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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

 

 

FORM 10-Q

 

 

 

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2014

OR

 

¨	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

 

 

TELIK, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 

 

 

DELAWARE		93-0987903
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)		(I.R.S. EMPLOYER IDENTIFICATION NO.)

11588 Sorrento Valley Road, Suite 20, 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  x    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  x    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		x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares of common stock outstanding as of July 31, 2014 was 13,932,937.

 

 

 

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TELIK, INC.

INDEX

 

						Page
PART I.				FINANCIAL INFORMATION
		Item 1:		Financial Statements (Unaudited)
				Condensed Balance Sheets at June 30, 2014 and December 31, 2013			3
				Condensed Statements of Comprehensive Loss for the three and six months ended June 30, 2014 and 2013			4
				Condensed Statements of Cash Flows for the six months ended June 30, 2014 and 2013			5
				Notes to Condensed Financial Statements			6
		Item 2:		Management’s Discussion and Analysis of Financial Condition and Results of Operations			14
		Item 3:		Quantitative and Qualitative Disclosures About Market Risk			21
		Item 4:		Controls and Procedures			21
PART II.				OTHER INFORMATION
		Item 1.		Legal Proceedings			22
		Item 1A:		Risk Factors			22
		Item 6:		Exhibits			35
SIGNATURES							38

 

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PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

TELIK, INC.

CONDENSED BALANCE SHEETS

(In thousands)

 

		June 30, 2014				December 31, 2013
		(Unaudited)				Audited
Assets
Current assets:
Cash and cash equivalents		$	2,047			$	2,229
Prepaids and other current assets			199				381
Total current assets			2,246				2,610
Total assets		$	2,246			$	2,610
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity
Current liabilities:
Accounts payable		$	2			$	20
Accrued compensation			175				175
Accrued liabilities			233				169
Accrued contingent lease termination fee			591				591
Total current liabilities			1,001				955
Warrant liability			568				—
Total liabilities			1,569				955
Commitments and contingencies (Note 8)
Redeemable convertible preferred stock			1,711				—
Stockholders’ equity:
Common stock			46				46
Additional paid-in capital			555,142				555,139
Accumulated deficit			(556,222	)			(553,530	)
Total stockholders’ (deficit) equity			(1,034	)			1,655
Total liabilities, redeemable convertible preferred stock and stockholders’ (deficit) equity		$	2,246			$	2,610

See accompanying Notes to Condensed Financial Statements.

 

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TELIK, INC.

CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except per share amounts)

(Unaudited)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2014				2013				2014				2013
Operating costs and expenses:
Research and development		$	81			$	528			$	390			$	1,314
General and administrative			1,575				859				2,334				2,019
Total operating costs and expenses			1,656				1,387				2,724				3,333
Loss from operations			(1,656	)			(1,387	)			(2,724	)			(3,333	)
Interest and other income, net			59				1				59				10
Net loss			(1,597	)			(1,386	)			(2,665	)			(3,323	)
Deemed dividend on redeemable convertible preferred stock			(27	)			—				(27	)			—
Net loss available to common stockholders		$	(1,624	)		$	(1,386	)		$	(2,692	)		$	(3,323	)
Other comprehensive income, net of tax:
Changes in net unrealized gains on investments			—				—				—				—
Comprehensive loss		$	(1,597	)		$	(1,386	)		$	(2,665	)		$	(3,323	)
Basic and diluted net loss per share		$	(0.35	)		$	(0.30	)		$	(0.58	)		$	(0.76	)
Shares used to calculate basic and diluted net loss per share			4,583				4,560				4,583				4,380

See accompanying Notes to Condensed Financial Statements.

 

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TELIK, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

		Six Months Ended June 30,
		2014				2013
Cash flows from operating activities:
Net loss		$	(2,665	)		$	(3,323	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense			3				223
Decrease in fair value of warrants			(59	)			—
Changes in assets and liabilities:
Other receivables			—				3
Prepaid expenses and other current assets			182				331
Other assets			—				(70	)
Accounts payable			(18	)			(134	)
Accrued liabilities			64				(313	)
Accrued facility exit costs and contingent lease termination fee			—				(622	)
Net cash used in operating activities			(2,493	)			(3,905	)
Cash flows from investing activities:
Purchases of investments			—				(2,304	)
Maturities of investments			—				1,000
Net cash used in investing activities			—				(1,304	)
Cash flows from financing activities:
Proceeds from issuance of redeemable convertible preferred stock and warrants, net of issuance costs			2,311				—
Proceeds from issuance of common stock, net issuance of costs			—				3,570
Net cash provided by financing activities			2,311				3,570
Net decrease in cash and cash equivalents			(182	)			(1,639	)
Cash and cash equivalents at beginning of period			2,229				4,747
Cash and cash equivalents at end of period		$	2,047			$	3,108
Supplementary information:
Non-cash transaction disclosure:
Transfer of restricted investment in satisfaction of Porter Drive facility lease termination fee		$	—			$	250
Dividends accrued		$	27				—

See accompanying Notes to Condensed Financial Statements.

 

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TELIK, INC.

Notes to Condensed Financial Statements

(Unaudited)

1.        Nature of Operations and Going Concern

Business Overview

Telik, Inc., or Telik, we or, the Company, was incorporated in the state of Delaware in October 1988. We are engaged in the discovery and development of small molecule therapeutics. We operate in only one business segment.

We have incurred net losses since inception and we expect to incur substantial losses for the foreseeable future as we continue our research and development activities. To date, we have funded operations primarily through the sale of equity securities, non-equity payments from collaborators and interest income. The process of developing our products 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.

Private Financing

On May 12, 2014, we entered into a securities purchase agreement, or the PIPE agreement, to sell 1,250,000 shares of our Series B redeemable convertible preferred stock at $2.00 per share for a total of $2.5 million along with warrants to purchase 625,000 shares of common stock at $3.33 per share to a group of private investors led by Hudson Bay Capital Management LP, or Hudson Bay (such transaction, the “PIPE financing”). We received approximately $2.3 million in net proceeds from the sale of shares, after deducting related issuance costs, and used these proceeds to bridge us to the closing of the merger described below.

Merger Agreement

Concurrently on May 12, 2014, we entered into a merger agreement, or Merger Agreement, with MabVax Therapeutics, Inc., or MabVax, a privately held cancer immunotherapy company, or the Merger. On July 8, 2014, or the Closing Date, Telik and MabVax completed the Merger. As a result of the consummation of the Merger, as of the Closing Date, the former stockholders, option holders and warrant holders of MabVax owned approximately 85% of the outstanding shares of Telik common stock on a fully diluted basis and the stockholders, option holders and warrant holders of Telik prior to the Merger owned approximately 15% of the outstanding shares of Telik common stock on a fully diluted basis and a change of control occurred.

For accounting purposes, the Merger is treated as a “reverse acquisition” and MabVax is considered the accounting acquirer. Accordingly, MabVax will be reflected as the predecessor and acquirer in Telik’s financial statements for periods ending from and after the Closing Date. Telik’s financial statements will reflect the historical financial statements for periods ending from and after the Closing Date of MabVax as Telik’s historical financial statements, except for the legal capital which will reflect Telik’s legal capital (common stock).

The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and, ultimately, to generate revenue. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

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2.        Basis of Presentation and Summary of Significant Accounting Policies

We have prepared the accompanying condensed financial statements in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934, or the Exchange Act. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. We believe all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included herein. Operating results for the three and six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014 or any other future period. The condensed balance sheet at December 31, 2013 has been derived from the audited financial statements at that date. You should read these condensed financial statements and notes in conjunction with our audited financial statements for the year ended December 31, 2013, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2014.

Use of Estimates

In preparing our financial statements to conform with GAAP, we make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Actual results may differ from these estimates.

3.        Employee Stock-Based Compensation

Stock-based Compensation

Total estimated stock-based compensation expense, related to all of our share-based payment awards recognized under ASC 718, “Compensation—Stock Compensation” was comprised of the following:

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2014				2013				2014				2013
		(In thousands)
Research and development		$	—			$	34			$	—			$	92
General and administrative			2				49				3				131
Stock-based compensation expense before taxes			2				83				3				223
Effect on net loss		$	2			$	83			$	3			$	223

Because we had a net operating loss carryforward as of June 30, 2014, no tax benefits for the tax deductions related to stock-based compensation expense were recognized in our Condensed Statements of Comprehensive Loss. Additionally, no stock options were exercised in the three and six months ended June 30, 2014 and 2013. As of June 30, 2014, $4,500 of total unrecognized compensation costs, net of forfeitures, related to non-vested service based awards is expected to be recognized over a weighted average period of 1.35 years.

Valuation Assumptions

We used the Black-Scholes-Merton option valuation model, or the Black-Scholes model, to determine the stock-based expense recognized under ASC 718. Our expected stock-price volatility assumption was based solely on the weighted average of the historical volatility as there was insufficient traded option activity for us to use implied volatility. The expected term of stock awards under our Employee Stock Purchase Plan, or ESPP, was based on the

 

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weighted average purchase periods of each offering. The expected term of stock options granted was based on the simplified method in accordance with Staff Accounting Bulletin No. 110, or SAB 110, as our historical share option exercise experience did not provide a reasonable basis for estimation. The risk-free interest rate was based on the U.S. Treasury yield for a period consistent with the expected term of the stock award in effect at the time of the grant. There were no stock options granted and no new ESPP participants enrolled during the three and six months ended June 30, 2014 and 2013.

4.        Basic and Diluted Net Loss per Share

Basic and diluted net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period.

Weighted average outstanding options to purchase 225,870 and 282,620 shares of our common stock before application of the treasury stock method for the three months ended June 30, 2014 and 2013, 237,990 and 288,681 shares of our common stock before application of the treasury stock method for the six months ended June 30, 2014 and 2013, outstanding redeemable convertible preferred stock of 1,250,000 shares and warrants to purchase 625,000 shares of common stock were excluded from the diluted net loss per common share calculations because inclusion of such shares would be anti-dilutive.

5.        Fair Value Measurements on a Recurring Basis

We measure certain financial assets and liabilities at fair value on a recurring basis, including money market funds, US government agencies and warrants. The fair value of these financial instruments is determined based on a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. Government agency securities held in our account were recorded at their estimated fair value. These securities generally had market prices from multiple sources and it could be difficult to select the best individual price directly from the quoted prices in the active markets. Therefore we used Level 2 inputs for the valuation of these securities. Using the Level 2 inputs, a “consensus price” or a weighted average price for each of these securities was derived from a distribution-curve-based algorithm which included market prices obtained from a variety of industrial standard data providers (e.g. Bloomberg), security master files from large financial institutions and other third-party sources.

Warrants are valued using Black-Scholes-Merton model. The expected life is based on the term of the warrants. We use our historical volatility in developing our estimate of expected volatility. The fair value of warrants is estimated using the following assumptions, which, except for risk-free interest rate, are Level 3 inputs:

 

		June 30, 2014		May 13, 2014 (date of issuance)
Fair value of warrants (in thousands)		$568		$627
Risk-free interest rate		1.62%		1.62%
Dividend yield		N/A		N/A
Expected volatility		101.55%		106.43%
Expected life		4.83		5.00

 

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The following table presents information about our financial instruments that are measured at fair value on a recurring basis as of June 30, 2014 and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value:

 

						Fair Value Measurement at June 30, 2014 Using
		June 30, 2014				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
		(in thousands)
Financial assets:
Money market funds		$	1,457			$	1,457			$	—			$	—
Total financial assets		$	1,457			$	1,457			$	—			$	—
Financial liabilities:
Warrants		$	568			$	—			$	—			$	568
Total financial liabilities		$	568			$	—			$	—			$	568

The following table presents information about our financial assets that are measured at fair value on a recurring basis as of December 31, 2013, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

 

						Fair Value Measurement at December 31, 2013 Using
		December 31, 2013				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
		(in thousands)
Financial assets: (presented as cash equivalents) :
Money market funds		$	458			$	458			$	—			$	—
US government agencies			1,400				—				1,400				—
Total financial assets		$	1,858			$	458			$	1,400			$	—

The changes in the value of the warrant liability during the six months ended June 30, 2014 were as follows (in thousands):

 

Fair value – beginning of period		$	—
Issuances			627
Change in fair value			(59	)
Fair value – end of period		$	568

There were no transfers between Level 1 and Level 2 measurements in the three and six months ended June 30, 2014 and in the year ended December 31, 2013.

 

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6.        Cash and Cash Equivalents

The following is a summary of estimated fair value of cash and cash equivalents:

 

		June 30, 2014				December 31, 2013
		(in thousands)
Cash and money market funds		$	2,047			$	829
US government agencies			—				1,400
Total		$	2,047			$	2,229
Reported as:
Cash and cash equivalents		$	2,047			$	2,229
Total		$	2,047			$	2,229

There were no realized gains or losses on sales of available-for-sale securities for the three and six months ended June 30, 2014 and the year ended December 31, 2013. There were no unrealized gains or losses on available-for-sale securities as of June 30, 2014 or December 31, 2013.

All marketable debt securities held as of December 31, 2013 as available-for-sale were expected to mature in less than a year.

7.        Accrued Contingent Lease Termination Fee

In November 2010, we ceased the use of our facility at 3165 Porter Drive in Palo Alto, California and subleased the facility to a tenant for the remaining contractual term of our master lease, which is through May 2014. As a result, we recorded a charge of $4.7 million which included the estimated fair value of future lease-related payments less estimated net income from sublease rental offset by a reduction of $335,000 in the balance of deferred rent related to the facility as of November 30, 2010.

On February 19, 2013, we entered into an agreement with our landlord, ARE San Francisco No.24, LLC, or ARE, pursuant to which the premises was voluntarily surrendered, the master lease and sublease were terminated as of February 28, 2013, we were relieved of further obligations under the master lease and further rights to rental income under the sublease, and we agreed to pay a termination fee to ARE of approximately $0.7 million. Prior to the termination of these agreements, the remaining lease payments to ARE through the end of the master lease totaled approximately $4.5 million and the remaining sublease income to Telik through the same period totaled approximately $3.2 million. In addition to the termination fee, if we receive $15 million or more in additional financing in the aggregate, an additional termination fee of $591,000 will be due to ARE, but otherwise be forgiven. As a result of the termination agreement, we reversed the remaining facility exit cost liability, recorded $591,000 as accrued contingent lease termination fee and included the net charge in general and administrative expenses in the Condensed Statements of Comprehensive Loss in the quarter ended March 31, 2013.

8.        Commitments

Operating Leases

On February 27, 2013, we entered into a 21-month lease agreement for 3,075 square feet of office space at 2100 Geng Road in Palo Alto, California and relocated our corporate offices to this facility in March 2013. Upon execution of the agreement, we paid the sublessor the first month’s rent and we paid the second month’s rent on March 28, 2013, and deposited into an escrow account approximately $219,000 which represents the total rent due for the remaining term (May 1, 2013 thru November 30, 2014).

We have no future rental payments under our non-cancelable operating leases as of June 30, 2014 and none for the year 2015 and beyond. We recorded a $591,000 contingent lease termination fee, in connection with the termination of our master lease and sublease of our Porter Drive facility, which is payable to ARE if we receive $15 million or more in additional financing in the aggregate, but otherwise forgiven.

 

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Restructuring plan upon closing of the Merger

In connection with the Merger, the company signed separation agreements in May 2014 with nine Telik employees and agreed to pay severances and health benefits upon closing of the Merger subject to certain provisions in the agreement. The total in severance and benefits costs to be paid out is approximately $748,000. This amount has not been accrued at June 30, 2014, since the Merger did not close until July 2014.

9.        Redeemable convertible preferred stock and warrants

On May 12, 2014, we entered into a PIPE agreement pursuant to which we issued and sold to the purchasers an aggregate of 1,250,000 shares of our Series B redeemable convertible preferred stock at $2.00 per share for a total of $2.5 million along with warrants to purchase 625,000 shares of our common stock, or the PIPE warrants. We received approximately $2.3 million in net proceeds under the PIPE agreement after deducting related issuance costs.

The Series B redeemable convertible preferred stock sold in the PIPE financing has the following rights:

Conversion Price Adjustment. The conversion price is subject to adjustment upon the earlier of: (i) the date that some or all of the registrable securities have become registered pursuant to an effective registration statement and (ii) 6 months after May 13, 2014, or the Closing Date, each such date, an Adjustment Date, in which the conversion price of the Series B convertible preferred stock thereafter shall be the lower of (a) the initial conversion price and (b) 90% of the average of the 10 lowest weighted average prices of Common Stock during the 20 days immediately preceding the Adjustment Date.

Dividend. 8% cumulative dividend on the Stated Value (as defined in the Series B certificate of designation).

Liquidation Preference. Preferential payment is made to holders of Series B redeemable convertible preferred stock in the event of a liquidation event. Initially, $2.00 per share of Series B convertible preferred stock plus accrued and unpaid dividends, subject to adjustment.

Anti-Dilution. Full ratchet anti-dilution adjustment for any issuances of Common Stock and convertible securities for Common Stock below the current conversion price of $2.00, subject to the beneficial ownership cap of 4.99% of the outstanding Common Stock post-conversion and exchange cap of 19.99% of the outstanding Common Stock immediately prior to such conversion.

We classified our shares of Series B redeemable convertible preferred stock as mezzanine equity as the number of common shares converted are not fixed until the date of the conversion as the conversion amount and conversion price are subject to adjustments, and the preferred shares are subject to a “Change of Control Redemption” provision that allows shares to be redeemable upon the request of preferred stockholders at certain time after the consummation of such Change of Control.

Since our Series B redeemable convertible preferred stockholders are entitled to cumulative dividends on each share held at a rate of 8% per annum on the Stated Value (as defined in the Series B certificate of designations) from and after the first date of issuance of any Series B preferred stock whether or not declared by the Board and whether or not there are funds legally available for the payment of dividends, we recorded $27,000 in dividends accrual for the period ended June 30, 2014.

The PIPE warrants become exercisable six months from May 13, 2014, expire in five years and may be exercised for cash or otherwise may be net-exercised. The PIPE warrants initially have a per share exercise price of

 

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$3.33. On the 60th day following the earlier of (i) the date all of the shares underlying the PIPE warrants become registered pursuant to an effective registration statement and (ii) six months following May 13, 2014, in each case the “reset date”, the exercise price will be reset to equal the lower of (i) the current exercise price and (ii) 90% of the average of the 10 lowest weighted average prices of common stock during the 20 trading days immediately preceding the reset date. Due to the potential change of exercise price per share of the PIPE warrants, the PIPE warrants were recorded as a long term liability. The PIPE warrants are recorded in fair value on a recurring basis, which was $627,000 and $568,000 as of May 13, 2014 and June 30, 2014 respectively. As a result of the change in fair value of the PIPE warrants, we recorded a decrease in fair value of $59,000 during the three months ended June 30, 2014 which was included in Interest income and other net. See Note 5 for more information on the valuation of our PIPE warrants.

10.        Litigation

On May 30, 2014, a putative class action lawsuit was commenced in Santa Clara County Superior Court, State of California, on behalf of Cadillac Partners and others similarly situated, naming as defendants our directors, the Company, MabVax, Hudson Bay Capital Management LP, Bio IP Ventures LLC, Hudson Bay Master Fund Ltd., and Hudson Bay IP Opportunities Master Fund LP. The suit alleged the defendants breached certain fiduciary duties, or aided and abetted a breach of fiduciary duties, in connection with our merger with MabVax. In support of their purported claims, the plaintiff alleged, among other things, that our board has historically failed to fulfill its fiduciary duty to its stockholders, the PIPE transaction and the Merger involved an inadequate sales process and includes preclusive deal protection devices, and that our board of directors would receive personal benefits not available to our public stockholders as a result of the Merger. The plaintiff sought to enjoin the Merger and obtain damages as well as attorneys’ and expert fees and costs.

On June 29, 2014, the parties entered into a Stipulation and Settlement, or Settlement, pursuant to which we agreed to file with the SEC certain supplemental disclosures in connection with the Merger, which we did on June 30, 2014 in our proxy statement on Schedule 14A. The Settlement is subject to certain confirmatory discovery to be undertaken by the plaintiff and to the parties’ agreement on the payment of the plaintiff’s attorneys’ fees and expenses.

On July 16, 2014, the Company and all other parties to the litigation entered into an agreement which, if consummated, will settle the litigation, or the proposed settlement. Among many other terms, under the proposed settlement the Company and all defendants will receive a broad release of any and all claims pertaining to the PIPE transaction, the Merger, the prior disclosure and a wide variety of other matters. The proposed settlement also calls for the parties to ask the court to, among other things, enter orders enjoining other shareholders from bringing similar actions, certifying the putative settlement class, and approving the proposed settlement as a fair, final, and binding resolution of the litigation. Under the proposed settlement, the Company and the other defendants have expressly denied the allegations of the complaint and denied engaging in any other misconduct, nor will any of them make any payment or in any respect amend the negotiated terms of the since-consummated PIPE transaction and Merger. Finally, under the proposed settlement, the Company and the other defendants have not agreed to pay any legal fees, or reimburse any expenses, allegedly incurred by the plaintiffs who filed the complaint; instead, the Company expects that counsel for those plaintiffs will present any such disputed claim for legal fees and expenses to the court for resolution. We expect our insurance policy to cover a portion of these fees and expenses, including legal fees of approximately $111,000 incurred by us.

11.        Subsequent Events

On July 1, 2014, Telik and MabVax, entered into an Amendment No. 1 to the Merger Agreement to (a) modify the definition of MabVax’s common stock financing in the Merger Agreement, (b) remove certain redemption provisions in the Certificate of Designations, Preferences and Rights of MabVax’s Series A-1 Convertible Preferred Stock and the Certificate of Designations, Preferences and Rights of MabVax’s Series A-2 Convertible Preferred Stock attached to the Merger Agreement, (c) remove certain references to Telik’s obligations to assume MabVax’s obligations to redeem shares of MabVax’s Series C-1 Convertible Preferred Stock and Series C-2 Convertible Preferred Stock following the completion of the Merger.

 

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On July 7, 2014, Telik and the holders of its issued and outstanding Series B Convertible Preferred Stock, entered into a Series B Omnibus Amendment and Stockholder Consent, the Omnibus Amendment that approved an amendment and restatement of Telik’s Certificate of Designations, Preferences and Rights of Series B-1 Convertible Preferred Stock, amendments to the Warrants and the Purchase Agreement to permit Telik’s common stock to be traded on the OTCQB and OTCQX marketplaces, an amendment to the provisions of the Registration Rights Agreement to extend the deadline for filing a registration statement with the SEC covering resales of shares of Telik common stock issuable upon exercise of the Warrants and the shares issuable upon conversion of the Series B Preferred Stock from July 11, 2014 to August 1, 2014, and to approve the amendments made to the Merger Agreement (disclosed below).

On July 7, 2014, Telik and MabVax, entered into an Amendment No. 2 to the Merger Agreement to (a) amend the provisions of the proposed Certificate of Designations, Preferences and Rights of MabVax’s Series A-1 Convertible Preferred Stock attached to the Merger Agreement to permit shares of Telik’s common stock to trade on the OTCQB and OTCQX marketplaces following the completion of the Merger and (b) modify the Telik stockholder approval provisions set forth in the Merger Agreement to permit the Merger to be completed without the consent of the holders of majority of the issued and outstanding capital stock of Telik. Amendment No. 2 also included amendments removing the requirement that Telik amend its charter documents to change its name from Telik, Inc. to MabVax Therapeutics Holding, Inc. upon completion of the Merger and the requirement for Telik to implement a 5 to 1 reverse split of Telik’s common stock should the closing price of Telik’s common stock as of the last business day immediately prior to the effective time of the Merger be less than $4 per share.

On July 8, 2014, or the Closing Date, the Merger was completed. In connection with the Merger, Telik issued, as of the Closing Date, its securities to MabVax’s stockholders in exchange for securities owned by MabVax’s securityholders, as follows: (i) an aggregate of 9,349,841 shares of Telik common stock, (ii) an aggregate of 2,762,841 shares of Telik Series A-1 convertible preferred stock, par value $0.01 per share, convertible into an aggregate of 12,285,156 shares of Telik common stock as of the Closing Date, (iii) warrants to purchase up to an aggregate of 16,442,087 shares of Telik’s common stock, with an exercise price of $0.4524974 per share and expiring on July 10, 2023, and (iv) options to purchase up to 1,552,694 shares of common stock. The Telik securities issued in connection with the Merger were issued in a private placement transaction pursuant to Section 4(2)(a) and Rule 506(b) of Regulation D of the Securities Act. The Common Exchange Ratio (as defined in the Merger Agreement) was 2.223283558 and the Preferred Exchange Ratio (as defined in the Merger Agreement) was .5.

As a result of the consummation of the Merger, as of the Closing Date, the former stockholders, optionholders and warrant holders of MabVax owned approximately 85% of the outstanding shares of Telik common stock on a fully-diluted basis and the stockholders, optionholders and warrant holders of Telik prior to the Merger owned approximately 15% of the outstanding shares of Telik common stock on a fully diluted basis and a change of control has occurred. For accounting purposes, the Merger is treated as a “reverse acquisition” and MabVax is considered the accounting acquirer. Accordingly, MabVax will be reflected as the predecessor and acquirer in Telik’s financial statements. Telik’s financial statements for the periods ending from and after the Closing Date will reflect the historical financial statements of MabVax as Telik’s historical financial statements, except for the legal capital which will reflect Telik’s legal capital (common stock).

 

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Special Note Regarding Statements of Expected Future Performance

This Quarterly Report on Form 10-Q contains statements indicating expectations about future performance and other forward-looking statements that involve risks and uncertainties. We usually use words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “future,” “intend,” “potential,” or “continue” or the negative of these terms or similar expressions to identify forward-looking statements. These statements appear throughout this Quarterly Report on Form 10-Q and are statements regarding our current intent, belief or expectation, primarily with respect to our operations and related industry developments. Examples of these statements include, but are not limited to, statements regarding the following: our future operating expenses, our future losses, our future expenditures for research and development, the sufficiency of our cash resources and ability to raise adequate funds in the future, the timing and implications of results of our Phase 2 clinical trials, the progress of our research programs, including clinical testing, the extent to which our issued and pending patents may protect our products and technology, our ability to identify new product candidates using TRAP technology (our proprietary Target-Related Affinity Profiling technology), the potential of such product candidates to lead to the development of safer or more effective therapies, our ability to develop the technology derived from our collaborations, and our anticipated timing for filing additional Investigational New Drug applications, or INDs, with the FDA, or for the initiation or completion of Phase 1, Phase 2 or Phase 3 clinical trials for any of our product candidates, the rights granted to the holders of our Series A-1 convertible preferred stock, the rights granted to the holders of our Series B convertible preferred stock, our limited trading market and the quotation of our shares of common stock on the OTCQB marketplace, dilution to the holders of our common stock related to future issuances and our involvement in potential future litigation. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us and described in Part II, Item 1A of this Quarterly Report on Form 10-Q.

The following discussion and analysis should be read in conjunction with the unaudited condensed financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with the financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission on March 10, 2014.

TELIK, the Telik logo, TRAP, TELCYTA and TELINTRA are trademarks of Telik, Inc. All other brand names or trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

Overview

Telik has been engaged in the discovery and development of small molecule drugs. Our business strategy is to advance our drug product candidates through Phase 2 clinical studies, and to enter into a partnership with a pharmaceutical or biotechnology company to assist in further development and commercialization, license product candidates outside our therapeutic focus, and identify and develop additional drug product candidates.

As a consequence of the Merger, Telik’s current technologies and product development candidates will be evaluated by MabVax to determine if additional effort and investment is warranted relative to the product opportunities at MabVax. No assurance can be given that any current technologies or product development candidates currently at Telik will continue in the combined company.

We have incurred significant net losses since inception and expect to incur losses for the foreseeable future as we continue our research and development activities. During the six months ended June 30, 2014, our loss from operations was $2.7 million and our net loss was $2.7 million. Net cash used in operations for the six months ended June 30, 2014 was $2.5 million and cash and cash equivalents at June 30, 2014 were $2.0 million. As of June 30, 2014, we had an accumulated deficit of $556.2 million.

 

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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.

Private Financing

On May 12, 2014, we entered into a securities purchase agreement to sell 1,250,000 shares of our Series B Convertible Preferred Stock at $2.00 per share for a total of $2.5 million along with warrants to purchase 625,000 shares of common stock at $3.33 per share to a group of private investors led by Hudson Bay. We received approximately $2.3 million in net proceeds from the sale of shares, after deducting related issuance costs, and used it to bridge us to the closing of the merger described below.

Merger Agreement

Concurrently on May 12, 2014, we entered into a merger agreement, or Merger Agreement, with MabVax Therapeutics, Inc., or MabVax, a privately held cancer immunotherapy company, or the Merger. On July 8, 2014, or the Closing Date, Telik and MabVax completed the Merger. As a result of the consummation of the Merger, as of the Closing Date, the former stockholders, option holders and warrant holders of MabVax own approximately 85% of the outstanding shares of Telik common stock on a fully diluted basis and the stockholders, option holders and warrant holders of Telik prior to the Merger owned approximately 15% of the outstanding shares of Telik common stock on a fully diluted basis and a change of control has occurred.

For accounting purposes, the Merger is treated as a “reverse acquisition” and MabVax is considered the accounting acquirer. Accordingly, MabVax will be reflected as the predecessor and acquirer in Telik’s financial statements. Telik’s financial statements for the periods ending from and after the Closing Date will reflect the historical financial statements of MabVax as Telik’s historical financial statements, except for the legal capital which will reflect Telik’s legal capital (common stock).

The combined company of Telik and MabVax, or the combined entity, is 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.

We expect the quarterly and annual results of operations of the combined entity will fluctuate for the foreseeable future as we continue to identify and advance a number of potential drug candidates into clinical and preclinical development activities, including initiating the manufacturing of our lead antibody candidate and funding operations as we expand our infrastructure. The successful development of our drug product candidates is uncertain. As such, an accurate prediction of future results is difficult or impossible.

 

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Telik – Clinical Product Development

The clinical development of TELINTRA, a small molecule glutathione analog inhibitor of the enzyme glutathione S-transferase P1-1, was suspended in the third quarter of 2013. We have a Phase 3 placebo-controlled randomized registration trial of TELINTRA for the treatment of Low to Intermediate-1 risk MDS, using red-blood-cell transfusion independence as the endpoint, which was designed in accordance with the FDA’s guidance. Telik will evaluate this product relative to others in its pipeline and a determination will be made as to whether the product warrants continued effort. Telik may seek a corporate partner or attempt to out license the program. Until such time as a determination on the potential of the project can be made, the plan to initiate a Phase 3 registration trial of TELINTRA is placed on hold.

Telik – Preclinical Drug Product Development

We have three small molecule compounds in our preclinical development program: TLK60404— a small molecule compound inhibiting both Aurora kinase and VEGFR kinase, TLK60357— a novel, potent small molecule inhibitor of cell division and TLK60357— a potent VGFR kinase inhibitor that blocks the formation of new blood vessels in tumors. While these compounds display anticancer activity against human cancer cells, we have placed these development programs on hold until the combined company can evaluate these programs relative to others in our pipeline and make a determination as to whether any of the programs warrant continued effort. We may seek a corporate partner or attempt to out license any or all of these programs. Until such time as a determination on the potential of these programs can be made, these programs will continue to be placed on hold.

Nasdaq Listing Compliance

On November 14, 2013, we received a notice from The Nasdaq Stock Market LLC, or Nasdaq, indicating that we no longer satisfied the minimum $2,500,000 stockholders’ equity requirement for continued listing on The Nasdaq Capital Market and providing us the opportunity to submit a plan to regain compliance with that requirement. On December 30, 2013, we submitted to Nasdaq a plan to regain compliance.

On January 9, 2014, following its review of the plan, we received a notice from Nasdaq that it had determined to delist our securities based on the stockholders’ equity deficiency unless we request a hearing before The Nasdaq Listing Qualifications Panel, or the Panel. We requested a hearing, and a hearing before the Panel was held on February 20, 2014, at which time we presented our plan to evidence compliance with the requirements for continued listing on The Nasdaq Capital Market. On February 25, 2014, we received a notice from Nasdaq that the Panel had granted our request for continued listing on The Nasdaq Capital Market, provided we evidence compliance with the $2,500,000 stockholders’ equity requirement by May 30, 2014.

On May 21, 2014, we received a notice from the Panel granting our request for continued listing on The Nasdaq Capital Market, provided that by July 8, 2014, we close the Merger and the combined company qualifies for initial listing on the Capital Market. Telik may also continue to be listed on The Nasdaq Capital Market by independently regaining compliance with the continued listing requirements of The Nasdaq Capital Market by July 8, 2014 through a financing or licensing transaction.

Pursuant to the terms of the Panel’s decision and as disclosed above, on July 8, 2014, Telik completed the Merger, and the combined entity was required to evidence compliance with all applicable requirements for initial listing on The Nasdaq Capital Market upon completion of the merger, including the $4.00 minimum stock price requirement, or to otherwise evidence compliance with the requirements for continued listing on The Nasdaq Capital Market on a stand-alone basis. Due to the failure of Telik to obtain the approval of its stockholders of the 5 to 1 reverse stock split described in our proxy statement filed with the SEC on June 3, 2014, or the reverse split, the new

 

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combined company was not in a position to evidence full compliance with the terms of the Panel’s decision dated May 21, 2014, to meet the July 8^th deadline and the Panel issued a determination to suspend trading in the Company’s securities on The Nasdaq Capital Market effective as of market open on July 10, 2014. Commencing on July 10, 2014, shares of our common stock began trading on the OTCQB marketplace under the symbol “TELK”.

We have appealed the Panel’s decision to the Nasdaq Listing and Hearing Review Council, or the Nasdaq Listing Council, requesting additional time to obtain the necessary votes to approve the reverse stock split and to demonstrate compliance with all applicable requirements for initial listing on The Nasdaq Capital Market, including the $4.00 minimum stock price requirement. As described in our proxy statement filed with the SEC on July 25, 2014, we scheduled a stockholder’s meeting for August 20, 2014 soliciting stockholder approval for, among other items, the reverse split and an amendment to our amended and restated certificate of incorporation to change our name to MabVax Therapeutics Holdings, Inc. and to increase the authorized number of our common shares to a new total of 150,000,000 and our authorized number of preferred shares to a new total of 15,000,000.

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 financial statements, which have been prepared in accordance with GAAP. The preparation of these 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 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.

There has been no material change in our critical accounting policies and significant judgments and estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2013.

Results of Operations

Research and Development Expenses

Our research and development costs in the three and six months ended June 30, 2014 were primarily for the completion of all clinical study reports associated with the wind down of our clinical trials in 2013 including the filing of annual safety reports, drug storage and headcount related expenses.

 

		Three Months Ended June 30,								%				Six Months Ended June 30,								%
		2014				2013				Change				2014				2013				Change
		(In thousands, except percentages)
Research and development		$	81			$	528				(85	)%		$	390			$	1,314				(70	)%

The decrease of 85%, or $447,000, in research and development expenses for the three months ended June 30, 2014 compared to the same period in 2013, was primarily due to the following:

 

•

decreased costs of $345,000 associated with headcount reduction, reduced stock-based compensation of approximately $34,000 and a $48,000 decrease in allocated facility and IT costs as a result of our relocation to a smaller corporate office space in March 2013; and

 

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•

a decrease of approximately $20,000 in our phase 2 clinical studies for TELINTRA as we have closed out all our clinical sites.

The decrease of 70%, or $924,000, in research and development expenses for the six months ended June 30, 2014 compared to the same period in 2013, was primarily due to the following:

 

•

decreased costs of $567,000 associated with headcount reduction, reduced stock-based compensation of approximately $92,000 and a $125,000 decrease due to lower allocated facility and IT costs; and

 

•

a decrease of approximately $140,000 in our phase 2 clinical studies for TELINTRA as we have closed out all our clinical sites.

As a result of the consummation of the Merger, we expect future research and development expenditures of the combined company will increase as we advance our lead drug candidates into preclinical and clinical development activities including initiating manufacturing of our lead antibody candidate.

General and Administrative Expenses

 

		Three Months Ended June 30,								%				Six Months Ended June 30,								%
		2014				2013				Change				2014				2013				Change
		(In thousands, except percentages)
General and administrative		$	1,575			$	859				83	%		$	2,334			$	2,019				16	%

The increase in general and administrative expenses of 83%, or $716,000, for the three months ended June 30, 2014 compared to the same period in 2013, was primarily due to an increase in merger related legal and professional services expenses.

The increase in general and administrative expenses of 16%, or $315,000, for the six months ended June 30, 2014 compared to the same period in 2013 was primarily due to the following:

 

•

an increase in merger related legal and professional services expenses of $507,000;

 

•

partially offset by decreases of $129,000 related to stock-based compensation, and $63,000 in corporate administrative and facility related expenses.

As a result of the consummation of the Merger, we expect our future general and administrative expenditures to increase. While merger related expenses will have ended, the combined company will incur additional expenses related to being a public company. We expect the increase to be attributable to expanding our corporate infrastructure, increased legal expenses, increased insurance requirements, and fees related to regulatory filings.

 

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Stock-Based Compensation Expense

Employee stock-based compensation expense related to our share-based payment awards was as follows:

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2014				2013				2014				2013
		(In thousands)
Research and development		$	—			$	34			$	—			$	92
General and administrative			2				49				3				131
Stock-based compensation expense before taxes			2				83				3				223
Effect on net loss		$	2			$	83			$	3			$	223

The decreases in employee stock-based compensation expense for the three and six months ended June 30, 2014 compared with the same periods in 2013 were primarily due to having fewer option shares vested in 2014.

Interest Income and Interest Expense

 

		Three Months Ended June 30,								%				Six Months Ended June 30,								%
		2014				2013				Change				2014				2013				Change
		(In thousands, except percentages)
Interest and other income, net		$	59			$	1				5800	%		$	59			$	10				490	%

The increase in interest and other income, net of approximately $58,000 for the three months ended June 30, 2014 compared to the same period in 2013 was due primarily to the decrease in fair value of the PIPE warrants. The increase in interest and other income, net of approximately $49,000 for the six months ended June 30, 2014 compared to the same period in 2013 was due primarily to the decrease in fair value of the PIPE warrants, partially offset by a gain from the sale of office equipment recorded during the six months ended June 30, 2013.

Liquidity and Capital Resources

 

		June 30, 2014				December 31, 2013
		(In millions, except ratios)
Cash and cash equivalents		$	2.0			$	2.2
Working capital		$	1.2			$	1.7
Current ratio			2.2 : 1				2.7 : 1
		Six Months Ended June 30,
		2014				2013
		(In millions)
Cash (used in) / provided by:
Operating activities		$	(2.5	)		$	(3.9	)
Investing activities		$	—			$	(1.3	)
Financing activities		$	2.3			$	3.6

Sources and Uses of Cash. Due to historically significant research and development expenditures and the lack of any approved products to generate revenue, we have not been profitable and have generated operating losses since we incorporated in 1988. As such, we have funded our research and development operations through the sale of equity securities, non-equity payments from corporate partners, interest earned on investments, government grants and equipment lease and loan financings. At June 30, 2014, we had available cash and cash equivalents of $2.0 million. Our cash and investment balances are held in a variety of interest-bearing instruments including money market accounts. Cash in excess of immediate requirements is invested with regard to liquidity and capital preservation. Wherever possible, we seek to minimize the potential effects of concentration and degrees of risk.

 

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Cash Flows from Operating Activities. Cash used in operations for the six months ended June 30, 2014 was $2.5 million compared with $3.9 million for the same period in 2013. Net loss of $2.7 million in the six months ended June 30, 2014 included non-cash charges of $3,000 for stock-based compensation and a $59,000 decrease in fair value of the PIPE warrants. Cash used in operations was impacted by an $182,000 reduction in prepaid expenses due to decreases in prepaid insurance and prepaid rent balances. Operating cash outflows for the same period in 2013 resulted primarily from a net loss of $3.3 million which included non-cash charges of $223,000 for stock-based compensation. Cash used in 2013 was impacted by a $622,000 net reduction in accrued facility exit costs primarily due to our lease termination agreements for our Porter Drive facility which is detailed in Note 7 of the Notes to Condensed Financial Statements. Cash used in operations in 2013 also included a $313,000 reduction in accrued liabilities primarily due to payments related to our annual audit and franchise tax.

Cash Flows from Investing Activities. There were no investing activities for the six months ended June 30, 2014 compared with $1.3 million cash used for the same period in 2013. Cash used in investing activities in 2013 was primarily from $2.3 million in the purchase of available-for-sale investments and was partially offset by $1.0 million in investment maturities. We had no capital expenditures for the six months ended June 30, 2014 or 2013.

Cash Flows from Financing Activities. Cash provided by financing activities for the six months ended June 30, 2014 was $2.3 million compared with $3.6 million cash provided for the same period in 2013. Cash provided by financing activities for the six months ended June 30, 2014 was from the sale of our Series B redeemable convertible preferred stock and warrants in the PIPE financing. Cash provided by financing activities for the same period in 2013 was from sales of our common stock under the Sales Agreement with MLV, or the Sales Agreement, of about $3.6 million in net proceeds.

Working Capital. Working capital decreased to $1.2 million at June 30, 2014 from $1.7 million at December 31, 2013. The decrease in working capital was primarily due to our use of cash for operating expenses.

Future Contractual Obligations. We currently have no future rental payment obligations under non-cancelable operating leases. 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 on February 19, 2013 to voluntarily surrender our premises. As a result 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 $0.7 million. In addition to the termination fee, if we receive $15 million or more in additional financing in the aggregate, an additional termination fee of $591,000 will be due to ARE, but will otherwise be forgiven.

On February 27, 2013, we entered into an arrangement to sublease a facility at 2100 Geng Road, Suite 102, Palo Alto, California in which to relocate our principal executive offices as the sublease of our former facility at 700 Hansen Way, Palo Alto, California expired on March 31, 2013. Upon execution of the agreement, we paid the sublessor the first month’s rent with second month’s rent due on March 28, 2013, and deposited into an escrow account approximately $219,000 which represents the total rent due for the remaining term (May 1, 2013 through November 30, 2014).

In connection with the Merger, the company signed separation agreements in May 2014 with nine Telik employees and agreed to pay severances and health benefits upon closing of the Merger subject to certain provisions in the agreement. The total in severance and benefits costs to be paid out is approximately $748,000.

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements as defined in Regulation S-K 303(a)(4)(ii).

 

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Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in our market risk during the six months ended June 30, 2014 compared to the disclosures in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 10, 2014.

 

Item 4.

Controls and Procedures.

Evaluation of disclosure controls and procedures. Our management, with the participation of our President and Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2014. Based on such evaluation, our President and Chief Executive Officer and Chief Financial Officer concluded that, subject to limitations described below, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), were effective as of June 30, 2014.

Changes in internal control over financial reporting. As discussed above, we completed the Merger on July 8, 2014 and we are currently in the process of evaluating and integrating internal controls over financial reporting of the parties to the Merger. During the quarter ended June 30, 2014, other than the changes to our internal control process resulting from the Merger, there were no changes in our internal controls over financial reporting identified in management’s evaluation pursuant to Rule 13a-15(d) of the Exchange Act during the quarter ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Limitations on the effectiveness of controls. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met and, as set forth above, our President and Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures were sufficiently effective to provide reasonable assurance that the objectives of our disclosure control system were met.

 

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PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings.

On May 30, 2014, a putative class action lawsuit was commenced in Santa Clara County Superior Court, State of California, on behalf of Cadillac Partners and others similarly situated, naming as defendants our directors, the Company, MabVax, Hudson Bay Capital Management LP, Bio IP Ventures LLC, Hudson Bay Master Fund Ltd., and Hudson Bay IP Opportunities Master Fund LP. The suit alleges the defendants breached certain fiduciary duties, or aided and abetted a breach of fiduciary duties, in connection with the Merger. In support of their purported claims, the plaintiff alleged, among other things, that our board has historically failed to fulfill its fiduciary duty to its stockholders, the PIPE transaction and the Merger involved an inadequate sales process and includes preclusive deal protection devices, and that our board of directors would receive personal benefits not available to our public stockholders as a result of the Merger. The plaintiff sought to enjoin the Merger and obtain damages as well as attorneys’ and expert fees and costs.

On June 29, 2014, the parties entered into a Stipulation and Settlement, or settlement, pursuant to which we agreed to file with the SEC certain supplemental disclosures in connection with the merger, which we did on June 30, 2014 in our proxy statement on Schedule 14A. The settlement is subject to certain confirmatory discovery to be undertaken by the plaintiff and to the parties’ agreement on the payment of the plaintiff’s attorneys’ fees and expenses.

On July 16, 2014, the Company and all other parties to the litigation entered into an agreement which, if consummated, will settle the litigation, the proposed settlement. Among many other terms, under the proposed settlement the Company and all defendants will receive a broad release of any and all claims pertaining to the PIPE transaction, the Merger, the prior disclosure and a wide variety of other matters. The proposed settlement also calls for the parties to ask the court to, among other things, enter orders enjoining other shareholders from bringing similar actions, certifying the putative settlement class, and approving the proposed settlement as a fair, final, and binding resolution of the litigation. Under the proposed settlement, the Company and the other defendants have expressly denied the allegations of the complaint and denied engaging in any other misconduct, nor will any of them make any payment or in any respect amend the negotiated terms of the since-consummated PIPE transaction and Merger. Finally, under the proposed settlement, the Company and the other defendants have not agreed to pay any legal fees, or reimburse any expenses, allegedly incurred by the plaintiffs who filed the complaint; instead, the Company expects that counsel for those plaintiffs will present any such disputed claim for legal fees and expenses to the court for resolution. We expect our insurance policy to cover a portion of these fees and expenses.

 

Item 1A.

Risk Factors.

Included below is a description of risk factors related to our business to enable readers to assess, and be appropriately apprised of, many of the risks and uncertainties applicable to the forward-looking statements made in this Quarterly Report on Form 10-Q. The risks and uncertainties set forth below are not all of the risks and uncertainties facing our business, but we do believe that they reflect the more important ones. You should carefully consider these risk factors as each of these risks could adversely affect our business, operating results and financial condition. Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements.

The risk factors described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC on March 10, 2014, are set forth below. These risk factors have not substantively changed, except for those identified by asterisk and restated below.

 

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If we are unable to raise adequate funds in the near future, we will not be able to continue to fund our operations, research programs, preclinical testing and clinical trials to develop and manufacture our drug product candidates, and our auditors have indicated that our recurring losses and net capital deficiency raise substantial doubt about our ability to continue as a going concern.

Our independent registered public accounting firm has issued a report on our financial statements that includes an explanatory paragraph referring to our recurring losses from operations and expressing substantial doubt as to our ability to continue as a going concern without additional capital becoming available. While we were able to raise $3.6 million in 2013 and $2.5 million in May 2014, we believe our existing cash and investment securities will only be sufficient to support our operations through approximately July 2014 for the closing of the Merger. Any failure to dispel any continuing doubts about our ability to continue as a going concern could make it more difficult to obtain required financing on favorable terms or at all, negatively affect the market price of our common stock and could otherwise have a material adverse effect on our business, financial condition and results of operations. We could be required to liquidate our assets, seek bankruptcy protection or other alternatives and it is likely that investors will lose all or some of their investment in us. In addition, the tight credit markets and concerns regarding the availability of credit, particularly in the United States, may also negatively impact our ability to raise additional capital to fund our business. We cannot assure you that any future actions that we may take will raise or generate sufficient capital to fully address the significant uncertainties of our financial position. Moreover, we may not successfully identify or implement any of the above alternatives, and, even if we determine to pursue one or more of these alternatives, we may be unable to do so on a timely basis or on acceptable financial terms. As a result, we may be unable to realize value from our assets and discharge our liabilities in the normal course of business. All of these factors raise substantial doubt about our ability to continue as a going concern.

Raising additional capital by issuing securities or through collaboration and licensing arrangements may cause dilution to existing stockholders or require us to relinquish rights to our technologies or product candidates.

In order to fund our current and future operations, including the initiation of a Phase 3 registration trial of TELINTRA, we need to raise additional funds through equity or debt financings, collaborative arrangements with corporate partners or other sources. On August 30, 2011, we entered into an At Market Issuance Sales Agreement, or the Sales Agreement with McNicoll, Lewis & Vlak LLC, or MLV, pursuant to which we may issue and sell shares of our common stock having an aggregate offering price up to $7.0 million, from time to time, through the Sales Agreement. As of December 31, 2013, we sold 2,782,887 shares of our common stock and received approximately $5.8 million in net proceeds since entering into the Sales Agreement. On May 12, 2014, we entered into an agreement to sell 1,250,000 shares of convertible preferred stock to a group of investors for a total of $2.5 million. Our ability to sell shares of our common and preferred stock is subject to share volume limitations, market conditions and our continued listing on the Nasdaq Capital Market.

To the extent that we raise additional capital by issuing equity securities, our stockholders will experience dilution. To the extent that we raise additional capital through licensing arrangements or arrangements with collaborative partners, 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 ourselves.

We have a history of net losses, which we expect to continue for the next several years should we have the ability to operate as a going concern. We will never be profitable unless we develop, and obtain regulatory approval and market acceptance of, our product candidates.

To date, we have not obtained regulatory approval for the commercial sale of any products, and we have not received any revenue from the commercial sale of products. Due to the significant research and development expenditures required to develop our technology and identify new product candidates, and the lack of any products to generate revenue, we have not been profitable and have incurred operating losses since we were incorporated in 1988. As of June 30, 2014, we had an accumulated deficit of $556.2 million. Should we have the ability to operate as a going concern, we expect to incur losses for the next several years as we continue our research and development activities and incur significant clinical testing and drug supply manufacturing costs. We do not anticipate that we will generate product revenue for at least several years. Our losses, among other things, have caused and will cause

 

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our stockholders’ equity and working capital to decrease. We expect that this trend will continue until we develop, and obtain regulatory approval and market acceptance of, our product candidates, if at all. We may never generate product revenue sufficient to become profitable.

If clinical trials of our product candidates are delayed or unsuccessful, or if we are unable to complete the preclinical development of our other preclinical product candidates, our business may suffer.

Preclinical testing and clinical trials are long, expensive and uncertain processes. It may take us or our collaborators several years to complete this testing, and failure can occur at any stage of the process. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and interim results of clinical trials do not necessarily predict final results. A number of companies in the pharmaceutical industry, including biotechnology companies, have suffered significant setbacks in advanced clinical trials, even after promising results in earlier clinical trials. To obtain regulatory approvals, we must, among other requirements, complete carefully controlled and well-designed clinical trials demonstrating that a particular drug is safe and effective for the applicable disease. In order to complete such trials, we will need to raise significant additional funds.

We rely on third-party clinical investigators to conduct our clinical trials and, as a result, we may face additional delays outside our control. We have in the past engaged contract research organizations, or CROs, to facilitate the administration of our Phase 3 clinical trials. Dependence on a CRO subjects us to a number of risks. We may not be able to control the amount and timing of resources the CRO may devote to our clinical trials. Should the CRO fail to administer our Phase 3 clinical trials properly and on a timely basis, regulatory approval, development and commercialization of our product candidates will be delayed.

We do not know whether we will begin planned clinical trials on time or whether we will complete any of our on-going clinical trials on schedule, if at all. Clinical trials can be delayed for a variety of other reasons, including delays in clinical testing, obtaining regulatory approval to commence a study, delays in reaching agreement on acceptable clinical study agreement terms with prospective clinical sites, delays in obtaining institutional review board approval to conduct a study at a prospective clinical site and delays in recruiting subjects to participate in a study. Even if we are able to complete such clinical trials, we do not know whether any such trials will result in marketable products. Typically, there is a high rate of failure for product candidates in preclinical and clinical trials. We do not anticipate that any of our product candidates will reach the market for at least the next several years.

Delays in clinical testing can also materially impact our product candidates’ development costs. If we experience delays in clinical testing or approvals, our product candidates’ development costs will increase. For example, we may need to make additional payments to third-party investigators and organizations to retain their services or we may need to pay additional recruitment incentives. If the delays are significant, our financial results and the commercial prospects for our product candidates will be harmed, and our ability to remain viable will be significantly impaired or delayed.

If we do not find collaborators for our product candidates, we may have to reduce or delay our rate of product development and/or increase our expenditures.

Our strategy to develop, manufacture and commercialize our products includes entering into relationships with pharmaceutical companies to advance certain programs and reduce our expenditures with respect to such programs. Our product candidates will target highly competitive therapeutic markets in which we have limited experience and expertise. If we are unable to develop this expertise ourselves, we will need to enter into agreements with one or more biotechnology or pharmaceutical companies to provide us with the necessary resources and experience for the development and commercialization of products in these markets. In particular, we are seeking a partnership with a pharmaceutical or biotechnology company to further advance the development and commercialization of TELINTRA. There are a limited number of companies with the resources necessary to develop our future products commercially, and we may be unable to attract any of these firms. The current credit and financial market conditions

 

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could also impact our ability to find a collaborator for our development programs. A company that has entered into a collaboration agreement with one of our competitors may choose not to enter into a collaboration agreement with us. We may not be able to negotiate a collaboration agreement on acceptable terms or at all. If we are not able to establish collaborative arrangements, we may have to reduce or delay further development of some of our programs and/or increase our expenditures and undertake the development activities at our own expense. If we elect to increase our expenditures to fund our development programs, we will need to obtain additional capital, which may not be available on acceptable terms or at all.

In addition, there have been a significant number of recent business combinations among biotechnology and pharmaceutical companies that have reduced the number of potential future collaborators that would be willing to enter into a collaboration agreement with us. If business combinations involving potential collaborators continue to occur, our ability to find a collaborative partner could be diminished, which could result in the termination or delay in one or more of our product candidate development programs.

We will depend on collaborative arrangements to complete the development and commercialization of some of our product candidates. These collaborative arrangements may place the development of our product candidates outside of our control, may require us to relinquish important rights or may otherwise not be on terms favorable to us.

We may enter into collaborative arrangements with third parties for clinical trials, development, manufacturing, regulatory approvals or commercialization of some of our product candidates. Dependence on collaborative arrangements will subject us to a number of risks. We may not be able to control the amount and timing of resources our collaborative partners may devote to the product candidates. Our collaborative partners may experience financial difficulties. Should a collaborative partner fail to develop or commercialize a compound or product candidate to which it has rights from us, we may not receive any future milestone payments and will not receive any royalties for that compound or product candidate. Business combinations or significant changes in a collaborative partner’s business strategy may also adversely affect a partner’s willingness or ability to complete its obligations under an arrangement. If we fail to enter into additional collaborative agreements on favorable terms, our business, financial condition and results of operations could be materially adversely affected.

If our competitors develop and market products that are more effective than our product candidates or any products that we may develop, or obtain marketing approval before we do, our commercial opportunity will be reduced or eliminated.

The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. Some of the drugs that we are attempting to develop will have to compete with existing therapies. In addition, a large number of companies are pursuing the development of pharmaceuticals that target the same diseases and conditions that we are targeting. We face competition from pharmaceutical and biotechnology companies in the United States and abroad. Our competitors may develop new screening technologies and may utilize discovery techniques or partner with collaborators in order to develop products more rapidly or successfully than we or our collaborators are able to do.

Many of our competitors, particularly large pharmaceutical companies, have substantially greater financial, technical and human resources than we do. These organizations also compete with us to attract qualified personnel and parties for acquisitions, joint ventures, licensing arrangements or other collaborations. In addition, academic institutions, government agencies and other public and private organizations conducting research may seek patent protection with respect to potentially competing products or technologies and may establish exclusive collaborative or licensing relationships with our competitors.

Our competitors may succeed in developing technologies and drugs that are more effective, better tolerated or less costly than any which are being developed by us or which would render our technology and potential drugs obsolete and noncompetitive. In addition, our competitors may succeed in obtaining FDA or other regulatory

 

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approvals for product candidates more rapidly than us or our collaborators. Any drugs resulting from our research and development efforts, or from our joint efforts with our existing or future collaborative partners, may not be able to compete successfully with our competitors’ existing products or product candidates under development or may not obtain regulatory approval in the United States or elsewhere.

If we do not obtain regulatory approval to market products in the United States and foreign countries, we or our collaborators will not be permitted to commercialize our product candidates.

Even if we are able to achieve success in our preclinical testing, we, or our collaborators, must provide the FDA and foreign regulatory authorities with clinical data that demonstrate the safety and efficacy of our product candidates in humans before they can be approved for commercial sale. Failure to obtain regulatory approval will prevent commercialization of our product candidates.

The pharmaceutical industry is subject to stringent regulation by a wide range of regulatory authorities. We cannot predict whether regulatory clearance will be obtained for any product candidate that we are developing or hope to develop. A pharmaceutical product cannot be marketed in the United States until it has completed rigorous preclinical testing and clinical trials and an extensive regulatory clearance process implemented by the FDA. Satisfaction of regulatory requirements typically takes many years and depends on the type, complexity and novelty of the product candidate and requires the expenditure of substantial resources. Of particular significance are the requirements covering research and development, testing, manufacturing, quality control, labeling and promotion of drugs for human use.

Before commencing clinical trials in humans, we, or our collaborators, must submit and receive approval from the FDA of an IND application. We must comply with FDA “Good Laboratory Practices” regulations in our preclinical studies. Clinical trials are subject to oversight by Institutional Review Boards, or IRBs, of participating clinical sites and the FDA and:

 

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must be conducted in conformance with the FDA regulations;

 

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must meet requirements for IRB approval;

 

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must meet requirements for informed consent;

 

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must meet requirements for Good Clinical Practices;

 

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may require large numbers of participants; and

 

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may be suspended by us, our collaborators or the FDA at any time if it is believed that the subjects participating in these trials are being exposed to unacceptable health risks or if the FDA finds deficiencies in the IND application or the conduct of these trials. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements, or may impose other conditions.

Before receiving FDA clearance to market a product candidate, we, or our collaborators must demonstrate that the product candidate is safe and effective in the patient population that will be treated. Negative or inconclusive results or adverse medical events during a clinical trial could cause a clinical trial to be repeated, a program to be terminated and could delay approval. We typically rely on third-party clinical investigators to conduct our clinical trials and other third-party organizations to perform data collection and analysis. As a result, we may face additional delaying factors outside our control. In addition, we may encounter delays or rejections based upon additional government regulation from future legislation or administrative action or changes in FDA policy or interpretation during the period of product development, clinical trials and FDA regulatory review. Failure to comply with applicable FDA or other applicable regulatory requirements may result in criminal prosecution, civil penalties, recall or seizure of products, total or partial suspension of production or injunction, as well as other regulatory action. We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approval.

If regulatory clearance of a product candidate is granted, this clearance will be limited to those disease states and conditions for which the product candidate is demonstrated through clinical trials to be safe and efficacious,

 

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which could limit our market opportunity. Furthermore, product approvals, once granted, may be withdrawn if problems occur after initial marketing. We cannot ensure that any product candidate developed by us, alone or with others, will prove to be safe and efficacious in clinical trials and will meet all of the applicable regulatory requirements needed to receive marketing clearance. Regulatory clearance may also contain requirements for costly post-marketing testing and surveillance to monitor the safety and efficacy of the product candidate. If problems occur after initial marketing, such as the discovery of previously unknown problems with our product candidates, including unanticipated adverse events or adverse events of unanticipated severity or frequency, or manufacturer or manufacturing issues, marketing approval can be withdrawn.

Outside the United States, the ability to market a product depends on receiving a marketing authorization from the appropriate regulatory authorities. Most foreign regulatory approval processes include all of the risks associated with FDA clearance described above and some may include additional risks.

If we or our licensees cannot obtain and defend our respective intellectual property rights, or if our product candidates, technologies or any products that we may develop are found to infringe patents of third parties, we could become involved in lengthy and costly legal proceedings that could adversely affect our business.

Our success will depend in a large part on our own and our licensees’ ability to obtain and defend patents for each party’s respective technologies and the compounds and other products, if any, resulting from the application of these technologies. The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions. As a result, the degree of future protection for our proprietary rights is uncertain, and we cannot assure you that:

 

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we were the first to make the inventions covered by each of our pending patent applications;

 

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we were the first to file patent applications for these inventions;

 

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others will not independently develop similar or alternative technologies or duplicate any of our technologies;

 

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any of our pending patent applications will result in issued patents;

 

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any patents issued to us or our collaborators will provide a basis for commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties;

 

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any of our issued patents will be valid or enforceable; or

 

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we will develop additional proprietary technologies that are patentable.

Accordingly, we cannot predict the breadth of claims allowed in our or other companies’ patents.

We are actively pursuing multiple life cycle patent applications for TELINTRA, including applications related to combination therapies, polymorphs, formulations, manufacturing processes and the genomic profiles of responders. We have been granted US and foreign patents for potent analogs of TELINTRA (expiry in 2026) and a US patent for the tablet formulation of TELINTRA (expiry in 2031). We have US and foreign patents pending on crystalline forms and polymorph form of TELINTRA (expiry in 2031); amorphous ansolvate form of TELINTRA (expiry in 2032); manufacturing process for TELINTRA crystalline form (expiry in 2031); dosing schedule and treatment methods for MDS with TELINTRA (expiry in 2031); the treatment of multiple myeloma with TELINTRA (expiry in 2032); and excipient compatibility with TELINTRA (expiry in 2032). One patent on treatment methods for MDS with TELINTRA was granted at the European Patent Office. Intention to grant has been received from the European Patent Office for a patent on dosing schedule and a patent on treatment methods for MDS with TELINTRA. We can generally apply for patent term extensions on the patents for TELINTRA when and if marketing approvals for these compounds are obtained in the relevant countries. In foreign countries, these extensions are available only if approval is obtained before the patent expires, but in the United States, extensions are available even if approval is obtained after the patent would expire normally through a system of interim extensions until approval.

 

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We have US and foreign patents granted or pending on our pipeline drug development candidates TLK60404, TLK60357 and TLK60596. These patents will expire in 2029, 2030 and 2032 respectively. In addition, the primary patents that cover our TRAP drug discovery technology will expire in August, 2015.

Our success will also depend, in part, on our ability to operate without infringing the intellectual property rights of others. We cannot assure you that our activities will not infringe patents owned by others. To date, we have not received any communications with the owners of related patents alleging that our activities infringe their patents. However, if our product candidates, technologies or any products that we may develop are found to infringe patents issued to third parties, the manufacture, use and sale of any products that we may develop could be enjoined, and we could be required to pay substantial damages. In addition, we may be required to obtain licenses to patents or other proprietary rights of third parties. We cannot assure you that any licenses required under any such patents or proprietary rights would be made available on terms acceptable to us, if at all. Failure to obtain such licenses could negatively affect our business.

Others may have filed and in the future may file patent applications covering small molecules or therapeutic products that are similar to ours. We cannot assure you that our patent applications will have priority over patent applications filed by others. Any legal action against us or our collaborators claiming damages and seeking to enjoin commercial activities relating to the affected products and processes could, in addition to subjecting us to potential liability for damages, require us or our collaborators to obtain a license to continue to manufacture or market the affected products and processes. We cannot predict whether we, or our collaborators, would prevail in any of these actions or that any license required under any of these patents would be made available on commercially acceptable terms, if at all. We believe that there may be significant litigation in the industry regarding patent and other intellectual property rights. If we become involved in litigation, it could consume a substantial portion of our managerial and financial resources, and we may not be successful in any such litigation.

In addition, we could incur substantial costs and use of our key employees’ time and efforts in litigation if we are required to defend against patent suits brought by third parties or if we initiate these suits, and we cannot predict whether we would be able to prevail in any of these suits.

Furthermore, some of our patents and intellectual property rights are owned jointly by us and our collaborators. While there are legal and contractual restraints on the rights of these joint owners, they may use these patents and other intellectual property in ways that may harm our business. We may not be able to prevent this type of use.

We also rely on trade secrets to protect technology, including aspects of our TRAP technology, where we believe patent protection is not appropriate or obtainable. However, trade secrets are difficult to protect. While we require employees, academic collaborators and consultants to enter into confidentiality agreements, we may not be able to adequately protect our trade secrets or other proprietary information in the event of any unauthorized use or disclosure or the lawful development by others of such information. If the identity of specific proteins or other elements of our TRAP technology become known, our competitive advantage in drug discovery could be reduced.

Many of our collaborators and scientific advisors have publication and other rights to certain information and data gained from their collaborations and research with us. Any publication or other use could limit our ability to secure intellectual property rights or impair any competitive advantage that we may possess or realize by maintaining the confidentiality of that information or data.

If we are unable to enter into or maintain existing contracts with third parties to manufacture our product candidates or any products that we may develop in sufficient quantities and at an acceptable cost, clinical development of product candidates could be delayed and we may be unable to meet demand for any products that we may develop and lose potential revenue.

We do not currently operate manufacturing facilities for clinical or commercial production of our product candidates. We expect to continue to rely on third parties for the manufacture of our product candidates and any

 

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products that we may develop. We currently lack the resources and capability to manufacture any of our product candidates on a clinical scale or any products that we may develop on a commercial scale. As a result, we will be dependent on corporate partners, licensees or other third parties for the manufacturing of clinical and commercial scale quantities of our product candidates and any products that we may develop. Our product candidates and any products that we may develop may be in competition with other product candidates and products for access to these manufacturing facilities. For this and other reasons, our collaborators or third parties may not be able to manufacture our product candidates and products in a cost effective or timely manner.

If manufacturing is not performed in a timely manner, if our suppliers fail to perform or if our relationships with our suppliers or manufacturers should terminate, our clinical trials could be delayed. We may not be able to enter into or maintain any necessary third-party manufacturing arrangements on acceptable terms, if at all. Our current dependence upon others for the manufacture of our product candidates and our anticipated dependence upon others for the manufacture of any products that we may develop may adversely affect our future profit margins and our ability to commercialize any products that we may develop on a timely and competitive basis.

Working capital constraints may force us to delay our efforts to develop certain product candidates in favor of developing others, which may prevent us from commercializing all product candidates as quickly as possible.

Because we have limited resources, and because research and development is an expensive process, we must regularly assess the most efficient allocation of our research and development budget. As a result, we have had to prioritize development candidates and may not be able to fully realize the value of some of our product candidates in a timely manner, as they will be delayed in reaching the market, if at all.

If product liability lawsuits are successfully brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates and any products that we may develop.

The testing and marketing of medical products entail an inherent risk of product liability. Although we are not aware of any historical or anticipated product liability claims or specific causes for concern, if we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates and any products that we may develop. In addition, product liability claims may also result in withdrawal of clinical trial volunteers, injury to our reputation and decreased demand for any products that we may commercialize. We currently carry product liability insurance that covers our clinical trials up to a $10.0 million annual aggregate limit, and the clinical trials added through the Merger currently carry up to a $5.0 million annual aggregate limit. We will need to increase the amount of coverage if and when we have a product that is commercially available. If we are unable to obtain sufficient product liability insurance at an acceptable cost, potential product liability claims could prevent or inhibit the commercialization of any products that we may develop, alone or with corporate partners.

Substantial future sales of our common stock by us or by our existing stockholders could cause our stock price to fall.

Additional equity financings or other share issuances by us, including shares issued in connection with strategic alliances and corporate partnering transactions, could adversely affect the market price of our common stock. Sales by existing stockholders of a large number of shares of our common stock in the public market or the perception that additional sales could occur could cause the market price of our common stock to drop. Substantially all of our outstanding shares of common stock were freely tradable and, in limited cases, subject to certain volume, notice and manner of sale restrictions under Rule 144 of the Securities Act of 1933.

 

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If we do not progress in our programs as anticipated, our stock price could decrease.

For planning purposes, we estimate the timing of a variety of clinical, regulatory and other milestones, such as when a certain product candidate will enter clinical development, when a clinical trial will be completed or when an application for regulatory approval will be filed. Our estimates are based on present facts and a variety of assumptions. Many of the underlying assumptions are outside of our control. If milestones are not achieved when we estimated that they would be, investors could be disappointed, and our stock price may decrease.

Our stock price may be volatile, you may not be able to resell your shares at or above your purchase price.

Our stock prices and the market prices for securities of biotechnology companies in general have been highly volatile, with recent significant price and volume fluctuations, and may continue to be highly volatile in the future. For example, our stock price dropped by 71% on the day following the announcement in December 2006 that the preliminary top-line results of our first three Phase 3 trials did not meet primary end-points. During the six months ended June 30, 2014, our common stock traded between $1.19 and $2.06, and on June 30, 2014, our common stock closed at $1.45. The following factors, in addition to other risk factors described in this section, may have a significant impact on the market price of our common stock, some of which are beyond our control:

 

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developments regarding, or the results of, our clinical trials;

 

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announcements of technological innovations or new commercial products by our competitors or us;

 

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the issuance of equity or debt securities of the Company, or disclosure or announcements relating thereto;

 

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developments concerning proprietary rights, including patents;

 

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developments concerning our collaborations;

 

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publicity regarding actual or potential medical results relating to products under development by our competitors or us;

 

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regulatory developments in the United States and foreign countries;

 

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litigation;

 

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economic and other external factors or other disaster or crisis; or

 

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period-to-period fluctuations in our financial results.

We have been, and in the future may be, subject to securities class action lawsuits and shareholder derivative actions. These, and potential similar or related litigation, could result in substantial damages and may divert management’s time and attention from our business.

We have been, and may in the future be, the target of securities class actions or shareholder derivative claims. Any such actions or claims could result in substantial damages and may divert management’s time and attention from our business.

The rights of our common stockholders are limited by and subordinate to the rights of the holders of Series A-1 convertible preferred stock and Series B convertible preferred stock; these rights may have a negative effect on the value of shares of our common stock.

The holders of the Series A-1 convertible preferred stock and Series B convertible preferred stock have rights and preferences generally superior to those of the holders of common stock. The existence of these superior rights and preferences may have a negative effect on the value of shares of our common stock. These rights are more fully set forth in the Series A-1 certificate of designations and Series B certificate of designations, respectively, and include, but are not limited to:

 

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the right to receive a liquidation preference, prior to any distribution of our assets to the holders of our common stock, in an amount equal to $ 0.0377081186 per share for the Series A-1convertible preferred stock and $2.00 per share for the Series B convertible preferred stock, subject to adjustments, and all accrued and unpaid dividends;

 

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•

the right to convert into shares of our common stock at the conversion price set forth in the Series A-1 certificate of designations and Series B certificate of designations, respectively, which may be adjusted as set forth therein; and

 

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the right to receive dividends in arrears at a rate of 8% per annum in preference to the holders of our common stock and to receive dividends made to holders of our common stock on an as converted basis.

The holders of Series A-1 convertible preferred stock and Series B convertible preferred stock will have the right to block certain fundamental transactions as further described in the Series A-1 certificate of designations and Series B Preferred Stock certificate of designations, respectively; these holders may use this right to negotiate terms more favorable to the holders of the Series A-1 preferred stock and Series B preferred stock to the detriment of the holders of other classes of our capital stock or may prevent us from completing transactions favorable to us and the holders of our capital stock.

As further set forth in the Series A-1 certificate of designation, the holders of a majority of the issued and outstanding Series A-1 convertible preferred stock, Series B convertible preferred stock or Hudson Bay Opportunities Fund LP have the right to approve or block certain transactions, including transactions that:

 

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create or issue additional or other capital stock or securities exchangeable for or convertible or exercisable into capital stock pari passu with or senior to the Series A-1 convertible preferred stock or Series B convertible preferred stock;

 

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reclassify, alter or amend any of our existing securities that is pari passu with the Series A-1 preferred stock or Series B convertible preferred stock;

 

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change the authorized number of shares of our capital stock;

 

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create or issue debt securities;

 

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authorize or effect payment of dividends or distributions on our capital stock;

 

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authorize or effect change of control, dissolution or liquidation events;

 

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amend or repeal our certificate of incorporation or bylaws;

 

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amend, alter or repeal preferences, special rights or other powers of the Series A-1 convertible preferred stock or Series B convertible preferred stock;

 

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avoid the observance or performance of the terms of the Series A-1 or Series B certificates of designations; and

 

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effect any change in our principal business.

Hudson Bay and/or the Series A-1 convertible preferred stockholders and/or the Series B convertible preferred stockholders may have interests differing from or detrimental to other holders of our capital stock with respect to these fundamental transactions. Obtaining their consent may delay or limit our ability to enter into transactions that may be beneficial to the holders of our capital stock.

A limited public trading market may cause volatility in the price of our common stock

Our common stock is currently quoted on the OTCQB marketplace. Despite our appeal to the NASDAQ Listing Council as described above, there is no assurance that our stock will again be eligible for trading on the

 

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NASDAQ Capital Market or any other national securities exchange in the near future. The quotation of our common stock on the OTCQB marketplace does not assure that a meaningful, consistent and liquid trading market currently exists, and in recent years such market has experienced extreme price and volume fluctuations that have particularly affected the market prices of many smaller companies like us. Our common stock is subject to this volatility. Sales of substantial amounts of common stock, or the perception that such sales might occur, could adversely affect prevailing market prices of our common stock and our stock price may decline substantially in a short time and our stockholders could suffer losses or be unable to liquidate their holdings.

The floating conversion price for our Series B convertible preferred stock may lead to significant shareholder dilution and a corresponding drop in the market price of our common stock.

As described above and in the Series B certificate of designations, our Series B convertible preferred stock is convertible into our common stock at a “floating” conversion price. Following the Adjustment Date (as defined in the Series B certificate of designations), this conversion price adjusts according to the market price of our common stock. If the market price of our common stock declines, the Series B convertible preferred stock will be convertible into a greater number of shares of common stock, which could have the effect of diluting the ownership interest of all other holders of common stock. If the market price of our common stock were to decline significantly, this dilution could be substantial. Furthermore, any such dilution may cause the market price of the common stock to decline further, resulting in additional dilution and a continued potential adverse effect on the common stock price thereafter and could result in an imbalance of supply and demand for our common stock and reduce its price. This series of events could lead to a repetitive cycle, further and successively driving the market price of our common stock downward. The further the market price of our common stock declines, the further the floating conversion price will fall and the greater the number of shares we will have to issue upon conversion. In addition to affecting the market price of our common stock and diluting the value of each share of common stock for existing shareholders, the floating conversion price and the effects that it may have may also make it more difficult for us to raise capital in the future, which could adversely affect our ability to operate or grow our business.

We may not be able to achieve secondary trading of our stock in certain states because our common stock is no longer nationally traded, which could subject our stockholders to significant restrictions and costs.

Because our common stock is no longer eligible for trading on Nasdaq or on a national securities exchange, our common stock is subject to the securities laws of the various states and jurisdictions of the United States in addition to federal securities law. While we may register our common stock or qualify for exemptions for our common stock in one of more states, if we fail to do so the investors in those states where we have not taken such steps may not be allowed to purchase our stock or those who presently hold our stock may not be able to resell their shares without substantial effort and expense. These restrictions and potential costs could be significant burdens on our stockholders.

 

Item 5.

Other Information.

Employment Agreements

As disclosed on our Current Report on Form 8-k filed with the SEC on July 9, 2014, we assumed MabVax’s obligations pursuant to its employment agreements with each of J. David Hansen, Gregory P. Hanson and Wolfgang W. Scholz, Ph.D. in connection with the Merger. These agreements are further described below and attached as exhibits to this Quarterly Report on Form 10-Q.

J. David Hansen Employment Agreement

The Hansen Employment Agreement has an initial term of 3 years, with an option to renew or extend the terms if notice is provided by either Mr. Hansen or MabVax at least 60 days prior to the end of the term. Under the terms of his agreement, Mr. Hansen is currently entitled to receive a base salary of $315,660.29. Mr. Hansen is also entitled to an annual bonus, based on certain performance-based objectives established by the Compensation Committee of the Board.

 

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The Hansen Employment Agreement may be terminated upon death, disability, and with or without Cause (as defined by the Hansen Employment Agreement) by MabVax, with Good Reason (as defined in the Hansen Employment Agreement), with or without Cause and upon a Change in Control (as defined in the Employment Agreement), by Mr. Hansen or at either party’s election not to renew the employment agreement. In the event the Hansen Employment Agreement is terminated as a result of Mr. Hansen’s death, Mr. Hansen’s authorized representative shall be entitled to receive all Accrued Obligations (as defined in the employment agreement), full acceleration of vesting of all issued and outstanding stock options, benefits for up to one year, any unpaid annual bonus amounts and a pro rata bonus payment. In the event the Hansen Employment Agreement is terminated by MabVax for Disability or without Cause, by Mr. Hansen for Good Reason, non-renewal by MabVax or in connection with a Change in Control, Mr. Hansen would be entitled to receive all Accrued Obligations, full acceleration of vesting of all issued and outstanding stock options, unpaid bonus amounts, benefits for up to one year or until Mr. Hansen obtains coverage through subsequent employment (whichever is earlier) and severance payments equal to Mr. Hansen’s annual base salary payable in 12 equal monthly installments. In the event the employment agreement is terminated by Telik for Cause, without Good Reason by Mr. Hansen, or the parties elect not to renew the agreement, Mr. Hansen will be entitled to payment of any base salary earned but unpaid through the date of termination and any other payment or benefit to which he is entitled under the applicable terms of any applicable company arrangement during the 30 day period following the termination of the Hansen Employment Agreement.

Gregory P. Hanson Employment Agreement

The Hanson Employment Agreement has an initial term of 3 years, with an option to renew or extend the terms if notice is provided by either Mr. Hanson or MabVax at least 60 days prior to the end of the term. Under the terms of his agreement, Mr. Hanson is currently entitled to receive a base salary of $215,000. Mr. Hanson is also entitled to an annual bonus, based on certain performance-based objectives established by MabVax’s Chief Executive Officer. In addition, MabVax previously granted Mr. Hanson options to purchase up to 70,000 shares of MabVax common stock at $2.25 per share (options to purchase up to 155,630 shares of Telik common stock at an exercise price of $1.012 per share pursuant to the Merger Agreement) under the terms of the MabVax 2014 Employee, Director and Consultant Equity Incentive Plan which was assumed by Telik pursuant to the Merger Agreement.

The Hanson Employment Agreement may be terminated upon death, disability, and with or without Cause (as defined by the Hansen Employment Agreement) by MabVax, with Good Reason (as defined in the Hanson Employment Agreement), with or without Cause and upon a Change in Control (as defined in the Employment Agreement), by Mr. Hanson or at either party’s election not to renew the employment agreement. In the event the Hanson Employment Agreement is terminated as a result of Mr. Hanson’s death, Mr. Hanson’s authorized representative shall be entitled to receive all Accrued Obligations (as defined in the employment agreement), full acceleration of vesting of all issued and outstanding stock options, benefits for up to 1 year, any unpaid annual bonus amounts and a pro rata bonus payment. In the event the Hanson Employment Agreement is terminated by MabVax for Disability or without Cause, by Mr. Hanson for Good Reason, non-renewal by MabVax or in connection with a Change in Control, Mr. Hanson would be entitled to receive all Accrued Obligations, full acceleration of vesting of all issued and outstanding stock options, unpaid bonus amounts, benefits for up to one year or until Mr. Hanson obtains coverage through subsequent employment (whichever is earlier) and severance payments equal to Mr. Hanson’s annual base salary payable in 12 equal monthly installments. In the event the employment agreement is terminated by Telik for Cause, without Good Reason by Mr. Hanson, or the parties elect not to renew the agreement, Mr. Hanson will be entitled to payment of any base salary earned but unpaid through the date of termination and any other payment or benefit to which he is entitled under the applicable terms of any applicable company arrangement during the 30 day period following the termination of the Hanson Employment Agreement.

 

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Wolfgang W. Scholz Ph.D. Employment Agreement

The Scholz Employment Agreement has an initial term of 3 years, with an option to renew or extend the terms if notice is provided by either Dr. Scholz or MabVax at least 60 days prior to the end of the term. Under the terms of his agreement, Dr. Scholz is currently entitled to receive a base salary of $213,803. Dr. Scholz is also entitled to an annual bonus, based on certain performance-based objectives established by MabVax.

The Scholz Employment Agreement may be terminated upon death, disability, and with or without Cause (as defined by the Scholz Employment Agreement) by MabVax, with Good Reason (as defined in the Scholz Employment Agreement), with or without Cause and upon a Change in Control (as defined in the Employment Agreement), by Mr. Scholz or at either party’s election not to renew the employment agreement. In the event the Scholz Employment Agreement is terminated as a result of Dr. Scholz’s death, Dr. Scholz’s authorized representative shall be entitled to receive all Accrued Obligations (as defined in the employment agreement), full acceleration of vesting of all issued and outstanding stock options, benefits for up to 1 year, any unpaid annual bonus amounts and a pro rata bonus payment. In the event the Scholz Employment Agreement is terminated by MabVax for Disability or without Cause, by Dr. Scholz for Good Reason, non-renewal by MabVax or in connection with a Change in Control, Dr. Scholz would be entitled to receive all Accrued Obligations, full acceleration of vesting of all issued and outstanding stock options, unpaid bonus amounts, benefits for up to one year or until Dr. Scholz obtains coverage through subsequent employment (whichever is earlier) and severance payments equal to Dr. Scholz’s annual base salary payable in 12 equal monthly installments. In the event the employment agreement is terminated by Telik for Cause, without Good Reason by Dr. Scholz, or the parties elect not to renew the agreement, Dr. Scholz will be entitled to payment of any base salary earned but unpaid through the date of termination and any other payment or benefit to which he is entitled under the applicable terms of any applicable company arrangement during the 30 day period following the termination of the Scholz Employment Agreement.

MabVax Common Stock Financing

Prior to the Merger, on July 8, 2014, MabVax issued shares of MabVax common stock for aggregate proceeds of approximately $3,000,000 in a private placement pursuant to Section 4(a)(2) and Regulation D of the Securities Act with certain institutional investors, or the MabVax Private Placement, pursuant to a Securities Purchase Agreement, dated July 3, 2014, by and among MabVax and certain institutional investors, or the MabVax Purchase Agreement. Pursuant to the MabVax Purchase Agreement, MabVax agreed to issue the purchasers participating in the MabVax Private Placement prior to the closing of the Merger with Telik additional “anti-dilution” shares of MabVax common stock, for no additional consideration should MabVax sell shares of its common stock in the future at a price lower than $2.54 per share prior to the first to occur of (x) December 31, 2015 and (y) the date on which MabVax raised an aggregate of $10,000,000. The number of additional shares would be calculated on a weighted average based on the price per share of equity securities sold by MabVax following the initial closing of the MabVax Private Placement and in no event would a purchaser be issued a number of additional shares of MabVax common stock in excess of 33% of the number of shares initially purchased by such purchaser. These shares of MabVax common stock issued in the MabVax Private Placement were converted into shares of our common stock in connection with the Merger. We also assumed MabVax’s obligations with respect to the anti-dilution provisions in the Merger so that these provisions now apply to sales of our common stock. The full text of the MabVax Purchase Agreement for the MabVax Private Placement is attached as Exhibit 10.12 to this Quarterly Report on Form 10-Q.

 

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Item 6. Exhibits.

 

2.1		Agreement and Plan of Merger and Reorganization, dated May 12, 2014, between Telik, Tacoma Acquisition Corp., Inc. and MabVax. (1)
2.2		Amendment No. 1, dated as of June 30, 2014, by and between Telik and MabVax. (2)
2.3		Amendment No. 2, dated as of July 7, 2014, by and between Telik and MabVax. (3)
3.1		Amended and Restated Certificate of Incorporation. (4)
3.2		Certificate of Amendment to Amended and Restated Certificate of Incorporation. (5)
3.3		Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock of Telik, Inc. (6)
3.4		Certificate of Designations, Preferences and Rights of Series A-1 Convertible Preferred Stock (7)
3.5		Amended and Restated Bylaws. (8)
4.1		Specimen Stock Certificate. (9)
4.2		Form of Common Stock Warrant and Warrant Certificate. (10)
4.3		Form of Common Stock Warrant (11)
4.4		Form of Warrant to Purchase Common Stock (12)
10.1		Securities Purchase Agreement, dated May 12, 2014, between Telik and the investors identified on the Schedule of Buyers therein. (13)
10.2		Registration Rights Agreement, dated as of February 12, 2014, between MabVax and the persons and entities identified on the signature pages thereto. (14)
10.3		Securities Purchase Agreement, dated as of February 12, 2014, between MabVax and the purchasers set forth on the signature pages thereto including that certain Amendment No. 1 to Securities Purchase Agreement, dated as of May 12, 2014, between MabVax and the persons and entities identified on the signature pages thereto. (15)
10.4		Separation Agreement and Release, dated May 12, 2014, between Michael M. Wick and Telik. (16)
10.5		Separation Agreement and Release, dated May 12, 2014, between William P. Kaplan and Telik. (17)
10.6		Separation Agreement and Release, dated May 12, 2014, between Steven R. Schow and Telik. (18)
10.7		Separation Agreement and Release, dated May 12, 2014, between Wendy K. Wee and Telik. (19)
10.8		Omnibus Amendment and Stockholder Consent, dated July 7, 2014, by and among Telik and the Purchasers. (20)
10.9		Employment Agreement, dated July 8, 2014, by and between MabVax and J. David Hansen.
10.10		Employment Agreement, dated July 8, 2014, by and between MabVax and Gregory P. Hanson.
10.11		Employment Agreement, dated July 8, 2014, by and between MabVax and Wolfgang W. Scholz, Ph.D.
10.12		Securities Purchase Agreement, dated July 8, 2014, by and between MabVax and certain institutional investors set forth therein.
10.13		Michael Wick Resignation Letter, dated July 7, 2014. (21)
10.14		Edward W. Cantrall Resignation Letter, dated July 7, 2014. (22)
10.15		Steven R. Goldring Resignation Letter, dated July 7, 2014. (23)

 

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10.16		Richard B. Newman Resignation Letter, dated July 7, 2014. (24)
31.1		Certification required by Rule 13a-14(a) or Rule 15d-14(a).
31.2		Certification required by Rule 13a-14(a) or Rule 15d-14(a).
32.1		Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Document
101.DEF		XBRL Taxonomy Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

 

(1)	Incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

(2)	Incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K, as filed on July 1, 2014 (File No. 000-31265).

(3)	Incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

(4)	Incorporated by reference to Exhibit 3.1 to our Annual Report on Form 10-K for the year ended December 31, 2001, as filed on March 27, 2002 (File No. 000-31265).

(5)	Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K dated March 28, 2012, as filed on March 30, 2012 (File No. 000-31265).

(6)	Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

(7)	Incorporated by reference to Exhibit A to Exhibit 2.1 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

(8)	Incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K dated December 11, 2007, as filed on December 14, 2007 (File No. 000-31265).

(9)	Incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-1A filed on July 3, 2000 (File No. 333-33868).

(10)	Incorporated by reference to Exhibit 4.8 to our Registration Statement on Form S-3, as filed on August 8, 2011 (File No. 333-176121).

(11)	Incorporated by reference to Exhibit B to Exhibit 2.1 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

(12)	Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

(13)	Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

(14)	Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

(15)	Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

(16)	Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

(17)	Incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

(18)	Incorporated by reference to Exhibit 10.6 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

(19)	Incorporated by reference to Exhibit 10.7 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

 

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(20)	Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

(21)	Incorporated by reference to Exhibit 99.1 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

(22)	Incorporated by reference to Exhibit 99.2 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

(23)	Incorporated by reference to Exhibit 99.3 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

(24)	Incorporated by reference to Exhibit 99.4 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

 

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SIGNATURES

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 8, 2014

 

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EXHIBIT INDEX

 

2.1		Agreement and Plan of Merger and Reorganization, dated May 12, 2014, between Telik, Tacoma Acquisition Corp., Inc. and MabVax. (1)
2.2		Amendment No. 1, dated as of June 30, 2014, by and between Telik and MabVax. (2)
2.3		Amendment No. 2, dated as of July 7, 2014, by and between Telik and MabVax. (3)
3.1		Amended and Restated Certificate of Incorporation. (4)
3.2		Certificate of Amendment to Amended and Restated Certificate of Incorporation. (5)
3.3		Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock of Telik, Inc. (6)
3.4		Certificate of Designations, Preferences and Rights of Series A-1 Convertible Preferred Stock (7)
3.5		Amended and Restated Bylaws. (8)
4.1		Specimen Stock Certificate. (9)
4.2		Form of Common Stock Warrant and Warrant Certificate. (10)
4.3		Form of Common Stock Warrant (11)
4.4		Form of Warrant to Purchase Common Stock (12)
10.1		Securities Purchase Agreement, dated May 12, 2014, between Telik and the investors identified on the Schedule of Buyers therein. (13)
10.2		Registration Rights Agreement, dated as of February 12, 2014, between MabVax and the persons and entities identified on the signature pages thereto. (14)
10.3		Securities Purchase Agreement, dated as of February 12, 2014, between MabVax and the purchasers set forth on the signature pages thereto including that certain Amendment No. 1 to Securities Purchase Agreement, dated as of May 12, 2014, between MabVax and the persons and entities identified on the signature pages thereto. (15)
10.4		Separation Agreement and Release, dated May 12, 2014, between Michael M. Wick and Telik. (16)
10.5		Separation Agreement and Release, dated May 12, 2014, between William P. Kaplan and Telik. (17)
10.6		Separation Agreement and Release, dated May 12, 2014, between Steven R. Schow and Telik. (18)
10.7		Separation Agreement and Release, dated May 12, 2014, between Wendy K. Wee and Telik. (19)
10.8		Omnibus Amendment and Stockholder Consent, dated July 7, 2014, by and among Telik and the Purchasers. (20)
10.9		Employment Agreement, dated July 8, 2014, by and between MabVax and J. David Hansen.
10.10		Employment Agreement, dated July 8, 2014, by and between MabVax and Gregory P. Hanson.
10.11		Employment Agreement, dated July 8, 2014, by and between MabVax and Wolfgang W. Scholz, Ph.D.
10.12		Securities Purchase Agreement, dated July 8, 2014, by and between MabVax and certain institutional investors set forth therein.

 

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10.13		Michael Wick Resignation Letter, dated July 7, 2014. (21)
10.14		Edward W. Cantrall Resignation Letter, dated July 7, 2014. (22)
10.15		Steven R. Goldring Resignation Letter, dated July 7, 2014. (23)
10.16		Richard B. Newman Resignation Letter, dated July 7, 2014. (24)
31.1		Certification required by Rule 13a-14(a) or Rule 15d-14(a).
31.2		Certification required by Rule 13a-14(a) or Rule 15d-14(a).
32.1		Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Document
101.DEF		XBRL Taxonomy Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

 

(1)	Incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

(2)	Incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K, as filed on July 1, 2014 (File No. 000-31265).

(3)	Incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

(4)	Incorporated by reference to Exhibit 3.1 to our Annual Report on Form 10-K for the year ended December 31, 2001, as filed on March 27, 2002 (File No. 000-31265).

(5)	Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K dated March 28, 2012, as filed on March 30, 2012 (File No. 000-31265).

(6)	Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

(7)	Incorporated by reference to Exhibit A to Exhibit 2.1 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

(8)	Incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K dated December 11, 2007, as filed on December 14, 2007 (File No. 000-31265).

(9)	Incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-1A filed on July 3, 2000 (File No. 333-33868).

(10)	Incorporated by reference to Exhibit 4.8 to our Registration Statement on Form S-3, as filed on August 8, 2011 (File No. 333-176121).

(11)	Incorporated by reference to Exhibit B to Exhibit 2.1 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

(12)	Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

(13)	Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

(14)	Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

(15)	Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

(16)	Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

(17)	Incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

 

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(18)	Incorporated by reference to Exhibit 10.6 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

(19)	Incorporated by reference to Exhibit 10.7 to our Current Report on Form 8-K, as filed on May 12, 2014 (File No. 000-31265).

(20)	Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

(21)	Incorporated by reference to Exhibit 99.1 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

(22)	Incorporated by reference to Exhibit 99.2 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

(23)	Incorporated by reference to Exhibit 99.3 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

(24)	Incorporated by reference to Exhibit 99.4 to our Current Report on Form 8-K, as filed on July 9, 2014 (File No. 000-31265).

 

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