Upon completion of enrollment in the ongoing Phase 2b clinical trial with CYT003 in allergic asthma, the Company called the second tranche of CHF 6.625 million on October 21, 2013. The second tranche of the convertible loan notes of CHF 6.625 million was paid in four different installments between October 29, 2013 and December 10, 2013. The convertible loan notes carry an interest rate of 9% p.a. and are due for repayment at 150% of the nominal value on February 10, 2015. In case of a change in controlling interest, the investors can demand the repayment of the convertible loan notes at 190% of the original amount of the convertible loan notes.
The value of the liability component of the second tranche of the convertible loan notes was deter- mined based on a discount rate of 61.19%. The remaining value has been allocated to the equity component.
As of May 2, 2014 a total amount of CHF 7.00 million was subordinated. This amount includes CHF 6.625 million of the principle amount of the first and second tranche of the convertible loan note and accrued interests in the amount of TCHF 375. In addition to this, any interest due for the convertible loan notes accruing after April 14, 2014 is subordinated as well.
The fair value of the convertible loan notes on December 31, 2014 amounted to CHF 6.66 million (2013: CHF 9.550 million).
The total interest expense amounted to CHF 3.767 million and has been recognized for 2014 as “Financial expense” (same period in 2013: CHF 0.285 million).
The convertible loan notes recognized in the balance sheet are 2014 2013
calculated as follows: TCHF TCHF
Nominal value of the convertible loan notes issued in October
and December 2013* 6,625 6,625
Equity component (711) (711)
Liability component on initial recognition in October and December 2013 5,914 5,914
Interest expense 3,445 242
Liability component as per December 31, 9,359 6,156
Accrued interest as per December 31, (deferred until February 10, 2015) 607 43
*Granted by:
- venBio Global Strategic Fund L.P., Grand Cayman (Cayman Islands) - Amgen Investments Ltd., Hamilton (Bermuda)
- Abingworth Bioventures V L.P., London (UK) - Aisling Capital III L.P., New York, NY (USA)
in TCHF 2014 2013
Accrued project costs – 1,674
Accrued payroll and bonuses 213 1,340
Accrued interest Convertible Bond/-loan notes 4,931 2,299
Other 211 403
Balance as per December 31, 5,355 5,716
thereof non-current – 2,299
NIC002 Project
Cytos Biotechnology Ltd announced on January 23, 2013, that Novartis terminated the license agreement under which it had been developing NIC002, a therapeutic vaccine candidate for the treatment of nicotine addiction and returned the licensed rights to Cytos pursuant to the provisions of the license agreement.
In this context, it was decided that the non-current accrued expenses of TCHF 645 and the current accrued expenses of TCHF 101 as per December 31, 2012, are considered unnecessary and therefore have been reversed in the first quarter 2013 to the income statement.
16. Provisions
Explanation of provisions concerning the “Asklia” litigation
As a consequence of the merger of Cytos Biotechnology AG (“Cytos”) with Asklia Holding AG (“Asklia”) in 2002, Cytos assumed a number of provisions for legal claims as well as costs for law- yers, accounting and liquidation of companies. Since the acquisition of and merger with Asklia, most of the provisions have been claimed or reversed to the income statement.
Asklia was involved in (i) various litigations and lawsuits arising in the ordinary daily business and (ii) claims regarding representations, warranties and covenants given by Asklia when divesting its business. Some of these Asklia claims and lawsuits were settled. Other cases of legal disputes, involving subsidiaries of Asklia that were divested prior to the acquisition were transferred as part of the divested business. In two of such lawsuits, in which the plaintiffs claimed CHF 1.3 million and CHF 0.6 million, Asklia agreed to indemnify the acquirer of the divested business for all costs the divested company or the acquirer will incur in connection with these proceedings.
As a consequence of the acquisition of Asklia these liabilities and lawsuits as well as the other pend- ing and threatened lawsuits and claims of Asklia were taken over by Cytos. Cytos had the opinion that the adequate provisions of CHF 2.5 million that were made as per December 31, 2013 would cover the risks associated with these various claims and pending or threatened lawsuits.
On May 1, 2014, a settlement was reached between Cytos and the legal entity that is one of the counterparties of this lawsuit for which Cytos assumed the liability as mentioned above. Against a payment of CHF 2 million, any liability of or claim against Cytos is settled in full. As a result, the remaining provisions of CHF 0.5 million were reversed and credited to other income.
Legal
in TCHF Other)) claims Total
Balance as per December 31, 2012 37 2,309 2,346
Additions 50 141 191
Utilization (39) – (39)
Balance as per December 31, 2013 48 2,450 2,498
Additions – 43 43
Utilization (14) (2,000) (2,014)
Reversed (34) (493) (527)
17. Shareholders’ equity
Share Treasury
Shares capital shares
(number) (TCHF) (TCHF)
December 31, 2012 22,411,431 2,241 (224)
New Shares issued 8,113,845 812 –
Treasury shares sold (80,975) (8) 8
Shares and employee option shares* 80,975 8 –
December 31, 2013 30,525,276 3,053 (216)
New shares issued – – –
Treasury shares sold (55,520) (6) 6
Shares and employee option shares* 55,520 6 –
December 31, 2014 30,525,276 3,053 (210)
*issued from Treasury shares
Issued and fully Treasury Total
Number of shares at paid shares shares shares
December 31, 2013 28,365,108 2,160,168 30,525,276
December 31, 2014 28,420,628 2,104,648 30,525,276
Summary of authorized and conditional capital
(see articles 4b, 4c, 4h, 4g, and 4i of the articles of association of the Company)
in TCHF (except share data) 2014 2013
Authorized capital as per December 31 1,526 1,526
Conditional capital as per December 31 1,526 1,526
Weighted average number of shares used
in computing basic and diluted net loss per share 30,525,276 23,350,223
Under the Swiss Code of Obligations (CO), new share capital can be created by way of ordinary, authorized or conditional capital increase, which is defined as follow:
Ordinary capital (art. 650 CO):
Shareholders resolve on terms of capital increase and instruct board to increase capital within three months from shareholders’ resolution.
Authorized capital (art. 651 CO):
Shareholders amend the articles of association to include authorized capital (up to 50% of existing share capital) to authorize board to issue a maximum amount of shares. Authorized capital is valid for two years from shareholders’ resolution.