UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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FOR THE QUARTERLY PERIOD ENDED June 30, 2017
OR
☐
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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: 0-31265
MABVAX THERAPEUTICS HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
|
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93-0987903
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(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
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(I.R.S. EMPLOYER
IDENTIFICATION NO.)
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11535 Sorrento Valley Road, Suite 400, San Diego, CA
92121
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP
CODE)
(858) 259-9405
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA
CODE)
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by 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 ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes ☒ No
☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange
Act.
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
|
|
|
|
Non-accelerated filer
(Do not check if a smaller reporting company)
|
☐
|
Smaller reporting company
|
☒
|
Indicate by check mark whether the registrant is an emerging growth
company as defined in as defined in Rule 405 of the Securities Act
of 1933 (§230.405 of this chapter) or Rule 12b-2 of the
Securities Exchange Act of 1934 (§240.12b-2 of this
chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ☐ No
☒
The number of shares of common stock outstanding as of August 14,
2017 was 10,563,899.
INDEX
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Page
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1
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1
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2
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3
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4
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5
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24
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32
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32
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33
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33
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35
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35
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35
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36
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37
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38
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PART 1. FINANCIAL INFORMATION
Item 1.
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Financial Statements
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MABVAX THERAPEUTICS HOLDINGS, INC.
Condensed Consolidated
Balance Sheets
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Assets
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Current
assets:
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Cash and cash
equivalents
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$1,846,906
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$3,979,290
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Prepaid
expenses
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61,043
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281,858
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Other current
assets
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88,564
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32,830
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Total current
assets
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1,996,513
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4,293,978
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Property and
equipment, net
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664,136
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731,712
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Goodwill
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6,826,003
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6,826,003
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Other long-term
assets
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168,597
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168,597
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Total
assets
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$9,655,249
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$12,020,290
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Liabilities
and Stockholders' Equity
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Current
liabilities:
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Accounts
payable
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$2,086,650
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$1,137,903
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Accrued
compensation
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639,128
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770,592
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Accrued clinical
operations and site costs
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1,643,379
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1,218,641
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Accrued lease
contingency fee
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590,504
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590,504
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Other accrued
expenses
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367,389
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315,034
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Interest
payable
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45,742
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51,295
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Current portion of
notes payable
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1,666,667
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1,589,661
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Current portion of
capital leases payable
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17,726
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17,004
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Total current
liabilities
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7,057,185
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5,690,634
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Long-term
liabilities:
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Long-term portion
of notes payable, net
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2,284,889
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2,774,627
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Long-term portion
of capital lease payable
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59,065
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68,113
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Other long-term
liabilities
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167,296
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144,394
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Total long-term
liabilities
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2,511,250
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2,987,134
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Total
liabilities
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9,568,435
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8,677,768
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Commitments and
contingencies
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Stockholders'
equity:
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Series D
convertible preferred stock, $0.01 par value, 1,000,000 shares
authorized, 98,105 and 132,489 shares issued and outstanding with a
liquidation preference of $981 and $1,325 as of June 30, 2017, and
December 31, 2016, respectively
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981
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1,325
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Series E
convertible preferred stock, $0.01 par value, 100,000 shares
authorized, 33,333 shares issued and outstanding with a liquidation
preference of $333
|
333
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333
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Series F
convertible preferred stock, $0.01 par value, 1,559,252 shares
authorized, 665,281 shares issued and outstanding with a
liquidation preference of $6,653
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6,653
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6,653
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Series G
convertible preferred stock, $0.01 par value, 5,000,000 shares
authorized, 1,000,000 and 0 issued and outstanding with a
liquidation preference of $10,000 and $0 as of June 30, 2017, and
December 31, 2016, respectively
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10,000
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—
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Series H
convertible preferred stock, $0.01 par value, 2,000 shares
authorized, 850 and 0 shares issued and outstanding with a
liquidation preference of $850,000 and $0 as of June 30, 2017, and
December 31, 2016, respectively
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9
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—
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Series I
convertible preferred stock, $0.01 par value, 1,968,664 shares
authorized, 1,968,664 and 0 issued and outstanding with a
liquidation preference of $19,687 and $0 as of June 30, 2017, and
December 31, 2016, respectively
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19,687
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—
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Common stock, $0.01
par value; 150,000,000 shares authorized, 9,219,770 and 6,296,110
shares issued and outstanding as of June 30, 2017, and December 31,
2016, respectively
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92,198
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62,961
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Additional paid-in
capital
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94,803,349
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81,533,511
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Accumulated
deficit
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(94,846,396)
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(78,262,261)
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Total stockholders'
equity
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86,814
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3,342,522
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Total liabilities
and stockholders' equity
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$9,655,249
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$12,020,290
|
See
Accompanying Notes to Condensed Consolidated Financial
Statements
MABVAX THERAPEUTICS
HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
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Revenues:
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Grants
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$—
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$—
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$—
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$148,054
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Total
revenues
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—
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—
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—
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148,054
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Operating costs and
expenses:
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Research
and development
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2,332,700
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1,596,002
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5,151,064
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3,296,514
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General
and administrative
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3,408,042
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1,929,166
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5,681,992
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4,581,005
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Total operating
costs and expenses
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5,740,742
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3,525,168
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10,833,056
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7,877,519
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Loss from
operations
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(5,740,742)
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(3,525,168)
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(10,833,056)
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(7,729,465)
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Interest and other
expense
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(249,126)
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(262,807)
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(511,666)
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(463,280)
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Net
loss
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$(5,989,868)
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$(3,787,975)
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$(11,344,722)
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$(8,192,745)
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Deemed dividend on
inducement shares
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(5,220,000)
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—
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(5,220,000)
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—
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Deemed dividend on
warrant reprice
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(19,413)
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—
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(19,413)
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—
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Net loss allocable
to common stockholders
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$(11,229,281)
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$(3,787,975)
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$(16,584,135)
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$(8,192,745)
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Basic and diluted
net loss per share
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$(1.47)
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$(0.92)
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$(2.37)
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$(2.03)
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Shares used to
calculate basic and diluted net loss per share
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7,662,700
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4,128,617
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6,985,943
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4,037,835
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See
Accompanying Notes to Condensed Consolidated Financial
Statements
MABVAX THERAPEUTICS HOLDINGS,
INC.
Condensed Consolidated Statements of Stockholders’
Equity
For the Six Months Ended June 30, 2017
(Unaudited)
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Series D, E, F, G, H and I Convertible Preferred Stock
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Additional
Paid-in
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Accumulated
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Shares
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Shares
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Capital
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Deficit
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Balance at December 31, 2016
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831,103
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$8,311
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6,296,110
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$62,961
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$81,533,511
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$(78,262,261)
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$3,342,522
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Private
placement, net of costs
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850
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9
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—
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—
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820,562
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—
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820,571
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Underwritten
offering, net of costs
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1,000,000
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10,000
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1,342,858
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13,429
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3,678,828
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—
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3,702,257
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Issuance
of inducement shares
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1,968,664
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19,687
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931,336
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9,313
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(29,000)
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—
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—
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Deemed
dividends on inducement shares
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—
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—
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—
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—
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5,220,000
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(5,220,000)
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—
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Repricing
of warrants
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—
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—
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—
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—
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19,413
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(19,413)
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—
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Stock
issued for services
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—
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—
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86,574
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866
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62,684
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—
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63,550
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Preferred
stock conversions
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(34,384)
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(344)
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464,654
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4,647
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(4,303)
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—
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—
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Stock
issued upon vesting of RSUs
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—
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—
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98,238
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982
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(982)
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—
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—
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Stock-based
compensation
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—
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—
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—
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—
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3,502,636
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—
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3,502,636
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Net
loss
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—
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—
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—
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—
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—
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(11,344,722)
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(11,344,722)
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Balance at June 30, 2017
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3,766,233
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$37,663
|
9,219,770
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$92,198
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$94,803,349
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$(94,846,396)
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$86,814
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See
Accompanying Notes to Condensed Consolidated Financial
Statements
MABVAX THERAPEUTICS HOLDINGS,
INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
For the Six
Months Ended June 30,
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Operating
activities
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Net
loss
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$(11,344,722)
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$(8,192,745)
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Adjustments to
reconcile net loss to net cash used in operating activities:
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Depreciation and
amortization
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83,933
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32,466
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Stock-based
compensation
|
3,502,636
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2,491,451
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Issuance of
restricted common stock for services
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63,550
|
64,000
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Amortization and
accretion related to notes payable
|
215,195
|
223,352
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Increase (decrease)
in operating assets and liabilities:
|
|
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Grants
receivable
|
—
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757,562
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Other
receivables
|
22,829
|
—
|
Prepaid expenses
and other
|
146,967
|
56,318
|
Accounts
payable
|
931,817
|
(877,179)
|
Accrued clinical
operations and site costs
|
424,738
|
100,116
|
Accrued
compensation
|
(131,464)
|
(80,227)
|
Other accrued
expenses
|
59,216
|
199,752
|
Net cash used in
operating activities
|
(6,025,305)
|
(5,225,134)
|
Investing
activities
|
|
|
Purchases of
property and equipment
|
(4,142)
|
(316,846)
|
Net cash used in
investing activities
|
(4,142)
|
(316,846)
|
Financing
activities
|
|
|
Cash receipt from
bank loan, net of financing costs
|
—
|
4,610,324
|
Private offering,
net of issuance costs
|
820,571
|
—
|
Underwritten
offering, net of issuance costs
|
3,702,257
|
—
|
Principal payments
on bank loan
|
(555,556)
|
—
|
Principal payments
on financed insurance policies
|
(61,883)
|
—
|
Principal payments
on capital lease
|
(8,326)
|
(2,555)
|
Purchase of vested
employee stock in connection with tax withholding
obligation
|
—
|
(177,823)
|
Net cash provided
by financing activities
|
3,897,063
|
4,429,946
|
Net change in cash
and cash equivalents
|
(2,132,384)
|
(1,112,034)
|
Cash and cash
equivalents at beginning of period
|
3,979,290
|
4,084,085
|
Cash and cash
equivalents at end of period
|
$1,846,906
|
$2,972,051
|
|
|
|
|
|
Cash paid during
the period for income taxes
|
$1,600
|
$14,546
|
Cash paid during
the period for interest on term note
|
$302,256
|
$226,029
|
Supplemental
disclosures of non-cash investing and financing
information:
|
|
Purchase of
equipment in accounts payable
|
$16,930
|
$109,471
|
Fair value of
warrants issued
|
$—
|
$607,338
|
Fair value of
repricing of warrants issued in previous financing
|
$19,413
|
$—
|
Deemed dividends on
inducement shares
|
$5,220,000
|
—
|
Capital lease in
connection with purchase of equipment
|
$—
|
$95,656
|
Conversion of
Series D preferred stock to common stock
|
$4,647
|
$—
|
See
Accompanying Notes to Condensed Consolidated Financial
Statements
MABVAX THERAPEUTICS HOLDINGS,
INC.
Notes to Unaudited Condensed Consolidated Financial
Statements
1. Basis of Presentation
We
are a Delaware corporation, originally incorporated in 1988 under
the name Terrapin Diagnostics, Inc. in the State of Delaware, and
subsequently renamed “Telik, Inc.” in 1998, and
thereafter renamed MabVax Therapeutics Holdings, Inc.
(“MabVax”) in September 2014. Our principal corporate
office is located at 11535 Sorrento Valley Road, Suite 400, San
Diego, CA 92121 telephone: (858) 259-9405. On July 8, 2014, we
consummated a merger with MabVax Therapeutics, Inc. (“MabVax
Therapeutics”), pursuant to which our subsidiary Tacoma
Acquisition Corp. merged with and into MabVax Therapeutics, with
MabVax Therapeutics surviving as our wholly owned subsidiary. This
transaction is referred to as the
“Merger.” Unless the context otherwise
requires, references to “we,” “our,”
“us,” or the “Company” in this Quarterly
Report mean MabVax Therapeutics Holdings, Inc. on a condensed
consolidated financial statement basis with our wholly-owned
subsidiary following the Merger, MabVax Therapeutics, as
applicable. Beginning October 10, 2014, our common stock was quoted
on the OTCQB under the symbol “MBVX.” Since August 17,
2016, our common stock has been trading on The NASDAQ Capital
Market under the symbol “MBVX.”
The
balance sheet data at December 31, 2016, has been derived from
audited financial statements at that date. It does not include,
however, all the information and notes required by accounting
principles generally accepted in the United States of America
(“GAAP”) for complete financial statements. The
consolidated financial statements as presented reflect certain
reclassifications from previously issued financial statements to
conform to the current year presentation.
On
August 16, 2016, we filed a certificate of amendment to our Amended
and Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware in order to effectuate a reverse
stock split of our issued and outstanding common stock on a 1 for
7.4 basis, effective on August 16, 2016 (the “Reverse Stock
Split”). The Reverse Stock Split was effective with The
Financial Industry Regulatory Authority (FINRA) and the
Company’s common stock began trading on The NASDAQ Capital
Market at the open of business on August 17, 2016. All share and per share amounts, and number of
shares of common stock into which each share of preferred stock
will convert, in the financial statements and notes thereto have
been retroactively adjusted for all periods presented to give
effect to the Reverse Stock Split, including reclassifying an
amount equal to the reduction in par value of common stock to
additional paid-in capital.
MabVax
is a clinical stage biopharmaceutical company engaged in the
discovery, development and commercialization of proprietary human
monoclonal antibody products for the treatment of a variety of
cancers. We have discovered a pipeline of human monoclonal antibody
products based on the protective immune responses generated by
patients who have been vaccinated against targeted cancers with our
proprietary vaccines. We have the exclusive license to the vaccines
from Memorial Sloan Kettering Cancer Center (“MSK”). We
operate in only one business segment.
We
have incurred net losses since inception and expect to incur
substantial losses for the foreseeable future as we continue our
research, development and clinical activities. To date, we have
funded operations primarily through government grants, proceeds
from the sale of common and preferred stock, the issuance of debt,
the issuance of common stock in lieu of cash for services, payments
from collaborators, and interest income. The process of developing
products will require significant additional research and
development, preclinical testing and clinical trials, as well as
regulatory approvals. We expect these activities, together with
general and administrative expenses, to result in substantial
operating losses for the foreseeable future. We will not receive
substantial revenue unless we or our collaborative partners
complete clinical trials, obtain regulatory approvals and
successfully commercialize one or more products; or we license our
technology after achieving one or more milestones of interest to a
potential partner.
The
accompanying unaudited condensed consolidated financial statements
were prepared using GAAP for interim financial information and the
instructions to Regulation S-X. While these statements reflect all
normal recurring adjustments, which are, in the opinion of
management, necessary for a fair presentation of the results of the
interim period, they do not include all information or notes
required by GAAP for annual financial statements and should be read
in conjunction with the Audited Financial Statements of MabVax
Therapeutics Holdings, Inc. for the year ended December 31,
2016, filed in our Annual Report on Form 10-K on March 1,
2017.
The
preparation of condensed consolidated financial statements in
conformity with GAAP 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 condensed consolidated financial statements and the
reported amounts of expenses during the reporting period.
Management believes that these estimates are reasonable; however,
actual results may differ from these estimates.
Recent Accounting Pronouncements
In May 2014, the FASB issued
ASU 2014-09, “Revenue from Contracts with Customers
(Topic 606)”, which contains new
accounting literature relating to how and when a company recognizes
revenue. Under ASU 2017-09, a company will recognize revenue
when it transfers promised goods or services to customers in an
amount that reflects the consideration to which the company expects
to be entitled in exchange for those goods and services.
ASU 2014-09 is effective for the Company’s fiscal
year beginning January 1, 2018, which reflects a one year deferral
approved by the FASB in July 2015, and will be adopted by the
Company beginning January 1, 2018. We expect the adoption of
this new standard will not have a material impact on our condensed
consolidated financial statements.
In
February 2016, the FASB issued ASU 2016-2,
“Leases (Topic
842).”
This update will increase transparency and comparability by
recognizing lease assets and lease liabilities on the balance sheet
and disclosing key information about leasing
arrangements. Under the new guidance, lessees will be
required to recognize the following for all leases (with the
exception of short-term leases) at the commencement date (i) a
lease liability, which is a lessee’s obligation to make lease
payments arising from a lease, measured on a discounted basis; and
(ii) a right-of-use asset, which is an asset that represents the
lessee’s right to use, or control the use of, a specified
asset for the lease term. Under the new guidance, lessor accounting
is largely unchanged, and it simplified the accounting for sale and
leaseback transactions. Lessees will no longer be provided with a
source of off-balance sheet financing. Lessees (for capital and
operating leases) and lessors (for sales-type, direct financing,
and operating leases) must apply a modified retrospective
transition approach for leases existing at, or entered into after,
the beginning of the earliest comparative period presented in the
financial statements. The modified retrospective approach would not
require any transition accounting for leases that expired before
the earliest comparative period presented. Lessees and lessors may
not apply a full retrospective transition approach. The standard is
effective for fiscal years beginning after December 15, 2018,
including interim periods within those fiscal years. We are
currently in the process of assessing what impact this new standard
may have on our condensed consolidated financial
statements.
In March 2016, the FASB issued ASU 2016-09,
“Compensation—Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting.”
This update includes multiple provisions intended to simplify
various aspects of the accounting for share-based payment
transactions including accounting for excess tax benefits and tax
deficiencies, classification of excess tax benefits in the
statement of cash flows and accounting for award forfeitures. This
update is effective for annual and interim reporting periods of
public entities beginning after December 15, 2016, with early
adoption permitted. The adoption of this new standard did
not have a material impact on our condensed consolidated financial
statements.
In June 2016, the FASB issued ASU
No. 2016-13, “Financial
Instruments—Credit Losses (Topic326): Measurement of Credit
Losses on Financial Instruments.” This ASU requires
instruments measured at amortized cost to be presented at the net
amount expected to be collected. Entities are also required to
record allowances for available-for-sale debt securities rather
than reduce the carrying amount. This ASU is effective for fiscal
years beginning after December 15, 2019, including interim
periods within those fiscal years. We expect the adoption of
this new standard will not have a material impact on our condensed
consolidated financial statements.
In
August 2016, the FASB issued ASU No. 2016-15 (“ASU
2016-15”), “Statement of Cash Flows (Topic 230):
Classification of Certain Cash Receipts and Cash Payments.”
The standard provides guidance on eight (8) cash flow issues: (1)
debt prepayment or debt extinguishment costs; (2) settlement of
zero-coupon bonds; (3) contingent consideration payments after a
business combination; (4) proceeds from the settlement of insurance
claims; (5) proceeds from the settlement of corporate-owned life
insurance policies; (6) distributions received from equity method
investees; (7) beneficial interests in securitization transactions;
and (8) separately identifiable cash flows and application of the
predominance principle. ASU 2016-15 addresses how certain cash
receipts and cash payments are presented and classified in the
statement of cash flows. ASU 2016-15 is effective for fiscal years,
and interim periods within those years, beginning after December
15, 2017 with early adoption permitted. We expect the adoption of
this new standard will not have a material impact on our condensed
consolidated financial statements.
In August 2016, the FASB issued ASU
No. 2016-16, “Income Taxes (Topic 740):
Intra-Entity Transfers of Assets Other Than
Inventory.” This ASU requires the recognition of
the income tax consequences of an intra-entity transfer of an asset
other than inventory when the transfer occurs. The amendments in
this ASU should be applied on a modified retrospective basis
through a cumulative-effect adjustment directly to retained
earnings as of the beginning of the period of adoption. We
expect the adoption of this new standard will not have a material
impact on our condensed consolidated financial
statements.
In January 2017, the FASB issued ASU
No. 2017-03, “Accounting Changes and Error
Corrections (Topic 250) and Investments—Equity Method and
Joint Ventures (Topic 323).” This ASU
amends the disclosure requirements for ASU
No. 2014-09, Revenue from Contracts with Customers (Topic
606), ASU No. 2016-02, Leases (Topic 842) and ASU
No. 2016-13, Financial Instruments—Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments.
This ASU states that if a registrant does not know or cannot
reasonably estimate the impact that the adoption of the above ASUs
is expected to have on the financial statements, then in addition
to making a statement to that effect, the registrant should
consider additional qualitative financial statement disclosures to
assist the reader in assessing the significance of the impact that
the standard will have on the financial statements of the
registrant when adopted. This ASU was effective upon
issuance. We expect the adoption of this new standard will
not have a material impact on our condensed consolidated financial
statements.
In January 2017, the FASB issued ASU
No. 2017-04, “Intangibles—Goodwill and Other
(Topic 350): Simplifying the Test for Goodwill
Impairment.” This ASU eliminates Step 2 from the
goodwill impairment test. Instead, an entity should recognize an
impairment charge for the amount by which the carrying value
exceeds the reporting unit’s fair value, not to exceed the
total amount of goodwill allocated to that reporting unit. This ASU
is effective for annual or any interim goodwill impairment tests in
fiscal years beginning after December 15, 2019. We
expect the adoption of this new standard will not have a material
impact on our condensed consolidated financial
statements.
In January 2017, the FASB issued ASU
No. 2017-01, “Business Combinations (Topic 805):
Clarifying the Definition of a Business.” This ASU
clarifies the definition of a business with the objective of adding
guidance to assist entities with evaluating whether transactions
should be accounted for as acquisitions (or disposals) of assets or
businesses. This ASU is effective for annual periods beginning
after December 15, 2017, including interim periods within
those periods. We expect the adoption of this new standard
will not have a material impact on our condensed consolidated
financial statements.
Management
believes that any other recently issued, but not yet effective,
accounting standards if currently adopted would not have a material
effect on the accompanying condensed consolidated financial
statements.
2. Liquidity and Going Concern
The
accompanying condensed consolidated financial statements have been
prepared on the going concern basis, which assumes that the Company
will continue to operate as a going concern and which contemplates
the realization of assets and the satisfaction of liabilities and
commitments in the normal course of business. As reflected in the
accompanying condensed consolidated financial statements, the
Company had a net loss of $11,344,722, net cash used in operating
activities of $6,025,305, net cash used in investing activities of
$4,142, and net cash provided by financing activities of $3,897,063
for the six months ended June 30, 2017. As of June 30, 2017, the
Company had $1,846,906 in cash and cash equivalents and an
accumulated deficit of $94,846,396 and stockholders’ equity
of $86,814.
On
January 15, 2016, we and Oxford Finance LLC, as collateral agent
and lender, entered into a Loan and Security Agreement providing
for senior secured term loans to the Company in an aggregate
principal amount of up to $10,000,000, subject to the terms and
conditions set forth in the Loan Agreement (the “January 2016
Term Loan”). On January 15, 2016, the Company
received an initial loan of $5,000,000 under the Loan Agreement,
before fees and issuance costs of approximately $390,000. The
option to draw the second $5,000,000 expired on September 30,
2016.
On
March 31, 2017, we and Oxford Finance LLC, signed a First Amendment
to Loan and Security Agreement (“Amendment”), providing
that the payment of principal of $138,889 on the January 2016 Term
Loan that otherwise would have been due on the Amortization Date of
April 1, 2017, will be due and payable on May 1, 2017 along with
any other payment of principal due on May 1, 2017. We were
obligated to pay a fully earned and non-refundable amendment fee of
$15,000 to the Collateral Agent. On May 1, 2017, we paid the
principal that was due on May 1, 2017, along with the $15,000
amendment fee.
On
August 22, 2016, we closed a public offering of 1,297,038 shares of
common stock and 665,281 shares of Series F Convertible Preferred
Stock (the “Series F Preferred Stock”), and warrants to
purchase 1,962,319 shares of common stock at $5.55 per share and
warrants to purchase 1,962,319 shares of common stock at $6.29 per
share, at an offering price of $4.81 per share (the “August
2016 Public Offering”). For every one share of common
stock or Series F Preferred Stock sold, we issued one warrant to
purchase one share of common stock at $5.55 per share and one
warrant to purchase one share of common stock at $6.29 per
share. We received $9,438,753 in gross proceeds, before
underwriting discounts and commissions and offering expenses
totaling $871,305. The gross proceeds include the
underwriters’ over-allotment option, which they exercised on
the closing date.
On May
3, 2017, we sold 850 shares of 0% Series H Convertible
Preferred Stock (“the Series H Preferred
Stock”), at a stated value of $1,000 per share,
representing an aggregate of $850,000 before offering costs of
$29,429 in a private placement (the “May 2017 Private
Placement”), to certain existing investors. The shares of Series H Preferred Stock are
convertible into shares of common stock based on a conversion
calculation equal to the stated value of the Series H Preferred
Stock, plus all accrued and unpaid dividends (the “Base
Amount”), if any, on such Series H Preferred Stock, as of
such date of determination, divided by the conversion price. The
stated value of each share of Series H Preferred Stock is $1,000
and the initial conversion price is $1.75 per share, each subject
to adjustment for stock splits, stock dividends, recapitalizations,
combinations, subdivisions or other similar events. This financing
is discussed in further detail in Note 5, Convertible Preferred
Stock, Common Stock and Warrants.
On
May 19, 2017, we closed a public offering of 1,342,858 shares of
common stock and 1,000,000 shares of newly designated 0% Series G
Convertible Preferred Stock (the “Series G Preferred
Stock”), at $1.75 per share of common stock and Series G
Preferred Stock (the “May 2017 Public Offering”).
The Series G Preferred Stock is initially convertible into
1,000,000 shares of common stock, subject to adjustment for stock
splits, stock dividends, recapitalizations, combinations,
subdivisions or other similar events, to certain existing investors
in the offering who, as a result of their purchases of common
stock, would hold in excess of 4.99% of our issued and outstanding
common stock, and elect to receive shares of our Series G Preferred
Stock. We received $4,100,000 in gross proceeds, before
underwriting discounts and commissions and offering expenses
totaling $397,743. The May 2017 Public Offering is described in
more detail in Note 5, Convertible Preferred Stock, Common Stock
and Warrants.
On July
24, 2017, the Board of Directors, or Board, authorized the Company
to engage an independent financial
advisory firm to assist the Company in exploring and evaluating
strategic options with the goal of maximizing shareholder
value. The Company will continue to work to advance its
clinical programs and validate its platform technology, including
the recent commencement of patient dosing in the Phase 1 MVT-1075
Radioimmunotherapy clinical trial for the treatment of pancreatic,
colon and lung cancers, and remains committed to this continued
progression. As part of the
Company’s ongoing evaluation and prioritization of its
portfolio of assets, and in response to inbound inquiries, the
Company plans to engage an industry-leading firm to advise us on
potential alternatives and strategies that will have the potential
to unlock shareholder value.
The
financial advisory firm will be assisting the Company in evaluating
transaction options currently being considered, which could include
the acquisition of MabVax by another company, the sale or
divestiture of specific assets, merging with another company,
licensing of selected technologies or a combination of selected
divestitures followed by a reverse merger. MabVax does not have a
defined timeline for the exploration of strategic alternatives and
is not confirming that the evaluation will result in any strategic
alternative being announced or consummated.
On July
27, 2017, we entered into a subscription agreement with an
accredited investor pursuant to which we agreed to sell an
aggregate of $125,000 in common stock under terms similar to the
May 2017 Public Offering. The transaction closed on August 2, 2017,
as further described in Note 12, Subsequent Events.
On
August 11, 2017, we entered into a
security purchase agreement with a group of existing investors in
the Company, where we sold 2,386.36 shares of 0% Series J Convertible
Preferred Stock to be issued (“the Series J Preferred
Stock”), at a stated value of $550 per share,
representing an aggregate of approximately $1,312,500 before
offering costs estimated at approximately $130,000 in a registered
direct offering (the “August 2017
Financing”). The shares of Series J Preferred Stock are
convertible into shares of common stock based on a conversion
calculation equal to the stated value of the Series J Preferred
Stock plus the Base Amount on such Series J Preferred Stock, as of
such date of determination, divided by the conversion price. The
stated value of each share of Series J Preferred Stock is $550 and
the initial conversion price is $0.55 per share, each subject to
adjustment for stock splits, stock dividends, recapitalizations,
combinations, subdivisions or other similar events. This financing
is discussed in further detail in Note 12, Subsequent
Events.
We
plan to continue to fund the Company’s losses from operations
and capital funding needs through equity or debt financings,
strategic collaborations, licensing arrangements, government grants
or other arrangements. Further, to extend availability of existing
cash available for our programs for the purpose of achieving
milestones or a strategic transaction, we have cut personnel and
other operating expenses substantially following the completion of
two clinical development programs. For example, we were able to
reduce costs following completion of two phase 1a clinical trials
of our lead antibody HuMab 5B1, which has enabled us to reduce our
expenditures on clinical trials while we continue with our
radioimmunotherapy product MVT-1075 discussed further in
Management’s Discussion and Analysis of Financial Condition
and Results of Operations, and management
has volunteered to defer receiving portions of salaries until one
or more business transactions can be achieved, as discussed further
in Note 12, Subsequent Events. Further,
we have reduced our personnel from 25 full time employees to 13
full time employees with the completion of our two clinical trials.
However, we cannot be sure that capital funding will be available
on reasonable terms, or at all, and that our staff reductions to
fit ongoing needs will be sufficient. If we are unable to secure
adequate additional funding, we may be forced to make additional
reductions in spending, incur further cutbacks in personnel, extend
payment terms with suppliers, liquidate assets where possible,
and/or suspend or curtail planned programs. In addition, if the
Company does not meet its payment obligations to third parties as
they come due, it may be subject to litigation claims. Even if we
are successful in defending against these claims, litigation could
result in substantial costs and be a distraction to
management.
We
anticipate that the Company will continue to incur net losses into
the foreseeable future as we: (i) monitor the four patients
remaining on therapy in our Phase I clinical trial of MVT5873 until
therapy is discontinued. (ii) continue our clinical trial for the
development of MVT1075 as a radioimmunotherapy. and (iii) continue
operations as a public company. Based on receipt of $850,000 from
our May 2017 Private Placement, $4.1 million from the May 2017
Public Offering, the $125,000 private placement in July 2017, and
the $1.3 million in securities purchase agreements signed in August
2017, and without any other additional funding or receipt of
payments from potential licensing agreements, we expect we will
have sufficient funds to meet our obligations through October 2017.
These conditions give rise to substantial doubt as to the
Company’s ability to continue as a going concern. The
accompanying consolidated financial statements do not include any
adjustments that might result from the outcome of this
uncertainty. Any
of these actions could materially harm the Company’s
business, results of operations, and prospects. These conditions
give rise to substantial doubt as to the Company’s ability to
continue as a going concern. The accompanying condensed
consolidated financial statements do not include any adjustments
that might result from the outcome of this
uncertainty.
If
the Company raises additional funds by issuing equity securities,
substantial dilution to existing stockholders would result. If the
Company raises additional funds by incurring debt financing, the
terms of the debt may involve significant cash payment obligations
as well as covenants and specific financial ratios that may
restrict the Company’s ability to operate its
business.
3. Cash and Cash Equivalents
We
consider all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. The
Company limits its exposure to credit loss by holding cash in U.S.
dollars, or, from time to time, placing cash and investments in
U.S. government, agency and government-sponsored enterprise
obligations.
4. Fair value of financial instruments
Our
financial instruments consist of cash and cash equivalents and
accounts payable, both of which are generally considered to be
representative of their respective fair values because of the
short-term nature of those instruments.
5. Convertible Preferred Stock, Common Stock and
Warrants
Dividends on Preferred Stock
We
immediately recognize the changes in the redemption value on
preferred stock as they occur and the carrying value of the
security is adjusted to equal what the redemption amount would be
as if redemption were to occur at the end of the reporting date
based on the conditions that exist as of that date.
No
dividends were ever declared by our Board of Directors since our
inception on any series of convertible preferred
stock.
Series D Preferred Stock
As
of June 30, 2017, and December 31, 2016, there were 98,105 and
132,489 shares of Series D convertible preferred stock
(“Series D Preferred Stock”) issued and outstanding
that are convertible into an aggregate of 1,325,738 and 1,790,392
shares of common stock, respectively.
The
Series D Preferred Stock had been issued on March 25, 2015, to
certain holders of the Company’s Series A-1 Preferred Stock
and Merger warrants (the “Series A-1 Exchange
Securities”) and holders of the Company’s Series B
Preferred Stock and Series B warrants (the “Series B Exchange
Securities” and, collectively with the Series A-1 Exchange
Securities, the “Exchange Securities”), all previously
issued by the Company. Pursuant to the exchange agreements, the
holders exchanged the Exchange Securities and relinquished any and
all other rights they may have had pursuant to the Exchange
Securities, their respective governing agreements and certificates
of designation, including any related registration rights, in
exchange for an aggregate of 342,906 shares of the Company’s
common stock and an aggregate of 238,156 shares of the
Company’s newly designated Series D Preferred Stock,
convertible into 3,218,325 shares of common stock.
As
contemplated by the exchange agreements and as approved by the
Company’s Board of Directors, the Company filed with the
Secretary of State of the State of Delaware a Certificate of
Designation of Preferences, Rights and Limitations of Series D
Convertible Preferred Stock (the “Series D Certificate of
Designations”), on March 25, 2015. Pursuant to the
Series D Certificate of Designations, the Company designated
1,000,000 shares of its blank check preferred stock as Series D
Preferred Stock. Each share of Series D Preferred Stock has a
stated value of $0.01 per share. In the event of a
liquidation, dissolution or winding up of the Company, each share
of Series D Preferred Stock will be entitled to a per share
preferential payment equal to the stated value. Each share of
Series D Preferred Stock is convertible into 13.5135 shares of
common stock. The conversion ratio is subject to adjustment in
the event of stock splits, stock dividends, combination of shares
and similar recapitalization transactions. The Company is
prohibited from effecting the conversion of the Series D Preferred
Stock to the extent that, as a result of such conversion, the
holder beneficially would own more than 4.99% (provided that
certain investors elected to block their beneficial ownership
initially at 2.49% in the Exchange Agreements), in the aggregate,
of the issued and outstanding shares of the Company’s common
stock calculated immediately after giving effect to the issuance of
shares of common stock upon the conversion of the Series D
Preferred Stock. Each share of Series D Preferred Stock
entitles the holder to vote on all matters voted on by holders of
common stock. With respect to any such vote, each share of Series D
Preferred Stock entitles the holder to cast such number of votes
equal to the number of shares of common stock such shares of Series
D Preferred Stock are convertible into at such time, but not in
excess of the beneficial ownership limitations.
Series E Preferred Stock
As
of June 30, 2017, and December 31, 2016, there were 33,333 shares
of Series E convertible preferred stock (“Series E Preferred
Stock”) issued and outstanding, convertible into 519,751
shares of common stock.
On
March 30, 2015, the Company filed with the Secretary of State of
the State of Delaware a Certificate of Designation of Preferences,
Rights and Limitations of Series E Convertible Preferred Stock (the
“Series E Certificate of Designations”) to designate
100,000 shares of its blank check preferred stock as Series E
Preferred Stock.
The
shares of Series E Preferred Stock are convertible into shares of
common stock based on a conversion calculation equal to the stated
value of such preferred share, plus all accrued and unpaid
dividends, if any, on such share of Series E Preferred Stock, as of
such date of determination, divided by the conversion price. The
stated value of each share of Series E Preferred Stock is $75 and
the initial conversion price is $5.55 per share, each subject to
adjustment for stock splits, stock dividends, recapitalizations,
combinations, subdivisions or other similar events. In addition,
during the period proscribed for in the Series E Certificate of
Designations, in the event the Company issues or sells, or is
deemed to issue or sell, shares of common stock at a per share
price that is less than the conversion price then in effect, the
conversion price shall be reduced to such lower price, subject to
certain exceptions. The Company is prohibited from effecting a
conversion of the share of Series E Preferred Stock to the extent
that, as a result of such conversion, such holder would
beneficially own more than 4.99% of the number of shares of common
stock outstanding immediately after giving effect to the issuance
of shares of common stock upon conversion of the Series E Preferred
Stock, which beneficial ownership limitation may be increased by
the holder up to, but not exceeding, 9.99%. Each holder is entitled
to vote on all matters submitted to stockholders of the Company,
and shall have the number of votes equal to the number of shares of
common stock issuable upon conversion of such holder’s share
of Series E Preferred Stock, but not in excess of beneficial
ownership limitations. The shares of Series E Preferred Stock bear
no interest.
On
August 22, 2016, when the Company closed on the August 2016 Public
Offering, the current Series E Preferred Stock conversion price of
$5.55 per share was reduced to $4.81 per share under the terms of
the Series E Certificate of Designations, resulting in an increase
in the number of shares of common stock to 519,751 that the Series
E Preferred Stock may be converted into. There is no further
adjustment required by the Series E Certificate of Designations in
the event of an offering of shares below $4.81 per share by the
Company.
Series F Preferred Stock
As
of June 30, 2017, and December 31, 2016, there were 665,281 shares
of Series F Preferred Stock, par value of $0.01 per share, issued
and outstanding, convertible into 665,281 shares of common stock.
In the event of a liquidation, dissolution or winding up of the
Company, each share of Series F Preferred Stock will be entitled to
a per share preferential payment equal to the par
value.
On
August 16, 2016, we filed a Certificate of Designations,
Preferences and Rights of the 0% Series F Convertible Preferred
Stock with the Delaware Secretary of State, designating 1,559,252
shares of preferred stock as 0% Series F Preferred Stock.
The
shares of Series F Preferred
Stock are convertible into shares of common stock based on a
conversion calculation equal to the stated value of such Series F
Preferred Stock, plus all
accrued and unpaid dividends, if any, on such Series F Preferred Stock, as of such date of
determination, divided by the conversion price. The stated value of
each share of Series F Preferred
Stock is $4.81 and the initial conversion price is $4.81 per
share, each subject to adjustment for stock splits, stock
dividends, recapitalizations, combinations, subdivisions or other
similar events. In the event of a liquidation, dissolution or
winding up of the Company, each share of Series F Preferred Stock will be entitled to a per
share preferential payment equal to the par value. All shares of
the Company’s capital stock will be junior in rank to Series
F Preferred Stock with respect
to the preferences as to dividends, distributions and payments upon
the liquidation, dissolution and winding-up of the Company, except
for the Company’s Series D Preferred Stock and Series E Preferred Stock.
The
holders of Series F Preferred
Stock will be entitled to receive dividends if and when
declared by our Board of Directors. The Series F Preferred Stock shall participate on an
“as converted” basis, with all dividends declared on
the Company’s common stock. In addition, if we grant, issue
or sell any rights to purchase our securities pro rata to all our
record holders of our common stock, each holder will be entitled to
acquire such securities applicable to the granted purchase rights
as if the holder had held the number of shares of common stock
acquirable upon complete conversion of all Series F Preferred Stock then held.
We are
prohibited from effecting a conversion of the Series F Preferred Stock to the extent that, as a
result of such conversion, the holder would beneficially own more
than 4.99% of the number of shares of common stock outstanding
immediately after giving effect to the issuance of shares of common
stock upon conversion of the Series F Preferred Stock, which beneficial ownership
limitation may be increased by the holder up to, but not exceeding,
9.99%. Each holder is entitled to vote on all matters submitted to
stockholders of the Company, and shall have the number of votes
equal to the number of shares of common stock issuable upon
conversion of such holder’s Series F Preferred Stock, but not in excess of the
beneficial ownership limitations.
Series G Preferred Stock
As
of June 30, 2017, and December 31, 2016, there were 1,000,000 and
none shares of our Series G Preferred Stock issued and outstanding
and convertible into 1,000,000 and none shares of our common stock,
respectively.
Pursuant
to a Series G Preferred Stock Certificate of Designations, on May
15, 2017, we designated 5,000,000 shares of our blank check
preferred stock as Series G Preferred Stock, par value of $0.01 per
share.
The
shares of Series G Preferred Stock are convertible into shares of
common stock based on a conversion calculation equal to the stated
value of the of such Series G Preferred Stock, plus all accrued and
unpaid dividends, if any, on such Series G Preferred Stock, as of
such date of determination, divided by the conversion price. The
stated value of each share of Series G Preferred Stock is $1.75 and
the initial conversion price is $1.75 per share, each subject to
adjustment for stock splits, stock dividends, recapitalizations,
combinations, subdivisions or other similar events. The
holder of a majority of the Series G Preferred Stock shall have the
right to nominate a candidate for the Board, such right to expire
on December 31, 2017.
In the event of a liquidation, dissolution or
winding up of the Company, each share of Series G Preferred Stock
will be entitled to a per share preferential payment equal to the
par value. All shares our
capital stock will be junior in rank to Series G Preferred Stock
with respect to the preferences as to dividends, distributions and
payments upon the liquidation, dissolution and winding-up of the
Company, except for the Company’s Series D Convertible
Preferred Stock, Series E Convertible Preferred Stock and Series F
Convertible Preferred Stock. The holders of Series G Preferred Stock will
be entitled to receive dividends if and when declared by our Board
of Directors. The Series G Preferred Stock shall participate on an
“as converted” basis, with all dividends declared on
our common stock. In addition, if we grant, issue or
sell any rights to purchase our securities pro rata to all our
record holders of our common stock, each holder will be entitled to
acquire such securities applicable to the granted purchase rights
as if the holder had held the number of shares of common stock
acquirable upon complete conversion of all Series G Preferred Stock
then held.
We
are prohibited from effecting a conversion of the Series G
Preferred Stock to the extent that, as a result of such conversion,
the holder would beneficially own more than 4.99% of the number of
shares of common stock outstanding immediately after giving effect
to the issuance of shares of common stock upon conversion of the
Series G Preferred Stock, which beneficial ownership limitation may
be increased by the holder up to, but not exceeding, 9.99%. Each
holder is entitled to vote on all matters submitted to stockholders
of the Company, and shall have the number of votes equal to the
number of shares of common stock issuable upon conversion of such
holder’s Series G Preferred Stock, but not in excess of the
beneficial ownership limitations.
Series H Preferred Stock
As
of June 30, 2017, and December 31, 2016, there were 850 and none
shares of our Series H Preferred Stock issued and outstanding and
convertible into 485,714 and none shares of our common stock,
respectively.
Pursuant
to a Series H Preferred Stock Certificate of Designations, on May
3, 2017, we designated 2,000 shares of our blank check preferred
stock as Series H Preferred Stock, par value of $0.01 per
share.
The
shares of Series H Preferred Stock are convertible into shares of
common stock based on a conversion calculation equal to the stated
value of the Series H Preferred Stock, plus the Base Amount, if
any, on such Series H Preferred Stock, as of such date of
determination, divided by the conversion price. The stated value of
each share of Series H Preferred Stock is $1,000 and the initial
conversion price is $1.75 per share, each subject to adjustment for
stock splits, stock dividends, recapitalizations, combinations,
subdivisions or other similar events.
In the event of a liquidation, dissolution or
winding up of the Company, each share of Series H Preferred Stock
will be entitled to a per share preferential payment equal to the
Base Amount. All shares of our
capital stock will be junior in rank to Series H Preferred Stock
with respect to the preferences as to dividends, distributions and
payments upon the liquidation, dissolution and winding-up of the
Company other than Series A through G Preferred
Stock. The holders of
Series H Preferred Stock will be entitled to receive dividends if
and when declared by our Board of Directors. The Series H Preferred
Stock shall participate on an “as converted” basis,
with all dividends declared on our common stock. In
addition, if we grant, issue or sell any rights to purchase our
securities pro rata to all our record holders of our common stock,
each holder will be entitled to acquire such securities applicable
to the granted purchase rights as if the holder had held the number
of shares of common stock acquirable upon complete conversion of
all Series H Preferred Stock then held.
We
are prohibited from effecting a conversion of the Series H
Preferred Stock to the extent that, as a result of such conversion,
the holder would beneficially own more than 4.99% of the number of
shares of common stock outstanding immediately after giving effect
to the issuance of shares of common stock upon conversion of the
Series H Preferred Stock, which beneficial ownership limitation may
be increased by the holder up to, but not exceeding, 9.99%. Each
holder is entitled to vote on all matters submitted to stockholders
of the Company, and shall have the number of votes equal to the
number of shares of common stock issuable upon conversion of such
holder’s Series H Preferred Stock, but not in excess of the
beneficial ownership limitations.
Series I Preferred Stock
As
of June 30, 2017, and December 31, 2016, there were 1,968,664 and
none shares of our Series I convertible preferred stock (the
“Series I Preferred Stock”) issued and outstanding and
convertible into 1,968,664 and none shares of our common stock,
respectively.
Pursuant
to a Series I Preferred Stock Certificate of Designations, on May
26, 2017, we designated 1,968,664 shares of our blank check
preferred stock as Series I Preferred Stock, par value of $0.01 per
share.
Each
share of Series I Preferred Stock has a stated value of $0.01 per
share. In the event of a liquidation, dissolution or winding
up of the Company, each share of Series I Preferred Stock will be
entitled to a per share preferential payment equal to the stated
value. Each share of Series I Preferred Stock is convertible into
one share of common stock. The conversion ratio is subject to
adjustment in the event of stock splits, stock dividends,
combination of shares and similar recapitalization
transactions. The Company is prohibited from effecting the
conversion of the Series I Preferred Stock to the extent that, as a
result of such conversion, the holder beneficially owns more than
4.99%, in the aggregate, of the issued and outstanding shares of
the Company’s Common Stock calculated immediately after
giving effect to the issuance of shares of Common Stock upon the
conversion of the Series I Preferred Stock (the “Beneficial
Ownership Limitation”), which beneficial ownership limitation
may be increased by the holder up to, but not exceeding,
9.99%. Each share of Series I Preferred Stock entitles the
holder to vote on all matters voted on by holders of Common Stock.
With respect to any such vote, each share of Series I Preferred
Stock entitles the holder to cast such number of votes equal to the
number of shares of Common Stock such shares of Series I Preferred
Stock are convertible into at such time, but not in excess of the
Beneficial Ownership Limitation.
Warrants Issued in Connection with April 2015 Private
Placement
As
of June 30, 2017, and December 31, 2016, there were warrants to
purchase 706,262 shares at $11.10 per share and 99,099 shares at
$2.00 per share; and as of December 31, 2016, there were warrants
to purchase 805,361 shares of common stock at $11.10 per share that
were outstanding that were remaining from our private offering in
March and April 2015 (the “April 2015 Private
Placement”) in which we sold $8,546,348 worth of units (the
“Units”), net of $668,150 in issuance costs, of which
$2,500,000 of the Units consisted of Series E Preferred Stock and
the balance consisted of 1,660,271 shares of common stock, together
with warrants to all investors to purchase 1,055,361 shares of
common stock at $11.10 per share. Each Unit was sold at
a purchase price of $5.55 per Unit. OPKO Health, Inc., the lead
investor in the April 2015 Private Placement, purchased $2,500,000
worth of Units consisting of all of the shares of the Series E
Preferred Stock.
The
warrants are exercisable upon issuance and expire October 10, 2017,
and may be exercised for cash or on a cashless basis if at $11.10
per share, or for cash if at $2.00 per share. The warrant exercise
price is subject to certain adjustments including stock splits,
dividends and reverse-splits. The Company is prohibited from
effecting the exercise of the warrants to the extent that, as a
result of such exercise, the holder beneficially would own more
than 4.99% in the aggregate, of the issued and outstanding shares
of the Company’s common stock calculated immediately after
giving effect to the issuance of shares of common stock upon the
exercise of the warrants. Investor rights of participation in
future financings by the Company expired on April 10, 2017. The
warrants are not listed on any securities exchange or other trading
market.
In
connection with the May 2017 Public Offering, for the investors in
the April 2015 Private Placement to
issue 2,900,000 shares of common stock (the “Inducement
Shares”), they were required to invest at least 25% of
their original investment from such private financing in the May
2017 Public Offering and still hold 100% of their common stock or
Series E preferred stock from the private 2015 financing, and must
also must agree to amend the terms of their outstanding warrants
that had an exercise price of $11.10 per share, such that the
amended warrants shall have an exercise price of $2.00 per share
and no cashless exercise feature (as amended, the “Inducement
Amended Warrants”). The Company further agreed with the lead
investor in the May 2017 Public Offering (the “Lead
Investor”) in connection with the warrant issued in the April
2015 Private Placement to register for resale on a registration
statement all the Inducement Shares and shares of common stock
underlying the Inducement Amended Warrants.
Warrants Issued in Connection with October 2015 Public
Offering
As
of June 30, 2017, and December 31, 2016, there were warrants to
purchase 168,919 shares of common stock that were outstanding that
we issued in connection with our public offering on October 5,
2015, which consisted of 337,838 shares of common stock and
warrants to purchase 168,919 shares of common stock, at an offering
price of $8.14 per share. For every two shares of common
stock sold, the Company issued one warrant to purchase one share of
common stock. We received $2,750,000 in gross proceeds,
before underwriting discounts and commissions and offering expenses
totaling approximately $586,608. The shares and warrants were
separately issued and sold in equal proportions. The warrants are
immediately exercisable, expire September 30, 2018, and have an
exercise price of $9.77 per share. The warrants are not
listed on any securities exchange or other trading
market.
August 2016 Public Offering
On
August 22, 2016, we closed a public offering of 1,297,038 shares of
common stock and 665,281 shares of Series F preferred stock, and
warrants to purchase 1,962,319 shares of common stock at $5.55 per
share and warrants to purchase 1,962,319 shares of common stock at
$6.29 per share, at an offering price of $4.81 per share. For
every one share of common stock or Series F preferred stock sold,
we issued one warrant to purchase one share of common stock at
$5.55 per share and one warrant to purchase one share of common
stock at $6.29 per share. We received $9,438,753 in gross
proceeds, before underwriting discounts and commissions and
offering expenses totaling $871,305. The gross proceeds include the
underwriter’s over-allotment option, which it exercised on
the closing date.
May 2017 Private Placement
On May 3, 2017, we
entered into separate subscription agreements with accredited
investors pursuant to which we sold an aggregate of $850,000, or
850 shares, of Series H Preferred
Stock, at a stated value of $1,000 per share, before
offering costs of $29,429, in the May 2017 Private
Placement. The shares of Series H Preferred Stock are
convertible into shares of common stock based on a conversion
calculation equal to the stated value of the Series H Preferred
Stock, plus the Base Amount, if any, on such Series H Preferred
Stock, as of such date of determination, divided by the conversion
price. The initial conversion price is $1.75 per share, each
subject to adjustment for stock splits, stock dividends,
recapitalizations, combinations, subdivisions or other similar
events.
In the event of a liquidation, dissolution or
winding up of the Company, each share of Series H Preferred Stock
will be entitled to a per share preferential payment equal to the
Base Amount. All shares of our
capital stock will be junior in rank to Series H Preferred Stock
with respect to the preferences as to dividends, distributions and
payments upon the liquidation, dissolution and winding-up of the
Company other than Series A through G Preferred Stock.
The holders of Series H Preferred
Stock will be entitled to receive dividends if and when declared by
our Board of Directors. The Series H Preferred Stock shall
participate on an “as converted” basis, with all
dividends declared on our common stock. In addition, if
we grant, issue or sell any rights to purchase our securities pro
rata to all our record holders of our common stock, each holder
will be entitled to acquire such securities applicable to the
granted purchase rights as if the holder had held the number of
shares of common stock acquirable upon complete conversion of all
Series H Preferred Stock then held.
We
are prohibited from effecting a conversion of the Series H
Preferred Stock to the extent that, as a result of such conversion,
the holder would beneficially own more than 4.99% of the number of
shares of common stock outstanding immediately after giving effect
to the issuance of shares of common stock upon conversion of the
Series H Preferred Stock, which beneficial ownership limitation may
be increased by the holder up to, but not exceeding, 9.99%. Each
holder is entitled to vote on all matters submitted to stockholders
of the Company, and shall have the number of votes equal to the
number of shares of common stock issuable upon conversion of such
holder’s Series H Preferred Stock, but not in excess of the
beneficial ownership limitations.
The
shares were offered and sold solely to “accredited
investors” in reliance on the exemption from registration
afforded by Rule 506 of Regulation D and Section 4(a)(2) of the
Securities Act of 1933, as amended (the “Securities
Act”). On the closing date, we entered into registration
rights agreements with each of the investors, pursuant to which we
agreed to undertake to file a registration statement to register
the resale of the shares within thirty (30) days following the
closing date, to cause such registration statement to be declared
effective by the Securities and Exchange Commission within sixty
(60) days of the closing date and to maintain the effectiveness of
the registration statement until all of such shares have been sold
or are otherwise able to be sold pursuant to Rule 144 under the
Securities Act, without any restrictions.
On May
10, 2017, we entered into exchange agreements (the “Exchange
Agreements”) with each of the holders of our Series H
Preferred Stock representing an aggregate of $850,000 of our Series
H Preferred Stock (the “Exchange Securities”) with such
exchange to be effective on the closing of our May 2017 Public
Offering. Prior to the closing of the May 2017 Public Offering, we
and the holders rescinded and cancelled the Exchange Agreements and
they have no force and effect and no transaction contemplated by
the Exchange Agreements was consummated.
May 2017 Public Offering
On
May 19, 2017, we closed a public offering of 1,342,858 shares of
common stock and 1,000,000 shares of newly designated 0% Series G
Convertible Preferred Stock, or Series G Preferred Stock, at $1.75
per share of common stock and Series G Preferred Stock, or the May
2017 Public Offering. The Series G Preferred Stock is
initially convertible into 1,000,000 shares of common stock,
subject to adjustment for stock splits, stock dividends,
recapitalizations, combinations, subdivisions or other similar
events and was purchased by certain existing investors of the
Company who, as a result of their purchases of common stock, would
hold in excess of 4.99% of our issued and outstanding common stock.
We received $4,100,000 in gross proceeds, before underwriting
discounts and commissions and offering expenses totaling
$397,743.
The May 2017 Public Offering was consummated
pursuant to an underwriting agreement that we signed on May 15,
2017, with Laidlaw & Company (UK) Ltd. (“Laidlaw”),
as underwriter (the
“Underwriter”) pursuant to which, among other things,
we agreed to issue and sell to the Underwriter, and the Underwriter
agreed to purchase from us, in an underwritten public offering, an
aggregate of 1,342,858 shares of common stock and 1,000,000 shares
of Series G Preferred Stock. We granted the Underwriters an
option for a period of up to 45 days from the date of our
prospectus to purchase up to an aggregate of 201,428 additional
shares of our common stock at the public offering price of $1.75
per share, less the underwriting discount, solely to cover
overallotments, which was not exercised.
In connection with the May 2017 Public Offering,
we agreed with the lead investor of the August 2016 Public Offering
(the “August Lead Investor”) pursuant to a Letter
Agreement, dated May 18, 2017, to issue the Inducement Shares to
the investors in the August 2016 Public Offering (the “August
2016 Investors”), as incentive shares to those investors to
make a minimum required investment in this public offering of at
least 50% of their investment in the $9.4 million August 2016
Public Offering, or the Minimum Required Investment, and who still
hold 100% of the shares of common stock previously acquired. Such
August 2016 Investors shall be entitled to receive their pro rata
share of 2,900,000 shares, after the Lead Investor in this offering
receives the first 10%. For the August 2016 Investors who purchased
Series F Preferred Stock and made the Minimum Required Investment
and who still held 100% of the shares of Series F Preferred Stock
at the closing of the May 2017 Public Offering, they may, instead
of receiving a pro rata share of the 2,610,000 shares remaining
after the August Lead Investor receives the first 290,000 shares,
elect to receive their Inducement Shares in the form of a new
Series I Preferred Stock to be created with similar rights as
currently exist in the Series G Preferred Stock. The stated
value of each share of Series I Preferred Stock will be $0.01 and
the conversion rate shall be one (1) share of common stock for one
(1) share of Series I Preferred Stock, each subject to adjustment
for stock splits, stock dividends, recapitalizations, combinations,
subdivisions or other similar events. In the event of a
liquidation, dissolution or winding up of the Company, each share
of Series I Preferred Stock will be entitled to a per share
preferential payment equal to the par value, or $0.01 per share.
All shares of the Company’s capital stock will be junior in
rank to the Series I Preferred Stock at the time of creation, with
respect to the preferences as to dividends, distributions and
payments upon the liquidation, dissolution and winding-up of the
Company, except for the Company’s Series D Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock, Series G
Preferred Stock, and Series H Preferred Stock.
Also in
connection with the May 2017 Public Offering, for these August 2016
Investors to receive the Inducement Shares, each of them must also
agree to the cancellation of the warrants issued to them in the
August 2016 Public Offering. Investors in the Company’s 2015
private offering that invest at least 25% of their original
investment from such private financing in the May 2017 Public
Offering and still hold 100% of their common stock or Series E
preferred stock from the private 2015 financing also must agree to
amend the terms of their outstanding warrants that currently have
an exercise price of $11.10 per share, such that the amended
warrants shall have an exercise price of $2.00 per share and no
cashless exercise feature (as amended, the “Inducement
Amended Warrants”). The Company agreed with the Lead Investor
to register for resale on a registration statement all the
Inducement Shares and shares of common stock underlying the
Inducement Amended Warrants, and to issue the Inducement Shares to
each investor meeting the investment and ownership terms described
above.
Based
on the closing of the Offering, and election of certain prior
investors who made the Minimum Required Investment and elected to
take Series I Preferred Stock upon its creation, 931,336 Inducement
Shares of common stock were issued and 1,968,664 Inducement Shares
were issued in the form of Series I Preferred Stock that was
created following the closing of the May 2017 Public Offering and
issued following verification with each investors that the terms of
the Inducement Shares have been met. The Company recorded a deemed
dividend of $5,220,000 for the three and six months ended June 30,
2017 in connection with issuing the Inducement Shares.
Additionally,
in connection with participation by the April 2015 investors in the
May 2017 Public Offering, the Company revised the exercise price
for 90,099 warrants from $11.10 to $2.00 per warrant share and
recorded a deemed dividend of $19,413 for the three and six months
ended June 30, 2017.
May 2017 Letter Agreement
As
a condition to the Lead Investor leading an investment in the May
2017 Public Offering, including the requirement that we offer
incentive shares to August 2016 Investors who participate in making
the Minimum Required Investment in the May 2017 Public Offering, we
agreed to the following:
Board Nomination
|
|
The
Company shall nominate one candidate to the Board of Directors of
the Company acceptable to the holder of a majority of the Series G
Preferred Stock by December 31, 2017, and two current Board members
will resign.
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Executive Hire
|
|
The Company shall hire a new C-level executive in a leadership role
by July 15, 2017.
|
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Board Compensation
|
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The
Company is obligated to issue an aggregate of 1,050,000 options to
certain employees and members of the Board, at a price not less
than $2.00 per share, and 50,000 options to each other Board member
at the current market price in connection with this offering. The
options shall be issued pursuant to the Company’s option plan
and are subject to the requisite approvals and subject to
availability under the plan. To the extent we need to increase the
number of shares available under such plan, we will need the
approval of our Board and Stockholders. All Board fees will
be waived for 2017.
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Funds Held in Escrow
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$500,000 of the funds from this offering will be held in escrow and
released to one or more investor relations services acceptable to
the Company following the closing of this offering.
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Additionally we
granted the Lead Investor in
the May 2017 Public Offering certain rights to approve future (i)
issuances of our securities, (ii) equity or debt financings and
(iii) sales of any development product assets currently held by us,
subject to certain exceptions, if such securities are sold at price
below $2.50 per share and for as long as the Lead Investor in the offering holds 50% or
more of the shares of Series G Preferred Stock purchased by the
Lead Investor in this offering
(the “May 2017 Consent Right”). All other prior consent
rights of the Lead Investor
have been superseded by the May 2017 Consent Right.
For the period from
the May 2017 Public Offering to June 30, 2017, the Company incurred
approximately $177,000 in expenses related to outside investor
relations services. Further, two Board members have
resigned, which achieves
one of the conditions of the Lead Investor.
Consultant Grants
On
January 13, 2016, the Board of Directors approved the issuance of
13,514 shares of restricted stock with immediate vesting valued at
$64,000 to a consultant for advisory services to the
Company.
On
February 10, 2017, the Company entered into a consulting agreement
with MDM Worldwide, pursuant to which MDM Worldwide shall provide
investor relations services to the Company in consideration for an
immediate grant of 20,000 shares of the Company’s common
stock and a monthly cash retainer of $10,000 a month for ongoing
services for a period of one year. As the shares granted were fully
vested upon grant and the Company has no legal recourse to recover
the shares in the event of nonperformance, the Company recognized
the grant date fair value of the 20,000 shares or $56,600, as
investor relations expense upon grant during the first quarter of
2017.
On
March 7, 2017, the Company entered into a consulting agreement with
Jenene Thomas Communications, pursuant to which Jenene Thomas
Communications shall provide investor relations services to the
Company. In consideration for the services, which begin on April 1,
2017, we will pay a monthly cash retainer of $12,500. Additionally,
we issued 20,000 restricted shares of common stock on April 1,
2017, to be vested at 5,000 per quarter over the four quarters of
services under the agreement beginning April 1, 2017. The shares
granted vest over a one-year period over which the services are
performed and, as such, will be amortized over the same period
beginning in April 1, 2017. During the three and six months ended
June 30, 2017, we have recognized $6,950 in general and
administrative expenses related to this arrangement in common stock
for services.
6. Notes Payable
On
January 15, 2016, we entered into a loan and security agreement
with Oxford Finance, LLC pursuant to which we had the option to
borrow $10,000,000 in two equal tranches of $5,000,000 each (the
“Loan Agreement”). The first tranche of
$5,000,000 was funded at close on January 15, 2016 (the “Term
A Loan”). The option to fund the second tranche of $5,000,000
(the “Term B Loan”) was upon the Company achieving
positive interim data on the Phase 1 HuMab-5B1 antibody trial in
pancreatic cancer and successfully uplisting to either the NASDAQ
Stock Market or NYSE MKT on or before September 30,
2016. The option for the Term B Loan expired on
September 30, 2016. The Company is not pursuing completion of any
additional debt financing with Oxford Finance, LLC at the present
time. The interest rate for the Term A Loan is set on a monthly
basis at the index rate plus 11.29%, where the index rate is the
greater of the 30-day LIBOR rate or 0.21%. Interest is
due on the first day of each month, in arrears, calculated based on
a 360-day year. The loan is interest only for first year
after funding, and the principal amount of the loan is amortized in
equal principal payments, plus period interest, over the next 36
months. A facility fee of 1.0% or $100,000 was due at
closing of the transaction, and was earned and paid by the Company
on January 15, 2016. The Company is obligated to pay a
$150,000 final payment upon completion of the term of the loan, and
this amount is being accreted using the effective interest rate
method over the term of the loan. Each of the term loans can be
prepaid subject to a graduated prepayment fee, depending on the
timing of the prepayment.
Concurrent
with the closing of the transaction, the Company issued 225,226
common stock purchase warrants to Oxford Finance, LLC with an
exercise price of $5.55 per share. The warrants are
exercisable for five years and may be exercised on a cashless
basis, and expire on January 15, 2021. The Company recorded
$607,338 for the fair value of the warrants as a debt discount
within notes payable and an increase to additional paid-in capital
on the Company’s balance sheet. We used the
Black-Scholes-Merton valuation method to calculate the value of the
warrants. The debt discount is being amortized as interest expense
over the term of the loan using the effective interest
method.
We
granted Oxford Finance, LLC a perfected first priority lien on all
of the Company’s assets with a negative pledge on
intellectual property. The Company paid Oxford Finance, LLC a good
faith deposit of $50,000, which was applied towards the facility
fee at closing. The Company agreed to pay all costs,
fees and expenses incurred by Oxford Finance, LLC in the initiation
and administration of the facilities including the cost of loan
documentation.
At
the initial funding, the Company received net proceeds of
approximately $4,610,000 after fees and expenses. These fees and
expenses are being accounted for as a debt discount and classified
within notes payable on the Company’s condensed consolidated
balance sheet. The Company's transaction costs of approximately
$390,000 are presented in the condensed consolidated balance sheet
as a direct deduction from the carrying amount of the notes
payable, consistent with debt discounts. Debt discounts, issuance
costs and the final payment are being amortized or accreted as
interest expense over the term of the loan using the effective
interest method.
The
Loan Agreement also contains customary indemnification obligations
and customary events of default, including, among other things, our
failure to fulfill certain of the Company's obligations under the
Loan Agreement, the occurrence of a material adverse change, which
is defined as a material adverse change in the Company's business,
operations, or condition (financial or otherwise), a material
impairment of the prospect of repayment of any portion of the loan,
or a material impairment in the perfection or priority of the
Lenders’ lien in the collateral or in the value of such
collateral. In the event of default by the Company under the
Loan Agreement, the Lenders would be entitled to exercise their
remedies thereunder, including the right to accelerate payment of
the debt, upon which we may be required to repay all amounts then
outstanding under the Loan Agreement, which could harm the
Company's financial condition.
On
March 31, 2017, we and Oxford Finance, LLC signed a First Amendment
to Loan and Security Agreement (“Amendment”), providing
that the payment of principal on the January 2016 Term Loan that
otherwise would have been due on the Amortization Date will be due
and payable on May 1, 2017 along with any other payment of
principal due on May 1, 2017. We were obligated to pay a fully
earned and non-refundable amendment fee of $15,000 to the
Collateral Agent. On May 1, 2017, we paid the principal due on May
1, 2017, along with the $15,000 amendment fee.
The
Company was in compliance with all applicable covenants set forth
in the Loan Agreement as of June 30, 2017.
For
the three and six months ended June 30, 2017, the Company recorded
interest expense related to the term loan of $150,634 and $307,292,
respectively. For the three and six months ended June 30, 2016, the
Company recorded $155,512 and $284,441 in interest expense related
to the term loan, respectively. The annual effective interest rate
on the note payable, including the amortization of the debt
discounts and accretion of the final payment, but excluding the
warrant amortization, was approximately 13.17% and 11.72% as of
June 30, 2017 and 2016, respectively.
Future
principal payments under the Loan Agreement as of June 30, 2017,
are as follows:
Years ending December 31:
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2017
(remaining)
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$972,221
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2018
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1,666,667
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2019
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1,666,667
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2020
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138,889
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Notes
payable, balance as of June 30, 2017
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4,444,444
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Unamortized
discount on notes payable
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(492,888)
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Notes
payable, balance as of June 30, 2017
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3,951,556
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Current
portion of notes payable
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(1,666,667)
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Non-current
portion of notes payable
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$2,284,889
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7. Related Party Transactions
On
April 1, 2016, the Company entered into a two-year consulting
agreement with Jeffrey Ravetch, M.D., Ph.D., a Board member until
August 3, 2017, for work beginning January 1, 2016 through December
31, 2017, at a rate of $100,000 a year, in support of scientific
and technical advice on the discovery and development of technology
and products for the Company primarily related to monoclonal
antibodies, corporate development, and corporate partnering
efforts. In April 2016, the Company paid Dr. Ravetch
$100,000 for services to be performed in 2016, and will pay
quarterly thereafter beginning January 1, 2017. During the three
and six months ended June 30, 2017, the Company recorded $25,000
and $50,000, respectively, in consulting expenses, as part of
general and administration expenses, related to this
agreement.
On
November 3, 2016, the Company granted 17,500 stock options to
Jeffrey Ravetch, M.D., Ph.D., for his ongoing consulting services
to the Company. The option award vests over a three-year period.
During the three and six months ended June 30, 2017, the Company
recognized $3,826 and $7,652 of stock-based compensation expense,
respectively, as part of general and administration expenses,
related to this option grant.
On May 19, 2017, the Company granted each
director, other than J. David Hansen, Jeffrey Ravetch, a Board
member at the time, and Philip Livingston, 50,000 options at market
price, $1.80 on May 19, 2017, with immediate vesting for their
continuing service to the Company, in exchange for giving up their
Board fees for the remainder of the year. J. David Hansen and Jeffrey Ravetch were
each granted 500,000 options and Philip Livingston was granted
50,000 options each at $2.00 exercise price per share with
immediate vesting and no performance obligations. Options granted
to J. David Hansen, CEO and Philip Livingston were granted as a
condition of the May 2017 financing transaction. The 450,000
options granted to Dr. Ravetch in addition to the 50,000 options
granted to other non-employee members of the Company’s Board
of Directors were in recognition of the additional value provided
by Dr. Ravetch as a scientific expert. During the three months
ended June 30, 2017, the Company recorded $1,480,089 in stock-based
compensation expenses in general and administration expenses,
related to these grants.
8. Stock-based Activity
Amendment of Equity Incentive Plan
On
March 31, 2015, the Company approved a Second Amended and Restated
2014 Employee, Director and Consultant Equity Incentive Plan (the
“Plan”) to increase the number of shares reserved for
issuance under the Plan from 21,362 to 1,129,837 shares of common
stock. Additional changes to the Plan include:
●
An “evergreen” provision to reserve additional shares
for issuance under the Plan on an annual basis commencing on the
first day of fiscal 2016 and ending on the second day of fiscal
2024, such that the number of shares that may be issued under the
Plan shall be increased by an amount equal to the lesser of: (i)
1,081,081 or the equivalent of such number of shares after the
administrator, in its sole discretion, has interpreted the effect
of any stock split, stock dividend, combination, recapitalization
or similar transaction in accordance with the Plan; (ii) the number
of shares necessary such that the total shares reserved under the
Plan equals (x) 15% of the number of outstanding shares of common
stock on such date (assuming the conversion of all outstanding
shares of Preferred Stock (as defined in the Plan) and other
outstanding convertible securities and exercise of all outstanding
warrants to purchase common stock) plus (y) 30,946; and (iii) an
amount determined by the Board.
●
Provisions that no more than 405,406 shares may be granted to any
participant in any fiscal year.
●
Provisions to allow for performance based equity awards to be
issued by the Company in accordance with Section 162(m) of the
Internal Revenue Code.
●
On September 22,
2016, the Board of Directors ratified an automatic increase in the
number of shares reserved for issuance under the Plan, increasing
the total shares reserved from 1,129,837 to 1,208,307 shares of
common stock, under the annual evergreen provision for the Plan,
plus a fixed amount of 30,946.
●
On January 1, 2017, the Board of Directors
ratified an automatic increase in the number of shares reserved for
issuance under the Plan, effective January 1, 2017, increasing the
total shares reserved from 1,208,307 to 2,159,352 shares of common
stock, under the annual evergreen provision for the Plan ,
plus a fixed amount of 30,946.
●
On June 12, 2017, at the Company’s stockholders at its annual
meeting approved a proposal to increase in the number of shares
reserved for issuance under the Plan, increasing the total shares
reserved under the Plan from 2,128,406 (including the fixed amount
of 30,946) to 4,128,406, and increasing the number of shares that
may be granted to any participant in any fiscal year to 900,000,
from 405,406.
Stock-based Compensation
We
measure stock-based compensation expense for equity-classified
awards, principally related to stock options and restricted stock
units, or RSUs, based on the estimated fair value of the award on
the date of grant. We recognize the value of the portion of the
award that we ultimately expect to vest as stock-based compensation
expense over the requisite service period in our condensed
consolidated statements of operations. Due to limited activity in
2017, 2016 and 2015, we assumed a forfeiture rate of
zero.
We
use the Black-Scholes model to estimate the fair value of stock
options granted. The expected term of stock options granted
represents the period of time that we expect them to be
outstanding. For the three and six months ended June 30, 2017 and
2016, the following valuation assumptions were used:
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Risk-free
interest rate
|
1.8%
|
|
1.2 to
1.4%
|
|
1.5 to
2.0%
|
|
1.2 to
1.4%
|
Dividend yield
|
0%
|
|
0%
|
|
0%
|
|
0%
|
Expected volatility
|
80%
|
|
82 to
84%
|
|
73 to
85%
|
|
82 to
84%
|
Expected life of options, in years
|
5
yrs.
|
|
6
yrs.
|
|
1.4 to
6.0 yrs.
|
|
6
yrs.
|
Weighted-average
grant date fair value
|
$1.14
|
|
$2.76
|
|
$1.53
|
|
$2.93
|
Total
estimated stock-based compensation expense, related to all of the
Company’s stock-based payment awards recognized under ASC
718, “Compensation—Stock
Compensation” and ASC 505,
“Equity” was comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
$376,684
|
$284,057
|
$697,359
|
$587,681
|
General and
administrative
|
2,093,140
|
673,506
|
2,805,277
|
1,903,770
|
Total stock-based
compensation expense
|
$2,469,824
|
$957,563
|
$3,502,636
|
$2,491,451
|
Stock-based Award Activity
The
following table summarizes the Company’s stock option
activity during the six months ended June 30, 2017:
|
|
Weighted-Average
Exercise Price
|
Outstanding
at December 31, 2016
|
851,375
|
$10.94
|
Granted
|
2,046,690
|
2.37
|
Exercised
|
—
|
—
|
Forfeited/cancelled/expired
|
(1,081)
|
4.19
|
Outstanding
and expected to vest at June 30, 2017
|
2,896,984
|
$4.89
|
Vested
and exercisable at June 30, 2017
|
1,672,364
|
$4.73
|
The
total unrecognized compensation cost related to unvested stock
option grants as of June 30, 2017, was $3,385,133 and the weighted
average period over which these grants are expected to vest is 2.23
years. The weighted average remaining contractual life of stock
options outstanding at June 30, 2017 and 2016 is 9.35 and 9.0
years, respectively.
During
the first six months of 2017, the Company granted 2,046,690 options
to officers and employees with a weighted average exercise price of
$2.37 which consisted of 1,300,000 shares vesting immediately at
grant and remainder vesting over a three-year period starting at
the one-year anniversary of the grant date. During the
first six months of 2016, the Company granted 223,716 options to
officers and employees with a weighted average exercise price of
$5.40.
Stock
options granted to employees generally vest over a three-year
period with one third of the grants vesting at each one-year
anniversary of the grant date.
Because
the Company had a net operating loss carryforward as of June 30,
2017, no tax benefits for the tax deductions related to stock-based
compensation expense were recognized in the Company’s
condensed consolidated statements of operations. Additionally, no
stock options were exercised in the three and six months ended June
30, 2017 and 2016.
A
summary of activity related to restricted stock grants under the
Plan for the six months ended June 30, 2017 is presented
below:
|
|
Weighted
Average Grant-Date Fair Value
|
Non-vested
at December 31, 2016
|
205,478
|
$16.84
|
Granted
|
—
|
—
|
Vested
|
(98,238)
|
17.02
|
Forfeited
|
—
|
—
|
Non-vested
at June 30, 2017
|
107,240
|
$16.84
|
As
of June 30, 2017, there were 107,240 nonvested restricted
stock units remaining outstanding.
As
of June 30, 2017, and 2016, unamortized compensation expense
related to restricted stock grants amounted to $1,271,294 and
$2,975,469, respectively, which is expected to be recognized over a
weighted average period of 0.79 and 1.8 years,
respectively.
Management Bonus Plan and Compensation for Non-Employee
Directors
On
February 16, 2016, our Compensation Committee approved a 2016
Management Bonus Plan (the “2016 Management Plan”)
outlining maximum target bonuses of the base salaries of certain of
our executive officers. Under the terms of the 2016 Management
Plan, the Company's Chief Executive Officer shall receive a maximum
target bonus of up to 50% of his annual base salary, and the Chief
Financial Officer and each of the Company's Vice Presidents shall
receive a maximum target bonus of up to 30% of their annual base
salary.
On
February 16, 2016, the Compensation Committee of the Board of
Directors of the Company approved the following
amendments to Company's policy for compensating non-employee
members of the Board:
●
The initial equity grant upon first appointment (or election) of
future non-employee directors to the Board shall be a 10-year
option to purchase 6,757 shares of the Company's common stock,
under the Company's Second Amended and Restated 2014 Equity
Incentive Plan with 3-year annual vesting and a strike price equal
the closing price of the Company's common stock on the effective
date of the appointment (or election);
●
The annual cash retainer for each non-employee director, paid
quarterly, is increased by $1,000 per calendar quarter to a total
of $7,000 per quarter, effective April 1, 2016; and
●
The additional annual cash retainer for the chairperson of each of
the Audit, Compensation, and Nominating and Governance Committees,
paid quarterly, is increased by $1,000 per calendar year, such that
each chairperson retainer shall be as follows, effective April 1,
2016: Audit Committee: $13,000; Compensation Committee: $9,000;
Nominating and Governance Committee: $6,000.
On
August 25, 2016, the Compensation Committee of the Board of
Directors of the Company approved the following amendments to
Company's policy for compensating non-employee members of the
Board:
●
The initial equity
grant upon first appointment (or election) of future non-employee
directors to the Board shall be a 10-year option to purchase 25,000
shares of the Company's common stock, under the Company's Second
Amended and Restated 2014 Equity Incentive Plan with 3-year annual
vesting and a strike price equal to the closing price of the
Company's common stock on the effective date of the appointment (or
election); and
●
The additional
automatic annual option grant to each non-employee director on the
date of the Company's annual meeting shall be a 10-year option to
purchase 17,500 shares of the Company's common stock, under the
Company's Second Amended and Restated 2014 Equity Incentive Plan
with 1-year vesting and a strike price equal to the closing price
of the Company's common stock on the date of the annual
meeting.
On
February 6, 2017, the Compensation Committee of the Board of
Directors of the Company approved the following amendments to
Company's policy for compensating non-employee members of the
Board:
●
The initial equity
grant upon first appointment (or election) of future non-employee
directors to the Board shall be a 10-year option to purchase 30,000
shares of the Company's Common Stock, under the Company's Second
Amended and Restated 2014 Equity Incentive Plan with 3-year annual
vesting and a strike price equal to the closing price of the
Company's common stock on the effective date of the appointment (or
election);
●
The additional
automatic annual option grant to each non-employee director on the
date of the Company's annual meeting shall be a 10-year option to
purchase 20,000 shares of the Company's Common Stock, under the
Company's Second Amended and Restated 2014 Equity Incentive Plan
with 1-year vesting and a strike price equal the closing price of
the Company's common stock on the date of the annual
meeting.
Common stock reserved for future issuance
Common
stock reserved for future issuance consists of the following at
June 30, 2017:
Common
stock reserved for conversion of preferred stock and
warrants
|
8,038,563
|
Common
stock options outstanding
|
2,896,984
|
Authorized
for future grant or issuance under the Stock Plan
|
972,129
|
Unvested
restricted stock
|
107,240
|
Total
|
12,014,916
|
9. Net Loss per Share
The
Company calculates basic and diluted net loss per share using the
weighted-average number of shares of common stock outstanding
during the period.
When
the Company is in a net loss position, it excludes from the
calculation of diluted net loss per share all potentially dilutive
stock options, preferred stock and warrants, and the diluted net
loss per share is the same as the basic net loss per share for such
periods. If the Company was to be in a net income position, the
weighted average number of shares used to calculate the diluted net
income per share would include the potential dilutive effect of
in-the-money securities, as determined using the treasury stock
method.
The
table below presents, the potentially dilutive securities that
would have been included in the calculation of diluted net loss per
share if they were not antidilutive for the periods
presented.
|
|
|
|
|
Stock
options
|
2,896,984
|
632,310
|
Restricted stock
awards
|
107,240
|
212,689
|
Preferred
stock
|
5,965,148
|
2,792,190
|
Common stock
warrants
|
2,073,415
|
1,199,505
|
Total
|
11,042,787
|
4,836,694
|
10. Contracts and Agreements
Memorial Sloan Kettering Cancer Center, or MSK
Since 2008 the Company has engaged in various
research agreements and collaborations with MSK including licensed
rights to cancer vaccines and the blood samples from patients who
have been vaccinated with MSK’s cancer vaccines. Total
sponsored research contracts outstanding in 2016 amounting to
approximately $800,000 in 2016 were 100% complete as of the year
ended December 31, 2016. Such sponsored research agreements provide
support for preclinical work on the Company’s product
development programs. The work includes preparing
radioimmunoconjugates of the Company’s antibodies and
performing in vitro and in vivo pharmacology studies for our therapeutic antibody
product, imaging agent product and radioimmunotherapy product
programs. For the three and six months ended June 30, 2017 the
Company incurred $0 and $184,000 expenses related to these
contracts, respectively, and for the three and six months ended
June 30, 2016, the Company incurred $0 and $212,574,
respectively.
Life Technologies Licensing Agreement
On
September 24, 2015, the Company entered into a licensing agreement
with Life Technologies Corporation, a subsidiary of ThermoFisher
Scientific. Under the agreement MabVax agreed to license
certain cell lines from Life Technologies Corporation to be used in
the production of recombinant proteins for the Company’s
clinical trials. The amount of the contract is for
$450,000 and was fully expensed during 2015. This
agreement was fully paid as of December 31, 2016. For the three and
six months ended June 30, 2017, and 2016, the Company recorded no
expenses associated with the agreement.
Rockefeller
University Collaboration
In
July 2015, the Company entered into a research collaboration
agreement with Rockefeller University's Laboratory of Molecular
Genetics and Immunology. The Company provided antibody material to
Rockefeller University, which is exploring the mechanism of action
of constant region (Fc) variants of the HuMab 5B1 in the role of
tumor clearance. The Company may supply additional research
materials if requested by the Rockefeller University, which is
evaluating ways to optimize the function. For the three and six
months ended June 30, 2017, and 2016, the Company recorded no
expenses associated with the agreement.
Patheon
Biologics LLC Agreement
On
April 14, 2014, the Company entered into a development and
manufacturing services agreement with Patheon (f.k.a. Gallus
Biopharmaceuticals) to provide a full range of manufacturing and
bioprocessing services, including cell line development, process
development, protein production, cell culture, protein
purification, bio-analytical chemistry and QC
testing. Total amount of the contract is estimated at
approximately $3.0 million. For the three and six months
ended June 30, 2017 and 2016, the Company recorded no expenses
associated with the agreement.
NCI PET Imaging Agent Grant
In
September 2013, the NCI awarded the Company a SBIR Program Contract
to support the Company’s program to develop a Positron
Emission Tomography (“PET”) imaging agent for
pancreatic cancer using a fragment of the Company’s 5B1
antibody (the “NCI PET Imaging Agent Grant”). The
project period for Phase I of the grant award of approximately
$250,000 covered a nine-month period, which commenced in September
2013 and ended in June 2014.
On
August 25, 2014, the Company was awarded a $1.5 million contract
for the Phase II portion of the NCI PET Imaging Agent Grant. The
contract is intended to support a major portion of the preclinical
work being conducted by the Company, together with its
collaboration partner, MSK, to develop a novel PET imaging agent
for detection and assessment of pancreatic cancer. The total
contract amount for Phase I and Phase II was approximately
$1,749,000. The Company recorded revenue associated with the NCI
PET Imaging Agent Grant as the related costs and expenses were
incurred. For the three and six month periods ended June 30, 2017
the Company recorded no revenues associated with the NCI PET
Imaging Agent Grant, and during the same periods in 2016, the
Company recorded $0 and $148,054 of revenue associated with the NCI
PET Imaging Agent Grant, respectively.
11. Commitments and contingencies
Capital Leases
On
March 21, 2016, the Company entered into a lease agreement with
ThermoFisher Scientific (“Lessor”). Under
the terms of the agreement, the Company agreed to lease two pieces
of equipment from the Lessor, a liquid chromatography system and an
incubator, totaling in cost of $95,656. The term of the
lease is five years (60 months), and the monthly lease payment is
$1,942. In addition, there is a $1.00 buyout option at the end of
the lease term.
Minimum
future annual capital lease obligations are as follows as of June
30, 2017:
2017
(remaining)
|
$11,652
|
2018
|
23,306
|
2019
|
23,306
|
2020
|
23,306
|
2021
|
7,769
|
Less
interest
|
(12,548)
|
Principal
|
76,791
|
Less
current portion
|
(17,726)
|
Noncurrent
portion
|
$59,065
|
Operating Leases
In
connection with the Merger, the Company recorded a $590,504
contingent lease termination fee, in connection with the
termination by MabVax (f.k.a. Telik, Inc.) of the master lease and
sublease of 3165 Porter Drive in Palo Alto, California, which is
payable to ARE-San Francisco No. 24, if the Company receives $15
million or more in additional financing in the aggregate. The
additional financing was achieved in 2015 and the termination fee
is reflected on the condensed consolidated balance sheet as an
accrued lease contingency fee.
On September 2, 2015, the Company
entered into a lease (the
“Lease”) with AGP Sorrento Business Complex, L.P., for
certain premises of office and laboratory space in buildings
located at 11535 Sorrento Valley Rd., San Diego, California, to
serve as the Company’s corporate offices and laboratories
(the “New Premises”). Because certain tenant
improvements needed to be made to the New Premises before the
Company could take occupancy, the term of the Lease did not
commence until the New Premises were ready for occupancy, which was
on February 4, 2016. The Lease terminates six years
after such term commencement date, unless earlier terminated in
accordance with the Lease. Pursuant to the terms of the Lease, the
monthly base rent is $35,631, subject to annual increases as set
forth in the Lease.
The
Company has an option to extend the Lease term for a single,
five-year period. If the Lease term is extended for the
optional five-year period, the monthly base rent will be adjusted
based on fair market rental value. In addition to rent,
the Company agreed to pay a portion of the taxes and utility,
maintenance and other operating costs paid or accrued in connection
with the ownership and operation of the property.
During
the three and six months ended June 30, 2017, the Company recorded
rent expense of $115,238 and $230,472, respectively, and the three
and six months ended June 30, 2016 the Company recorded rent
expense of $115,238 and $202,921, respectively.
Minimum
future annual operating lease obligations are as follows as of June
30, 2017:
2017
(remaining)
|
$220,199
|
2018
|
451,409
|
2019
|
464,951
|
2020
|
478,900
|
2021
|
493,267
|
Thereafter
|
82,612
|
Total
|
$2,191,338
|
12. Subsequent Events
Voluntary Deferrals of Management Salaries
Effective with the Company’s pay period ending August 10,
2017, and without changing their employment agreements dated July
1, 2017, five members of management volunteered to defer receiving
portions of their salaries that in the aggregate represent a
deferral of cash payments by the Company of approximately $236,000
for the remainder of 2017. The voluntary deferral of cash payments
is intended to help with the Company’s cash flow for the
remainder of the year, with voluntary reductions by the management
team committed to remain in effect until we complete a successful
financing of at least $8.0 million, or a business transaction that
represents, or business transactions in the aggregate that
represent, an amount of $10.0 million or greater, whichever occurs
first. The employment agreements with the Company remain unchanged,
except that the executives have volunteered to reduce the terms of
their employment agreements to two years from three in connection
with the
August 11, 2017 registered direct offering and Letter Agreement
with the Lead Investor discussed later in this Note 12, Subsequent
Events.
Series D Conversions
Between
July 1, 2017, and August 14, 2017, holders of Series D Preferred
Stock converted 44,001 shares of Series D Preferred Stock into
594,603 shares of common stock.
Series I Conversions
Between
July 1, 2017, and August 14, 2017, holders of Series I Preferred
Stock converted 597,384 shares of Series I Preferred Stock into
597,384 shares of common stock.
July 2017 Private Placement
On July
27, 2017, we entered into a subscription agreement with an
accredited investor pursuant to which we agreed to sell an
aggregate of $125,000 in common stock under terms similar to the
May 2017 Public Offering, in which investors purchased common stock
at $1.75 per share. According to the subscription agreement,
investors, if meeting the Minimum
Required Investment of 25% of their original investment in a
private placement in April 2015, and still hold their shares of
common stock or Series E Preferred Stock purchased in April 2015,
would be entitled to receive Inducement Shares of common stock, or
Series I Preferred Stock, at the election of the investor who would
hold in excess of 4.99% of the outstanding shares of common stock,
at the rate of 1.13 shares of common stock or Series I Preferred
Stock for every share of common stock or Series G Preferred Stock
purchased in the May 2017 Public Offering, as well as agree
to amend the terms of their outstanding warrants that currently
have an exercise price of $11.10 per share, such that the amended
warrants shall have an exercise price of $2.00 per share and no
cashless exercise feature. The transaction closed on August 2,
2017. As a result of the investor meeting the Minimum Required
Investment, the investor received an aggregate of 152,143 shares of
common stock for its investment, including 80,714 Inducement
Shares, and had warrants to purchase 225,225 shares of common stock
repriced from $11.10 to $2.00 per warrant share.
The
securities referenced above were issued in reliance on the
exemption from registration afford by Rule 506 of Regulation D
and/or Section 4(a)(2) of the Securities Act as a transaction by an
issuer not involving a public offering.
August 2017 Registered Direct Offering
On
August 11, 2017, we entered into securities purchase agreements to
sell 2,386.36 shares of a new 0% Series J Convertible Preferred
Stock, or Series J Preferred Stock, to be created with a stated
value of $550 per share (the “August 2017 Offering”).
The Series J Preferred Stock is initially convertible into
approximately 3,400,000 shares of common stock at $0.55 per share,
subject to adjustment for stock splits, stock dividends,
recapitalizations, combinations, subdivisions or other similar
events and was purchased by certain existing investors of the
Company (the “Prior Investors”). The total amount of
the securities purchase agreements amounted to approximately
$1,312,500, before estimated expenses of $130,000. The Certificate
of Designation for the Series J Preferred Stock shall include a
4.9% beneficial ownership conversion blocker, a 19.99% blocker
provision to comply with Nasdaq Rules (the “19.99% Conversion
Blocker”) until stockholders have approved any or all shares
of common stock issuable upon conversion of the Series J Preferred
Stock, and a 125% liquidation preference. All shares of the
Company’s capital stock will be junior in rank to the Series
J Preferred Stock at the time of creation, with respect to the
preferences as to dividends, distributions and payments upon the
liquidation, dissolution and winding-up of the Company, except for
the Company’s Series D Preferred Stock, Series E Preferred
Stock, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock, and Series I Preferred Stock.
In
connection with the August 2017 Offering, we agreed with the Lead
Investor pursuant to a Letter Agreement, dated August 9, 2017, to
issue incentive shares (the “Incentive Shares”) to
Prior Investors as an incentive to invest in the August 2017
Offering. Such Prior Investors shall be entitled to receive their
pro rata share of 65,000 shares in the form of a new Series K
Preferred Stock, to be created that is substantially similar to
common stock. and convertible into 6,500,000 shares of common
stock, subject to stockholder approval. The stated value of each
share of Series K Preferred Stock will be $0.01 and the conversion
rate shall be the stated value of $0.01 divided by .0001, or one
hundred (100) shares of common stock upon conversion of one (1)
share of Series K Preferred Stock, each subject to adjustment for
stock splits, stock dividends, recapitalizations, combinations,
subdivisions or other similar event, and have a 4.9% beneficial
ownership conversion blocker. In the event of a liquidation,
dissolution or winding up of the Company, each share of Series K
Preferred Stock will be entitled to a per share preferential
payment equal to the par value, or $0.01 per share. All shares of
the Company’s capital stock will be junior in rank to the
Series K Preferred Stock at the time of creation, with respect to
the preferences as to dividends, distributions and payments upon
the liquidation, dissolution and winding-up of the Company, except
for the Company’s Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred
Stock, Series H Preferred Stock, Series I Preferred Stock and
Series J Preferred Stock.
In
order to meet Nasdaq Capital Market rules in the August 2017
Offering, we are not obligated to issue any shares of common stock
upon conversion of the Series J Preferred Stock which would cause
the Company to breach our obligations under the rules and
regulations of the Nasdaq Capital Market, which limit the aggregate
number of shares issued at a discount to market at 19.99% of the
number of shares outstanding on the closing date of the August 2017
Offering, except that such limitation shall not apply in the event
that we obtain the approval of our stockholders as required by the
applicable rules of the Nasdaq Capital Market for issuances of
common stock in excess of such amount. Similarly, none of the
Series K Preferred Stock may be converted into common stock until
we obtain the approval of our stockholders.
Item 2.
|
Management’s Discussion and
Analysis of Financial Condition and Results of
Operations
|
FORWARD LOOKING STATEMENTS
The
following discussion should be read in conjunction with our
condensed consolidated financial statements and other financial
information appearing elsewhere in this quarterly report. In
addition to historical information, the following discussion and
other parts of this quarterly report contain forward-looking
statements. You can identify these statements by forward-looking
words such as “plan,” “may,”
“will,” “expect,” “intend,”
“anticipate,” believe,” “estimate”
and “continue” or similar words. Forward-looking
statements include information concerning possible or assumed
future business success or financial results. You should read
statements that contain these words carefully because they discuss
future expectations and plans, which contain projections of future
results of operations or financial condition or state other
forward-looking information. We believe that it is important to
communicate future expectations to investors. However, there may be
events in the future that we are not able to accurately predict or
control. Accordingly, we do not undertake any obligation to update
any forward-looking statements for any reason, even if new
information becomes available or other events occur in the future
and thus you should not unduly rely on these
statements.
The
forward-looking statements included herein are based on current
expectations that involve several risks and uncertainties set forth
under “Risk Factors” in our Annual Report on Form 10-K
as of and for the year ended December 31, 2016, Part II, Section
1A, herein, and other periodic reports filed with the United States
Securities and Exchange Commission (“SEC”).
Accordingly, to the extent that this Report contains
forward-looking statements regarding the financial condition,
operating results, business prospects or any other aspect of the
Company, please be advised that the Company’s actual
financial condition, operating results and business performance may
differ materially from that projected or estimated by the Company
in forward-looking statements and thus you should not unduly rely
on these statements.
Overview
We have been engaged in the discovery and
development of proprietary human monoclonal antibody products for
the diagnosis and treatment of a variety of cancers. We have
discovered a pipeline of human monoclonal antibody products based
on the protective immune responses generated by patients who have
been vaccinated against targeted cancers. Therapeutic vaccines
under development were discovered at Memorial Sloan Kettering
Cancer Center, or MSK, and are exclusively licensed to MabVax
Therapeutics. We operate in only one business segment. We have
incurred substantial losses since inception, and we expect to incur
additional substantial losses for the foreseeable future as we
continue our research and development activities. To date, we have
funded our operations primarily through government grants, proceeds
from the sale of common and preferred stock, the issuance of debt,
the issuance of common stock in lieu of cash for services, payments
from collaborators and interest income. The process of
developing our product candidates will require significant
additional research and development, preclinical testing and
clinical trials, as well as regulatory approval. We expect these
activities, together with general and administrative expenses, to
result in substantial operating losses for the foreseeable future.
We will not receive product revenue unless we, or our collaborative
partners, complete clinical trials, obtain regulatory approval and
successfully commercialize one or more of our
products. We cannot provide assurance that we will ever
generate revenues or achieve and sustain profitability in the
future or obtain the necessary working capital for our
operations.
On July
24, 2017, the Company announced that the Board of Directors
authorized the Company to engage an
independent financial advisory firm to assist the Company in
exploring and evaluating strategic options with the goal of
maximizing shareholder value. The Company will continue to
work in earnest to advance its clinical programs and validate its
platform technology, including the recent commencement of patient
dosing in the Phase 1 MVT-1075 Radioimmunotherapy clinical trial
for the treatment of pancreatic, colon and lung cancers, and
remains committed to this continued progression. As part of the Company’s ongoing
evaluation and prioritization of its portfolio of assets, and in
response to inbound inquiries, the Company plans to engage an
industry-leading firm to advise us on potential alternatives and
strategies that will have the potential to unlock shareholder
value.
The
financial advisory firm will be assisting the Company in evaluating
transaction options currently being considered, which could include
the acquisition of MabVax by another company, the sale or
divestiture of specific assets, merging with another company,
licensing of selected technologies or a combination of selected
divestitures followed by a reverse merger. MabVax does not have a
defined timeline for the exploration of strategic alternatives and
is not confirming that the evaluation will result in any strategic
alternative being announced or consummated. The Company does
not intend to discuss or disclose further developments during this
process unless and until its Board of Directors has approved a
specific action or otherwise determined that further disclosure is
appropriate.
During the six
months ended June 30, 2017, our loss from operations was
$10,833,056, our net loss was $11,344,722, and our loss to common
stockholders was $16,584,135. Net cash used in operating activities
for the six months ended June 30, 2017 was $6,025,305 and cash and
cash equivalents and working capital deficit as of June 30, 2017,
were $1,846,906 and $5,060,672, respectively. As of June 30, 2017,
we had an accumulated deficit of $94,846,396 and a
stockholders’ equity of $86,814.
We
are subject to risks common to biopharmaceutical companies,
including the need for capital, risks inherent in our research,
development and commercialization efforts, preclinical testing,
clinical trials, uncertainty of regulatory and marketing approvals,
enforcement of patent and proprietary rights, potential competition
and retention of key employees. In order for a product to be
commercialized, it will be necessary for us to conduct preclinical
tests and clinical trials, demonstrate efficacy and safety of our
product candidates to the satisfaction of regulatory authorities,
obtain marketing approval, enter into manufacturing, distribution
and marketing arrangements, obtain market acceptance and, in many
cases, obtain adequate reimbursement from government and private
insurers. We cannot provide assurance that we will ever generate
revenues or achieve and sustain profitability in the future or
obtain the necessary working capital for our
operations.
Reverse Stock Split and Listing on NASDAQ
On
August 16, 2016, we filed a certificate of amendment to our Amended
and Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware in order to effectuate a reverse
stock split of our issued and outstanding common stock on a 1 for
7.4 basis, effective on August 16, 2016. The reverse split was
effective with The Financial Industry Regulatory Authority (FINRA),
and the Company’s common stock began trading on The NASDAQ
Capital Market at the open of business on August 17, 2016. All
share and per share amounts, and number of shares of common stock
into which each share of preferred stock will convert, in the
financial statements and notes thereto have been retroactively
adjusted for all periods presented to give effect to the Listing
Reverse Split, including reclassifying an amount equal to the
reduction in par value of common stock to additional paid-in
capital.
Our Clinical Development Programs and Plans for 2017
MVT-5873 – for the Treatment of Pancreatic
Cancer
We reported results from our Phase 1 clinical
trial of therapeutic antibody MVT-5873,
which is being evaluated to treat patients with advanced pancreatic
cancer and other CA19-9 positive cancers in a poster presentation
at the American Society of Clinical Oncology (ASCO) Annual Meeting
on June 3, 2017. The Company highlighted that the single agent
MVT-5837 appears safe and well tolerated in patients at
biologically active doses. Furthermore, all patients were evaluated
by RECIST 1.1 for tumor response, and the Company reported 11
patients achieved stable disease in this dose escalation safety
trial of 32 patients.
The
results of the Phase 1a trial with MVT-5873 indicate that this
fully-human antibody targeting CA19-9 cancers can be administered
at doses with acceptable safety and with a potentially positive
impact on disease. CA19-9 is broadly expressed in various cancers
including pancreatic, colon, and small cell lung cancer making this
antibody potentially useful for a larger patient population. The
early clinical efficacy signals from an identifiable subset of
subjects enabled us to understand those patients most likely to
respond to a MVT-5873 based therapy. At the maximum tolerated dose
(MTD) established in this trial, we have demonstrated an acceptable
safety margin and have cleared the way for MVT-5873 in combination
with our immunoPET imaging agent (MVT-2163) and Radioimmunotherapy
(MVT-1075) which are currently in Phase 1 clinical
trials.
The
recently completed Phase 1a trial was an open-label,
dose-escalation study evaluating the safety, tolerability and
pharmacokinetics of MVT-5873 as a single-agent in patients with
locally advanced or metastatic pancreatic or colon cancer who had
failed all prior therapies and regressed into progressive disease.
Secondary endpoints included evaluation of tumor response by RECIST
1.1 and duration of response. A second arm of the MVT-5873 Phase 1a
trial is actively evaluating MVT-5873 in combination with
gemcitabine plus nab-paclitaxel in newly diagnosed pancreatic
cancer patients. Dr. Eileen O’Reilly, Associate Director of
the David M. Rubenstein Center for Pancreatic Cancer Research,
attending physician, member at Memorial Sloan Kettering Cancer
Center and Professor of Medicine at Weill Cornell Medical College,
is the lead investigator in the MVT-5873 Phase 1 clinical
trial.
MVT-2163 –as an Imaging Agent for Pancreatic
Cancer
We initiated the MVT-2163 phase I trial in June
2016 to evaluate our next generation diagnostic PET imaging agent
in patients with locally advanced or metastatic adenocarcinoma of
the pancreas (PDAC) or other CA19-9 positive malignancies. MVT-2163
(89Zr-HuMab-5B1) combines the well-established PET
imaging radiolabel Zirconium-89 [89Zr] with the targeting
specificity of MVT-5873. We designed the trial to establish safety,
pharmacokinetics, biodistribution, optimal time to obtain the PET
image, and the amount of MVT-5873 to be used prior to
administration of MVT-2163 to obtain optimized PET scan
images.
We
reported results from our Phase 1a clinical trial of ImmunoPET
imaging agent, MVT-2163, for patients with locally advanced or
metastatic adenocarcinoma of the pancreas (PDAC) or other CA19-9
positive malignancies in a poster presentation and podium talk at
the Society of Nuclear Medicine and Molecular Imaging (SNMMI)
Annual Meeting held in Denver, CO on June 10-14, 2017.
As
of July 2017, twelve patients have been treated in this
first-in-human trial evaluating the safety and feasibility of
MVT-2163 to image pancreatic tumors and other CA19-9 positive
malignancies. MVT-2163 was administered alone and in combination
with MVT-5873 and was well tolerated in all cohorts. The only
toxicities were infusion reactions that resolved on the day of the
injection, with some patients requiring standard supportive
medication.
Uptake
of MVT-2163 was observed in primary tumors and metastases as early
as day 2 and continuously through day 7. Standard Uptake Values
(SUV), a measurement of activity in PET imaging, reached as high as
101 in the study. The investors reported that the high SUV is
amongst the highest lesion uptake they have ever seen for a
radiolabeled antibody. Bone and soft tissue disease were readily
visualized and lesion uptake of the radiotracer was higher than
typically seen with PET imaging agents. The correlation with
Computerized Tomography (CT) scans was high.
We
reported that MVT-5873 cold antibody pre-dose reduces liver SUV
facilitating detection of liver metastases. In addition, we
determined that the MVT-5873 cold antibody pre-dose does not
interfere with the uptake of MVT-2163 on cancer
lesions.
The
MVT-2163 product produced acceptable safety tolerability,
pharmacokinetics and biodistribution. MVT-2163 also produced high
quality PET images identifying both primary tumor and metastatic
sites. There was a promising correlation with diagnostic CT that
warrants further studies correlating these findings with
histopathology to assess the accuracy of MVT-2163 in identifying
smaller metastatic nodes below the detection level of standard CT
scans. The continual increase in high SUV values on cancer lesions
in this study supports the use of the Company’s MVT-1075
Radioimmunotherapy product which utilizes the same antibody to
deliver a radiation dose for the treatment of patients with
pancreatic, lung and colon cancers.
Plan for
remainder of 2017 –
In consultation with our clinical investigators, we plan to expand
our Phase 1 program later in 2017 to include additional patients
who will consent to have the smaller potential metastatic sites
being seen with MVT-2163 images biopsied to provide evidence that
MVT-2163 is identifying previously unseen disease. Better
understanding of the extent and spread of the cancer will
significantly improve the clinical decision regarding eligibility
for curative surgery. We expect to have results of biopsies later
in 2017.
MVT-1075
–as a Radioimmunotherapy for Pancreatic
Cancer
We
recently initiated a Phase 1 clinical trial our HuMab-5B1
radioimmunotherapy product that we have designated as MVT-1075.
MVT-1075 combines the demonstrated targeting specificity of the
HuMab-5B1 antibody with the proven clinical success of a low-energy
radiation emitter, 177Lutetium [177Lu]. We dosed our first patient
in June of this year. This Phase 1 first-in-human clinical trial is
an open-label, multi-center study evaluating the safety and
efficacy of MVT-1075 in up to 22 patients with CA19-9 positive
malignancies in the U.S. The primary objective is to determine the
maximum tolerated dose and safety profile in patients with
recurring disease who have failed prior therapies. Secondary
endpoints are to evaluate tumor response rate and duration of
response by RECIST 1.1, and to determine dosimetry and
pharmacokinetics. This dose-escalation study utilizes a traditional
3+3 design. The investigative sites will include Honor Health in
Scottsdale, Arizona and Memorial Sloan Kettering Cancer Center in
New York City.
Supporting
the MVT-1075 RIT clinical investigation are the Company’s
successful Phase 1a safety and target specificity data reported at
the annual meetings of the American Society for Clinical
Oncology (ASCO) and the Society for Nuclear Medicine and
Molecular Imaging(SNMMI) in June 2017, including the clinical
results for the Company’s HuMab-5B1 products, MVT-5873,
a single agent therapeutic antibody and MVT-2163, an
immuno-PET imaging agent. The combined results from 50 patients in
the Phase 1 MVT-5873 and MVT-2163 studies, established safety and
provided significant insight into drug biodistribution and an
optimal dosing strategy, which the Company has incorporated into
the MVT-1075 program. In April 2017, we reported preclinical
results for MVT-1075 at the American Association of Clinical
Research (AACR) Annual Meeting, demonstrating marked suppression,
and in some instances, regression of tumor growth in xenograft
animal models of pancreatic cancer, potentially making this product
an important new therapeutic agent in the treatment of pancreatic,
colon and lung cancers.
RESULTS OF OPERATIONS
We are
providing the following information about our revenues, expenses,
cash and liquidity.
Comparison of the Three and Six Months Ended June 30, 2017 and
2016
Revenues:
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
|
|
Revenues
|
$—
|
$—
|
(0)%
|
$—
|
$148,054
|
(100)%
|
For the
three months ended June 30, 2017 and 2016, we had no revenues
recorded. We had completed the current Phase of the NIH Imaging
Contract during the first quarter of the prior year.
For the
six months ended June 30, 2017, we recognized no revenues, as
compared to $148,054 for the same period in the prior year. This
decrease was due to the completion of the current Phase of the NIH
Imaging Contract during the first quarter of the prior
year.
Research
and development expenses:
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
|
|
Research and
development
|
$2,332,700
|
$1,596,002
|
46.2%
|
$5,151,064
|
$3,296,514
|
56.3%
|
For the
three months ended June 30, 2017, we incurred research and
development expenses of $2,332,700, as compared to $1,596,002 for
the same period a year ago. Stock-based compensation expense
included in research and development expenses for the three months
ended June 30, 2017 and 2016 was $376,684 and $284,057,
respectively. Increased expenses in
the three months ended June 30, 2017, compared to the same period
in the prior year are primarily due to increased spending on our
Phase I clinical trials of MVT-5873 as a therapeutic and MVT-2163
as a diagnostic for pancreatic cancer and other CA 19.9
malignancies, and in-house staffing to support preclinical and
clinical development efforts in support of our
programs.
For the
six months ended June 30, 2017, we incurred research and
development expenses of $5,151,064, as compared to $3,296,514 for
the same period a year ago. Stock-based compensation expense
included in research and development expenses for the six months
ended June 30, 2017 and 2016 was $697,359 and $587,681,
respectively. Increased expenses in
the six months ended June 30, 2017, compared to the same period in
the prior year are primarily due to increased spending on our Phase
I clinical trials of MVT-5873 as a therapeutic and MVT-2163 as a
diagnostic for pancreatic cancer and other CA 19.9 malignancies,
and in-house staffing to support preclinical and clinical
development efforts in support of our programs.
General
and administrative expenses:
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
|
|
General and
administrative
|
$3,408,042
|
$1,929,166
|
76.7%
|
$5,681,992
|
$4,581,005
|
24.0%
|
For the
three months ended June 30, 2017, we incurred general and
administrative expenses of $3,408,042, as compared to $1,929,166
for the same period a year ago. Stock-based compensation expense
included in general and administrative expenses for the three
months ended June 30, 2017 and 2016 was $2,093,140 and $673,506,
respectively. Stock-based compensation expense for the three months
ended June 30, 2017 and 2016 included $6,950 and $18,904 in
restricted stock for services, respectively. The increase in
general and administrative expenses was primarily due to higher
stock-based compensation expenses of $1,438,537 mainly due to
current quarter option grants, higher investor relations costs of
$141,082 related to hiring a new investor relations firm and social
media firm, and increased tax related costs of $57,954, partially
offset by lower legal costs of $111,142 compared to the same period
last year.
For the
six months ended June 30, 2017, we incurred general and
administrative expenses of $5,681,992, as compared to $4,581,005
for the same period a year ago. Stock-based compensation expense
included in general and administrative expenses for the six months
ended June 30, 2017 and 2016 was $2,805,277 and $1,903,770,
respectively. Stock-based compensation expense for the six months
ended June 30, 2017 and 2016 included $63,550 and $592,329 in
restricted stock for services, respectively. The increase in
general and administrative expenses was primarily due to higher
stock-based compensation expenses of $1,493,833 mainly due to
current quarter option grants, higher salaries and wages expense of
$140,461, higher investor relations costs of $123,732 related to
hiring a new investor relations firm and social media firm and
increased tax related costs of $101,954, partially offset by lower
expenses for stock issued for business development expenses of
$578,779, lower consulting costs of $143,554, and lower legal costs
of $84,233 compared to the same period last year.
Interest
income and other income (expense):
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
|
|
Interest and other
expense
|
$(249,127)
|
$(262,807)
|
(5.2)%
|
$(511,666)
|
$(463,280)
|
10.4%
|
Interest and other
expense was $249,127 and $262,807 for the three months ended June
30, 2017 and 2016, respectively. The amount for the three months
ended June 30, 2017, consisted primarily of $150,634 of interest
expense related to interest on the Company’s term loan from
Oxford Finance, $43,619 of financing cost amortization, $54,760 of
warrant amortization and other items of $114. The amount for the
three months ended June 30, 2016, consisted primarily of $155,512
of interest expense related to interest on the Company’s term
loan from Oxford Finance, LLC (“Oxford Finance”),
$47,584 of financing cost amortization, and $59,738 of warrant
amortization partially offset by interest income of
$6.
The
amount of interest and other expense for the six months ended June
30, 2017, consisted primarily of $307,292 interest expense related
the Company’s term loan from Oxford Finance, $90,762 of
financing cost amortization, $113,945 of warrant amortization and
other items of $333. The amount for the six months ended June 30,
2016, consisted primarily of $284,440 interest expense related to
interest on the Company’s term loan from Oxford Finance,
$79,289 of financing cost amortization, and $99,563 of warrant
amortization partially offset by interest income of
$12.
The
fair value of the warrants issued to Oxford Finance related to the
term loan was recorded as a discount to the value of the note
payable, and is amortized over the term of the loan. Financing costs incurred related to the term loan
are also amortized over the term of the loan.
Critical Accounting Policies and Significant Judgments and
Estimates
Our
management’s discussion and analysis of our financial
condition and results of operations are based on our consolidated
financial statements, which have been prepared in accordance with
generally accepted accounting principles in the United States
(“GAAP”). The preparation of these consolidated
financial statements requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements as well as the reported revenues
and expenses during the reporting periods. On an on-going basis, we
evaluate our estimates and judgments related to our operating
costs. We base our estimates on historical experience and on
various other factors that we believe are reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that
are not readily apparent from other sources. Actual results may
differ significantly from these estimates under different
assumptions or conditions.
Our critical accounting policies include:
Revenue
recognition. Revenue from
grants is based upon internal and subcontractor costs incurred that
are specifically covered by the grant, including a facilities and
administrative rate that provides funding for overhead expenses.
NIH grants are recognized when we incur internal expenses that are
specifically related to each grant, in clinical trials at the
clinical trial sites, by subcontractors who manage the clinical
trials, and provided the grant has been approved for payment. U.S.
grant awards are based upon internal research and development costs
incurred that are specifically covered by the grant, and revenues
are recognized when we incur internal expenses that are related to
the approved grant.
Any
amounts received by us pursuant to the NIH grants prior to
satisfying our revenue recognition criteria are recorded as
deferred revenue.
Clinical
trial expenses. We accrue
clinical trial expenses based on work performed. In determining the
amount to accrue, we rely on estimates of total costs incurred
based on the enrollment of subjects, the completion of trials and
other events defined in contracts. We follow this method because we
believe reasonably dependable estimates of the costs applicable to
various stages of a clinical trial can be made. However, the actual
costs and timing of clinical trials are highly uncertain, subject
to risks, and may change depending on several factors. Differences
between the actual clinical trial costs and the estimated clinical
trial costs that we have accrued in any prior period are recognized
in the subsequent period in which the actual costs become known.
Historically, these differences have not been material; however,
material differences could occur in the future.
Stock-based
compensation. Our
stock-based compensation programs include grants of stock options
and restricted stock to employees, non-employee directors and
non-employee consultants. Stock-based compensation cost is measured
at the grant date, based on the calculated fair value of the award,
and is recognized as an expense, under the straight-line method,
over the employee, non-employee director or non-employee
consultant’s requisite service period (generally the vesting
period of the equity grant).
We
account for equity instruments, including stock options and
restricted stock, issued to employees and non-employees in
accordance with authoritative guidance for equity based payments.
Stock options issued are accounted for at their estimated fair
value determined using the Black-Scholes-Merton option-pricing
model, and restricted stock is accounted for using the grant date
fair value of our common stock granted. The fair value of options
and restricted stock granted to non-employees is re-measured as
they vest, and the resulting increase in value, if any, is
recognized as expense during the period the related services are
rendered.
Impairment
of Goodwill. The
Company applies the GAAP principles related to Intangibles –
Goodwill and Other related to performing a test for goodwill
impairment annually. During the quarter ended June 30, 2017, due to
the Company’s determination to explore and evaluate
strategic options, we performed a step
1 analysis and assessed the market value of the Company to
determine whether an impairment had taken place. Based upon the
analysis performed no impairment was noted, therefore performing
step 2 was not required. We concluded that no impairment of
Goodwill had taken place during the quarter ended June 30, 2017.
Further, in performing a qualitative assessment, we concluded no
events and circumstances had taken place that would have indicated
that an impairment had taken place.
Income
taxes. Significant
judgment is required by management to determine our provision for
income taxes, our deferred tax assets and liabilities, and the
valuation allowance to record against our net deferred tax assets,
which are based on complex and evolving tax regulations throughout
the world. Our tax calculation is impacted by tax rates in the
jurisdictions in which we are subject to tax and the relative
amount of income earned in each jurisdiction. Our deferred tax
assets and liabilities are determined using the enacted tax rates
expected to be in effect for the years in which those tax assets
are expected to be realized.
The
effect of an uncertain income tax position is recognized as the
largest amount that is “more-likely-than-not” to be
sustained under audit by the taxing authority. An uncertain income
tax position will not be recognized if it has less than a 50%
likelihood of being sustained.
The
realization of our deferred tax assets is dependent upon our
ability to generate sufficient future taxable income. We establish
a valuation allowance when it is more-likely-than-not that the
future realization of all or some of the deferred tax assets will
not be achieved. The evaluation of the need for a valuation
allowance is performed on a jurisdiction-by-jurisdiction basis, and
includes a review of all available evidence, both positive and
negative. As of June 30, 2017, the Company concluded that it was
more-likely-than-not that its deferred tax assets would not be
realized, and a full valuation allowance has been
recorded.
The above listing is not intended to be a comprehensive list of all
of our accounting policies. In many cases, the accounting treatment
of a particular transaction is specifically dictated by GAAP. See
our audited consolidated financial statements and notes thereto
included in our 2016 Annual Report on Form 10-K, which contain
additional accounting policies and other disclosures required by
GAAP.
LIQUIDITY AND CAPITAL RESOURCES
To date, we have funded our operations primarily
through government grants, proceeds from the sale of common and
preferred stock, the issuance of debt, the issuance of common stock
in lieu of cash for services, payments from collaborators and
interest income. We have experienced negative cash flow from
operations each year since our inception. As of June 30, 2017, we
had an accumulated deficit of $94,846,396 and
stockholders’ equity of $86,814.
We expect to continue to incur increased expenses, resulting in
losses, over the next several years due to, among other factors,
our continuing and planned clinical trials and anticipated research
and development activities, unless we can achieve a major license
of one or more of our products under development. There can be no
assurance that we will be able to achieve a license and earn
revenues large enough to offset our operating expenses. We had cash
of $1,846,906 and a working capital deficit of $5,060,672 as of
June 30, 2017.
|
|
|
Cash and cash
equivalents
|
$1,846,906
|
$3,979,290
|
Working capital
(deficit)
|
$(5,060,672)
|
$(1,396,656)
|
Current
ratio
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
Cash provided by
(used in):
|
|
Operating
activities
|
$(6,025,305)
|
$(5,225,134)
|
Investing
activities
|
$(4,142)
|
$(316,846)
|
Financing
activities
|
$3,897,063
|
$4,429,946
|
Sources
and Uses of Net Cash for the Six Months Ended June 30,
2017
Net
cash used in operating activities was $6,025,305 for the six months
ended June 30, 2017, compared to $5,225,134 in the comparable
period a year ago. The net cash used in both periods was primarily
attributable to the net losses, adjusted to exclude certain
non-cash items, primarily stock-based compensation and amortization
of finance costs related to the term loan. Net cash used in
operating activities for the six months ended June 30, 2017 was
also impacted by an increase of $931,817 in accounts payable
related primarily to research contract services and an increase in accrued clinical operation and
site costs of $424,738.
The net
cash used in investing activities for the six months ended June 30,
2017 and 2016, amounted to $4,142 and $316,846, respectively,
primarily as a result of purchase of lab equipment in the
corresponding periods.
Net
cash provided by financing activities was $3,897,063 for the six
months ended June 30, 2017, compared to $4,429,946 in the
comparable period in 2016. Net cash provided by financing
activities for the six months ended June 30, 2017 was attributable
to the net proceeds from the May 2017 Private Placement and the May
2017 Public Offering during the second quarter of 2017. Net cash
provided by financing activities for the six months ended June 30,
2016 was attributable to the net proceeds from the term loan during
the first quarter in 2016.
On May
3, 2017, we sold 850 shares of Series H Preferred
Stock at a stated value of $1,000 per share, representing an
aggregate of $850,000 in the May 2017 Private Placement, to certain
existing investors. The shares of Series H Preferred Stock are
convertible into shares of common stock based on a conversion
calculation equal to the stated value of the Series H Preferred
Stock, plus the Base Amount, if any, on such Series H Preferred
Stock, as of such date of determination, divided by the conversion
price. The stated value of each share of Series H Preferred Stock
is $1,000 and the initial conversion price is $1.75 per share, each
subject to adjustment for stock splits, stock dividends,
recapitalizations, combinations, subdivisions or other similar
events. This financing is discussed in further detail in Note 5,
Convertible Preferred Stock, Common Stock and Warrants of the Notes
to Unaudited Condensed Consolidated Financial Statements included
herein.
On
May 19, 2017, we closed a public offering of 1,342,858 shares of
common stock and 1,000,000 shares of newly designated 0% Series G
Convertible Preferred Stock (the “Series G Preferred
Stock”), at $1.75 per share of common stock and Series G
Preferred Stock (the “May 2017 Public Offering”).
The Series G Preferred Stock is initially convertible into
1,000,000 shares of common stock, subject to adjustment for stock
splits, stock dividends, recapitalizations, combinations,
subdivisions or other similar events, to certain existing investors
in the offering who, as a result of their purchases of common
stock, would hold in excess of 4.99% of our issued and outstanding
common stock, and elect to receive shares of our Series G Preferred
Stock. This offering is discussed in further detail in Note 5,
Convertible Preferred Stock, Common Stock and Warrants of the Notes
to Unaudited Condensed Consolidated Financial Statements included
herein. We received $4,100,000 in gross proceeds, before
underwriting discounts and commissions and offering expenses
totaling $397,743.
On July
27, 2017, we entered into a subscription agreement with an
accredited investor pursuant to which we agreed to sell an
aggregate of $125,000 in common stock under terms similar to the
May 2017 Public Offering. The transaction closed on August 2, 2017,
as further described in Note 12, Subsequent Events.
On
August 11, 2017, we entered into a
security purchase agreement with a group of existing investors in
the Company, where we sold 2,386.36 shares of 0% Series J Convertible
Preferred Stock to be issued (“the Series J Preferred
Stock”), at a stated value of $550 per share,
representing an aggregate of approximately $1,312,500 before
offering costs estimated at approximately $130,000 in a registered
direct offering (the “August 2017
Financing”). The shares of Series J Preferred Stock are
convertible into shares of common stock based on a conversion
calculation equal to the stated value of the Series J Preferred
Stock plus the Base Amount on such Series J Preferred Stock, as of
such date of determination, divided by the conversion price. The
stated value of each share of Series J Preferred Stock is $550 and
the initial conversion price is $0.55 per share, each subject to
adjustment for stock splits, stock dividends, recapitalizations,
combinations, subdivisions or other similar events. This financing
is discussed in further detail in Note 12, Subsequent
Events.
We
anticipate that the Company will continue to incur net losses into
the foreseeable future as we: (i) monitor the four patients
remaining on therapy in our Phase I clinical trial of MVT-5873
until therapy is discontinued; (ii) continue our clinical trial for
the development of MVT-1075 as a radioimmunotherapy; and
(iii) continue operations as a public company. Based on
receipt of $850,000 from our May 2017 Private Placement, $4.1
million from the May 2017 Public Offering, the $125,000 private
placement in July 2017, and the $1.3 million in securities purchase
agreements signed in August 2017, and without any other additional
funding or receipt of payments from potential licensing agreements,
we expect we will have sufficient funds to meet our obligations
through October 2017. These conditions give rise to substantial
doubt as to the Company’s ability to continue as a going
concern. The accompanying consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
We
plan to continue to fund the Company’s losses from operations
and capital funding needs through equity or debt financings,
strategic collaborations, licensing arrangements, government grants
or other arrangements. Further, to extend availability of existing
cash available for our programs for the purpose of achieving
milestones or a strategic transaction, we have cut personnel and
other operating expenses substantially following the completion of
two clinical development programs,
and management has volunteered to defer receiving portions of
salaries until one or more business transactions can be achieved,
as discussed further in Note 12, Subsequent Events.
For
example, we were able to reduce costs following completion of two
phase 1a clinical trials of our lead antibody HuMab 5B1, which has
enabled us to reduce our expenditures on clinical trials while we
continue with our radioimmunotherapy product MVT-1075 discussed
further in Management’s Discussion and Analysis of Financial
Condition and Results of Operations. Further, we have reduced our
personnel from 25 full time employees to 13 full time employees
with the completion of our two clinical trials. However, we cannot
be sure that capital funding will be available on reasonable terms,
or at all, and that our staff reductions to fit ongoing needs will
be sufficient. If we are unable to secure adequate additional
funding, we may be forced to make additional reductions in
spending, incur further cutbacks in personnel, extend payment terms
with suppliers, liquidate assets where possible, and/or suspend or
curtail planned programs. In addition, if the Company does not meet
its payment obligations to third parties as they come due, it may
be subject to litigation claims. Even if we are successful in
defending against these claims, litigation could result in
substantial costs and be a distraction to management. Any of these
actions could materially harm the Company’s business, results
of operations, and prospects. These conditions give rise to
substantial doubt as to the Company’s ability to continue as
a going concern.
Future Contractual Obligations
On
September 2, 2015, the Company entered into a lease (the
“Lease”) with AGP Sorrento Business Complex, L.P., for
certain premises consisting of a total of approximately 14,971
square feet of office and laboratory space in buildings located at
11535-11585 Sorrento Valley Rd., San Diego, California, to
serve as the Company’s corporate offices and laboratories
(the “New Premises”). Because certain tenant
improvements needed to be made to the New Premises before the
Company could occupy the New Premises, the term of the Lease
commenced on February 5, 2015. The Lease terminates six years after
such term commencement date, unless earlier terminated in
accordance with the Lease. Pursuant to the terms of the Lease, the
current monthly base rent paid by the Company is $36,699, subject
to annual increases as set forth in the Lease.
The
Company has an option to extend the Lease term for a single,
five-year period. If the Lease term is extended for the optional
five-year period, the monthly base rent will be adjusted based on
fair market rental value. In addition to rent, the Company agreed
to pay a portion of the taxes and utility, maintenance and other
operating costs paid or accrued in connection with the ownership
and operation of the property.
Our
master lease and sublease of our facility located at 3165 Porter
Drive in Palo Alto, California were terminated on February 28,
2013, and we entered into a termination agreement with ARE-San
Francisco No. 24 (“ARE”) on February 19, 2013 to
voluntarily surrender its premises. Because of the termination
agreement, we were relieved of further obligations under the master
lease and further rights to rental income under the sublease and
paid a termination fee of approximately $700,000. In addition to
the termination fee, if we receive $15 million or more in
additional financing, in the aggregate, an additional termination
fee of $590,504 will be due to ARE. The additional financing was
achieved in 2015 and the termination fee is reflected on the
condensed consolidated balance sheet as an accrued lease
contingency fee.
Recent Accounting Pronouncements
In May 2014, the FASB issued
ASU 2014-09, "Revenue from Contracts with Customers
(Topic 606)", which contains
new accounting literature relating to how and when a company
recognizes revenue. Under ASU 2017-09, a company will
recognize revenue when it transfers promised goods or services to
customers in an amount that reflects the consideration to which the
company expects to be entitled in exchange for those goods and
services. ASU 2014-09 is effective for the
Company’s fiscal year beginning January 1, 2018, which
reflects a one year deferral approved by the FASB in July 2015, and
will be adopted by the Company from January 1, 2018. We
expect the adoption of this new standard will not have a material
impact on our condensed consolidated financial
statements.
In
February 2016, the FASB issued ASU 2016-2,"Leases (Topic
842)." This update will increase transparency and
comparability by recognizing lease assets and lease liabilities on
the balance sheet and disclosing key information about leasing
arrangements. Under the new guidance, lessees will be
required to recognize the following for all leases (except for
short-term leases) at the commencement date (i) a lease liability,
which is a lessee’s obligation to make lease payments arising
from a lease, measured on a discounted basis; and (ii) a
right-of-use asset, which is an asset that represents the
lessee’s right to use, or control the use of, a specified
asset for the lease term. Under the new guidance, lessor accounting
is largely unchanged, and it simplified the accounting for sale and
leaseback transactions. Lessees will no longer be provided with a
source of off-balance sheet financing. Lessees (for capital and
operating leases) and lessors (for sales-type, direct financing,
and operating leases) must apply a modified retrospective
transition approach for leases existing at, or entered into after,
the beginning of the earliest comparative period presented in the
financial statements. The modified retrospective approach would not
require any transition accounting for leases that expired before
the earliest comparative period presented. Lessees and lessors may
not apply a full retrospective transition approach. The standard is
effective for fiscal years beginning after December 15, 2018,
including interim periods within those fiscal years. We are
currently in the process of assessing what impact this new standard
may have on our condensed consolidated financial
statements.
In March 2016, the FASB issued ASU 2016-09,
“Compensation—Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting.”
This update includes multiple provisions intended to simplify
various aspects of the accounting for share-based payment
transactions including accounting for excess tax benefits and tax
deficiencies, classification of excess tax benefits in the
statement of cash flows and accounting for award forfeitures. This
update is effective for annual and interim reporting periods of
public entities beginning after December 15, 2016, with early
adoption permitted. The adoption of this new standard did
not have a material impact on our condensed consolidated financial
statements.
In June 2016, the FASB issued ASU
No. 2016-13, “Financial
Instruments—Credit Losses (Topic326): Measurement of Credit
Losses on Financial Instruments”. This
ASU requires instruments measured at amortized cost to be presented
at the net amount expected to be collected. Entities are also
required to record allowances for available-for-sale debt
securities rather than reduce the carrying amount. This ASU is
effective for fiscal years beginning after December 15, 2019,
including interim periods within those fiscal years. We
expect the adoption of this new standard will not have a material
impact on our condensed consolidated financial
statements.
In
August 2016, the FASB issued ASU No. 2016-15 (“ASU
2016-15”), “Statement of Cash Flows (Topic 230):
Classification of Certain Cash Receipts and Cash Payments.”
The standard provides guidance on eight (8) cash flow issues: (1)
debt prepayment or debt extinguishment costs; (2) settlement of
zero-coupon bonds; (3) contingent consideration payments after a
business combination; (4) proceeds from the settlement of insurance
claims; (5) proceeds from the settlement of corporate-owned life
insurance policies; (6) distributions received from equity method
investees; (7) beneficial interests in securitization transactions;
and (8) separately identifiable cash flows and application of the
predominance principle. ASU 2016-15 addresses how certain cash
receipts and cash payments are presented and classified in the
statement of cash flows. ASU 2016-15 is effective for fiscal years,
and interim periods within those years, beginning after December
15, 2017 with early adoption permitted. We expect the adoption of
this new standard will not have a material impact on our condensed
consolidated financial statements.
In August 2016, the FASB issued ASU
No. 2016-16, “Income
Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than
Inventory.” This
ASU requires the recognition of the income tax consequences of an
intra-entity transfer of an asset other than inventory when the
transfer occurs. The amendments in this ASU should be applied on a
modified retrospective basis through a cumulative-effect adjustment
directly to retained earnings as of the beginning of the period of
adoption. We expect the adoption of this new standard will
not have a material impact on our condensed consolidated financial
statements.
In January 2017, the FASB issued ASU
No. 2017-03, “Accounting
Changes and Error Corrections (Topic 250) and
Investments—Equity Method and Joint Ventures (Topic
323).” This
ASU amends the disclosure requirements for ASU
No. 2014-09, “Revenue
from Contracts with Customers (Topic
606),”
ASU No. 2016-02, “Leases
(Topic 842) and ASU No. 2016-13, Financial
Instruments—Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments.”
This ASU states that if a registrant does not know or cannot
reasonably estimate the impact that the adoption of the above ASUs
is expected to have on the financial statements, then in addition
to making a statement to that effect, the registrant should
consider additional qualitative financial statement disclosures to
assist the reader in assessing the significance of the impact that
the standard will have on the financial statements of the
registrant when adopted. This ASU was effective upon
issuance. We expect the adoption of this new standard will
not have a material impact on our condensed consolidated financial
statements.
In January 2017, the FASB issued ASU
No. 2017-04, “Intangibles—Goodwill
and Other (Topic 350): Simplifying the Test for Goodwill
Impairment.“
This ASU eliminates Step 2 from the goodwill impairment test.
Instead, an entity should recognize an impairment charge for the
amount by which the carrying value exceeds the reporting
unit’s fair value, not to exceed the total amount of goodwill
allocated to that reporting unit. This ASU is effective for annual
or any interim goodwill impairment tests in fiscal years beginning
after December 15, 2019. We expect the adoption of this
new standard will not have a material impact on our condensed
consolidated financial statements.
In January 2017, the FASB issued ASU
No. 2017-01, “Business
Combinations (Topic 805): Clarifying the Definition of a
Business.“
This ASU clarifies the definition of a business with the objective
of adding guidance to assist entities with evaluating whether
transactions should be accounted for as acquisitions (or disposals)
of assets or businesses. This ASU is effective for annual periods
beginning after December 15, 2017, including interim periods
within those periods. We expect the adoption of this new
standard will not have a material impact on our condensed
consolidated financial statements.
Management does not
believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material
effect on the accompanying condensed consolidated financial
statements.
Off-Balance Sheet Arrangements
We have
no material off-balance sheet arrangements.
Item 3.
|
Quantitative and Qualitative
Disclosures About Market Risk.
|
Interest Rate Sensitivity
Our
cash and cash equivalents of $1,846,906 at June 30, 2017, consisted
of cash and money market funds, all of which will be used for
working capital purposes. We do not enter into investments for
trading or speculative purposes. Our primary exposure to market
risk is related to the variability of interest rates on our term
loan with Oxford Finance, LLC initiated in January
2016. Under the loan agreement the interest rate for the
term loan is set monthly at an Index Rate plus 11.29%, where the
Index Rate is the greater of the 30-day LIBOR rate or
0.21%. Interest is due on the first day of each month,
in arrears, calculated based on a 360-day year. In addition,
interest income on our deposits are affected by changes in the
general level of interest rates in the United States. Because of
the short-term nature of our cash and cash equivalents, we do not
believe that we have any material exposure to changes in their fair
values as a result of changes in interest rates. The continuation
of historically low interest rates in the United States will limit
our earnings on investments held in U.S. dollars.
We do not hold any derivative financial instruments or
commodity-based instruments.
Disclosure Controls and Procedures
As
required by Rules 13a-15 and 15d-15 of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), the Company
has evaluated, with the participation of management, including the
Chief Executive Officer and the Chief Financial Officer, the
effectiveness of its disclosure controls and procedures (as defined
in such rules) as of the end of the period covered by this report.
The Chief Executive Officer and Chief Financial Officer concluded
that the Company’s disclosure controls and procedures are
effective as of June 30, 2017.
Because
of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Projections of
any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate. Management recognizes that any controls
and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving their objectives and
management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and
procedures.
Changes in Internal Control over Financial Reporting
As
required by Rule 13a-15(d) of the Exchange Act, our management,
including our principal executive officer and our principal
financial officer, conducted an evaluation of the internal control
over financial reporting to determine whether any changes occurred
during the period covered by this Quarterly Report on Form 10-Q
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Based on that evaluation, our principal executive officer and
principal financial officer concluded there were no changes in our
internal controls over financial reporting (as defined in Rule
13a-15(f) under the Exchange Act) that could significantly affect
internal controls over financial reporting as of June 30,
2017.
PART II. OTHER INFORMATION
Item 1.
|
Legal Proceedings.
|
None.
RISK FACTORS
We will be required to raise additional funds to finance our
operations and remain a going concern; we may not be able to do so
when necessary, and/or the terms of any financings may not be
advantageous to us, requiring cutbacks in programs and
personnel.
Our
operations to date have consumed substantial amounts of cash.
Negative cash flows from our operations are expected to continue
for the foreseeable future until strategic options are found to
maximize stockholder value. Our cash utilization amount is highly
dependent on the progress of our product development programs,
particularly, the results of our preclinical and clinical studies
and those of our partners, the cost, timing and outcomes of
regulatory approval for our product candidates, and the rate of
recruitment of patients in our human clinical trials. In addition,
the further development of our ongoing clinical trials will depend
on upcoming analysis and results of those studies and our financial
resources at that time.
We
will require future additional capital infusions including public
or private financing, strategic partnerships or other arrangements
with organizations that have capabilities and/or products that are
complementary to our own capabilities and/or products, in order to
continue the development of our product candidates. After
completing two phase 1a clinical trials, we reduced our personnel
from 25 full time employees to 13, and
management is deferring portions of management's
salaries, to
conserve cash for use in our clinical trial of MVT-1075. However,
we cannot be sure that our staff reductions will enable us continue
to move as quickly as we would like to move in our clinical trial.
Further, we cannot be sure that availability of capital funding
will be on reasonable terms, or at all. If we are unable to secure
adequate additional funding, we may be forced to make additional
reductions in spending, incur further cutbacks in personnel, extend
payment terms with suppliers, liquidate assets where possible,
and/or suspend or curtail planned programs. In addition, if the
Company does not meet its payment obligations to third parties as
they come due, it may be subject to litigation claims. Even if we
are successful in defending against these claims, litigation could
result in substantial costs and be a distraction to management. Any
of these actions could materially harm the Company’s
business, results of operations, and prospects. Further, there can
be no assurances that we will complete any financings, strategic
alliances or collaborative development agreements, and the terms of
such arrangements may not be advantageous to us. Any additional
equity financing will be dilutive to our current stockholders and
debt financing, if available, may involve restrictive covenants. If
we raise funds through collaborative or licensing arrangements, we
may be required to relinquish, on terms that are not favorable to
us, rights to some of our technologies or product candidates that
we would otherwise seek to develop or commercialize. Our failure to
raise capital when needed could materially harm our business,
financial condition and results of operations.
Additionally we
granted the Lead Investor in
the May 2017 Public Offering the May 2017 Consent Right to approve
future (i) issuances of our securities, (ii) equity or debt
financings and (iii) sales of any development product assets
currently held by us, subject to certain exceptions, if such
securities are sold at price below $2.50 per share and for as long
as the Lead Investor in the
offering holds 50% or more of the shares of Series G Preferred
Stock purchased by the Lead
Investor in this offering. All other prior consent rights of
the Lead Investor have been
superseded by the May 2017 Consent Right.
Should
the May 2017 Consent Right be required in connection with future
offerings, we may be required again to provide additional
consideration, including, but not limited to, consideration in the
form of cash and/or additional shares of our capital stock and/or
securities convertible into or exercisable for shares of our
capital stock, in order to obtain the May 2017 Consent Right.
If we are unable to obtain the May 2017 Consent Right when
necessary for future offerings, we may be unable to raise
additional funds. An inability to raise additional funds could have
a material adverse effect on our financial condition, results of
operations, ability to conduct our business and on the price of our
common stock.
Our
ongoing capital requirements will depend on numerous factors,
including: the progress and results of preclinical testing and
clinical trials of our product candidates under development; the
costs of complying with the FDA and other domestic and foreign
regulatory agency requirements, the progress of our research and
development programs and those of our partners; the time and costs
expended and required to obtain any necessary or desired regulatory
approvals; the resources that we devote to manufacturing
expenditures; our ability to enter into licensing arrangements,
including any unanticipated licensing arrangements that may be
necessary to enable us to continue our development and clinical
trial programs; the costs and expenses of filing, prosecuting and,
if necessary, enforcing our patent claims, or defending against
possible claims of infringement by third-party patent or other
technology rights; the cost of commercialization activities and
arrangements, if any, that we undertake; and, if and when approved,
the demand for our products, which demand depends in turn on
circumstances and uncertainties that cannot be fully known,
understood or quantified unless and until the time of approval,
including the range of indications for which any product is granted
approval.
Our restated certificate of incorporation, our amended and restated
by-laws and Delaware law could deter a change of our management
which could discourage or delay offers to acquire us; certain
restrictions in our agreements with existing stockholders could
also discourage or delay offers to acquire us.
Certain
provisions of Delaware law and of our restated certificate of
incorporation, as amended, and amended and restated by-laws, could
discourage or make it more difficult to accomplish a proxy contest
or other change in our management or the acquisition of control by
a holder of a substantial amount of our voting stock. It is
possible that these provisions could make it more difficult to
accomplish, or could deter, transactions that stockholders may
otherwise consider to be in their best interests or in our best
interests. These provisions include:
●
establishing a classified Board of Directors requiring that members
of the Board be elected in different years, which lengthens the
time needed to elect a new majority of the Board;
●
authorizing the issuance of “blank check” preferred
stock that could be issued by our Board of Directors to increase
the number of outstanding shares or change the balance of voting
control and thwart a takeover attempt;
●
prohibiting cumulative voting in the election of directors, which
would otherwise allow for less than a majority of stockholders to
elect director candidates;
●
limiting the ability of stockholders to call special meetings of
the stockholders;
●
prohibiting stockholder action by written consent and requiring all
stockholder actions to be taken at a meeting of our stockholders;
and
●
establishing 90 to 120-day advance notice requirements for
nominations for election to the Board of Directors and for
proposing matters that can be acted upon by stockholders at
stockholder meetings.
Additionally we
granted the Lead Investor in
the May 2017 Public Offering the May 2017 Consent Right to approve
future (i) issuances of our securities, (ii) equity or debt
financings and (iii) sales of any development product assets
currently held by us, subject to certain exceptions, if such
securities are sold at price below $2.50 per share and for as long
as the Lead Investor in the
offering holds 50% or more of the shares of Series G Preferred
Stock purchased by the Lead
Investor in this offering. All other prior consent rights of
the Lead Investor have been
superseded by the May 2017 Consent Right.
Should
the May 2017 Consent Right be required in connection with future
offerings, we may be required again to provide additional
consideration, including, but not limited to, consideration in the
form of cash and/or additional shares of our capital stock and/or
securities convertible into or exercisable for shares of our
capital stock, in order to obtain the May 2017 Consent Right.
If we are unable to obtain the May 2017 Consent Right when
necessary for future offerings, we may be unable to raise
additional funds. An inability to raise additional funds could have
a material adverse effect on our financial condition, results of
operations, ability to conduct our business and on the price of our
common stock.
Our
ongoing capital requirements will depend on numerous factors,
including: the progress and results of preclinical testing and
clinical trials of our product candidates under development; the
costs of complying with the FDA and other domestic and foreign
regulatory agency requirements, the progress of our research and
development programs and those of our partners; the time and costs
expended and required to obtain any necessary or desired regulatory
approvals; the resources that we devote to manufacturing
expenditures; our ability to enter into licensing arrangements,
including any unanticipated licensing arrangements that may be
necessary to enable us to continue our development and clinical
trial programs; the costs and expenses of filing, prosecuting and,
if necessary, enforcing our patent claims, or defending against
possible claims of infringement by third-party patent or other
technology rights; the cost of commercialization activities and
arrangements, if any, that we undertake; and, if and when approved,
the demand for our products, which demand depends in turn on
circumstances and uncertainties that cannot be fully known,
understood or quantified unless and until the time of approval,
including the range of indications for which any product is granted
approval.
Unless our common stock is listed on The NASDAQ Capital Market or
other national securities exchange, it will be deemed a
“penny stock,” which would make it more difficult for
our investors to sell their shares.
On
August 17, 2016, we began trading on The NASDAQ Capital Market. If
we fail to maintain our listing on The NASDAQ Capital Market or
other national securities exchange, our common stock will be
subject to the “penny stock” rules adopted under
Section 15(g) of the Exchange Act. The penny stock
rules generally apply to companies whose common stock is not
listed on the NASDAQ Capital Market or other national securities
exchange and trades at less than $4.00 per share, other than
companies that have had average revenue of at least $6,000,000 for
the last three years or that have tangible net worth of at least
$5,000,000 ($2,000,000 if the company has been operating for three
or more years). These rules require, among other things, that
brokers who trade penny stock to persons other than
“established customers” complete certain documentation,
make suitability inquiries of investors and provide investors with
certain information concerning trading in the security, including a
risk disclosure document and quote information under certain
circumstances. Many brokers have decided not to trade penny stocks
because of the requirements of the penny stock rules and,
thus, the number of broker-dealers willing to act as market makers
in such securities is limited. If we remain subject to the penny
stock rules for any significant period, it could have an
adverse effect on the market, if any, for our securities. If our
securities are subject to the penny stock rules, investors will
find it more difficult to dispose of our securities.
Additionally,
in order for our Company to continue trading on the NASDAQ Capital
Market, we must maintain compliance with all of the criteria under
at least one of the three continued listing standards: the Equity
Standard, which includes a requirement for $2.5 million in
stockholders’ equity; the Market Value of Listed Securities
Standard, which includes a requirement for a market value of listed
securities of at least $35 million; or the Net Income Standard,
which includes a requirement for net income of at least $500,000
from continuing operations in the latest fiscal year or in two of
the last three fiscal years. As of June 30, 2017, we met none of
the three standards; further, the closing price of our stock has
been under $1.00 per share since July 11, 2017, which is also a
listing maintenance requirement. As a result of these
circumstances, we are currently evaluating various strategic
options to maximize stockholder value and to maintain one or more
listing standards, including scheduling a special meeting of
stockholders to approve a reverse stock split to remain above the
$1.00 market threshold. However, for future periods if we do not
have a market value of listed securities of at least $35 million,
or do not meet the Equity Standard, then we may have to enter into
a license agreement or other strategic transaction on less
favorable terms to generate near term revenues, or raise additional
capital, which could be dilutive to the
Company.
Other
than set forth above, there have been no material changes to the
Risk Factors set forth in our Annual Report on Form 10-K for the
year ended December 31, 2016.
Item 2.
|
Unregistered Sales of Equity
Securities and Use of Proceeds.
|
May 2017 Private Placement
On May
3, 2017, we entered into separate subscription agreements with
accredited investors pursuant to which we agreed to sell an
aggregate of $850,000 of 0% Series H Convertible
Preferred Stock. The shares of
Series H Preferred Stock are convertible into shares of common
stock based on a conversion calculation equal to the stated value
of the Series H Preferred Stock, plus the Base Amount, if any, on
such Series H Preferred Stock, as of such date of determination,
divided by the conversion price. The stated value of each share of
Series H Preferred Stock is $1,000 and the initial conversion price
is $1.75 per share, each subject to adjustment for stock splits,
stock dividends, recapitalizations, combinations, subdivisions or
other similar events.
On the
closing date, we entered into separate registration rights
agreements with each of the investors, pursuant to which we agreed
to undertake to file a registration statement to register the
resale of the shares within thirty (30) days following the closing
date, to cause such registration statement to be declared effective
by the Securities and Exchange Commission within sixty (60) days of
the closing date and to maintain the effectiveness of the
registration statement until all of such shares of Common Stock
have been sold or are otherwise able to be sold pursuant to Rule
144 under the Securities Act, without any restrictions. We filed
the registration statement which was declared effective on June 14,
2017.
The
securities referenced above were issued in reliance on the
exemption from registration afford by Rule 506 of Regulation D
and/or Section 4(a)(2) of the Securities Act as a transaction by an
issuer not involving a public offering.
Item 3.
|
Defaults Upon Senior
Securities.
|
None.
None.
As
described in Note 12 herein, on August 11, 2017, we entered into
securities purchase agreements to sell approximately 2,386.36
shares of a new Series J Preferred Stock, to be created with a
stated value of $550 per share in our August 2017 Offering. The
Series J Preferred Stock is initially convertible into
approximately 3,400,000 shares of common stock at $0.55 per share,
subject to adjustment for stock splits, stock dividends,
recapitalizations, combinations, subdivisions or other similar
events and was purchased by Prior Investors. The total amount of
the securities purchase agreements amounted to approximately
$1,312,500, before estimated expenses of $130,000. The Certificate
of Designation for the Series J Preferred Stock shall include a
4.9% beneficial ownership conversion blocker, a 19.99% blocker
provision to comply with Nasdaq Rules (the “19.99% Conversion
Blocker”) until stockholders have approved any or all shares
of common stock issuable upon conversion of the Series J Preferred
Stock, and a 125% liquidation preference.
In
order to obtain the consent from the Lead Investor to the August
2017 Offering, we entered into a letter agreement on August 9, 2017
(the “August 2017 Letter Agreement”). Pursuant to the
August 2017 Letter Agreement, we agreed to issue incentive shares
(the “Incentive Shares”) to Prior Investors as an
incentive to invest in the August 2017 Offering. Such Prior
Investors will be entitled to receive their pro rata share of
65,000 shares in the form of a new Series K Preferred Stock, to be
created that is substantially similar to common stock. and
convertible into 6,500,000 shares of common stock, subject to
stockholder approval.
The August 2017 Letter Agreement also specified the
following:
●
That the Company file a proxy statement
for a special meeting of stockholders within 10 days of closing
the August 2017 Offering. Proposals shall include (i) an
amendment to the Company’s Certificate of Incorporation to
effect a reverse stock split of its issued and outstanding common
stock by a ratio of not less than one-for-two and not more than
one-for-twenty at any time prior to one year from the date of the
special meeting, with the exact ratio to be set at a whole number
within this range as determined by the Board of Directors, (ii) the
issuance of securities in one or more non-public offerings where
the maximum discount at which securities will be offered will be
equivalent to a discount of 30% below the market price of the
common stock, as required by and inaccordance with Nasdaq
Marketplace Rule 5635(d), (iii) the issuance of securities in one
or more non-public offerings where the maximum discount at which
securities will be offered will be equivalent to a discount of 20%
below the market price of the Common Stock, as required by and in
accordance with Nasdaq Marketplace Rule 5635(d), (iv) the issuance
of the Series J Conversion Shares and (v) the issuance of the
Inducement Shares.
●
Lead Investor will
commit to investing an additional $1,000,000 in a new private or
public offering of up to $8,000,000 (the “$8,000,000
Financing”). The $8,000,000 Financing shall sign and close
following shareholder approval of each of the proposals identified
in the August 2017 Letter Agreement.
●
That the
employment terms of all
management be reduced to two years from three years. and that
management defer portions of their salary for the remainder of the
year, which shall be paid upon the earlier of completion of the
$8,000,000 Financing or a business transaction that represents, or
transactions in the aggregate that represent, in excess of
$10,000,000.
EXHIBIT INDEX
Exhibit
No.
|
Description
|
Form
|
Filing
Date/Period
End
|
Exhibit
Number
|
|
|
|
|
|
10.1
|
August Letter Agreement
dated August 9, 2017* |
|
|
|
|
|
|
|
|
31.1
|
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002*
|
|
|
|
|
|
|
|
|
31.2
|
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002*
|
|
|
|
|
|
|
|
|
32
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002**
|
|
|
|
|
|
|
|
|
101
|
Interactive data file*
|
10-Q
|
6/30/2017
|
101
|
*Filed herewith
Pursuant to the
requirements 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.
|
|
|
Date:
August 14, 2017
|
MABVAX
THERAPEUTICS HOLDINGS, INC.
|
|
|
|
|
By:
|
/s/ J.
David Hansen
|
|
|
J.
David Hansen
|
|
|
President
and Chief Executive Officer (Principal Executive Officer authorized
to sign on behalf of the registrant)
|
|
|
|
|
|
|
|
By:
|
/s/
Gregory P. Hanson
|
|
|
Gregory
P. Hanson
|
|
|
Chief
Financial Officer (Principal Financial and Accounting Officer
authorized to sign on behalf of the registrant)
|