: - Virosomes with peptides corresponding to the conserved Membrane Proximal Region (MPR) of gp41 for triggering protective mucosal antibodies (mostly IgA) against a broad spectrum of HIV isolates. - Virosomes with soluble/stable recombinant gp41 without the MPR for eliciting complementary neutralizing IgA and IgG antibodies. 4 This Virosomes(R) technology is already market approved in more than 40 countries with excellent safety profile and no mucosal adjuvant is required for triggering mucosal antibodies. We executed an exclusive License Agreement dated March 1, 2007 with Pevion Biotech for the use of Virosomes(R) in the production of our HIV vaccine. We believe that our exclusive agreement with Pevion Biotech provides a competitive advantage by allowing us to avoid using an adjuvant for our HIV vaccine. We believe that adjuvants have not sufficiently advanced to allow clinical testing for our HIV vaccines. By carefully modifying parts of the HIV gp41 molecule, Mymetics has obtained vaccine subunits such as gp41 peptides and engineered recombinant gp41 molecules that: - May form stable dimers, trimers or tetramers and the protein folding isclose 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; - Can be chemically synthesized or easily produced by recombinant bacterialike E. coli; - Have been stripped of immunodominant areas that generates numerous non-neutralizing antibodies, which may fool the immune response. - Have been stripped of its key IL-2-like sequence and other human homologies, minimizing the important potential cross-reaction with host proteins that may contribute to the destruction of the immune system seen in HIV patients; This type of new engineered gp41 molecules should be able to elicit antibodies with a broad spectrum of action (cross-clade neutralization like A, B and C): blocking virus translocation across the mucosal barrier and/or to inhibit cell infection, thus preventing HIV-1 infection. Based on our recent research results, we believe that Mymetics's HIV vaccine candidate and strategies definitely place us amongst the most advanced teams devoted to AIDS prophylactic vaccine research that aims to prevent HIV transmission across the mucosal barrier. Mymetics's 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 pathogens. In the case of HIV, for example, an infected host cell alerts the immune system by secreting interleukine-2 (IL-2), a special protein (called a cytokine) that acts as a key 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 next time the invaders try to enter, they will be swiftly attacked and disarmed. HIV AND AIDS 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 5 O, group M being responsible for the current AIDS pandemic. Group M is split into nine genetic subtypes, also called nine clades (designated A through K, with no E or I). The original definition of clades was based on short genomic sequences, mostly within the HIV envelope protein (Env: gp160). These nine clades have uneven geographic distribution patterns. Clade C circulates in South Africa, India and parts of China. Clade A and D are common in East Africa and clade B is common in North & South America and Western Europe. Looking at the global numbers, it emerges that four clades (A, B, C and D) plus two recombinant forms called CRFs 01 and 02 (both of which are about 70% clade A) account for over 90% of all infections worldwide. From this perspective, diversity can be mostly limited to 4 key major clades, plus small contributions from the non-A segments of these two CRFs. According to the statistics, clade C represents the world's most dominant HIV (>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. Once attached, the virus penetrates the cell and commandeers the cell's machinery. Then it rapidly replicates itself. HIV-1 is lethal since it targets the most central cell of the immune system, the CD4+ T cells which produce the IL-2 cytokine, a key messenger for immune cells. These cells usually coordinate the cellular and humoral responses that are directed to thwart the pathogen (HIV). When the number of such CD4+ T cells decreases significantly over time, the amount of IL-2 becomes too low for an efficient immune attack orchestration. Consequently, HIV as well as other pathogens 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 million new virus particles are created daily) - Mutates rapidly: as it reproduces itself, it makes mistakes that produce new virus particles that are slightly different; these differences make the virus harder to target by the immune system. 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". Several other homologies between HIV and human proteins have been reported. It has also been reported that most of HIV infected subjects develop auto-antibodies (antibodies attacking your own proteins), even in early phase of the infection. It has been postulated that some mimicries must exist between HIV and human proteins, which could lead to such autoimmunity problems. The shaft of the virus' harpoon, called gp41, actually appears to "mimic" the host cell's IL-2. This dynamic enables the virus to attach itself to the host cell membrane at a precise portal. An unusual consequence: when the "soldiers" (antibodies against the viral gp41 protein) arrive to battle the virus, they can potentially "confuse" the virus'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. Such events likely contribute to the development of AIDS, a fatal disease that affects an increasing number of people worldwide. In light of these reported observations, Mymetics is using this information to develop a safer HIV vaccine that would be constituted of vaccine subunits having minimal human homologies. 6 WHERE ARE WE AND WHERE ARE WE GOING? From 1997 to 2001, Mymetics's R&D has documented the existence of an important three-dimensional molecular mimicry between the gp41 glycoprotein of HIV-1 and the human interleukin-2 (IL-2) cytokine, a mimicry also found in lentiviruses causing AIDS in other animal species. Mymetics has explored this mimicry as the starting point for developing a safe HIV-1 candidate vaccine capable of eliciting protective antibodies, while preventing potential harmful cross-reactivities toward host proteins such as the human IL-2 (Mymetics US Patent 6,455,265). We believe that this innovative concept may render vaccines from the 21st century as efficacious as those from the 20th century, in addition to being safer. Together with Protein'eXpert S.A. (Grenoble, France), 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 cluster I and 2F5/4E10 epitopes, in addition of being mutated in one important IL-2 mimicry area. The design of the first gp41 generation was intended to identify new important epitopes as well as to focus the immune response on possible neutralizing epitopes different from the 2F5/4E10 previously identified by other teams. In 2004, we started a collaboration with Dr. Morgane Bomsel(Cochin Institute, Paris, France), a renowned scientist in the field of HIV transcytosis and mucosal immunity. Dr Bomsel had few monoclonal IgA antibodies obtained from a phage display libraries issued from B cells of HIV resistant women. These monoclonal IgA antibodies were found later capable of preventing HIV transcytosis and HIV infection of primary isolates. Interestingly, these IgA have recognized epitopes on our gp41 first generation devoid of the 2F5/4E10 epitopes, meaning that other potential neutralizing epitopes exist and they are not limited to IgG isotypes. From January to August 2004, 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 by our academic collaborators. Thus, Dr. Morgane Bomsel obtained 60% inhibition of HIV-1 transcytosis with primary strains. Sera were also tested in the laboratory of Dr Christiane Moog (Institut Pasteur, Strasbourg, France), a 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 are similar to those obtained with the 2F5 monoclonal antibody (>90% inhibition), one of the most potent neutralizing antibodies so far identified. Infection of primary human macrophages by primary HIV-1 strains was also strongly inhibited (>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 first three years (2003-2005), we were strongly convinced that orienting the anchorage of gp41 proteins or gp41-derived peptides onto stable synthetic lipid membranes would better present the antigen to the immune system. Therefore, a third generation of recombinant gp41 proteins was 7 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 system: testing nasal administration alone or in combination with intra-muscular injection. In parallel to the protein approach, during Winter-Spring 2005 and in collaboration with Pevion Biotech Ltd. (Bern, Switzerland) and Dr. Bomsel, the second vaccine prototype has been formulated. This prototype consisted of using peptides derived from the conserved proximal membrane region of the gp41 ectodomain grafted in an oriented manner onto biosynthetic stable lipidic spheres called Virosomes(R). Rabbit immunizations (France) were launched from May to November 2005 for targeting the mucosal immune response. Biological samples were analyzed and all rabbits have produced specific antibodies toward the gp41 peptides. More importantly, when these samples were tested into transcytosis assays, most of these vaginal and rectal secretions (diluted 10-fold for the assay) contained antibodies that were able to prevent translocation (transcytosis) of primary R5 clades B and C with an efficiency of 70-90%, which is close to what is observed with human secretions isolated from HIV-resistant women. This successful rabbit study lead us to another pre-clinical trial in 2006 on non-human primates (macaques), hoping to reproduce the same results with virosomes-gp41 peptides. From March to September 2006, sixteen female macaques (animal facilities in Beijing, China) were immunized four times (40ug/100ul injected) over 6 months. - Mymetics's vaccine based on virosomes(R)-gp41 peptides have elicited mucosal IgA and blood IgG antibodies in >90% of vaccinated macaques. - These IgA and IgG antibodies could get redistributed into the genital and intestinal compartments, even in animals vaccinated by intra-muscular injection in the absence of mucosal adjuvant. - These antibodies were also capable of preventing at least 60% of HIV entry across a human mucosal epithelium in vitro and up to 98% in two out of sixteen animals. Significant inhibitions were obtained with primary HIV from clades B and C. - Such success into the macaque animal model, in the absence of mucosal adjuvant, is a major breakthrough which is highly encouraging for future human clinical trials. - Antibodies from secretions will be purified and evaluated for their potential to neutralize HIV infection. Following vaccination, macaques will be rectally challenged 5 months later with SHIV162P3 for measuring the level of protection. In parallel, we are close to finishing the production of the gp41 4th generation for clades B and C that will combine the best characteristics of the first three generations of gp41 previously synthesized. This gp41 will be grafted on virosomes for being tested during the next pre-clinical trial on non-human primates. This second pre-clinical trial should be launched in Spring 2007 for evaluating the vaccine candidate constituting two virosomes: virosomes-gp41 peptides combined with virosomes-rgp41. Mymetics is expecting this HIV vaccine prototype to trigger the best immune protection. Clinical lots of gp41 peptides and proteins are planed for Q3 2007, then toxicology and phamacokinetics evaluations will be conducted. If pre-clinical results are as good as with induction of mucosal antibodies as the primary end point of the study. Visit the IAVI web site (www.iavi.org) for more background information on AIDS. 8 VACCINAL USE OF THE MIMICRY DISCOVERY Our current research modules focus on the following two fields: PREVENTIVE VACCINES Mymetics believes that its discovery of the host-virus IL-2 mimicry opens the door to novel therapeutic and HIV-AIDS preventive vaccine strategies. We are convinced that properly mutated and engineered trimeric gp41 molecules represent excellent candidate vaccines because they are devoid of the "IL-2" like structure and other major human homologies and consequently, its potential harmful associated auto-immune side effects. Furthermore, these engineered gp41 have conserved their antigenic properties and correspond to the most conserved region of the viral envelope glycoprotein, which otherwise exhibits considerable genetic diversity. Mymetics specific preventive vaccine would be "universal" in that it would train the body's mucosal and blood immune system to recognize and defeat a broad array of HIV strains, while preventing the potential induction of the autoimmune reaction toward IL-2. Mymetics recent advances in protein engineering, peptide designs and mucosal antibody results have kept Mymetics's vaccine program very competitive. THERAPEUTIC MOLECULES Based on insights into mimicry, we have developed a series of synthetic peptides, based on the well-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. FIV causes 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 in light of our difficult financial situation. Similarly, we stopped research on HIV peptides 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 drug orally available, which could become highly attractive. We currently have compound prototypes potentially capable of commercialization, including: - 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 slowing down the spread of the virus. 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 has a great deal of useful information about AIDS, vaccines and other related issues in a few easy-to-read pages at (www.iavi.org/pdf/globalscience.pdf). RESEARCH AND DEVELOPMENT EXPENSES INTELLECTUAL PROPERTY We are the exclusive owner of intellectual property relating to our core business which is focused on the development of novel HIV-AIDS preventive vaccines and therapeutics. Particularly, we have: - Two issued French patents FR99 06528 and FR01 15424 on IL-2 mimicry. - One European issued patent EP1034000 on IL-2 mimicry. 9 - One U.S. issued patent US 6,455,265 on gp41 & IL-2 mimicry and its corresponding national filings and divisional filings in various countries including Europe, the United States, Japan, Canada and Israel. - Filed two patents under the Patent Cooperation Treaty, or PCT: - WO 03/048187 (PCT/US02/38152 filed on November 27, 2002 for peptides rich in tryptophane as inhibitors of HIV infection from PFS). - WO 03/104262 (PCT/US03/18251 filled on June 10, 2003 for describing gp41 peptides or proteins to block HIV fusion/infection), with national phases in the United States and EP. - We have additionally filed four United States provisional applications related to the field. - On July 29, 2004, we applied for a new PCT (PCT/IB2004/002433 or WO2005010033) which covers our mutated, trimeric, stable recombinant gp41 protein. - On May 2, 2005, we applied with INSERM for a new PCT (PCT/IB05/001182), which covers the description of IgA antibodies against our recombinant gp41 protein. - On March 3, 2006, we applied with INSERM and Pevion for a new PCT which covers our latest prototype HIV-AIDS preventive vaccine based on the usage of the virosome technology with HIV peptides and proteins. 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 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 license or sell such intellectual property to third parties on financially favorable terms. Although we believe that the results of our research and development activities have been favorable, there are numerous entities and individuals conducting research and development activities in the area of human biology and medicine all of which could be considered competitors. We are conducting research aimed at developing a "universal" preventive vaccine that could elicit protective mucosal and blood antibodies against HIV, with a primary interest for the clade C because of its world dominance. Our vaccine shall provide protection against a broad array of viral HIV-1 strains from different clades such as A, B, C and D. In the field of HIV vaccines, the failure in 2003 of the VAXGEN product in Phase III clinical 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. The worldwide vaccine market is dominated by four large multinational companies: Sanofi Pasteur S.A. (formerly Aventis Pasteur S.A.), Merck & Co., GlaxoSmithKline Plc, and Novartis-Chiron Inc. Other companies such as Progenics Pharmaceuticals, Inc., are developing therapeutic HIV vaccines, i.e. vaccines that target HIV-infected persons in an attempt to control the development of the disease. 10 While many of these individuals and entities have greater financial and scientific capabilities, and greater experience in conducting pre-clinical and clinical trials, we believe that our innovative approach to vaccine development is very competitive. Our approach is based on three main aspects: 1) design of lipid membrane anchored-antigens forming dimmers, trimers and tetramers that force the immune system to focus the response only on key relevant conserved regions; 2) the induction of protective antibodies not only in the blood but most importantly in the genito-reproductive and intestinal mucosal compartments (primary HIV entry site) and; 3) on the observed immunological cross-reactivity (or mimicry) between the well preserved, antigenic and immunodominant domain of GP41 and IL-2, and on the observation of expected autoimmune consequences in HIV infected subjects. Overall, our vaccine 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 include: - Sub-unit vaccine: a technology addressing a piece of the outer surface of HIV, such as GP160, GP140 or GP120, produced by genetic engineering. - Live vector vaccine: a live bacterium or virus such as vaccinia (used in the smallpox vaccine) modified so it cannot cause disease, but can transport into the body one or more genes that makes one or more HIV proteins. - Vaccine combination: an example includes a "prime-boost strategy", use of a recombinant vector vaccine to induce cellular immune responses followed by booster shots of a sub-unit vaccine to stimulate antibody production. - Peptide vaccine: chemically synthesized pieces of HIV proteins (peptides) known to stimulate HIV-specific immunity. - Virus-like particle vaccine (pseudovirion vaccine): a non-infectious HIV look-alike that has one or more, but not all, HIV proteins. - DNA vaccine: direct injection of genes coding for HIV proteins. - Whole-killed virus vaccine: HIV that has been inactivated by chemicals, irradiation or other means rendering it non-infectious. - Live-attenuated virus vaccine: live HIV from which one or more apparent disease-promoting genes of the virus have been deleted. GOVERNMENTAL REGULATION Our strategy was crafted in part to minimize the risks usually associated with clinical trials, regulatory approvals and marketing, which we would expect to be borne by one or more future partners. We contract with third parties to perform research projects related to our business. These third parties are located in various countries and are subject to the applicable laws and regulations of their respective countries. Accordingly, regulation by government authorities in the United States and foreign countries is a significant factor in the development, manufacture and marketing of our proposed products by our future partners and therefore has a direct impact on our ongoing research and product development activities. Any products that will be developed by our future partners based on our technology will require regulatory approval by government agencies prior to commercialization. In particular, human therapeutic products are subject to rigorous pre-clinical studies and clinical trials and other approval procedures of the FDA and similar regulatory authorities in foreign countries. In addition, various federal and state statutes and regulations will also govern or influence testing, manufacturing, safety, labelling, 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 11 expenditure of substantial time and financial resources. Obtaining royalties in the future will depend on our future partners' ability to obtain and maintain the necessary regulatory approvals. 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 metabolic and pharmacologic actions of a drug in humans, the side effects associated with increasing drug doses and, if possible, to gain early evidence on effectiveness. Phase I trials also include the study of structure-activity relationships and mechanism of action in humans, as well as studies in which investigational drugs are used as research tools to explore biological phenomena or disease processes. During Phase I clinical trials, sufficient information about a drug's pharmacokinetics and pharmacological effects should be obtained to permit the design of well-controlled, scientifically valid, Phase II studies. The total number of subjects and patients included in Phase I clinical trials varies, but is generally in the range of 20 to 80 people. Phase II. Refers to controlled clinical trials conducted to evaluate the effectiveness of a drug for a particular indication or indications in patients with a disease or condition under study and to determine the common short-term side effects and risks associated with the drug. These clinical trials are typically well-controlled, closely monitored and conducted in a relatively small number of patients, usually involving no more than several hundred subjects. Phase III. Refers to expanded controlled clinical trials, which many times are designated as "pivotal trials" designed to reach end points that the FDA has agreed in advance, if met, would allow approval for marketing. These clinical trials are performed after preliminary evidence suggesting effectiveness of a drug has been obtained. They are intended to gather additional information about the effectiveness and safety that is needed to evaluate the overall benefit-risk relationship of the drug and to provide an adequate basis for physician labelling. 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, re-evaluate, alter, suspend or terminate the testing based upon the data accumulated to that point and the FDA's assessment of the risk/benefit ratio to the patient. We have not yet conducted any clinical trials and are currently focused on research. 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 12 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. Our future partner(s) will have to complete an approval process, similar to the one required in the United States, in virtually every foreign target market in order to commercialize product candidates based on our technology in those countries. The approval procedure and the time required for approval vary from country to country and may involve additional testing. Approvals (both foreign and in the United States) may not be granted on a timely basis, or at all. In addition, regulatory approval of prices is required in most countries other than the United States. We face the risk that the resulting prices would be insufficient to generate an acceptable return to our partner(s). EMPLOYEES As of December 31, 2006, neither our Luxembourg nor our French affiliates had any employees. Mymetics Corporation had three full-time employees: Mr. Christian J.-F. Rochet, our Chief Executive Officer, Mr. Ernst Luebke, our Chief Financial Officer and Dr. Sylvain Fleury, Ph.D., our Chief Scientific Officer. Mymetics Corporation further had one part-time consultant: Professor Marc Girard, DVM, D. SC., our acting Head of Vaccine Development. Under their respective employment or consulting agreements, all our officers have agreed that their salaries, fees and out-of-pocket expenses will only be paid to them from time to time as the Company's financial position allows. As a result, Mr. Rochet, Mr. Luebke, Dr. Fleury and Prof. Girard were respectively owed E45,796, E176,167, E58,601 and E57,053 at December 31, 2006 after having agreed to convert approximately 50% of their respective claims into Mymetics common restricted shares at $0.10 per share, the current market price at the time of the conversion being $0.05 or less. WWW.MYMETICS.COM News and information about Mymetics Corporation and its subsidiaries is available on our web site, www.mymetics.com. ITEM 1A. RISK FACTORS You should carefully consider the risks described below together with all of the other information included in this report on Form 10-K. An investment in our common stock is very risky. If any of the following risks materialize, our business, financial condition or results of operations could be adversely affected. In such an event, the trading price of our common stock could decline, and you may lose part or all of your investment. When used in these risk factors, the terms "we" or "our" refer to Mymetics Corporation and its subsidiaries. We are a company engaged exclusively in research and development activities, focusing primarily on human biology and medicine. Our strategy was crafted in part to minimize the risks usually associated with clinical trials, regulatory approvals and marketing, which we would expect to be borne by our future partner(s). WE HISTORICALLY HAVE LOST MONEY, EXPECT LOSSES TO CONTINUE FOR THE FORESEEABLE FUTURE AND MAY NEVER ACHIEVE PROFITABILITY. We historically have lost money. In the year ended December 31, 2006, we sustained net losses of approximately E1,585,000. In the years ended December 31, 2005 and December 31, 2004, we sustained net losses of approximately E1,939,000 and E2,202,000, respectively. At December 31, 2006, we had an accumulated deficit of approximately E15,672,000. Total cash disbursed since 1990 for operating activities, including research and development, is E10,541,000. 13 The amount of these losses may vary significantly from year-to-year and quarter-to-quarter and will depend on, among other factors: - the timing and cost of product development; - the progress and cost of preclinical and clinical development programs; - the timing and cost of obtaining necessary regulatory approvals; - the timing and cost of sales and marketing activities for future products; and - the costs of pending and any future litigation of which we may be subject. We currently are engaged in research and development activities and do not have any commercially marketable products. The product research and development process requires significant capital expenditures, and we do not have any other sources of revenue to off-set such expenditures. Accordingly, we expect to generate additional operating losses at least until such time as we are able to generate significant revenues. To become profitable, we will need to generate revenues to off-set our operating costs, including our general and administrative expenses. We may not achieve or, if achieved, sustain our revenue or profit objectives, and our losses may increase in the future, and, ultimately, we may have to cease operations. In order to generate new and significant revenues, we must successfully develop and commercialize our proposed products or enter into collaborative agreements with others who can successfully develop and commercialize them. Our business plan is predicated on commercializing our products in collaboration with others. Even if our proposed products are commercially introduced, they may never achieve market acceptance and we may never generate significant revenues or achieve profitability. WE NEED TO RAISE SUBSTANTIAL ADDITIONAL CAPITAL TO FUND OUR OPERATIONS AND WE MAY BE UNABLE TO RAISE SUCH FUNDS ON A TIMELY BASIS AND ON ACCEPTABLE TERMS. Although we have restructured our existing debt as discussed below, we have not alleviated our working capital needs. We need to address our working capital needs by the end of June 2007 to allow us to continue devoting our efforts to development of the business instead of raising needed capital. If we must devote a substantial amount of time to raising capital, it will delay our ability to achieve our business plan within the time frames that we now expect, which could increase the amount of capital we need and could threaten the success of our business if competitors are able to produce an effective vaccine to the market ahead of us. In addition, the amount of time expended by our management on fund raising distracts them from concentrating on our business affairs. OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE OR PREDICT OUR FUTURE BUSINESS PROSPECTS. We have no operating history, and our operating results are impossible to predict because we have not begun selling any products. We are in the development stage, and our proposed operations are subject to all of the risks inherent in establishing a new business enterprise, including: - the absence of an operating history; - the lack of commercialized products; - insufficient capital; - expected substantial and continual losses for the foreseeable future; - limited experience in dealing with regulatory issues; 14 - limited marketing experience; - an expected reliance on third parties for the commercialization of our proposed products; - a competitive environment characterized by numerous, well-established and well-capitalized competitors; - uncertain market acceptance of our proposed products; and - reliance on key personnel. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the formation of a new business, the development of new technology, and the competitive and regulatory environment in which we will operate. See "Description of the Business". Because we are subject to these risks, you may have a difficult time evaluating our business and your investment in our company. OUR PROPOSED PRODUCTS ARE IN THE DEVELOPMENT STAGES AND WILL LIKELY NOT BE COMMERCIALLY INTRODUCED BEFORE 2010, IF AT ALL. Our proposed key products still are in the development stage and will require further development, preclinical and clinical testing and investment prior to commercialization in the United States and abroad. See "Description of the Business". While we are pleased about the progress made to date on these products, we cannot be sure that these products in development will: - be successfully developed; - prove to be safe and efficacious in clinical trials; - meet applicable regulatory standards or obtain required regulatory approvals; - demonstrate substantial protective or therapeutic benefits in the prevention or treatment of any disease; - be capable of being produced in commercial quantities at reasonable costs; - obtain coverage and favorable reimbursement rates from insurers and other third-party payors; or - be successfully marketed or achieve market acceptance by physicians and patients. We do not intend to undertake any product development beyond Phase II human clinical trials (i.e., Phase III clinical studies) or be responsible for obtaining regulatory approval or marketing the products. Nevertheless, even if we are successful in selling or licensing our products to another pharmaceutical company, it likely that any revenues we may receive in connection with those arrangements will depend upon that other companies sales, which will, in turn, depend upon the factors stated above. NEITHER CHRISTIAN ROCHET, OUR CHIEF EXECUTIVE OFFICER, NOR ERNST LUEBKE, OUR CHIEF FINANCIAL OFFICER, ARE FULLY PAID FOR THEIR EFFORTS, AND MAY BE FORCED TO SEEK OTHER EMPLOYMENT ON A FULL TIME OR PART TIME BASIS WHICH COULD ADVERSELY AFFECT THE COMPANY'S PROSPECTS. Messrs. Rochet and Luebke are intimately familiar with the business of the Company, its funding contacts, employees, advisors, consultants and strategic partners. The inability of the Company to compensate them in accordance with the amounts due under their respective Employment Agreements could force them for economic reasons to seek other employment on a part time or full time basis. Finding people of comparable talent and dedication with the contacts that they have to persons important to the 15 present and future business of the Company would be difficult given our inability to pay management the amount of money they are owed and the amount of money new management would likely demand. 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 PLANNING TO LEAVE US, REPLACING EITHER OF THESE MEMBERS OF OUR SCIENTIFIC TEAM WOULD BE DIFFICULT AND WOULD DIMINISH THE COMPANY'S ABILITY TO ACHIEVE ITS BUSINESS PLAN. If we are unable to 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 believe that replacing him as CSO on time for successfully prosecuting our pending patent applications would be next to impossible. We are therefore exposed to the risk of losing our pending patent applications. Similarly, our financial constraints may make it impossible for Marc Girard to remain as a consultant to us. Given his knowledge of our vaccine development, losing his services would delay progress on developing and commercializing our vaccine and may threaten our ability to achieve our business plan. OUR BUSINESS MODEL IS PREDICATED ON OUR BELIEF THAT WE WILL BE ABLE TO ENGAGE LARGE PHARMACEUTICAL COMPANIES TO PARTNER WITH US IN THE DEVELOPMENT OF OUR PRODUCTS AND FAILURE TO DO SO WILL LIKELY MAKE THE COMPANY UNATTRACTIVE AS AN ACQUISITION TARGET. We anticipate that we will need a large pharmaceutical company to assist us with human trials and financing. See "Funding Requirements". Our failure to succeed in this endeavor will have a dramatic adverse result regarding our financial needs and ability to successfully sell any products that we develop. IF WE FAIL TO OBTAIN REGULATORY APPROVAL TO COMMERCIALLY MANUFACTURE OR SELL ANY OF OUR FUTURE PRODUCTS, OR IF APPROVAL IS DELAYED OR WITHDRAWN, WE WILL BE UNABLE TO GENERATE REVENUE FROM THE SALE OF OUR PRODUCTS. We must obtain regulatory approval to sell any of our products in the United States and abroad. In the United States, we must obtain the approval of the FDA for each product or drug that we intend to commercialize. The FDA approval process is typically lengthy and expensive, and approval is never certain. Products to be commercialized abroad are subject to similar foreign government regulation. Generally, only a very small percentage of newly discovered pharmaceutical products that enter preclinical development are approved for sale. Because of the risks and uncertainties in biopharmaceutical development, our proposed products could take a significantly longer time to gain regulatory approval than we expect or may never gain approval. If regulatory approval is delayed or never obtained, our management's credibility, the value of our company and our operating results and liquidity would be adversely affected. Furthermore, even if a product gains regulatory approval, the product and the manufacturer of the product may be subject to continuing regulatory review. Even after obtaining regulatory approval, we may be restricted or prohibited from marketing or manufacturing a product if previously unknown problems with the product or its manufacture are subsequently discovered. The FDA may also require us to commit to perform lengthy post-approval studies, for which we would have to expend significant additional resources, which could have an adverse effect on our operating results and financial condition. Although we have conducted pre-clinical studies, costly and lengthy human clinical trials are required to obtain regulatory approval to market our proposed vaccine, and the results of the trials are highly uncertain. In addition, the number of pre-clinical studies and human clinical trials that the FDA requires varies depending on the product, the disease or condition the product is being developed to address and regulations applicable to the particular product. Accordingly, we may need to perform additional pre-clinical studies using various doses and formulations before we can begin human clinical trials, which could result in delays in our ability to market any of our products. Furthermore, even if we obtain favorable results in pre-clinical studies on animals, the results in humans may be different. After we have conducted pre-clinical studies in animals, we must demonstrate that our products are safe and effective for use on the target human patients in order to 16 receive regulatory approval for commercial sale. The data obtained from pre-clinical and human clinical testing are subject to varying interpretations that could delay, limit or prevent regulatory approval. We face the risk that the results of our clinical trials in later phases of clinical trials may be inconsistent with those obtained in earlier phases. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials, even after experiencing promising results in early animal or human testing. Adverse or inconclusive human clinical results would prevent us from filing for regulatory approval of our products. Additional factors that can cause delay or termination of our human clinical trials include: - slow patient enrollment; - timely completion of clinical site protocol approval and obtaining informed consent from subjects; - longer treatment time required to demonstrate efficacy or safety; - adverse medical events or side effects in treated patients; and - lack of effectiveness of the product being tested. Delays in our clinical trials could allow our competitors additional time to develop or market competing products and thus can be extremely costly in terms of lost sales opportunities and increased clinical trial costs. EVEN IF OUR PROPOSED PRODUCTS RECEIVE FDA APPROVAL, THEY MAY NOT ACHIEVE EXPECTED LEVELS OF MARKET ACCEPTANCE, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND OPERATING RESULTS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE. Even if we are able to obtain required regulatory approvals for our proposed products, the success of those products is dependent upon market acceptance by physicians and patients. Levels of market acceptance for our new products could be impacted by several factors, including: - the availability of alternative products from competitors; - the price of our products relative to that of our competitors; - the timing of our market entry; and - the ability to market our products effectively. Some of these factors are not within our control. Our proposed products may not achieve expected levels of market acceptance. Additionally, continuing studies of the proper utilization, safety and efficacy of pharmaceutical products are being conducted by the industry, government agencies and others. Such studies, which increasingly employ sophisticated methods and techniques, can call into question the utilization, safety and efficacy of previously marketed products. In some cases, these studies have resulted, and may in the future result, in the discontinuance of product marketing. These situations, should they occur, could have a material adverse effect on our business, financial position and results of operations, and the market value of our common stock could decline. IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, WE MAY NOT BE ABLE TO COMPETE AS EFFECTIVELY. The pharmaceutical industry places considerable importance on obtaining patent and trade secret protection for new technologies, products and processes. Our success will depend, in part, upon our ability to obtain, enjoy and enforce protection for any products we develop or acquire under United States and foreign patent laws and other intellectual property laws, preserve the confidentiality of our trade secrets and operate without infringing the proprietary rights of third parties. Where appropriate, we seek patent protection for certain aspects of our technology. However, our owned and licensed patents and patent applications may not ensure the protection of our intellectual property for a number of other reasons: 17 - Competitors may interfere with our patents and patent process in a variety of ways. Competitors may claim that they invented the claimed invention before us or may claim that we are infringing on their patents and therefore we cannot use our technology as claimed under our patent. Competitors may also have our patents reexamined by showing the patent examiner that the invention was not original or novel or was obvious. - We are in the development stage and are in the process of developing proposed products. Even if we receive a patent, it may not provide much practical protection. If we receive a patent with a narrow scope, then it will be easier for competitors to design products that do not infringe on our patent. Even if the development of our proposed products is successful and approval for sale is obtained, there can be no assurance that applicable patent coverage, if any, will not have expired or will not expire shortly after this approval. Any expiration of the applicable patent could have a material adverse effect on the sales and profitability of our proposed product. - Enforcing patents is expensive and may require significant time by our management. In litigation, a competitor could claim that our issued patents are not valid for a number of reasons. If the court agrees, we would lose protection on products covered by those patents. - We also may support and collaborate in research conducted by government organizations or universities. We cannot guarantee that we will be able to acquire any exclusive rights to technology or products derived from these collaborations. If we do not obtain required licenses or rights, we could encounter delays in product development while we attempt to design around other patents or we may be prohibited from developing, manufacturing or selling products requiring these licenses. There is also a risk that disputes may arise as to the rights to technology or products developed in collaboration with other parties. It also is unclear whether efforts to secure our trade secrets will provide useful protection. While we use reasonable efforts to protect our trade secrets, our employees or consultants may unintentionally or willfully disclose our proprietary information to competitors resulting in a loss of protection. Enforcing a claim that someone else illegally obtained and is using our trade secrets, like patent litigation, is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Finally, our competitors may independently develop equivalent knowledge, methods and know-how. CLAIMS BY OTHERS THAT OUR PRODUCTS INFRINGE THEIR PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION. The pharmaceutical industry has been characterized by frequent litigation regarding patent and other intellectual property rights. Patent applications are maintained in secrecy in the United States and also are maintained in secrecy outside the United States until the application is published. Accordingly, we can conduct only limited searches to determine whether our technology infringes the patents or patent applications of others. Any claims of patent infringement asserted by third parties would be time-consuming and could likely: - result in costly litigation; - divert the time and attention of our technical personnel and management; - cause product development delays; - require us to develop non-infringing technology; or - require us to enter into royalty or licensing agreements. Although patent and intellectual property disputes in the pharmaceutical industry often have been settled through licensing or similar arrangements, costs associated with these arrangements may be substantial and often require the payment of ongoing royalties, which could hurt our gross margins. In addition, we cannot be sure that the necessary licenses would be available to us on satisfactory terms, or that we 18 could redesign our products or processes to avoid infringement, if necessary. Accordingly, an adverse determination in a judicial or administrative proceeding, or the failure to obtain necessary licenses, could prevent us from developing, manufacturing and selling some of our products, which could harm our business, financial condition and operating results. 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 a company incorporated under the laws of Delaware, all our officers and directors are located outside of the United States. As a result, it may be difficult for investors to effect service of process on those persons in the United States or to enforce in the United States judgments obtained in United States courts against those persons based on the civil liability provisions of the United States securities laws. It may be difficult and costly for an investor to have a court in Switzerland enforce a judgment obtained in other jurisdictions, including the United States, against us or our directors or officers under the securities laws of the United 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 control of our Company or changes in our management that the stockholders of our company may deem advantageous. These provisions - limit the ability of our stockholders to call special meetings of stockholders; - provide for a staggered board; - provide that our board of directors is expressly authorized to make, alter or repeal the bylaws; and - establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings. ITEM 1B. UNRESOLVED STAFF COMMENTS. None. ITEM 2. PROPERTIES We currently occupy approximately 100 square meters of office space that houses our administrative operations in Nyon, Switzerland (near Geneva), at 14, rue de la Colombiere. Our CSO and his assistant have been using office and other facilities such as scientific databases access leased on short term basis from the Swiss Institute of Experimental Cancer Research (ISREC)in Lausanne (20 miles from our Nyon office). We also conduct our research operations at the properties of various third parties, worldwide. We believe that our current facilities are adequate for our foreseeable needs, and no additional space presently is necessary. The leases in Nyon and Lausanne can be terminated at short notice. ITEM 3. LEGAL PROCEEDINGS Our present policy is to defend vigorously only the suits with material amounts being sought in damages and after considering the potential legal costs involved. We do not currently maintain any insurance but are planning to conclude one as soon as our financial resources allow it. Neither Mymetics Corporation nor our wholly owned subsidiary 6543 Luxembourg SA are presently involved in any litigation incident to our business. 19 Our French subsidiary, Mymetics S.A., is engaged in litigation brought by Dr. Pierre-Francois Serres, one of our former officers and directors, concerning his claims of unlawful termination of his employment by former management of our company. Dr. Serres obtained a judgment from the Lyon Industrial Tribunal for the full E173,000 in damages that he claimed. On October 26, 2006, the Court of Appeals of Lyon (France) invalidated the judgment rendered by the Lyon Industrial Tribunal. Dr. Serres has appealed the decision of the Court of Appeals of Lyon. Should Dr. Serres be unsuccessful in his appeal, which we expect based upon advice of our French counsel, he will have to reimburse approximately E33,000 that he had previously been able to garnish from our bank account following the judgment of the Lyon Industrial Tribunal. We intend to vigorously pursue this matter until fully resolved. As disclosed in our Form 8-K dated February 13, 2006, Mymetics S.A. was placed under receivership ("Redressement Judiciaire") on February 7, 2006 by the Tribunal de Commerce in Lyon, France, as a result of an ongoing dispute between Mymetics Corporation and Dr. Serres, discussed above. The court appointed two judges to oversee the case, a lawyer to represent the creditors and a judicial administrator to manage Mymetics S.A., all of whom are considered agents of the court. The court further imposed a "two-month observation period" during which management and the administrator should strive to find a solution to the crisis, which we are attempting to do. On April 4, 2006, the court extended the observation period until July 18, 2006, based on a favorable report about the future of Mymetics delivered by the judicial administrator, which date has been extended to May 7, 2007. We are actively working on a plan which we expect will allow our French subsidiary to emerge from "Redressement Judiciaire" on or about that date. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 20 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES (a) 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. We have filed timely periodic reports since that time. We are now in the process of having a market maker submit a Form 211 to the NASD to have us listed for quotation on the OTCBB. (c) The following table sets forth the quarterly high and low sales price per share of the Corporation's common stock for the periods indicated. The prices represent inter-dealer quotations, which do not include retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
FISCAL QUARTER ENDED HIGH LOW -------------------- ------ ------ 2005 March 31............ $ 0.18 $ 0.31 June 30............. 0.045 0.25 September 30........ 0.045 0.08 December 31......... 0.035 0.14(*) 2006 March 31............ $0.070 $0.060 June 30............. 0.028 0.025 September 30........ 0.025 0.025 December 31......... 0.026 0.026
(*) at December 30, 2005, last day of OTC trading (d) Stockholders. At March 19, 2007, the Corporation had approximately 630 holders of record of its common stock, some of which are securities clearing agencies and intermediaries. (e) 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. (f) 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, 2006. 21
Number of Securities to be Weighted Average Exercise Number of Securities remaining issued upon exercise of Price of Outstanding available for issuance under Options, Warrants and Options, Warrants and equity compensation plans(excluding Rights Rights securities reflected in column (a)) Plan Category (a) (b) (c) ------------- -------------------------- ------------------------- ----------------------------------- Equity Compensation Plans Approved by Security Holders (1) 455,000(2) U.S. $0.97 4,557,500 Equity Compensation Plans not Approved by Security Holders --(3) N/A ------- ---------- --------- Total 455,000 U.S. $0.97 4,557,500 ======= ========== =========
22 (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, therefore, included in this table. (2) Includes (i) 442,500 shares of common stock underlying options granted under our 2001 Stock Option Plan and (ii) 12,500 shares of common stock underlying options granted under our 1994 Amended and Restated Stock Option Plan. (3) 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, 2003 and ending on March 19, 2007. These issuances were made pursuant to individual contracts that are discrete from one another and in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933, and/or Regulation D promulgated under the Securities Act, as transactions by an issuer not involving any public offering to persons who are sophisticated in such transactions and who had knowledge of and access to sufficient information about Mymetics to make an informed investment decision. Among this information was the fact that the securities were restricted securities. - On January 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 $.05 per share. - On January 30, 2006, we issued two previous investors 50,000 common shares of Mymetics Corporation each as introduction fee, market price being $.035 per share on that date. - On March 6, 2006, we issued another previous investor 1,500,000 common shares of Mymetics Corporation for $60,000, 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. - On March 13, 2006, we issued another previous investor 1,500,000 common shares of Mymetics Corporation for $60,000, or $.04 per share. - On April 1, 2006, we issued two previous investors 50,000 common shares of Mymetics Corporation each as introduction fee, market price being $.055 per share on that date. - On April 4, 2006, we issued one previous investor 300,000 common shares of Mymetics Corporation for $6,000, or $.02 per share. - On April 24, 2006, we issued the same investor 300,000 common shares of Mymetics Corporation for $12,000, or $.04 per share. - On May 15, 2006, we issued another investor 2,350,000 common shares of Mymetics Corporation for E100,000, or approximately $.055 per share. - On May 31, 2006, we issued a previous investor and lender 1,000,000 common shares of Mymetics Corporation for the conversion of a $50,000 convertible 23 note, or $.05 per share. - On July 7, 2006, we issued a new investor 2,600,000 common shares of Mymetics Corporation for $130,000, or $.05 per share. - On July 21, 2006, our officers agreed to convert approximately 50% of the amounts due to them as unpaid salaries, fees and expenses against a total of 3,500,000 common shares of Mymetics Corporation for an aggregate amount of $350,000, or $.10 per share, market price being $0.05 on that date. - On November 7, 2006, we issued a previous investor 1,300,000 common shares of Mymetics Corporation for E100,000, or approximately $.10 per share. - On November 9, 2006, we issued another previous investor 1,280,000 common shares of Mymetics Corporation for E100,000, or approximately $.10 per share. - On November 21, 2006, we issued one individual 300,000 shares each as fee for services at $.025 per share. - On December 21, 2006, we issued a previous investor 1,320,000 common shares of Mymetics Corporation for E100,000, or approximately $.10 per share. - On December 21, 2006, we issued another previous investor 1,320,000 common shares of Mymetics Corporation for E100,000, or approximately $.10 per share. - On December 21, 2006, we issued a new investor 330,000 common shares of Mymetics Corporation for $33,000, or $.10 per share. - On January 25, 2006, we issued a previous investor 650,000 common shares of Mymetics Corporation for E50,000, or approximately $.10 per share. - On January 31, 2007, we issued a previous investor 300,000 common shares of Mymetics Corporation at $.035 per share, as initial fee for fund raising services to be rendered. - On January 31, 2007, we issued a new investor 200,000 common shares of Mymetics Corporation at $.035 per share, as initial fee for fund raising services to be rendered. - On January 31, 2007, we issued a previous investor 250,000 common shares of Mymetics Corporation at $.035 per share, as fee for services rendered. - On January 31, 2007, we issued a new investor 250,000 common shares of Mymetics Corporation at $.035 per share, as fee for services rendered. - On February 5, 2007, we issued a previous investor 1,420,000 common shares of Mymetics Corporation for E110,000, or approximately $.10 per share. - On February 8, 2007, we issued a new investor 325,000 common shares of Mymetics Corporation for $32,500, or $.10 per share. - On March 19, we issued a previous investor 8,712,000 common shares of Mymetics Corporation for E990,000, or approximately $.15 per share. - On March 19, 2007, we issued 12,500,000 common shares of Mymetics Corporation in connection with a settlement of our litigation against MFC Merchant Bank S. A. ("MFC"), KHD Humboldt Wedag International, Ltd. (fka MFC Bancorp, Ltd.), the parent company of MFC, and certain prior and present officers of MFC. See "Liquidity and Capital Resources" under "Management's Discussion and Analysis of Financial Condition and Results of Operations". 24 ITEM 6. SELECTED FINANCIAL DATA The following table reflects selected consolidated financial data for the Corporation for the fiscal years ended December 31, 2006, 2005, 2002, 2001 and 2000, respectively.
FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED DEC 31, DEC 31, DEC 31, DEC 31, DEC 31, 2006, 2005 2004 2003 2002 ------- ------- ------- ------- ------- (EUROS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) OPERATING DATA Operating revenues 0 0 0 0 8 Research & Development Expenses 543 489 612 1,263 1,878 General & Administrative Expenses 723 1,138 1,264 1,090 1,293 Loss from continuing Operations 1,585 1,939 2,202 2,786 (3,622) COMMON SHARE DATA(1) Loss from continuing operations per common share (0.02) (0.03) (0.04) (0.05) (0.07) Weighted average common shares outstanding (in thousands) 99,716 71,972 62,145 51,285 50,046 BALANCE SHEET DATA Working capital (6,538) (6,051) (2,035) (4,294) (2,306) Total assets 360 166 192 367 477 Long-term obligations 242 281 3,110 242 242 Total stockholders' equity (6,480) (6,280) (5,065) (4,400) (2,349)
(1) Basic and diluted common share data is the same. 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, 2006, 2004 and 2002 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, 2006 COMPARED TO YEARS ENDED DECEMBER 31, 2005 AND DECEMBER 31, 2004 We did not achieve any revenue for the years ended December 31, 2006 or December 31, 2005. Our lack of revenue is directly attributable to our focus on research and development. The Company predicts that this focus will continue for the foreseeable future, but we are unable to predict future economic conditions at the time that our products are ready to be commercialized by our future partners(s), as described elsewhere in this document. Future revenues could be affected by local and other economic conditions, technology, competitive forces, and/or challenges to the Company's intellectual property. Costs and expenses decreased to E1,585,000 for the year ended December 31, 2006 from E1,939,000 for the year ended December 31, 2005, a decline of 18.3%. Costs and expenses decreased to E1,939,000 for the year ended December 31, 2005 from E2,202,000 for the year ended December 31, 2004, a decline of 11.9%. Research and development expenses increased to E543,000 in the current period from E489,000 in the comparative period of 2004, an increase of 11.0%. Research and development expenses decreased to E489,000 in the period ended December 31, 2005 from E612,000 in the comparative period of 2004, a decline of 20.1%. 25 The decrease of R&D expenses during the year 2005 (following a similar decrease in 2004) was 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 preventive 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 feline therapeutic peptides due to our perception of a weak or non existent commercial potential. Having thus decided to focus entirely on the development of a preventive vaccine against HIV-AIDS, we devoted our resources over the years as follows: - 2004 was a year of development of our key recombinant gp41 vaccine protein, which induced sizeable expenses, - 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. - 2006 was the year during which our latest vaccine prototype was tested on macaques at the facilities of the Institute of Laboratory Animal Science of the Chinese Academy of medical Sciences and the Faculty of Laboratory Animal Sciences of the Peking Union Medical College in Beijing (Republic of China), our Chinese partners, which implies higher costs than our initial rabbit tests and requires more time to complete, such time depending again on biological factors and not on the amount of money invested. General and administrative expenses decreased to E723,000 in the year ended December 31, 2006 from E1,138,000 in the comparable period of 2005, or 36.5%. 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 backup ready to step in should a critical need arise. We expect to return to normal operating conditions, and in particular to 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 incurring the costs of our legal suit brought against MFC Merchant Bank SA, its parent company KHD Humboldt Wedag Ltd and some of their past and present officers. General and administrative expenses decreased to E1,138,000 in the year ended December 31, 2005 from E1,264,000 in the comparable period of 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 backup ready to step in should a critical need arise. We expect to return to normal operating conditions, and in particular to 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 personal risks taken by accepting to operate without D&O insurance coverage and ii) to bring their salaries closer to prevailing market conditions. 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 26 management to require subjective and complex judgments which could potentially affect reported results. REVENUE RECOGNITION AND RECEIVABLES As we are a development stage company, we have not generated any material revenues since we commenced our current line of business in 2001, and we do not anticipate generating any material revenues on a sustained basis unless and until a licensing agreement or other commercial arrangement is entered into with respect to our technology. However, should we engage in any form of commercial activity, a revenue recognition and receivables policy according to the following principles would be implemented: Revenue related to the sale of products is recognized when all of the following conditions are met: persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectibility is reasonably assured. Receivables are stated at their outstanding principal balances. Management reviews the collectibility of receivables on a periodic basis and determines the appropriate amount of any allowance. Based on this review procedure, management has determined that the allowances at December 31, 2006 and 2005 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. The Company makes estimates of the uncollectibility of its accounts receivable. The Company analyzes accounts receivable and historical bad debt levels, customer 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 centered research activities, we intend to continue the activities currently ongoing. In this regard: - Mymetics has completed the preliminary testings in rabbits during 2005, which consisted to elicit neutralizing antibodies upon injection of the second generation of recombinant, mutated, trimeric gp41 proteins, involving four laboratories in France. Despite the no or low induction of neutralizing antibodies with the gp41 second generation, these results were extremely important and crucial for a better understanding of our HIV vaccine candidate. - These results lead Mymetics to produce, purify and characterize the third generation of gp41, still not optimal but required for testing certain protein properties and behaviors. We concluded that the best trimeric gp41 protein folding and oriented epitope presentation should be optimal if the HIV vaccine candidate is constituted not by one single gp41 antigen harboring all the immunogenic regions (epitopes) of the gp41 protein, but rather by two gp41 complementary antigens, each presenting different parts of the proteins: 1) shorter recombinant gp41 proteins and 2) gp41 peptides that cover the missing regions absent on the rgp41 protein. Each antigen would target a different set of antibodies that might be produced in various anatomical compartments such as in the blood and/or at the mucosa levels. Mymetics has hypothesized that this approach would offer the main advantage of presenting key epitopes to the immune system, using different 27 antigens, to focus the antibody response on relevant parts of the gp41 proteins and also to avoid the problem of epitope immunodominance, meaning preferential recognition of one irrelevant region of the gp41 over a relevant one. For testing its hypothesis, Mymetics has initiated in Spring 2005 rabbit immunizations with a specific gp41 peptide, one of the two potential gp41 subunits that will constitute Mymetics'HIV final vaccine candidate. Results obtained at the end of 2005 were extremely encouraging. Most of rabbits have produced specific mucosal antibodies against the membrane proximal region of the gp41 and vaginal protection is likely possible because vaginal secretions were containing IgA antibodies capable of blocking up to 90% of the virus translocation (transcytosis) of primary HIV strains from clades B and C across human epitheliums (HIV transmission model). 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. - In March 2006, non-human female primates were immunized over six months with HIV gp41 peptides. We were hoping to reproduce the results obtained in rabbits. Genital and intestinal mucosa represent the main early entry door for HIV. Therefore, it is crucial to protect these entrances against HIV by producing into these compartments protective antibodies. Furthermore, the intestinal mucosa is the biggest immune organ of the body that can massively produce mostly IgA but HIV vaccine from the past were inefficient at triggering antibodies into this anatomical compartment. We believe that an HIV vaccine that could successfully achieve IgA and IgG production into both genital and intestinal tracts might open the door to a new prophylactic vaccine approach efficient at preventing or slowing down HIV infection. - Mymetics's vaccine based on virosomes(R)-gp41 peptides have elicited mucosal IgA and blood IgG antibodies in more than 90% of vaccinated macaques. These IgA and IgG antibodies could get redistributed into the genital and intestinal compartments, even in animals vaccinated by intra-muscular injection in the absence of mucosal adjuvant. Vaccinated macaques will be challenged in early 2007 with SHIV for evaluating the level of protection against the virus. - Mymetics will finish for Q2 2007 the production of its gp41 fourth generation for clades B and C. Then, a second pre-clinical trial on macaque is scheduled in 2007, which will test gp41 peptides combined with recombinant gp41 proteins fourth generation. Mymetics is expecting this HIV vaccine candidate constituted of the two gp41 antigens to trigger a more complete and protective antibody immune response at the mucosa and blood levels. - Mymetics intends also to initiate, depending on the pre-clinical trial results on macaques, a phase I clinical trial in Q2 2008 for evaluating human tolerance and immunogenicity. 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 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 execute 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 2009 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. 28 We have initiated discussions under Non Disclosure Agreements with two 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 at the earliest. LIQUIDITY AND CAPITAL RESOURCES The Company had E29,000 cash at December 31, 2006, compared to E70,000 at December 31, 2005 and no/immaterial cash at December 31, 2004. As we are a development stage company, we have not generated any material revenues since we commenced our current line of business in 2001, and we do not anticipate generating any material revenues on a sustained basis unless and until a licensing agreement or other commercial arrangement is entered into with respect to our technology. Increases in borrowing pursuant to a non-revolving term facility with MFC and other short term advances provided cash of E618,000 in current year, E425,000 in the comparative period last year and E241,000 in 2004. The non-revolving term facility is in the principal amount of up to E3.8 million and was to mature on December 31, 2006, with partial repayments of E900,000 on June 30, 2006. In addition, any amount repaid under this facility can be converted at the lender's option into "Rule 144" restricted common shares of Mymetics Corporation at $0.30 per share. At December 31, 2006, Mymetics had borrowed an aggregate of E4,021,000 pursuant to this non-revolving term facility. We filed a law suit against MFC and certain of its prior and present officers and directors in Delaware and New York contesting the validity of this credit facility. On March 19, 2007 we entered into a Settlement Agreement with MFC, to dismiss with prejudice the lawsuits in Delaware and New York that Mymetics brought against MFC, KHD Humboldt Wedag International, Ltd. (f/k/a MFCBancorp., Ltd.), the parent company of MFC, and certain prior and present officers of MFC, in which Mymetics had alleged breaches of fiduciary duty, interference with prospective business relations and civil conspiracy against one or more of the foregoing parties. On March 19, the Company entered into a settlement agreement related to this facility. Under the terms of the Settlement Agreement, Mymetics agreed to pay E1.49 million in cash and to issue 12.5 million restricted shares of its common stock. No gain or loss was recorded on this transaction. MFC agreed to terminate the E4.02 million credit facility agreement, ending any further payments or obligations of Mymetics under the credit facility agreement and releasing from its blanket security interest all assets of Mymetics, including Mymetics' intellectual property. The Company also agreed to withdraw its lawsuits against MFC and certain prior and present officers of MFC. As of December 31, 2006, we had an accumulated deficit of approximately E15.7 million and we incurred losses of E1,585,000 in the twelve-month period ending December 31, 2006. 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 compensation. 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 E1,933,000 at December 31, 2006, include E338,000 due to our officers as unpaid salaries, fees and out-of-pocket expenses and E1,595,000 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, 2006, 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. As a result of having put our French subsidiary in receivership (see Item 3. Legal Proceedings), Dr. Serres has made it almost impossible for Mymetics SA to ever return to "better times". 29 Net cash used by operating activities was E1,359,000 for the year ended December 31, 2006, compared to E561,000 for the year ended December 31, 2005 and E1,241,000 for the year ended December 31, 2004. The major factor in 2006 was a decrease of accounts payable of E162,000 compared to successive increases in accounts payable, which provided cash of E604,000 and E259,000 for the years ended December 31, 2005 and 2004 respectively. Investing activities used cash of E300,000 for the year ended December 31, 2006 and used/provided immaterial cash for the years ended December 31, 2005 and 2004. Financing activities provided cash of E1,614,000 for the year ended December 31, 2006 compared to E781,000 in the same period last year and E928,000 in 2004. Proceeds from issuance of common stock provided cash of E996,000 for the year ended December 31, 2006 compared to E356,000 in the same period in 2004 and E687,000 during the year 2004. Our budgeted cash outflow, or cash burn rate, for 2007 is approximately E7,647,000 for research and fixed and normal recurring expenses, as follows, assuming we will be able to obtain the necessary financing:
12 Months ---------- 2007 budget GMP & Human Clinical Trial Phase I E4,445,000 Vaccine R&D 736,000 Administration 2,016,000 Old Debts (from previous Management) 430,000 Special Projects 20,000 ---------- Total E7,647,000 ==========
We expect that the cash outflow may increase significantly in 2007 over 2006 as the Company increases its research and development activities, and prepares for additional research, human clinical trials and compliance duties associated with the signing of a partnership agreement with a major pharmaceutical company. Administration costs include E756,000 in gross salaries and related payroll costs for three of our executive officers, and payments under consulting contract with one of our officers. In addition, E360,000 are earmarked for the payment of the backlog due to our officers. We do not pay our non-employee directors, and we credit our three salaried executive officers a combined amount of E54,000 per month. As of March 31, 2007, we had three full-time salaried executives, exclusive of our contract for the consulting services of our Head of Vaccines Development. Certain secretarial and administrative work for our CEO and CFO is outsourced to self-employed assistants who accept being partially paid in common stock of Mymetics at the current market price. We anticipate to hire these assistants on a part time basis as soon as the required financing will become available. We anticipate hiring an assistant to our CFO as well as a part-time laboratory technician in the first half of 2007, and may need to hire additional personnel in order to meet the needs and demands of any future workload. Monthly fixed and recurring expenses for "Property leases" of E1,000 represents the monthly sublease and maintenance payments to unaffiliated third parties under a sublease contract 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. After the principal tenant cancelled his lease as of December 31, 2006, we were able to take over a direct lease for the whole office surface (approx. 1000 square feet) at a very favorable cost for the area (E1,200 since January 1, 2007). We further leased 500 square feet for 30 our CSO on the campus of the Swiss Institute of Experimental Cancer Research (ISREC) in Lausanne (Switzerland), located 20 miles from our Nyon office. Included in Administration costs are E182,000 estimated recurring legal fees paid to outside corporate counsel and ongoing litigation expenses, E57,000 audit and review fees paid to our independent accountants, and E30,000 in investor relations expenses. We intend to continue to incur additional expenditures during the next 12 months for additional research and development of our HIV 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. We anticipate that our operations will require approximately E7.6 million in the year ending December 31, 2007. We will seek to raise the required capital from equity or debt financings, donors and/or potential partnerships with major international pharmaceutical and biotechnology firms. However, there can be no assurance that we will be able to raise additional capital on satisfactory terms, or at all, to finance our operations. In the event that we are not able to obtain such additional capital, we would be required to further restrict or even cease our operations. RECENT FINANCING ACTIVITIES During 2006, our only source of funds was the sale of common restricted shares to non-US investors under Regulation S of the Securities Act of 1933. The vast majority is such sales were made at $0.10 per share despite the current market price being between $0.02 and $0.05. Whenever possible, restricted common stock was issued at $0.10 instead of cash to pay for services received. In addition to the scientific work directly financed by Mymetics, the US National Institutes of Health (NIH) as well as the French "Association Nationale pour la Recherche sur le SIDA" (ANRS) have carried out pre-clinical animal trials with our prototype vaccine at their own expenses. It is difficult to estimate the monetary value of such work, in particular because it is carried out in both institutions' own research facilities, but we estimate having saved hundreds of thousands of Euros over what it would have cost us to finance such work out of our own funds. As in previous years, Mymetics, being a for-profit publicly traded company, was ineligible to receive donors' funds. Management is presently examining various strategies to overcome this difficulty. 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 2008 as our initial target date of 2007 had to be postponed due to lack of funds. 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 funding through future collaborative arrangements, licensing arrangements, and debt and equity financings under Regulation D and Regulation S under the Securities Act of 1933. We do not know whether additional financing will be available on commercially acceptable terms when needed. If 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. 31 The extent and timing of our future capital requirements will depend primarily upon the rate of our progress in the research and development of our technologies, our ability to enter into a partnership agreement with a major pharmaceutical company, and the results of future clinical trials. To date we have generated no material revenues from our business operations. We are unable to predict when or if we will be able to generate revenues from licensing our technology or the amounts expected from such activities. These revenue streams may be generated by us or in conjunction with collaborative partners or third party licensing arrangements, and may include provisions for one-time, lump sum payments in addition to ongoing royalty payments or other revenue sharing arrangements. However, we presently have no commitments for any such payments. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off-balance sheet arrangements. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
PAYMENTS DUE BY PERIOD (THOUSANDS OF EUROS) AT MARCH 19, 2007 ------------------------------------------- LESS MORE THAN 1 - 3 3 - 5 THAN CONTRACTUAL OBLIGATION TOTAL 1 YEAR YEARS YEARS 5 YEARS ---------------------- ----- ------ ----- ----- ------- Long-term debt 500 E0 500 E0 E0 Capital Lease Obligations E0 E0 E0 E0 E0 Operating Lease Obligations E0 E0 E0 E0 E0 Purchase Obligations 575 575 E0 E0 E0 Other Long-Term Liabilities Reflected on Mymetics Balance Sheet under GAAP E0 E0 E0 E0 E0 ---- --- --- --- --- TOTAL 1075 575 500 E0 E0 ==== === === === ===
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk from changes in interest rates which could affect our financial condition and results of operations. We have not entered into derivative contracts for our own account to hedge against such risk. INTEREST RATE RISK Fluctuations in interest rates may affect the fair value of financial instruments. An increase in market interest rates may increase interest payments and a decrease in market interest rates may decrease interest payments of such financial instruments. We have debt obligations which are sensitive to interest rate fluctuations. The following tables provide information about our exposure to interest rate fluctuations for the carrying amount of such debt obligations as of December 31, 2006 and 2005 and expected cash flows from these debt obligations. 32 EXPECTED FUTURE CASH FLOW
YEAR ENDING DECEMBER 31, 2006 (IN THOUSANDS) ------------------------------------------------------------------- CARRYING FAIR VALUE VALUE 2007 2008 2009 2010 2011 THEREAFTER -------- ------ ------ ---- ---- ---- ---- ---------- Debt obligations (1).. E4,372 E4,372 E4,021 E351 E-- E-- E-- E-- Debt obligations.(2).. E 851 E 851 E -- E851 E-- E-- E-- E--
(1) Before settlement of our litigation against MFC Merchant Bank S. A. ("MFC"), KHD Humboldt Wedag International, Ltd. (fka MFC Bancorp, Ltd.), the parent company of MFC, and certain prior and present officers of MFC. (2) After settlement under which the MFC loan of E4,021 was terminated and a shareholder loan of E500 maturing on March 19, 2008 was obtained to partially finance the settlement. See "Liquidity and Capital Resources" under "Management's Discussion and Analysis of Financial Condition and Results of Operations"
YEAR ENDING DECEMBER 31, 2005 (IN THOUSANDS) ------------------------------------------------------------------- CARRYING FAIR VALUE VALUE 2006 2007 2008 2009 2010 THEREAFTER -------- ------ ------ ---- ---- ---- ---- ---------- Debt obligations...... E3,754 E3,754 E3,754 E-- E-- E-- E-- E--
33 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, 2006, 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, 2006, 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. ITEM 9B. OTHER INFORMATION None 34 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERANCE 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 2007 annual meeting of stockholders, the term of the Class II directors will expire at our 2008 annual meeting of stockholders, and the term of the Class III directors will expire at our 2006 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 three vacancies on the Board caused by the resignation of Dr. Pierre-Francois Serres, who was a Class III director whose term would have expired at our 2006 annual meeting of stockholders, Dr. Robert Zimmer, who was a Class II director whose term would have expired at our 2008 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. On January 11, 2006, Dr. Sylvain Fleury, Ph. D., our current Chief Scientific Officer, was elected to fill the vacancy caused by the resignation of Dr. Serres. The positions left vacant by the resignation of Dr. Robert Zimmer and Professor Plotkin will be reserved for potential investors and/or candidates related to the securing of a strategic partner. The following table sets forth information regarding each of our current directors and executive officers. 35
EXPIRATION OF TERM NAME CURRENT POSITION WITH THE COMPANY AGE AS A DIRECTOR ---- -------------------------------------- --- ------------------ Christian Rochet Chief Executive Officer, President 58 2008 (Class II) And Director (appointed July 31, 2003) Ernst Luebke Chief Financial Officer, Treasurer, 61 2007 (Class I) Secretary and Director (appointed July 31, 2003) Sylvain Fleury, Ph. D. Chief Scientific Officer (appointed 44 2006 (Class III) November 3, 2003) and Director (appointed January 11, 2006) Marc Girard, DVM, D. Sc. Head of Vaccine Development 70 n/a (appointed January 15, 2004)
36 CHRISTIAN ROCHET Mr. Rochet is the Chief Executive Officer and a Director of Mymetics. Prior to joining Mymetics in July 2003, he had been an independent business consultant on development and diversification strategies for over 21 years. He became a 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. On July 31, 2003, Mr. Rochet was elected as President and Director, and appointed as Chief Executive Officer of the Company. ERNST LUEBKE Mr. Luebke was appointed as our Chief Financial Officer and as a Director on July 31, 2003. Prior to joining Mymetics, Mr. Luebke spent over 21 years as an independent international business consultant and was the founder of several companies active in the medical and biotech sectors. Together with Mr. Rochet, he became a major shareholder of 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. Luebke was elected as Director and appointed as Chief Financial Officer and Treasurer of the Company. Mr. Luebke was further appointed Secretary of the Company on August 29, 2003. SYLVAIN FLEURY, Ph.D. Dr. Fleury was appointed as our Chief Scientific Officer in November 2003 and as a Director on January 11, 2006. In addition to serving as our Chief Scientific Officer, Dr. Fleury has maintained until June 2006 his academic research activity on in heart transplantation at the Department of Experimental Surgery from the Centre Hospitalier Universitaire Vaudois (CHUV) in Lausanne, Switzerland. Dr. Fleury moved to the CHUV in January 1997 where he initially worked as Assistant to Professor Giuseppe Pantaleo until June 2000, a leading expert in AIDS. During that time, he studied the immune regeneration of HIV infected subjects under highly active anti-retroviral therapy. He then moved to the Division of Cardiology (CHUV) as Project leader for developing new research activities in gene therapy applied to heart transplantation, in collaboration with Novartis, and genetic studies involving chemokines and chemokine receptors in heart rejection. In January 2004, Dr. Fleury moved to the Department of Experimental Surgery directed by Professor Yann Barrandon, a world leader on stem cells, for completing its research on lentiviral gene therapy . Dr. Fleury obtained his B.Sc. in Microbiology in 1985 from the University of Montreal (Canada), his M.Sc. in Virology in 1988 from the Institut Armand-Frappier (Laval, Canada) and his Ph.D. in 1992 from the Clinical Research Institute of Montreal in Canada with Rafick Sekaly. During his Ph.D., Dr. Fleury worked on the CD4 molecule, which is the primary HIV cellular receptor. From 1993-1996, Dr. Fleury completed his postgraduate studies in Bethesda (USA) at the NIAID, National Institutes of Health (NIH), with Dr. Ronald N. Germain, a world renowned Immunologist. Dr. Fleury is the recipient of several awards and prizes and has published articles in his field of study in scientific journals with a high impact such as Science, Cell, Nature, Nature Medicine, Circulation. MARC GIRARD, DVM, D. SC. Professor Girard was appointed as our Head of Vaccine Development in January 2004. Prior to joining Mymetics, Professor Girard served as Director General, Fondation Merieux, in Lyon, France between 2001 and 2003. Between 1999 and 2001, Professor Girard served as Director, European Research Center for Virology and Immunology (CERVI), Lyon, France. Professor Girard has also taught as a professor since 1966, most recently between 1984 and 1999 at the Institut Pasteur, Paris, France where he also served as the Head of Laboratory of Molecular Virology, Department of Virology, Institut Pasteur, Paris between 1980 and 1999. During his career, Professor Girard has served the medical community in a variety of capacities, including as Head, HIV Vaccine Task Force, French National Agency for AIDS Research (ANRS), Paris between 1988 and 1998, the Chairman, Department of Virology, Institut Pasteur, Paris between 1997 and 1999 and the Chairman, European Consortium for an HIV Vaccine (EuroVac), Brussels between 1999 and 2002. Professor Girard received his D.V.M. (Alfort Veterinary College) in 1960, his D. Sc. (University of Paris) in 1967 and completed a post doctoral fellow in 1966 through studies with Prof. James Darnell, MIT then 37 Albert Einstein College of Medicine and Prof. David Baltimore and Renato Dulbecco of the Salk Institute. Professor Girard is also the published author of several articles in his field of study. AUDIT COMMITTEE FINANCIAL EXPERT Our board of directors has appointed two of our directors as members of our Audit Committee, i.e. Mr. Christian Rochet and Mr. Ernst Luebke and determined that Mr. Ernst Luebke, who further serves as Mymetics's CFO, qualifies as our "audit committee financial expert". CODE OF ETHICS We have adopted a Code of Ethics that applies to our executive officers, including our chief executive officer. A copy of the Code of Ethics is filed as an exhibit to this Form 10-K annual report. 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, 2006, all of our executive officers, directors and 10% stockholders filed all required reports under Section 16(a) in a timely manner, except as follows: Dr. Serres, Dr Fleury, Professor Girard, Ms. Reindle and a Swiss bank acting on behalf of several of its clients. ITEM 11. EXECUTIVE COMPENSATION Compensation Committee Report The Compensation Committee met with management to review and discuss the Compensation Discussion and Analysis disclosures that follow. Based on such review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K, and the Board has approved that recommendation. Compensation Committee Christian J.-F. Rochet (Chairman) Ernst Luebke Compensation Disclosure and Analysis As a result of our lack of revenues and liquidity, we currently do not pay our named executive officers their full compensation on a regular basis under the terms of their employment agreements (discussed below) for their services. Under their employment agreements, our named executive officers have agreed to defer their salaries until such time as we are in a position to pay them. In arriving at the named executive officers' salaries, our objective was to determine a salary that, if paid, would be competitive in the market for executives of small pharmaceutical companies. SUMMARY COMPENSATION TABLE The following table sets forth for the last three fiscal years information on the annual compensation earned by our directors and officers. 38
CHANGE IN PENSION VALUE AND NON-EQUITY NONQUALIFIED INCENTIVE DEFERRED STOCK OPTION PLAN COMPENSATION ALL OTHER NAME AND PRINCIPAL AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL POSITION YEAR SALARY (E) BONUS (E) (E) (E) (E) (E) (E) (E) ------------------ ---- ---------- --------- ------ ------ ------------ ------------ ------------ -------- Christian J.-F. Rochet 2006 E216,000(5) -- -- -- -- -- -- E216,000(5) (PEO) (1) 2005 E144,000(5) -- -- -- -- -- -- E144,000(5) 2004 E 40,000(5) -- -- -- -- -- -- E 40,000(5) Ernst Luebke (PFO) (2) 2006 E216,000(5) -- -- -- -- -- -- E216,000(5) 2005 E144,000(5) -- -- -- -- -- -- E144,000(5) 2004 E 40,000(5) -- -- -- -- -- -- E 40,000(5) Sylvain Fleury, Ph. D. 2006 E216,000(5) -- -- -- -- -- -- E216,000(5) (3) 2005 E144,000(5) -- -- -- -- -- -- E144,000(5) 2004 E 96,000(5) -- -- -- -- -- -- E 96,000(5) Marc Girard, DVM, 2006 E 48,000(5) -- -- -- -- -- -- E 48,000(5) D.Sc. (4) 2005 E 48,000(5) -- -- -- -- -- -- E 48,000(5) 2004 E 36,000(5) -- -- -- -- -- -- E 36,000(5)
(1) Mr. Rochet has been our President and Chief Executive Officer since July 31, 2003. (2) Mr. Luebke has been our Chief Financial Officer and Treasurer since July 31, 2003 and our Secretary since August 29, 2003. (3) Dr. Fleury has been appointed as our Chief Scientific Officer on November 3, 2003. (4) Professor Girard has 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. (5) See below "Employment Agreements". The tables entitled "GRANTS OF PLAN-BASED AWARDS," "OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END," "OPTION EXERCISES AND STOCK VESTED," "PENSION BENEFITS," "NONQUALIFIED DEFERRED COMPENSATION" and "DIRECTOR COMPENSATION" and the respective discussions related to those tables have been omitted because no compensation required to be reported in those tables was awarded to, earned by or paid to any of the named executive officers or directors in any of the covered fiscal years. Employment Agreements Under the Executive Employment Agreement for Christian Rochet, he is employed as CEO for five years commencing July 1, 2006. Mr. Rochet receives an annual salary of E216,000 and is entitled to cash bonuses of 3% of all payments to be received from industry partners of the Company. If Mr. Rochet is terminated without cause or he terminates for good reason, he is entitled to a lump-sum payment equal to the greater of 24 months of his salary or the remaining term of his employment agreement. Under the Executive Employment Agreement for Ernst Luebke, he is employed as CFO for five years commencing July 1, 2006. Mr. Luebke receives an annual salary of E216,000 and is entitled to cash bonuses of 3% of all payments to be received from industry partners of the Company. If Mr. Luebke is terminated without cause or he terminates for good reason, he is entitled to a lump-sum payment equal to the greater of 24 months of his salary or the remaining term of his employment agreement. Under the Executive Employment Agreement for Sylvain Fleury, Ph.D., he is employed 39 as CEO for five years commencing July 1, 2006. Dr. Fleury receives an annual salary of E216,000 and is entitled to cash bonuses of 3% of all payments to be received from industry partners of the Company. If Dr. Fleury is terminated without cause or he terminates for good reason, he is entitled to a lump-sum payment equal to the greater of 24 months of his salary or the remaining term of his employment agreement. Under their employment agreements, the officers have agreed to defer payment of amounts due to them until the Company's financial position has been stabilized. Professor Girard has also agreed to defer payments due to him under his consulting agreement until the Company's financial position has been stabilized. As a result, at year end the Company owed Mr. Rochet, Mr. Luebke, Dr. Fleury and Professor Girard E45,796, E176,167, E58,601 and E57,053, respectively, as salary and reimbursement of actual travel and other expenses disbursed by them on behalf of Mymetics. 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 July 31, 2003, the members of the Compensation Committee were Mr. Rochet, Mr. Luebke, Dr. Serres and Dr. Zimmer, the latter two until their resignation only, i.e. June 7 and June 13, 2005 respectively. Both of Messrs. Rochet and Luebke were officers and employees of the Company during the fiscal year. 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 19, 2007, 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 135,627,464 shares of our common stock outstanding on March 19, 2007. We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the tables below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days of March 19, 2007, 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. 40
NAME AND ADDRESS OF AMOUNT AND NATURE OF BENEFICIAL OWNER TITLE OF CLASS BENEFICIAL OWNERSHIP PERCENT OF CLASS ------------------- -------------- -------------------- ---------------- Anglo Irish Bank (Suisse) SA Common 28,602,000(2) 25.84% 7, place des Alpes CH - 1201 Geneva, Switzerland Martine Reindle Common 9,022,653(3) 8.15% CP 18 CH - 1295 Mies, Switzerland Ernst Luebke (1) Common 5,079,418(4) 4.58% Chief Financial Officer, Secretary and Director Dr. Sylvain Fleury (1) Common 1,500,000(5) 1.35% Chief Scientific Officer Christian Rochet (1) Common 1,377,138(6) 1.24% Chief Executive Officer, President and Director Prof. Marc Girard (1) Common 1,000,000(7) 0.90% Head of Vaccine Development and member of the SAB All current executive officers and Common 8,956,556 8.07% directors as a group (4 persons)
41 ---------- (1) Address is Mymetics Corporation, European Executive Office, 14, rue de la Colombiere, CH-1260 Nyon (Switzerland). (2) Held on behalf of several bank customers. (3) Acquired prior to the reverse merger of 2001. (4) Of which 4,079,418 acquired prior to being elected as director and appointed as officer and 1,000,000 acquired through conversion of unpaid salary and expenses. (5) Of which 500,000 issued for services and 1,000,000 acquired through conversion of unpaid salary and expenses. (6) Of which 377,138 acquired prior to being elected as director and appointed as officer and 1,000,000 acquired through conversion of unpaid salary and expenses. (7) Of which 500,000 issued for services and 500,000 acquired through conversion of unpaid fees and expenses. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE During 2006, there were no transactions, and there are currently no proposed transactions, to which we were, are or will be a party in which the amount involved exceeds $120,000 and in which any of our directors, executive officers or holders of more than 5% of our common stock, or an immediate family member of any of the foregoing, had or will have a direct or indirect interest. Furthermore, it is our intention to ensure that all future transactions, including loans, between us and our officers, directors and principal stockholders and their affiliates are on terms no less favorable to us than those that we could obtain from unaffiliated third parties. 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 ACCOUNTING 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 2006 and 2005:
2006 2005 ------- ------- Audit Fees $42,788 $43,027 Audit-Related Fees -- -- Tax Fees -- 1,649 All Other Fees -- -- ------- ------- Total $42,788 $44,676 ======= =======
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. 42 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 2006 and 2005, 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 2006 and 2005, 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, 2007, Our Board of Directors pre-approved all services to be provided by Peterson Sullivan PLLC. PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (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 Company and the stockholders of Mymetics S.A. listed on the signature page thereto (1) 2.3 Purchase Agreement dated October 17, 1998 between the Company and the majority stockholders of Nazca Holdings Ltd. (2) 2.4 Amendment to the Purchase Agreement dated October 17, 1998 between the Company and the majority stockholders of Nazca Holdings Ltd. (3) 2.5 Revised Purchase Agreement dated July 28, 1999 between the Company and the majority stockholders of Nazca Holdings Ltd. (4) 2.6 Share Exchange Agreement dated July 30, 2002 between the Company and the stockholders of Mymetics S.A. listed on the signature page thereto (5) 43 3(i) Articles of Incorporation of the Company (as amended through May 10, 2002) (6) 3(ii) Bylaws (7) 4.1 Form of Specimen Stock Certificate (8) 4.2 Form of letter regarding Warrant (8) 4.3 Form of Share Exchange Agreement (8) 9.1 Voting and Exchange Trust Agreement dated March 19, 2001, among the Company, 6543 Luxembourg S.A. and MFC Merchant Bank S.A. (8) 10.1 Services Agreement dated May 31, 2001, between the Company and MFC Merchant Bank, S.A.(7) 10.2 Employment Agreement dated May 3, 2001, between Pierre-Francois Serres and the Company (7) 10.3 Indemnification Agreement dated March 19, 2001, between the Company and MFC Bancorp Ltd. (7) 10.4 Agreement dated for reference May 15, 2000, between the Company and Maarten Reidel (7) 10.5 Preferred Stock Redemption and Conversion Agreement dated for reference December 21, 2000, between the Company and Sutton Park International Ltd. (10) 10.6 Preferred Stock Conversion Agreement dated for reference December 21, 2000, between the Company and Med Net International Ltd. (11) 10.7 Preferred Stock Conversion Agreement dated December 21, 2000, between the Company and Dresden Papier GmbH (11) 10.8 Assignment Agreement dated December 29, 2000, among the Company, Mymetics S.A. and MFC Merchant Bank S.A. (1) 10.9 Credit Facility Agreement dated July 27, 2000, between MFC Merchant Bank, S.A. and the Company (1) 10.10 Amended Credit Facility Agreement dated for reference August 13, 2001, between MFC Merchant Bank, S.A. and the Company (16) 10.11 Second Amended Credit Facility Agreement dated for reference February 27, 2002, between MFC Merchant Bank, S.A. and the Company (16) 10.12 Amended and Restated Credit Facility Agreement dated for reference February 28, 2003, among MFC Merchant Bank, S.A., MFC Bancorp Ltd., and the Company (16) 10.13 Guarantee dated for reference February 28, 2003, by MFC Bancorp Ltd. to MFC Merchant Bank S.A. (16) 10.14 Shareholder Agreement dated March 19, 2001, among the Company, the Holders of Class B Exchangeable Preferential Non-Voting Shares of 6543 Luxembourg S.A. signatory thereto and 6543 Luxembourg S.A.(8) 10.15 Support Agreement dated March 19, 2001, between the Company and 6543 Luxembourg S.A. (8) 44 10.16 1995 Qualified Incentive Stock Option Plan (12) 10.17 Amended 1994 Stock Option Plan (13) 10.18 2001 ICHOR Company Stock Option Plan (7) 10.19 Employment Agreement dated March 18, 2002, between the Company and Peter P. McCann (14) 10.20 Consulting Agreement dated August 31, 2001, between the Company and Michael K. Allio (8) 10.21 Amendment to Consulting Agreement dated August 21, 2002, between the Company and Michael K. Allio (16) 10.22 Employment Agreement dated March 18, 2002, between the Company and Dr. Joseph D. Mosca (15) 10.23 Separation Agreement and Release dated January 31, 2003, between the Company and Peter P. McCann (16) 10.24 Director and Non-Employee Stock Option Agreement dated July 19, 2001, between the Company and Robert Demers (8) 10.25 Director and Non-Employee Stock Option Agreement dated July 19, 2001, between the Company and Michael K. Allio (8) 10.26 Director and Non-Employee Stock Option Agreement dated July 19, 2001, between the Company and John M. Musacchio (8) 10.27 Director and Non-Employee Stock Option Agreement dated July 19, 2001, between the Company and Patrice Pactol (8) 10.28 Director and Non-Employee Stock Option Agreement dated July 19, 2001, between the Company and Pierre-Francois Serres (8) 10.29 Director and Non-Employee Stock Option Agreement dated July 23, 2002, between the Company and Pierre-Francois Serres (16) 10.30 Director and Non-Employee Stock Option Agreement dated July 23, 2002, between the Company and Patrice Pactol (16) 10.31 Director and Non-Employee Stock Option Agreement dated July 23, 2002, between the Company and Robert Demers (16) 10.32 Director and Non-Employee Stock Option Agreement dated July 23, 2002, between the Company and John M. Musacchio (16) 10.33 Director and Non-Employee Stock Option Agreement dated July 23, 2002, between the Company and Michael K. Allio (16) 10.34 Director and Non-Employee Stock Option Agreement dated August 21, 2002, between the Company and Michael K. Allio (16) 10.35 Director and Non-Employee Stock Option Agreement dated June 20, 2002, between the Company and Peter P. McCann (16) 10.36 Director and Non-Employee Stock Option Agreement dated July 23, 2002, between the Company and Peter P. McCann (16) 10.37 Director and Non-Employee Stock Option Agreement dated February 6, 2003, between the Company and Peter P. McCann (16) 10.38 Patent Pledge Agreement dated November __, 2002 among Mymetics S.A., Mymetics Deutschland GmbH, the Company and MFC Merchant Bank S.A. (16) 10.39 Third Amendment to the Credit Facility Agreement dated for Reference December 31, 2006, between MFC Merchant Bank, S.A. 45 and the Company (17) 10.40 Fourth Amendment to the Credit Facility Agreement dated for Reference February 16, 2005, between MFC Merchant Bank, S.A. and the Company (17) 10.41 Consulting Agreement dated for reference January 1, 2004, between the Centre Hospitalier Universitaire Vaudois (CHUV), the Company and Dr. Sylvain Fleury, Ph.D. (18) 10.42 Consulting Agreement dated for reference January 1, 2004, between the Company and Professor Marc Girard, DVM, D.Sc. (18) 10.43 Cooperation and Option Agreement dated March 10, 2005, between the Company and Pevion A.G. (18) 10.44 Consulting Agreement dated March 23, 2005, between the Company and Northern Light International. (18) 10.45 Sixth Amended Credit Facility Agreement dated for reference December 31, 2005, between MFC Merchant Bank, S.A. and the Company (19) 10.46 Employment Agreement dated July 1, 2006, between the Company and Dr. Sylvain Fleury (20) 10.47 Employment Agreement dated July 1, 2006, between the Company and Christian Rochet (20) 10.48 Employment Agreement dated July 1, 2006, between the Company and Ernst Luebke (20) 10.49 License Agreement dated March 1, 2007, between the Company and Pevion Biotech Ltd. 10.50 Loan Agreement dated March 19, 2007, between the Company and Anglo Irish Bank (Suisse) S.A. (Translation from French language original) 10.51 Settlement Agreement dated March 19, 2007, between the Company and MFC Merchant Bank S.A. ("MFC Bank"), certain prior and present officers of MFC Bank and KHD Humboldt Wedag International Ltd (f/k/a MFC Bancorp Ltd) 11.1 Statement Regarding Calculation of Per Share Earnings. 14.1 Code of Ethics. 21.1 List of Subsidiaries 24.1 Powers of Attorney (included on the signature page hereto) 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14 of the Securities Exchange Act of 1934 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14 of the Securities Exchange Act of 1934 32.1 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer ---------- (1) Incorporated by reference to the Company's Schedule 14C filed with the Securities and Exchange Commission on April 26, 2001. (2) Incorporated by reference to the Company's report on Form 8-K filed with the Securities and Exchange Commission on October 22, 1998. 46 (3) Incorporated by reference to the Company's report on Form 8-K/A filed with the Securities and Exchange Commission on April 15, 1999. (4) Incorporated by reference to the Company's report on Form 8-K/A filed with the Securities and Exchange Commission on August 13, 1999. (5) Incorporated by reference to the Company's Amendment No. 1 to Form S-1 filed with the Securities and Exchange Commission on August 8, 2002. (6) Incorporated by reference to the Company's report on Form 10-Q for the quarter ended March 31, 2002, filed with the Securities and Exchange Commission on May 15, 2002. (7) Incorporated by reference to the Company's report on Form 10-Q for the quarter ended June 30, 2001, filed with the Securities and Exchange Commission on August 14, 2001. (8) Incorporated by reference to the Companys Registration Statement on Form S-1, File No. 333-88782, filed with the Securities and Exchange Commission on May 22, 2002. (9) Incorporated by reference to the Company's report on Form 8-K/A filed with the Securities and Exchange Commission on August 9, 2000. (10) Incorporated by reference to Schedule 13D/A filed by MFC Bancorp Ltd. with the Securities and Exchange Commission on dated January 2, 2001. (11) Incorporated by reference to the Company's report on Form 10-K for the fiscal year ended December 31, 2000, filed with the Securities and Exchange Commission on March 14, 2001. (12) Incorporate by reference to the Company's Registration Statement on Form S-8, File No. 333-15831, filed with the Securities and Exchange Commission on November 8, 1996. (13) Incorporated by reference to the Company's Registration Statement on Form S-8, File No. 333-15829, filed with the Securities and Exchange Commission on November 8, 1996. (14) Incorporated by reference to the Company's report on Form 10-K for the fiscal year ended December 31, 2004, and filed with the Securities and Exchange Commission on March 29, 2002. (15) Incorporated by reference to the Company's report on Form 10-Q for the quarter ended March 31, 2002, filed with the Securities and Exchange Commission on May 15, 2002. (16) Incorporated by reference to the Company's report on Form 10-K for the fiscal year ended December 31, 2005, and filed with the Securities and Exchange Commission on March 27, 2003. (17) Incorporated by reference to the Company's report on Form 8-K filed With the Securities and Exchange Commission on February 18, 2005. (18) Incorporated by reference to the Company's report on Form 10-K for the fiscal year ended December 31, 2004, filed with the Securities and Exchange Commission on March 30, 2005. (19) Incorporated by reference to the Company's report on Form 10-K for the fiscal year ended December 31, 2005, filed with the Securities and Exchange Commission on April 17, 2006. (20) Incorporated by reference to the Company's report on Form 10-Q for the period ended June 30, 2006, and filed with the Securities and Exchange Commission on August 21, 2006. (21) Incorporated by reference to the Company's report on Form 8-K filed With the Securities and Exchange Commission on February 18, 2005. 47 (22) Incorporated by reference to the Company's report on Form 10-K for the fiscal year ended December 31, 2004, filed with the Securities and Exchange Commission on March 30, 2005. (23) Incorporated by reference to the Company's report on Form 10-K for the fiscal year ended December 31, 2005, filed with the Securities and Exchange Commission on April 17, 2006. (b) Reports on Form 8-K During our fourth quarter ended December 31, 2006, we did not file any reports on Form 8-K with the Securities and Exchange Commission. 48 PETERSON SULLIVAN PLLC 601 UNION STREET SUITE 2300 SEATTLE WA 98101 (206) 382-7777 FAX 382-7700 CERTIFIED PUBLIC ACCOUNTANTS REPORT OF INDEPENDENT REGISTERED 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, 2006 and 2005, and the related consolidated statements of operations and comprehensive loss, changes in shareholders' equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2006, and for the period from May 2, 1990 (inception) to December 31, 2006. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mymetics Corporation (a development stage company) and Subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, and for the period from May 2, 1990 (inception) to December 31, 2006, in conformity with accounting principles generally accepted in the United States. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has not developed a commercially viable product and, therefore, has not been able to generate revenues, which has resulted in significant losses being incurred. Further, the Company's current liabilities exceed its current assets by E6,538,000 as of December 31, 2006, and there is no assurance that cash will become available to pay current liabilities in the 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 Seattle, Washington March 23, 2007 49 MYMETICS CORPORATION AND SUBSIDIARIES (A Development Stage Company) CONSOLIDATED BALANCE SHEETS December 31, 2006 and 2005 (In Thousands of Euros)
2006 2005 -------- -------- ASSETS Current Assets Cash E 29 E 70 Receivables 15 42 Prepaid expenses 16 2 -------- -------- Total current assets 60 114 Patents and Licenses 300 52 -------- -------- E 360 E 166 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current Liabilities Accounts payable E 1,933 E 2,095 Taxes and social costs payable 5 15 Current portion of note payable 4,372 3,754 Other 288 301 -------- -------- Total current liabilities 6,598 6,165 Payable to Shareholders 242 242 Note Payable, less current portion -- 39 -------- -------- Total liabilities 6,840 6,446 Shareholders' Equity (Deficit) Common stock, U.S. $.01 par value; 495,000,000 shares authorized; issued and outstanding 110,690,464 at December 31, 2006 and 76,043,664 at December 31, 2005 1,061 778 Common stock issuable, 330,000 at December 31, 2006 and 6,628,800 At December 31, 2005 3 59 Preferred stock, U.S. $.01 par value; 5,000,000 shares authorized; none issued or outstanding -- -- Additional paid-in capital 7,381 6,227 Deficit accumulated during the development stage (15,672) (14,087) Accumulated other comprehensive income 747 743 -------- -------- (6,480) (6,280) -------- -------- E 360 E 166 ======== ========
The accompanying notes are an integral part of these financial statements. 50 MYMETICS CORPORATION AND SUBSIDIARIES (A Development Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS For the Years Ended December 31, 2006, 2005 and 2004, and the Period from May 2, 1990 (Inception) to December 31, 2006 (In Thousands of Euros, Except Per Share Data)
Accumulated During Development Stage (May 2, 1990 to December 31, 2006 2005 2004 2006) ------- ------- ------- ------------ Revenues Sales E -- E -- E -- E 224 Interest -- -- -- 34 ------- ------- ------- -------- -- -- -- 258 Expenses Research and development 543 489 612 5,629 General and administrative 723 1,138 1,264 7,123 Bank fee -- -- 66 935 Interest 267 222 201 1,231 Goodwill impairment -- -- -- 209 Amortization 52 80 59 513 Directors' fees -- -- -- 274 Other -- 10 -- 10 ------- ------- ------- -------- 1,585 1,939 2,202 15,924 ------- ------- ------- -------- Loss before income tax provision (1,585) (1,939) (2,202) (15,666) Income tax provision -- -- -- (6) ------- ------- ------- -------- Net loss (1,585) (1,939) (2,202) (15,672) Other comprehensive income Foreign currency translation adjustment 4 (98) 191 747 ------- ------- ------- -------- Comprehensive loss E(1,581) E(2,037) E(2,011) E(14,925) ======= ======= ======= ======== Basic and diluted loss per share E (0.02) E (0.03) E (0.04) ======= ======= =======
The accompanying notes are an integral part of these financial statements. 51 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, 2006 (In Thousands of Euros)
Accumulated Other Comprehensive Deficit Income Accumulated - Foreign Additional During the Currency Date of Number of Par Paid-in Development Translation Transaction Shares Value Capital Stage Adjustment Total ------------- ---------- ----- ---------- ----------- ------------- ------- Balance at May 2, 1990 Shares issued for cash June 1990 33,311,361 E 119 E -- E -- E -- E 119 Net losses to December 31, 1999 -- -- -- (376) -- (376) Balance at December 31, 1999 33,311,361 119 -- (376) -- (257) ---------- ----- ------ ------- ---- ------- Bank fee -- -- 806 -- -- 806 Net loss for the year -- -- -- (1,314) -- (1,314) ---------- ----- ------ ------- ---- ------- Balance at December 31, 2000 33,311,361 119 806 (1,690) -- (765) Effect on capital structure resulting from a business combination March 2001 8,165,830 354 (354) -- -- -- Issuance of stock purchase warrants in connection with credit facility (restated) March 2001 -- -- 210 -- -- 210 Issuance of shares for bank fee March 2001 1,800,000 21 (21) -- -- -- Issuance of shares for bank fee June 2001 225,144 3 (3) -- -- -- Issuance of shares for cash June 2001 1,333,333 15 2,109 -- -- 2,124 Exercise of stock purchase warrants in repayment of debt June 2001 1,176,294 13 259 -- -- 272 Exercise of stock purchase warrants for cash December 2001 3,250,000 37 563 -- -- 600 Net loss for the year (restated) -- -- -- (1,848) -- (1,848) Translation adjustment -- -- -- -- 100 100 ---------- ----- ------ ------- ---- ------- Balance at December 31, 2001 49,261,962 562 3,569 (3,538) 100 693 Exercise of stock options March 2002 10,000 -- 8 -- -- 8
52 Issuance of stock purchase warrants for bank fee June 2002 -- -- 63 -- -- 63 Exercise of stock purchase warrants in repayment of debt July 2002 1,625,567 16 396 -- -- 412 Issuance of remaining shares from 2001 business combination August 2002 46,976 1 (1) -- -- -- Net loss for the year -- -- -- (3,622) -- (3,622) Translation adjustment -- -- -- -- 97 97 ----------- ----- ------ -------- ---- ------ Balance at December 31, 2002 50,944,505 579 4,035 (7,160) 197 (2,349) =========== ===== ====== ======== ==== ====== Issuance of shares for services September 2003 400,000 4 29 -- -- 33 Shares retired October 2003 (51) -- -- -- -- -- Issuance of shares for services November 2003 1,500,000 12 100 -- -- 112 Issuance of shares for cash December 2003 1,500,000 12 113 -- -- 125 Issuance of stock purchase warrants for financing fee December 2003 -- -- 12 -- -- 12 Net loss for the year -- -- -- (2,786) -- (2,786) Translation adjustment -- -- -- -- 453 453 ----------- ----- ------ -------- ---- ------ Balance at December 31, 2003 54,344,454 607 4,289 (9,946) 650 (4,400) =========== ===== ====== ======== ==== ====== Issuance of shares for services January 2004 550,000 5 27 -- -- 32 Issuance of shares for cash January 2004 2,000,000 17 150 -- -- 167 Issuance of stock purchase warrants for financing fee January 2004 -- -- 40 -- -- 40 Issuance of shares for cash February 2004 2,500,000 21 187 -- -- 208 Issuance of stock purchase warrants for financing fee February 2004 -- -- 62 -- -- 62 Issuance of shares for services April 2004 120,000 1 11 -- -- 12 Issuance of shares for bank fee May 2004 500,000 4 62 -- -- 66 Issuance of shares for cash May 2004 2,000,000 16 148 -- -- 164 Issuance of shares for services August 2004 250,000 2 26 -- -- 28 Issuance of shares for cash August 2004 1,466,667 12 128 -- -- 140 Issuance of stock purchase warrants for financing fee August 2004 -- -- 46 -- -- 46 Issuance of shares for services September 2004 520,000 4 29 -- -- 33 Issuance of shares for cash September 2004 50,000 -- 4 -- -- 4 Issuance of shares for services October 2004 2,106,743 16 132 -- -- 148 Issuance of shares for services November 2004 2,000,000 15 177 -- -- 192 Issuance of shares for cash November 2004 40,000 -- 4 -- -- 4 Net loss for the year -- -- -- (2,202) -- (2,202) Translation adjustment -- -- -- -- 191 191 ----------- ----- ------ -------- ---- ------
53 Balance at December 31, 2004 68,447,864 E 720 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) ----------- ----- ------ -------- ---- ------
54 Balance at December 31, 2005 82,670,464 837 6,227 (14,087) 743 (6,280) =========== ===== ====== ======== ==== ====== Issuance of shares for services January 2006 2,500,000 21 31 -- -- 52 Issuance of shares for cash January 2006 4,000,000 33 132 -- -- 165 Issuance of shares for services January 2006 100,000 1 2 -- -- 3 Issuance of shares for cash March 2006 1,500,000 12 38 -- -- 50 Issuance of shares for cash March 2006 2,500,000 21 62 -- -- 83 Issuance of shares for cash March 2006 250,000 2 6 -- -- 8 Issuance of shares for cash March 2006 1,500,000 12 38 -- -- 50 Issuance of shares for services April 2006 100,000 1 4 -- -- 5 Issuance of shares for cash May 2006 300,000 2 3 -- -- 5 Issuance of shares for cash May 2006 300,000 3 7 -- -- 10 Issuance of shares for cash May 2006 2,350,000 18 82 -- -- 100 Debt Conversion - non cash May 2006 1,000,000 8 31 -- -- 39 Issuance of shares for cash June 2006 2,600,000 20 80 -- -- 100 Debt Conversion - non cash July 2006 1,000,000 8 72 -- -- 80 Debt Conversion - non cash July 2006 1,000,000 8 72 -- -- 80 Debt Conversion - non cash July 2006 1,000,000 8 72 -- -- 80 Debt Conversion - non cash July 2006 500,000 4 36 -- -- 40 Issuance of shares for services November 2006 300,000 2 4 -- -- 6 Issuance of shares for cash November 2006 1,300,000 10 90 -- -- 100 Issuance of shares for cash November 2006 1,280,000 10 90 -- -- 100 Issuance of shares for cash December 2006 1,320,000 10 90 -- -- 100 Issuance of shares for cash December 2006 1,320,000 10 90 -- -- 100 Issuance of shares for cash December 2006 330,000 3 22 -- -- 25 Net loss for the year -- -- -- (1,585) -- (1,585) Translation adjustment -- -- -- -- 4 4 ----------- ----- ------ -------- ---- ------ Balance at December 31, 2006 111,020,464 1,064 7,381 (15,672) 747 (6,480) =========== ===== ====== ======== ==== ======
The accompanying notes are an integral part of these financial statements. 55 MYMETICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2006, 2005 and 2004 and the Period from May 2, 1990 (Inception) to December 31, 2006 (In Thousands of Euros)
Total Accumulated During Development Stage (May 2, 1990 to December 31, 2006 2005 2004 2006) ------- ------- ------- --------------- Cash Flows from Operating Activities Net loss E(1,585) E(1,939) E(2,202) E(15,672) Adjustments to reconcile net loss to net cash used in operating activities Amortization 52 80 59 513 Goodwill impairment -- -- -- 209 Fees paid in warrants -- -- 148 223 Services and fees paid in common stock 66 466 511 1,994 Amortization of debt discount -- -- -- 210 Changes in operating assets and liabilities, net of effects from reverse purchase Receivables 27 68 (10) 23 Accounts payable 118 604 259 1,915 Taxes and social costs payable (10) (25) (13) 5 Other (27) 185 7 320 ------- ------- ------- -------- Net cash used in operating activities (1,359) (561) (1,241) (10,260) Cash Flows from Investing Activities Patents and other (300) (52) (3) (693) Cash acquired in reverse purchase -- -- -- 13 ------- ------- ------- -------- Net cash used in investing activities (300) (52) (3) (680) Cash Flows from Financing Activities Proceeds from the issuance of common stock and warrants 996 356 687 5,015 Borrowings from shareholders -- -- -- 242 Increase in note payable and other short-term advances 618 425 241 5,095 Loan fees -- -- -- (130) ------- ------- ------- -------- Net cash provided by financing activities 1,614 781 928 10,222 Effect of exchange rate changes on cash 4 (98) 191 747 ------- ------- ------- -------- Net increase (decrease) in cash (41) 70 (125) 29 Cash, beginning of period 70 -- 125 -- ------- ------- ------- -------- Cash, end of period E 29 E 70 E -- E 29 ======= ======= ======= ========
The accompanying notes are an integral part of these financial statements. 56 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, 2006, 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 E6,480 at December 31, 2006. Deficits in operating cash flows since inception have been financed through debt and equity funding sources. In order to remain a going concern and continue the Company's research and development activities, management intends to seek additional funding. Further, the Company's current liabilities exceed its current assets by E6,538 as of December 31, 2006, and there is no assurance that cash will become available to pay current liabilities in the near term. Management is seeking additional financing but there can be no assurance that management will be successful in any of those efforts. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany accounts and transactions have been eliminated. Foreign Currency Translation The Company translates non-Euro assets and liabilities of its subsidiaries at the rate of exchange at the balance sheet date. Revenues and expenses are translated at the average rate of exchange throughout the year. Unrealized gains or losses from these translations are reported as a separate component of comprehensive income. Transaction gains or losses are included in general and administrative expenses in the consolidated statements of operations. The translation adjustments do not recognize the effect of income tax because the Company expects to reinvest the amounts indefinitely in operations. The Company's reporting currency is the Euro because substantially all of the Company's activities are conducted in Europe. Cash Cash deposits are occasionally in excess of insured amounts. Interest paid was E267 in 2006, E222 in 2005 and E201 in 2004. The Company has paid no income tax since its inception. Revenue Recognition Revenue related to the sale of products is recognized when all of the following conditions are met: persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectibility is reasonably assured. 57 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, 2006 and 2005 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. Current liabilities The Company was not able to meet the E900,000 loan repayment due at September 30, 2006 to MFC Merchant Bank SA ("MFC") under its E3.7 million credit facility. MFC had initially agreed to delay declaring a default to allow MFC and the Company to negotiate terms of repayment acceptable to MFC, and for the Company to identify additional investors to fund the repayment. On September 1, 2006, the Company received a letter from MFC declaring the Company in default. Under the terms of the credit facility, the Company's default accelerated the repayment of the credit facility. In its letter, MFC demanded repayment no later than September 5, 2006 of the outstanding balance under the credit facility, totaling approximately E3.9 million including interest through such date. The Company has not made that repayment. In connection with the declaration of default referred to above, the Company proceeded with lawsuits against MFC and certain prior and present officers of MFC, KHD Humboldt Wedag International, Ltd. (f/k/a MFC Bancorp., Ltd.) alleging breaches of fiduciary duty, interference with prospective business relations and civil conspiracy. On March 19, 2007, we entered into a settlement under which the E4,021 loan was terminated. See note 8. 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 99,716,382 for the year ended December 31, 2006, 71,972,491 for the year ended December 31, 2005, and 62,177,629 for the year ended December 31, 2004. Diluted earnings per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive securities. Options were not included in the computation of diluted earnings per share because their effect would be anti-dilutive due to net losses incurred. Preferred Stock 58 The Company has authorized 5,000,000 shares of preferred stock. No shares are issued or outstanding at December 31, 2006. 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 On January 1, 2006, the Company adopted the fair value recognition provisions of FAS No. 123(R), Share-Based Payment, ("FAS 123R"). Prior to January 1, 2006, the Company accounted for stock-based payments under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), and related Interpretations, as permitted by FAS No. 123, Accounting for Stock-Based Compensation ("FAS 123"). In accordance with APB 25, no compensation cost was required to be recognized for options granted that had an exercise price equal to the market value of the underlying common stock on the date of grant. The Company adopted FAS 123R using the modified-prospective transition method. Under that transition method, compensation cost recognized for the year ended December 31, 2006 and thereafter will include: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of FAS 123, and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of FAS 123R. The financial results for the prior periods have not been restated. The Company will amortize stock compensation cost ratably over the requisite service period. If the fair value method had been applied since inception, additional compensation costs of E320 would have been recorded. The expense for stock options and warrants to purchase stock granted is measured using a fair value valuation model at the date of grant multiplied by the number of options granted. 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 2006 and 2005. The issuance of common shares for services is recorded at the quoted price of the shares on the date the services are rendered. Estimates The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. New Accounting Standards In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48, Accounting for Uncertainties in Income Taxes, ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 is effective for financial statements as of January 1, 2007. The Company does not expect any material impact from applying FIN 48. In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("FAS 157"). FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements but does not require any new fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company does not expect any material impact from applying FAS 157. 59 In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, ("FAS 158"). FAS 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. FAS 158 is effective for employers with publicly traded equity securities for fiscal years ending after December 15, 2006. Employers without publicly traded equity securities are required to include certain disclosures until fully adopting FAS 158 for fiscal years ending after December 15, 2006 but before June 16, 2007. The Company does not expect any material impact from applying FAS 158. In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108 (SAB 108). Due to diversity in practice among registrants, SAB 108 expresses SEC staff views regarding the process by which misstatements in financial statements are evaluated for purposes of determining whether financial statement restatement is necessary. SAB 108 is effective for fiscal years ending after November 15, 2006, and early application is encouraged. The Company does not expect any material impact from applying SAB 108. In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, ("FAS 159"). FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. FAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company does not expect any material impact from applying FAS 159. Note 2. Receivables
2006 2005 ---- ---- Trade receivables E-- E-- Value added tax refund 15 42 --- --- 15 42 Allowance for doubtful accounts -- -- --- --- E15 E42 === ===
Note 3. Other Intangible Assets Other intangible assets consist of patents which are stated at cost of the fees paid to the French and US patent offices. At December 31, 2006 and 2005, the carrying amount of patents and licenses was E300 and E52 net of accumulated amortization of E380 and E328, respectively. Amortization expense relating to patents was E52, E80, and E59 for 2006, 2005 and 2004, respectively. Amortization expense is expected to amount to E15 each year from 2007 to 2011, which refers only to our new license acquisition costs, amortized over 20 years, 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 60 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 E3,700 at LIBOR plus 4% (approximately 7.63% at December 31, 2006), with an instalment of E900 repayable on June 30, 2006 and the balance due December 31, 2006, collateralized by all of the Company's assets plus any future patents. The Company owed E4,372 and E3,754 under this facility as of December 31, 2006 and 2005, 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, 2006, for potential issuance. The Company has disputed the validity of the loan in its lawsuit against MFC and certain of its officers and directors. See "Credit Facility with MFC Merchant Bank S.A." under "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters." The Company incurred fees of E52 and E87 (paid with shares of the Company) to MFC Bank in 2006 and 2005, respectively, related to management and financing services. 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 were exercisable within a three-year period beginning August 2000 at approximately E0.2319 per common share. Proceeds from the credit facility were allocated pro-rata based on the relative fair values of the credit facility and related warrants as the proceeds were received up to the maximum proceeds available under the credit facility. The maximum limit of the credit facility was E1,300 and the balance outstanding representing proceeds received under the credit facility was E228. The amount attributable to the warrants of E210 was recorded as a discount against the carrying amount of the credit facility and a credit to additional 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. In March 2005, 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 E88 as a result of this issuance. 61 In January 2006, the Company issued 2,500,000 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 E52 as a result of this issuance. In March 2007, the Company entered into a settlement agreement related to this credit facility. See note 8. 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. The Company owes officers approximately E338 at December 31, 2006, for salaries and fees and also for expenses paid on behalf of the Company. These amounts are unsecured, do not bear interest and are included in accounts payable. In July 2006, the officers agreed to convert approximately half of their current claims or E280 into 3,500,000 shares of common stock of Mymetics Corporation at a price per share of $0.10. The current market price was then $0.05 or less. 62 Note 5. Income Taxes The reconciliation of income tax on income computed at the federal statutory rates to income tax expense is as follows:
2006 2005 2004 ----- ----- ----- U.S. Federal statutory rates on loss from operations E(539) E(659) E(749) Nondeductible fee paid in warrants and common stock -- -- 224 Effect of exchange rate changes on U.S. net operating loss carryforward 257 (235) 103 Increase in valuation allowance 282 894 423 Other -- -- (1) ----- ----- ----- Income tax provision E -- E -- E -- ===== ===== =====
Deferred tax asset is composed of the following:
2006 2005 ------- ------- Difference in book and tax basis of amounts payable to shareholder E 82 E 82 Net operating loss carryforwards United States 2,489 2,224 France 1,238 1,253 ------- ------- 3,809 3,559 Less valuation allowance for deferred tax asset (3,809) (3,559) ------- ------- Net deferred tax asset E -- E -- ======= =======
The change in the valuation allowance was E282 less E32 related to expiring French net operating losses. 63 The Company's provision for income taxes was derived from U.S. and French operations. At December 31, 2006, the Company had estimated net operating loss carryforwards which expire as follows:
United States France ------ ------ 2006 E -- E 381 2007 -- 1,039 2008 -- 801 2009 -- 1,290 2010 -- 80 2011-2026 7,320 50 ------ ------ E7,320 E3,641 (*) ====== ======
(*) French losses would be lost should the company be liquidated in 2007 following its emergence from receivership. The change in the valuation allowance was E282 less E32 related to expiring French net operating losses. Note 6. 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 of Exercise Shares Price ------- ---------- Outstanding and exercisable at December 31, 2004 13,750 U.S. $1.11 Expired in 2005 (1,250) .75 Outstanding and exercisable at December 31, 2005 12,500 U.S. $1.15 Expired in 2006 (12,500) 1.15 ------- Outstanding and exercisable at December 31, 2006 -- ======= Reserved for future grants at December 31, 2006 -- =======
1995 Qualified Incentive Stock Option Plan 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: 64
Weighted Number Average of Exercise Shares Price -------- ---------- Outstanding and exercisable at December 31, 2004 100,000 U.S. $.75 Expired in 2005 (100,000) .75 Outstanding and exercisable At December 31, 2005 and 2006 -- -- ======== ========= Reserved for future grants at December 31, 2006 -- ========
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 2005 and 2006. The weighted average fair value of these options at the grant dates were E0.12 and E0.62 per option in 2003 and 2002, respectively. The following table summarizes information with respect to this plan:
Weighted Number Average of Exercise Shares Price --------- --------- Outstanding and exercisable at December 31, 2004, 2005 and 2006 442,500 U.S. $ .97 ========= ========== Reserved for future grants at December 31, 2006 4,557,500 =========
Almost all options have an expiration date ten and a half years after issuance. At December 31, 2006, exercise prices range from $0.12 to $3.50. There was no intrinsic value on outstanding options at December 31, 2006. Note 7. Commitments and Contingencies Total rent expense per year was E15 for 2006, E15 for 2005, and E32 for 2004. All leases can be cancelled at short notice with no penalties. On October 26, 2006, the Court of Appeals of Lyon (France) overturned a judgement rendered by the Lyon Industrial Tribunal ("Prud'hommes") in favor of Dr. Pierre-Francois Serres, a former director and officer of the Company. Under this lower court judgement and as disclosed on Form 10-K for the year ended December 31, 2005 to the Securities and Exchange Commission, Dr. Serres was awarded approximately E173,000. In the court's decision, the Company will not have to pay this amount and will receive reimbursement of approximately E33,000 he had previously been able to seize from the company's bank account based on the lower court's initial judgement. We intend to vigorously pursue this matter until fully resolved. Note 8. Subsequent Events 65 In January 2007, the Company issued 650,000 common shares to an investor for $65,500 and 1,000,000 common shares to four individuals as fee for services rendered. In February 2007, 1,745,000 shares were issued to three investors for $174,500. In January 2007, the Company issued 8,712,000 common shares to an investor for E990,000. The same investor also granted an unsecured loan in the amount of E500,000 at 5% interest, repayable on March 19, 2008, in view of financing the settlement discussed below. In March 2007, the Company entered into a settlement agreement to settle outstanding amounts due under the credit facility granted by MFC Merchant Bank SA (see note 4). In connection with the settlement, the Company paid E1.49 million and issued 12,500,000 common restricted shares. The payment of cash was applied to the outstanding credit facility balance with the remainder considered as a conversion of debt into equity on the issuance of the Company's shares. No gain or loss resulted from this transaction. 66 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Mymetics Corporation By: /s/ Christian Rochet ------------------------------------ Name: Christian J.F. Rochet Title: Chief Executive Officer ---------------------------------------- (Date) 67 POWERS OF ATTORNEY Each person whose signature appears below constitutes and appoints Ernst Luebke as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Annual Report on From 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title --------- ----- /s/ Christian J.F. Rochet Chief Executive Officer and Director ------------------------------------- (Principal Executive Officer) Christian J.F. Rochet ------------------------------------- (date) /s/ Ernst Luebke Chief Financial Officer and Director ------------------------------------- (Principal Financial and Accounting Ernst Luebke Officer) ------------------------------------- (date) /s/ Sylvain Fleury Chief Scientific Officer and ------------------------------------- Director Sylvain Fleury, Ph. D. ------------------------------------- (date)
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