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EX-23.1 - CONSENTS OF EXPERTS AND COUNSEL - MABVAX THERAPEUTICS HOLDINGS, INC. | ex23-1.htm |
As filed with the Securities and Exchange Commission on January 16,
2018
Registration No. 333-221998
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933
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MABVAX THERAPEUTICS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware
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2834
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93-0987903
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(State or other jurisdiction
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(Primary Standard Industrial
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(I.R.S. Employer
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of incorporation or organization)
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Classification Code Number)
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Identification Number)
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11535 Sorrento Valley Road, Suite 400
San Diego, CA 92121
(858) 259-9405
(Address, including zip
code, and telephone number, including area code, of
registrant’s principal executive offices)
J. David Hansen
Chief Executive Officer
MabVax Therapeutics Holdings, Inc.
11535 Sorrento Valley Road, Suite 400
San Diego, CA 92121
(858) 259-9405
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
With copies to:
Harvey Kesner, Esq.
Avital Perlman, Esq.
Sichenzia Ross Ference Kesner LLP
1185 Avenue of the Americas, 37th Floor
New York, NY 10036
(212) 930-9700
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Approximate date of commencement of proposed sale to the
public:
As soon as practicable after this Registration Statement is
declared effective.
If
any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, check the following
box: ☒
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under
the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same
offering. ☐
If
this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. ☐
If
this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. ☐
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
☐
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Accelerated filer
☐
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Non-accelerated filer (Do not check if a smaller reporting
company) ☐
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Smaller reporting company
☒
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Emerging growth company ☒
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If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial
accounting standards provided pursuant to
Section 13(a) of the Exchange
Act. ☐
The
Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of
1933, as amended, or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission,
acting pursuant to Section 8(a), may determine.
The information in this preliminary prospectus is
not complete and may be changed. These securities may not be sold
until the registration statement filed with the Securities and
Exchange Commission is effective. This preliminary prospectus is
not an offer to sell these securities and is not soliciting an
offer to buy these securities in any jurisdiction where the offer
or sale is not permitted.
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PRELIMINARY PROSPECTUS
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SUBJECT TO COMPLETION
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DATED JANUARY 16, 2018
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Up to
2,551,020
Shares of Common
Stock
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We are
offering, on a “best efforts” basis, up to
2,551,020 shares of our common stock to purchasers in
this offering.
This is
a best-efforts, self-underwritten offering. There is no requirement
to sell any specific number or dollar amount of securities and we
may sell less than $2,500,000 of our common stock. Our officers
will use their best efforts to sell the securities offered. We will
pay all expenses incurred in this offering. The assumed
number of shares offered hereby as reflected in this prospectus is
based on the last reported sale price of our common stock on
January 11, 2018. However, this final public
offering price will be a negotiated price and the final number of
shares offered hereby will be based on such negotiated offering
price.
The
offering will close on _______, 2018, 90 days after the
effectiveness of the registration statement of which this
prospectus is a part, unless all the securities are sold before
that date, we extend the offering another 90 days or we otherwise
decide to close the offering early or cancel it, in each case in
our sole discretion. If we extend the offering, we will provide
that information in an amendment to this prospectus. If we close
the offering early or cancel it, including during any extended
offering period, we may do so without notice to investors, although
if we cancel the offering we will promptly return any funds
investors may already have paid.
There
is no minimum number of shares that we must sell in this offering.
Because there is no minimum offering amount required as a condition
to closing in this offering, the actual public offering amount and
proceeds to us, if any, are not presently determinable and may be
substantially less than all of the securities offered
hereby. As a result, the actual amount of gross proceeds from
the sale of shares, if any, might not be sufficient to cover the
expenses of the offering, our use of proceeds as described herein,
or our near or longer term working capital.
Our
common stock is quoted on the NASDAQ Capital Market under the
symbol “MBVX”. On January 11, 2018, the
closing bid price of our common stock on the NASDAQ Capital Market
was $0.98 per share.
Investing
in our securities involves risks. You should carefully read and
consider the “Risk Factors” beginning on page 7 of this
prospectus before investing.
Neither
the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
Delivery
of
the shares is expected to be made on or about
__________________.
TABLE
OF CONTENTS
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Page
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7
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43
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66
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68
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74
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75
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75
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75
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Index
to Financial Statements
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76
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You
should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with any information
other than that contained in this prospectus. We are offering to
sell, and seeking offers to buy, the securities covered hereby only
in jurisdictions where offers and sales are permitted. The
information in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this
prospectus or any sale of the securities covered hereby. Our
business, financial condition, results of operations and prospects
may have changed since that date. We are not making an offer of
these securities in any jurisdiction where the offer is not
permitted.
For
investors outside the United States: We have not taken any action
that would permit this offering or possession or distribution of
this prospectus in any jurisdiction where action for that purpose
is required, other than in the United States. Persons outside the
United States who come into possession of this prospectus must
inform themselves about, and observe any restrictions relating to,
the offering of the securities covered hereby the distribution of
this prospectus outside the United States.
This
prospectus includes statistical and other industry and market data
that we obtained from industry publications and research, surveys
and studies conducted by third parties. Industry publications and
third-party research, surveys and studies generally indicate that
their information has been obtained from sources believed to be
reliable, although they do not guarantee the accuracy or
completeness of such information. We believe that the data obtained
from these industry publications and third-party research, surveys
and studies are reliable. We are ultimately responsible for all
disclosure included in this prospectus.
We
further note that the representations, warranties and covenants
made by us in any agreement that is filed as an exhibit to the
registration statement of which this prospectus is a part were made
solely for the benefit of the parties to such agreement, including,
in some cases, for the purpose of allocating risk among the parties
to such agreements, and should not be deemed to be a
representation, warranty or covenant to you. Moreover, such
representations, warranties or covenants were accurate only as of
the date when made. Accordingly, such representations, warranties
and covenants should not be relied on as accurately representing
the current state of our affairs.
PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in
this prospectus. This summary is not intended to be complete and
does not contain all of the information that you should consider in
making your investment decision. You should carefully read this
entire prospectus, including our consolidated financial
statements and the related notes and the information set forth
under the headings “Risk Factors” and
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” contained in this
prospectus before making an investment decision.
Unless the context otherwise requires, references to
“we,” “our,” “us,” or the
“Company” in this prospectus mean MabVax Therapeutics
Holdings, Inc. on a consolidated basis with its wholly-owned
subsidiary, MabVax Therapeutics, Inc., as applicable.
Company Background
We are a Delaware corporation, originally
incorporated in 1988 under the name Terrapin Diagnostics, Inc. in
the state of Delaware, and subsequently renamed “Telik,
Inc.” in 1998, and thereafter renamed MabVax Therapeutics
Holdings, Inc. in September 2014. Our principal corporate office is
located at 11535 Sorrento Valley Road, Suite 400, San Diego, CA
92121 and our telephone number is (858) 259-9405. On July 8, 2014,
we consummated a merger with MabVax Therapeutics, pursuant to which
our subsidiary Tacoma Acquisition Corp. merged with and into MabVax
Therapeutics, with MabVax Therapeutics surviving as our wholly
owned subsidiary. Our internet address is www.mabvax.com.
Information on our website is not incorporated into this
prospectus.
Business Overview
We are
a clinical-stage biotechnology company focused on the development
of antibody-based products to address unmet medical needs in the
treatment of cancer. MabVax has discovered a pipeline of
human monoclonal antibody products based on the protective immune
responses generated by patients who have been vaccinated against
targeted cancers with our proprietary vaccines. MabVax's lead
development program is centered around our HuMab-5B1 antibody,
which is fully human and discovered from the immune response of
cancer patients vaccinated with an antigen-specific vaccine during
a Phase I trial at Memorial Sloan Kettering Cancer Center, or
MSK. The antigen the antibody targets is expressed on
more than 90% of pancreatic cancers, and expressed in significant
percentages on small cell lung cancer, stomach, colon and other
cancers, making the antibody potentially broadly applicable to many
types of cancers. We have other antibody candidates that are
in preclinical development.
Monoclonal
antibodies are produced from a single DNA sequence encoded into
multiple cells that all produce the same single antibody. We
generate our pipeline of antibody-based product candidates from
patients who have been vaccinated with proprietary vaccines
licensed from MSK. Our approach involves surveying the protective
immune response from many patients to identify a monoclonal
antibody candidate against a specific target on the surface of a
cancer cell. We believe this approach provides us with a novel
next-generation human antibody technology platform. We believe our
approach to antibody discovery allows us to identify antibody
candidates with superior performance characteristics while
minimizing many of the toxicity and off target binding drawbacks
(phenomenon occurring when antibodies bind to non-cancer cells) of
other discovery technologies.
Our
lead clinical development program is a Phase 1 clinical trial of
our HuMab-5B1 radioimmunotherapy (“RIT”) product that
we have designated as MVT-1075. The development of MVT-1075 is
based on experience we gained through clinical studies of over 50
patients with either our antibody we designate as MVT-5873, or our
imaging agent we designate as MVT-2163 that are discussed in more
detail in our descriptions and results to date of our clinical
development programs. We initiated the Phase 1 clinical trial of
MVT-1075 in June 2017 and completed enrollment and dosing of the last patient in the
initial cohort of patients in December 2017. The clinical program
is intended to evaluate the product for the treatment of
pancreatic, colon and lung cancer. The primary objective is to
determine the maximum tolerated dose in patients who have failed
prior therapies. Secondary endpoints include evaluating tumor
response rate and duration of response by RECIST 1.1, and to
determine dosimetry and pharmacokinetics. This dose-escalation
study utilizes a traditional 3+3 design. We expect to
receive and report on interim safety data and tumor assessment
using standard RECIST measurement criteria for cohort 1 in the
first quarter 2018.
We also
intend to continue clinical development of the antibody MVT-5873 in
combination with gemcitabine and nab-paclitaxal in first line
therapy for the treatment of patients newly diagnosed with
pancreatic cancer. We have treated two cohorts of patients in our
combination therapy, for a total of six patients to date in this
study. In November, we expanded enrollment of an additional cohort
of three patients in the combination therapy with the objective of
confirming early observations. We expect to receive and report on
interim response data for the latest cohort in the first quarter of
2018.
In
September 2017, we announced our engagement of Greenhill & Co.
(NYSE: GHL) to serve as an advisor to assist the Company in
exploring and evaluating strategic options with the goal of
maximizing stockholder value. MabVax is currently in advanced
discussions with several potential strategic partners that could
result in multiple licensing and partnering transactions in early
2018. Greenhill and Co’s sole mandate has been to provide
MabVax with opportunities in exploring and evaluating strategic
options while continuing to identify new opportunities. We have now
reached the stage where several of our discussions with third
parties have led to preliminary terms for potential licensing
and/or partnering of certain antibody assets for defined fields of
use. We expect to retain rights to certain key aspects of our
antibody development program so that we can continue developing
some of these assets on our own using funds from the strategic
transactions. However, there is no guarantee that we will retain
such rights or enter into binding agreements at all with parties
introduced to us by Greenhill & Co. In parallel with the
strategic initiatives efforts led by Greenhill & Co., MabVax
continues to advance its Phase 1 clinical programs including the
MVT-1075 radioimmunotherapy clinical trial for the treatment of
pancreatic, colon and lung cancers, and the MBT-5873 clinical trial
in combination with one or more chemotherapy agents in first line
therapy for patients newly diagnosed with pancreatic
cancer.
Our Growth and Core Business Strategy
Our
primary business strategy is to develop our early antibody product
candidates through proof of concept clinical trials, which may
represent either phase I or phase II clinical trials depending on
the program and extent of progress. Once through proof of concept
clinical trials, we will decide whether to license, partner or sell
those product candidates, or continue to develop the candidates
depending on several variables such as access to additional
capital, cost of later stage clinical trials, risk of such
development efforts, and the value derived from licensing,
partnering or selling those assets.
Our Clinical Development Programs
MVT-1075 – our lead development program as a
Radioimmunotherapy for Pancreatic Cancer
In June
2017, we initiated a Phase 1 clinical trial of our HuMab-5B1
radioimmunotherapy product MVT-1075 based on experience we gained
through clinical studies of over 50 patients with either the
antibody MVT-5873, or our imaging agent we designate as
MVT-2163.
MVT-1075 combines
the demonstrated targeting specificity of the HuMab-5B1 antibody
with the proven clinical success of a low-energy radiation emitter,
177Lutetium [177Lu]. We dosed MVT-1075 in our first patient in June
2017. This Phase 1 first-in-human clinical trial is an open-label,
multi-center study evaluating the safety and efficacy of MVT-1075
in up to 22 patients with CA19-9 positive malignancies. The primary
objective is to determine the maximum tolerated dose and safety
profile in patients with recurring disease who have failed prior
therapies. Secondary endpoints are to evaluate tumor response rate
and duration of response by RECIST 1.1, and to determine dosimetry
and pharmacokinetics. This dose-escalation study utilizes a
traditional 3+3 design that is commonly used by companies as a dose
escalation strategy typical for phase I trials for the treatment of
cancer. The investigative sites are Honor Health in Scottsdale,
Arizona, and Memorial Sloan Kettering Cancer Center in New York
City.
In
April, the Company reported preclinical results for MVT-1075 at the
American Association of Clinical Research (AACR) Annual Meeting,
demonstrating suppression, and in some instances, regression, of
tumor growth in xenograft animal models of pancreatic cancer,
potentially making this product an important new therapeutic agent
in the treatment of pancreatic, colon and lung cancers. Supporting
the MVT-1075 RIT clinical investigation are the Company's
successful MVT-5873 and MVT-2163 Phase 1a safety and target
specificity data which were reported earlier this year at the
annual meetings of the American Society for Clinical Oncology
(ASCO) and the Society for Nuclear Medicine and Molecular Imaging
(SNMMI), respectively. The combined results from 50 patients in the
Phase 1 MVT-5873 and MVT-2163 studies established safety and
provided significant insight into drug biodistribution and an
optimal dosing strategy, which the Company has incorporated into
the MVT-1075 program.
MVT-5873 – for the Treatment of Pancreatic
Cancer
MVT-5873 as a Monotherapy in Late Stage Cancer
Patients – We reported results from our Phase 1a
clinical trial of 32 patients being treated with our therapeutic
antibody MVT-5873 as a monotherapy, which was evaluated for
safety and tolerability in patients with advanced pancreatic cancer
and other CA19-9 positive cancers, in a poster presentation at the
American Society of Clinical Oncology (ASCO) Annual Meeting on June
3, 2017. The Company highlighted that the single agent MVT-5837
appears safe and well tolerated in patients at biologically active
doses. Furthermore, all patients were evaluated by RECIST 1.1 for
tumor response, and the Company reported 11 patients achieved
stable disease in this dose escalation safety trial of 32
patients.
The
results of the Phase 1a trial with MVT-5873 indicate that this
fully-human antibody targeting CA19-9 cancers can be administered
at doses with acceptable safety and with a potentially positive
impact on disease. CA19-9 is broadly expressed in various cancers
including pancreatic, colon, and small cell lung cancer making this
antibody potentially useful for a larger patient population.
Clinical signals from an identifiable subset of subjects enabled us
to understand those patients most likely to respond to a MVT-5873
based therapy. At the maximum tolerated dose (MTD) established in
this trial, we have demonstrated an acceptable safety margin for
the antibody.
MVT-5873 in Combination with a Standard of Care
Chemotherapy – Based upon observations from the first
two cohorts of patients treated, the Company is continuing clinical
development of MVT-5873 in combination with gemcitabine and
nab-paclitaxal as a first line therapy for the treatment of
patients newly diagnosed with pancreatic cancer. MabVax has treated
six patients as of October 12, 2017 and is actively enrolling
additional patients with the objective of obtaining additional
safety and tumor response (RECIST 1.1) data. Dr. Eileen O’Reilly, Associate
Director of the David M. Rubenstein Center for Pancreatic Cancer
Research, attending physician, member at Memorial Sloan Kettering
Cancer Center and Professor of Medicine at Weill Cornell Medical
College, is the lead investigator in the MVT-5873 Phase 1 clinical
trial.
MVT-2163 – as an Imaging Agent for Pancreatic
Cancer
We
reported results from our Phase 1a clinical trial of ImmunoPET
imaging agent, MVT-2163, in 12 patients with locally advanced or
metastatic adenocarcinoma of the pancreas (PDAC) or other CA19-9
positive malignancies in a poster presentation and podium talk at
the Society of Nuclear Medicine and Molecular Imaging (SNMMI)
Annual Meeting held in Denver, CO on June 10-14, 2017.
The
Phase Ia clinical trial of MVT-2163 phase I trial was intended to
evaluate our next generation diagnostic PET imaging agent in
patients with locally advanced or metastatic adenocarcinoma of the
pancreas (PDAC) or other CA19-9 positive malignancies. MVT-2163
(89Zr-HuMab-5B1) combines the well-established PET imaging
radiolabel Zirconium-89 [89Zr] with the targeting specificity of
MVT-5873. We designed the trial to establish safety,
pharmacokinetics, biodistribution, optimal time to obtain the PET
image, and the amount of MVT-5873 to be administered as a blocking
dose prior to administration of MVT-2163 to obtain optimized PET
scan images.
As of
July 2017, 12 patients had been treated in this first-in-human
trial evaluating the safety and feasibility of MVT-2163 to image
pancreatic tumors and other CA19-9 positive malignancies. MVT-2163
was administered alone and in combination with MVT-5873 and was
well tolerated in all cohorts. The only toxicities were infusion
reactions that resolved on the day of the injection, with some
patients requiring standard supportive medication.
Uptake
of MVT-2163 was observed in primary tumors and metastases as early
as day two and continuously through day seven. Standard Uptake
Values (SUV), a measurement of activity in PET imaging, reached as
high as 101 in the study. The investors reported that the high SUVs
are amongst the highest lesion uptake values they have ever seen
for a radiolabeled antibody. Bone and soft tissue disease were
readily visualized and lesion uptake of the radiotracer was higher
than typically seen with PET imaging agents. The correlation with
Computerized Tomography (CT) scans was high.
We
reported that administering MVT-5873 prior to dosing MVT-2163
reduces liver uptake facilitating detection of liver metastases. In
addition, we determined that the MVT-5873 cold antibody pre-dose
does not interfere with the uptake of MVT-2163 on cancer
lesions.
In
summary, the MVT-2163 product produced acceptable safety
tolerability, pharmacokinetics and biodistribution. MVT-2163 also
produced high quality PET images identifying both primary tumor and
metastatic sites. There was a promising correlation with diagnostic
CT that warrants further studies correlating these findings with
histopathology to assess the accuracy of MVT-2163 in identifying
smaller metastatic nodes below the detection level of standard CT
scans. The continual increase in high SUV values on cancer lesions
in this study supports the use of the Company’s MVT-1075
radioimmunotherapy product which utilizes the same antibody to
deliver a radiation dose for the treatment of patients with
pancreatic, lung and colon cancers.
Plan for 2018
Based
on inquiries from third parties regarding their interest in MabVax
assets and clinical progress to date with MVT-5873, MVT-1075, and
MVT-2163, and with the assistance of investment advisor Greenhill
& Co., we expect to be able to decide on one or more strategic
alternatives for the Company in the first quarter of
2018.
We
currently plan to continue clinical development of MVT-1075 for the
treatment of locally advanced or metastatic pancreatic cancer
patients, by completing additional cohorts of patients in a dose
escalation safety trial to continue to assess the safety and
potential efficacy of this treatment, and expect to report results
in the first half of 2018.
We also
currently intend to continue clinical development of MVT-5873 in
combination with gemcitabine and nab-paclitaxal in first line
therapy for the treatment of patients newly diagnosed with
pancreatic cancer. We have treated two cohorts of patients for a
total of six patients through September 22, 2017 in this study; and
have initiated enrollment for an additional cohort of patients with
the objective of confirming early observations in the first quarter
2018.
Our plans beyond
the first quarter 2018 will depend substantially on which product
portfolios are licensed and/or sold to potential acquirers and/or
licensees in the remainder of 2017 and early 2018, and the
availability of financial resources resulting from such potential
transactions that are under consideration when we enter
2018.
Listing Reverse Split
On
August 2, 2016, the Board approved a 1-for-7.4 reverse stock split,
or the “Listing Reverse Split.” The Listing Reverse
Split was intended to allow us to meet the minimum share price
requirement of the NASDAQ Capital Market. On August 11, 2016, we
received approval from the NASDAQ Capital Market for the listing of
our common stock under the symbol “MBVX”, subject to
implementation of the Listing Reverse Split and closing of our
August 2016 public offering (the “August 2016 Public
Offering”). On August 16, 2016, we implemented the
Listing Reverse Split, closed on the August 2016 Public Offering
and began trading on the NASDAQ Capital Market at the open of
business on August 17, 2016. Unless otherwise stated herein, all
per share amounts herein give effect to the Listing Reverse
Split.
Recent Events
July 2017 Private Placement – On
July 27, 2017, we entered into a subscription agreement with an
accredited investor pursuant to which we agreed to sell 152,143
restricted shares of common stock for $125,000 (the “July
2017 Private Placement”). As part of the transaction, the
Company agreed to reprice the investor’s warrant to purchase
225,225 shares of common stock from $11.10 to $2.00 per warrant
share and remove the cashless exercise feature. The transaction
closed on August 2, 2017. The impact of repricing the
warrants to $2.00 a share, which took effect on August 2, 2017, was
immaterial, as the stock price on the date of the closing of the
transaction was $0.70 and the warrants at $2.00 a share expired on
October 10, 2017, unexercised.
August 11, 2017 Registered
Direct Offering – On
August 11, 2017, we entered into securities purchase agreements to
sell 2,386.36 shares of Series J Preferred Stock with a stated
value of $550 per share (the “August 2017
Offering”). The Series J Preferred Stock is convertible
into common stock at $0.55 per share, subject to adjustment for
stock splits, stock dividends, recapitalizations, combinations,
subdivisions or other similar events and was purchased by certain
existing investors of the Company (the “Prior
Investors”). The total amount of the securities purchase
agreements amounted to approximately $1,312,500, before estimated
expenses of $123,083. The
Certificate of Designation for the Series J Preferred Stock
includes a 4.99% beneficial ownership conversion blocker, a 19.99%
blocker provision to comply with the NASDAQ Capital Market rules
until stockholders have approved any or all shares of common stock
issuable upon conversion of the Series J Preferred Stock, which was
approved in a special meeting of stockholders on October 2, 2017
(the “October 2017 Special Meeting”), and a 125%
liquidation preference. All shares of the Company’s capital
stock will be junior in rank to the Series J Preferred Stock at the
time of creation, with respect to the preferences as to dividends,
distributions and payments upon the liquidation, dissolution and
winding-up of the Company, except for the Company’s Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock, Series H Preferred Stock, and
Series I Preferred Stock.
In connection with the August 2017 Offering, we agreed with the
lead investor (the “Lead Investor”) pursuant to a
Letter Agreement, dated August 9, 2017 (the “August 2017
Letter Agreement”), to issue incentive shares (the
“Incentive Shares”) to Prior Investors as an incentive
to invest in the August 2017 Offering. Such Prior Investors
received a portion of 65,000 shares in the form of a new Series K
Preferred Stock, allocated by the Lead Investor, and convertible
into 6,500,000 shares of common stock, subject to stockholder
approval, which was also approved in the October 2017 Special
Meeting. The stated value of each share of Series K Preferred Stock
is $0.01 and the conversion rate is the stated value of $0.01
divided by .0001, or one hundred (100) shares of common stock upon
conversion of one (1) share of Series K Preferred Stock, each
subject to adjustment for stock splits, stock dividends,
recapitalizations, combinations, subdivisions or other similar
event, and have a 4.99% beneficial ownership conversion blocker. In
the event of a liquidation, dissolution or winding up of the
Company, each share of Series K Preferred Stock will be entitled to
a per share preferential payment equal to the par value, or $0.01
per share. All shares of the Company’s capital stock will be
junior in rank to the Series K Preferred Stock at the time of
creation, with respect to the preferences as to dividends,
distributions and payments upon the liquidation, dissolution and
winding-up of the Company, except for the Company’s Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock, Series H Preferred Stock, Series I
Preferred Stock and Series J Preferred Stock. The Company recorded
a deemed dividend of $3,120,000 in August 2017 in connection with
issuing the Incentive Shares.
The
August 2017 Letter Agreement also specified the
following:
●
That the Company files a proxy
statement for a special meeting of stockholders within 10 days of
closing the August 2017 Offering. Proposals shall include
(i) an amendment to the Company’s Certificate of
Incorporation to effect a reverse stock split of its issued and
outstanding common stock by a ratio of not less than one-for-two
and not more than one-for-twenty at any time prior to one year from
the date of the special meeting, with the exact ratio to be set at
a whole number within this range as determined by the Board of
Directors, (ii) the issuance of securities in one or more
non-public offerings where the maximum discount at which securities
will be offered will be equivalent to a discount of 30% below the
market price of the common stock, as required by and in accordance
with Nasdaq Marketplace Rule 5635(d), (iii) the issuance of
securities in one or more non-public offerings where the maximum
discount at which securities will be offered will be equivalent to
a discount of 20% below the market price of the Common Stock, as
required by and in accordance with Nasdaq Marketplace Rule 5635(d),
(iv) the issuance of the Series J Conversion Shares and (v) the
issuance of the Inducement Shares.
●
Lead
Investor will commit to investing an additional $1,000,000 in a new
private or public offering of up to $8,000,000 (the
“$8,000,000 Financing”). The $8,000,000 Financing shall
sign and close following shareholder approval of each of the
proposals identified in the August 2017 Letter
Agreement.
●
That
the employment terms of all
management be reduced to two years from three years and that
management defer portions of their salary for the remainder of the
year, which shall be paid upon the earlier of completion of the
$8,000,000 Financing or a business transaction that represents, or
transactions in the aggregate that represent, in excess of
$10,000,000.
Effective with the Company’s pay period
ending August 10, 2017, and without changing their employment
agreements dated July 1, 2017, several members of management
volunteered to defer receiving portions of their salaries for the
remainder of 2017. The voluntary deferral of cash payments is
intended to help with the Company’s cash flow for the
remainder of the year, with voluntary reductions by the management
team committed to remain in effect until the earlier of completing
a successful financing of at least $8.0 million, a business
transaction that represents, or business transactions in the
aggregate that represent, an amount of $10.0 million or greater, or
the end of the year, whichever occurs first. The employment
agreements with the Company remain unchanged, except that the
executives have volunteered to reduce the terms of their employment
agreements to two years from three in connection with
the August 2017 Offering and August
2017 Letter Agreement with the Lead
Investor.
On August 14, 2017, the Chairman of
the Compensation Committee, acting on behalf of the Board of
Directors sent a letter to each executive of the Company stating
that the Board deems it in the best interests of the Company to
request that the executive voluntarily defer a portion of his
regular salary to help with cash flow of the Company. On August 16
and August 21, 2017, Paul Resnick, M.D. and Paul Maffuid, Ph.D.,
respectively gave notice of good reason (as that term is defined in
their employment agreements or “Good Reason”) for
termination of their employment. The Company had 30 days from the
notification date under each of their employment agreements to cure
their concerns. In oral discussions with each executive the
President and Chief Executive Officer communicated on behalf of the
Compensation Committee the Company’s intention to provide
additional equity compensation in return for salary deferrals.
Given the perceived uncertainty about the Company’s plans at
the time for addressing the concerns of Dr. Resnick and Dr.
Maffuid, and that nothing in writing had been provided as possible
equity compensation, they each submitted their notices to the
Company of good reason for termination. Further, they each
expressed in oral conversations that they wanted to remain employed
by the Company. The Company cured each executive’s concerns
within the 30-day cure period, by reinstating the deferred salary
for Dr. Resnick in one instance, and in granting restricted stock
to all executives with vesting over time, as disclosed in the
filings of Form 4s following the approvals. Both executives
rescinded their notices of good reason for termination on September
7, 2017, and all executives’ employment agreements remain
unchanged as the salary deferrals remain to be
voluntary.
In
order to meet the NASDAQ Capital Market rules in the August 2017
Offering, we were not obligated to issue any shares of common stock
upon conversion of the Series J Preferred Stock which would cause
the Company to breach our obligations under the rules and
regulations of the NASDAQ Capital Market, which limit the aggregate
number of shares issued at a discount to market at 19.99% of the
number of shares outstanding on the closing date of the August 2017
Offering, except that such limitation shall not apply in the event
that we obtain the approval of our stockholders as required by the
applicable rules of the NASDAQ Capital Market for issuances of
common stock in excess of such amount. Similarly, none of the
Series K Preferred Stock may be converted into common stock until
we obtain the approval of our stockholders. At the October 2017
Special Meeting, we obtained approval to issue shares underlying
all of the Series J Preferred Stock and the Series K Preferred
Stock.
September 11, 2017 Registered
Direct Offering – On September 11, 2017, we entered into an agreement to
sell 4.0 million shares of common stock at $0.50 a share for gross
proceeds of approximately $2.0 million, before estimated
expenses of $147,639. The shares were offered and sold to certain
accredited investors in a registered direct offering. Laidlaw & Company (UK) Ltd. acted as
placement agent for the offering.
September 22, 2017 Registered
Direct Offering – On September 22, 2017, we entered
into a subscription agreement with select accredited investors
relating to the Company’s registered direct offering,
issuance and sale of 2,016,129 shares of the Company’s common
stock, $0.01 par value per share. The purchase price per share was
$0.62. The total amount of the subscription agreements amounted to
$1,250,000, before estimated expenses of $35,000.
October 10, 2017 Registered Direct
Offering – On October 10, 2017, we entered into a
subscription agreement with select accredited investors relating to
the Company’s registered direct offering, issuance and sale
of 769,231 shares of the Company’s common stock, $0.01 par
value per share. The purchase price per share was $0.65. The total
amount of the subscription agreements amounted to $500,000, before
estimated expenses of $15,000. The securities were offered by means
of the Company’s shelf registration statement on Form S-3
(File #333-219291) which was declared effective on July 27, 2017 by
the Securities and Exchange Commission.
October 18, 2017 Preferred Stock Exchange
Agreement – On October 18, 2017, we entered into
exchange agreements (each, an “Exchange Agreement” and
collectively, the “Exchange Agreements”) with the
holders of all of the Company’s outstanding shares of Series
F Preferred Stock, Series G Preferred Stock and Series H Preferred
Stock, pursuant to which an aggregate of 665,281 shares of Series F
Preferred Stock, 1,000,000 shares of Series G Preferred Stock and
850 shares of Series H Preferred Stock were exchanged for an
aggregate of 58,000 newly authorized shares of Series L Convertible
Preferred Stock (the “Series L Preferred Stock”)
convertible into 9,666,669 shares of common stock (the
“Conversion Shares”), subject to a conversion
restriction until shareholder approval is obtained. We obtained the
necessary shareholder approval on December 1, 2017.
The
terms of the Exchange Agreements and Series L Preferred Stock were
determined by arms-length negotiation between the parties. No
commission or other payment was received by the Company in
connection with the Exchange Agreements. Such exchange was
conducted and the Series L Preferred Stock issuable pursuant to the
Exchange Agreements, including the Conversion Shares, were issued
pursuant to the exemption provided by Section 3(a)(9) of the
Securities Act.
Pursuant to a
registration rights agreement entered into between the Company and
the holders on October 18, 2017, we agreed to use reasonable best
efforts to file a registration statement registering the Conversion
Shares for resale within ten days of closing and cause the
registration statement to be declared effective within 30 days of
filing.
Summary of the
Offering
Common stock offered by us
|
|
Up to
2,551,020 shares of common stock for up to $2,500,000
of gross proceeds.
|
|
|
|
Offering
price
|
|
The
assumed number of shares offered hereby as reflected in this
prospectus is based on the last reported sale price of our common
stock on January 11, 2018. However, this final
public offering price will be a negotiated price and the final
number of shares offered hereby will be based on such negotiated
offering price.
|
|
|
|
Common stock outstanding before this offering
|
|
22,982,695
|
|
|
|
Common stock outstanding after this offering (assuming the
sale of all shares covered hereby)
|
|
25,533,715
shares (assuming the maximum offering is sold).
|
|
|
|
No minimum offering
|
|
There
is no minimum amount required for us to close this offering and we
may raise substantially less than the $2,500,000 in common stock
offered hereby. Because there is no minimum offering amount
required as a condition to closing in this offering, the actual
public offering amount and proceeds to us, if any, are not
presently determinable and may be substantially less than all of
the securities offered hereby.
|
|
|
|
Duration of offering
|
|
The
offering will close on _______, 2018, 90 days after the
effectiveness of the registration statement of which this
prospectus is a part, unless all the securities are sold before
that date, we extend the offering another 90 days or we otherwise
decide to close the offering early or cancel it, in each case in
our sole discretion. If we extend the offering, we will provide
that information in an amendment to this prospectus. If we close
the offering early or cancel it, including during any extended
offering period, we may do so without notice to investors, although
if we cancel the offering we will promptly return any funds
investors may already have paid.
|
|
|
|
Use of proceeds
|
|
We
intend to use the net proceeds received from this offering to
continue funding two Phase I clinical trials: our
radioimmunotherapy product candidate and our antibody therapeutic
product candidate in combination with a chemotherapy agent; and for
working capital and general corporate purposes. See “Use of
Proceeds” on page 24 of this prospectus.
|
|
|
|
Risk factors
|
|
See
“Risk Factors” beginning on page 7 of this prospectus
for a discussion of factors you should carefully consider before
investing in our securities.
|
|
|
|
NASDAQ trading symbol
|
|
Our
common stock is quoted on the NASDAQ Capital Market under the
symbol “MBVX”.
|
The
number of shares of common stock shown above to be outstanding
before and after this offering is based on 22,982,695
shares outstanding as of January 11, 2018, and
excludes as of that date:
●
2,756,092 shares of
our common stock issuable upon exercise of outstanding options
under our equity incentive plans at a weighted-average exercise
price of $ 4.77 per share;
●
1,268,056 shares of
our common stock issuable upon exercise of outstanding warrants
with a weighted-average exercise price of $6.37 per
share;
●
18,668,610 shares
of our common stock issuable upon conversion of outstanding shares
of our Series D Preferred Stock, Series E Preferred Stock, Series I
Preferred Stock, Series J Preferred Stock, Series K Preferred Stock
and Series L Preferred Stock;
●
4,716,448 shares of
our common stock that are reserved for equity awards that may be
granted under our equity incentive plans; and
●
102,741
shares of our common stock issuable upon vesting of restricted
stock units granted.
Unless
otherwise indicated, the information in this prospectus gives
effect to the 1 for 8 reverse split of our common stock effected on
September 8, 2014, and the Listing Reverse Split.
RISK FACTORS
Any investment in our securities involves a high degree of risk.
Investors should carefully consider the risks described below and
all of the information contained in this prospectus before deciding
whether to purchase our securities. Our business, financial
condition and results of operations could be materially adversely
affected by these risks if any of them actually occur. This
prospectus also contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially
from those anticipated in these forward-looking statements as a
result of certain factors, including the risks we face as described
below and elsewhere in this prospectus.
Risks Relating to Our Financial Condition
We will be required to raise additional funds to finance our
operations and remain a going concern; we may not be able to do so
when necessary, and/or the terms of any financings may not be
advantageous to us, requiring cutbacks in personnel.
Our
operations to date have consumed substantial amounts of cash.
Negative cash flows from our operations are expected to continue
over at least the next several years. Our cash utilization amount
is highly dependent on the progress of our product development
programs, particularly, the results of our preclinical and clinical
studies and those of our partners, the cost, timing and outcomes of
regulatory approval for our product candidates, and the rate of
recruitment of patients in our human clinical trials. In addition,
the further development of our ongoing clinical trials will depend
on upcoming analysis and results of those studies and our financial
resources at that time.
Although
we have raised approximately $4,900,000, net of offering costs,
since June 30, 2017, for various financings and offerings, we will
require future additional capital infusions including public or
private financing, strategic partnerships or other arrangements
with organizations that have capabilities and/or products that are
complementary to our own capabilities and/or products, in order to
continue the development of our product candidates. At present, we
have sufficient cash to fund operations until February 2018
assuming we do not complete any strategic or financing transactions
between now and February 2018. We are exploring and evaluating
strategic options with the goal of maximizing stockholder value,
and currently working with our financial advisor Greenhill &
Co., to assist us with our efforts.
Our
ongoing capital requirements will depend on numerous factors,
including: the progress and results of preclinical testing and
clinical trials of our product candidates under development; the
costs of complying with the FDA and other domestic and foreign
regulatory agency requirements, the progress of our research and
development programs and those of our partners; the time and costs
expended and required to obtain any necessary or desired regulatory
approvals; the resources that we devote to manufacturing
expenditures; our ability to enter into licensing arrangements,
including any unanticipated licensing arrangements that may be
necessary to enable us to continue our development and clinical
trial programs; the costs and expenses of filing, prosecuting and,
if necessary, enforcing our patent claims, or defending against
possible claims of infringement by third-party patent or other
technology rights; the cost of commercialization activities and
arrangements, if any, that we undertake; and, if and when approved,
the demand for our products, which demand depends in turn on
circumstances and uncertainties that cannot be fully known,
understood or quantified unless and until the time of approval,
including the range of indications for which any product is granted
approval. If we are unable to raise additional capital, then we may
have to substantially curtail our clinical trials which could slow
the progress in the development of our products.
We are required to obtain the consent of an existing investor, or
the Lead Investor, to certain future transactions, which may hinder
our ability to obtain future financing.
We
granted to the Lead Investor the right to approve future
transactions that require stockholder approval under the rules of
the
NASDAQ Stock Market LLC or any state laws (the
“Consent”). These transactions could include offerings
of our securities, mergers, acquisitions, or sales of some or
substantially all of our assets.
Should
the Consent be required in connection with future offerings, we may
be required again to provide additional consideration, including,
but not limited to, consideration in the form of cash and/or
additional shares of our capital stock and/or securities
convertible into or exercisable for shares of our capital stock, in
order to obtain the Consent. If we are unable to obtain the
Consent when necessary for future offerings, we may be unable to
raise additional funds. An inability to raise additional funds
could have a material adverse effect on our financial condition,
results of operations, ability to conduct our business and on the
price of our common stock.
The terms of our secured debt facility require us to meet certain
operating and financial covenants and place restrictions on our
operating and financial flexibility. If we raise additional capital
through debt financing, the terms of any new debt could further
restrict our ability to operate our business.
Effective
in January 2016, we entered into a $10 million loan and
security agreement with Oxford Finance LLC, or Oxford Finance, that
is secured by a lien covering substantially all of our assets,
excluding intellectual property. As of September 30, 2017, we had
an outstanding principal balance of approximately $3.9 million. The
option to draw the second $5 million expired on September 30, 2016.
The loan and security agreement contains customary affirmative and
negative covenants and events of default. The affirmative covenants
include, among others, covenants requiring us to maintain our legal
existence and governmental approvals, deliver certain financial
reports and maintain insurance coverage. The negative covenants
include, among others, restrictions on transferring collateral,
changing our business, incurring additional indebtedness, engaging
in mergers or acquisitions, paying dividends or making other
distributions, making investments and creating other liens on our
assets, in each case subject to customary exceptions. As of
January 11, 2018, we were in compliance with all the
covenants. If we default under the loan agreement, the lenders may
accelerate all of our repayment obligations and take control of our
pledged assets, potentially requiring us to renegotiate our
agreement on terms less favorable to us or to immediately cease
operations. Further, if we are liquidated, the lender’s right
to repayment would be senior to the rights of the holders of our
common stock and preferred stock to receive any proceeds from the
liquidation. The lenders could declare a default upon the
occurrence of any event that they interpret as a material adverse
change as defined under the loan agreement, thereby requiring us to
repay the loan immediately or to attempt to reverse the declaration
of default through negotiation or litigation. Any declaration by
the lenders of an event of default could significantly harm our
business and prospects and could cause the price of our common
stock to decline. If we raise any additional debt financing, the
terms of such additional debt could further restrict our operating
and financial flexibility.
We have a history of losses, and we anticipate that we will
continue to incur losses in the future; our auditors have included
in their audit report an explanatory paragraph as to substantial
doubt as to our ability to continue as a going
concern.
We have
experienced net losses every year since our inception and, as of
September 30, 2017, had an accumulated deficit of $101,046,557. Our
auditors have included in their audit report a “going
concern” explanatory paragraph as to substantial doubt as to
our ability to continue as a going concern that assumes the
realization of our assets and the satisfaction of our liabilities
and commitments in the normal course of business. Until such time
as we have completed more than one license agreement for our
technology, and assuming we have sufficient funding from such
licenses and financing transactions to continue to sustain
operations, we anticipate continuing to incur substantial
additional losses over at least the next several years due to,
among other factors, expenses related to the following: continuing
Phase I clinical trials with MVT-1075 as a radioimmunotherapy
agent, and MVT-5873 in combination with a chemotherapy agent, for
the treatment of various cancers, preclinical testing of follow-on
antibody candidates, investor and public relations, SEC compliance
efforts, anticipated research and development activities and the
general and administrative expenses associated with each of these
activities. We have not yet commercialized any product candidates.
Our ability to attain profitability will depend upon our ability to
enter into material revenue generating license arrangements,
develop and commercialize products that are effective and
commercially viable, to obtain regulatory approval for the
manufacture and sale of our products and to license or otherwise
market our products successfully. We may never achieve
profitability, and even if we do, we may not be able to sustain
being profitable. If we are unable to obtain additional capital we
may be forced to license, sell or terminate our activities with
respect to promising technologies which may require us to agree to
disadvantageous terms that will prevent us from realizing the
potential value from the results of our efforts and
expenditures.
Risks Related to our Business
If we are unable to obtain required regulatory approvals, we will
be unable to market and sell our product candidates.
Our
product candidates are subject to extensive governmental
regulations relating to development, clinical trials,
manufacturing, oversight of clinical investigators, recordkeeping
and commercialization. Rigorous preclinical testing and clinical
trials and an extensive regulatory review and approval process are
required to be successfully completed in the United States and in
each foreign jurisdiction in which we offer our products before a
new drug or other product can be sold in such jurisdictions.
Satisfaction of these and other regulatory requirements is costly,
time consuming, uncertain, and subject to unanticipated delays. The
time required to obtain approval by the FDA, or the regulatory
authority in such other jurisdictions is unpredictable and often
exceeds five years following the commencement of clinical trials,
depending upon the complexity of the product candidate and the
requirements of the applicable regulatory agency.
In
connection with the clinical development of our product candidates,
we face risks that:
●
the
product candidate may not prove to be safe and
efficacious;
●
patients
may die or suffer serious adverse effects for reasons that may or
may not be related to the product candidate being
tested;
●
we
may fail to maintain adequate records of observations and data from
our clinical trials, to establish and maintain sufficient
procedures to oversee, collect data from, and manage clinical
trials, or to monitor clinical trial sites and investigators to the
satisfaction of the FDA or other regulatory agencies;
●
the
results of later-phase clinical trials may not confirm the results
of earlier clinical trials; and
●
the
results from clinical trials may not meet the level of statistical
significance or clinical benefit-to-risk ratio required by the FDA
or other regulatory agencies for marketing approval.
Only
a small percentage of product candidates for which clinical trials
are initiated receive approval for commercialization. Furthermore,
even if we do receive regulatory approval to market a product
candidate, any such approval may be subject to limitations such as
those on the indicated uses for which we may market a particular
product candidate.
Our product candidates have not completed sufficient clinical
trials to obtain regulatory approval, and may never demonstrate
sufficient safety and efficacy in order to do so.
Our
product candidates are in the clinical and pre-clinical stages of
development. In order to achieve profitable operations, we alone,
or in collaboration with others, must successfully license,
develop, manufacture, introduce and market our products. The time
frame necessary to achieve market success for any individual
product, whether we or our potential strategic partners develop, is
long and uncertain. The products we are currently developing will
require significant additional research, development and
preclinical and clinical testing prior to application for
commercial use or sale. A number of companies in the biotechnology
and pharmaceutical industries have suffered significant setbacks in
clinical trials, even after showing promising results in early or
later-stage studies or clinical trials. Although we have obtained
some favorable results to-date in preclinical studies and clinical
trials of certain of our potential products, such results may not
be indicative of results that will ultimately be obtained in or
throughout such clinical trials, and clinical trials may not show
any of our products to be safe or capable of producing a desired
result. Additionally, we may encounter problems in our clinical
trials that may cause us to delay, suspend or terminate those
clinical trials.
Further,
our research or product development efforts may not be successfully
completed, any compounds we currently have under development may
not be successfully developed into drugs, may not receive
regulatory approval on a timely basis, if at all, and competitors
may develop and bring to market products or technologies that
render our potential products obsolete. If any of these events
occur, our business would be materially and adversely
affected.
If clinical trials or regulatory approval processes for our product
candidates are prolonged, delayed or suspended, we may be unable to
commercialize our product candidates on a timely basis, which would
require us to incur additional costs and delay our receipt of any
revenue from potential product sales.
We
cannot predict whether we, or our strategic partners if our product
candidates are licensed, will encounter problems with any of our
completed, ongoing or planned clinical trials that will cause us or
any regulatory authority to delay or suspend those clinical trials
or delay the analysis of data derived from them. A number of
events, including any of the following, could delay the completion
of our ongoing and planned clinical trials and negatively impact
our ability to obtain regulatory approval for, and to market and
sell, a particular product candidate:
●
conditions
imposed on us by the FDA or another foreign regulatory authority
regarding the scope or design of our clinical trials;
●
delays
in obtaining, or our inability to obtain, required approvals from
institutional review boards or other reviewing entities at clinical
sites selected for participation in our clinical
trials;
●
insufficient
supply of our product candidates or other materials necessary to
conduct and complete our clinical trials;
●
slow
enrollment and retention rate of subjects in our clinical
trials;
●
serious
and unexpected drug-related side effects related to the product
candidate being tested; and
●
delays
in meeting manufacturing and testing standards required for
production of clinical trial supplies.
Commercialization
of our product candidates may be delayed by the imposition of
additional conditions on our clinical trials by the FDA or any
other applicable foreign regulatory authority or the requirement of
additional supportive studies by the FDA or such foreign regulatory
authority. In addition, clinical trials require sufficient patient
enrollment, which is a function of many factors, including the size
of the patient population, the nature of the trial protocol, the
proximity of patients to clinical sites, the availability of
effective treatments for the relevant disease, the conduct of other
clinical trials that compete for the same patients as our clinical
trials, and the eligibility criteria for our clinical trials. Our
failure to enroll patients in our clinical trials could delay the
completion of the clinical trial beyond its expectations. In
addition, the FDA could require us to conduct clinical trials with
a larger number of subjects than we may have projected for any of
our product candidates. We may not be able to enroll a sufficient
number of patients in a timely or cost-effective manner.
Furthermore, enrolled patients may drop out of our clinical trials,
which could impair the validity or statistical significance of the
clinical trials.
We
do not know whether our clinical trials will begin as planned, will
need to be restructured, or will be completed on schedule, if at
all. Delays in our clinical trials will result in increased
development costs for our product candidates, and our financial
resources may be insufficient to fund any incremental costs. In
addition, if our clinical trials are delayed, our competitors may
be able to bring products to market before we do and the commercial
viability of our product candidates could be limited. In cases
where an outside party, such as the NCI conducts a clinical trial
on our behalf, we may not have direct involvement in discussions
with the FDA regarding the factors discussed above.
We are substantially dependent on the success of our product
candidates, MVT-1075, MVT-5873, and MVT-2163, and we cannot provide
any assurance that any of our product candidates will be
commercialized.
To
date, our main focus and the investment of a significant portion of
our efforts and financial resources has been in the development of
our product candidates, MVT-1075, MVT-5873, and MVT-2163, which are
in clinical development. Our future success depends heavily on our
ability to successfully license, manufacture, develop, obtain
regulatory approval, and commercialize these product candidates,
which may never occur. Before commercializing either
product candidate, we or any potential strategic partner will
require additional clinical trials and regulatory approvals for
which there can be no guarantee that we or our potential strategic
partners will be successful. We currently generate no revenues from
our product candidates, and we may never be able to develop,
license or commercialize a marketable drug.
Our product candidates will remain subject to ongoing regulatory
review even if they receive marketing approval, and if we or our
potential strategic partners fail to comply with continuing
regulations, we or our potential strategic partners could lose
these approvals and the sale of any of our approved commercial
products could be suspended.
Even
if we receive regulatory approval to market a particular product
candidate, the manufacturing, labeling, packaging, adverse event
reporting, storage, advertising, promotion, and record keeping
related to the product will remain subject to extensive regulatory
requirements. If we fail to comply with the regulatory requirements
of the FDA and other applicable domestic and foreign regulatory
authorities or discover any previously unknown problems with any
approved product, manufacturer, or manufacturing process, we could
be subject to administrative or judicially imposed sanctions,
including:
●
restrictions
on the products, manufacturers, or manufacturing
processes;
●
warning
letters;
●
civil
or criminal penalties;
●
fines;
●
injunctions;
●
product
seizures or detentions;
●
pressure
to initiate voluntary product recalls;
●
suspension
or withdrawal of regulatory approvals; and
●
refusal
to approve pending applications for marketing approval of new
products or supplements to approved applications.
Our industry is highly competitive and our product candidates may
become obsolete.
We
are engaged in a rapidly evolving field. Competition from other
pharmaceutical companies, biotechnology companies and research and
academic institutions is intense and likely to increase. Many of
those companies and institutions have substantially greater
financial, technical and human resources than we do. Those
companies and institutions also have substantially greater
experience in developing products, conducting clinical trials,
obtaining regulatory approval and in manufacturing and marketing
pharmaceutical products. Our competitors may succeed in obtaining
regulatory approval for their products more rapidly than we do.
Competitors have developed or are in the process of developing
technologies that are, or in the future may be, the basis for
competitive products. We are aware of potential competitors
developing products similar to our sarcoma vaccine, ovarian cancer
vaccine and pancreatic cancer antibodies product candidates. Our
competitors may succeed in developing products that are more
effective and/or cost competitive than those we are developing, or
that would render our product candidates less competitive or even
obsolete. In addition, one or more of our competitors may achieve
product commercialization or patent protection earlier than we do,
which could materially adversely affect our business.
If physicians and patients do not accept our future products, or
our potential strategic partner’s products, or if the market
for indications for which any product candidate is approved is
smaller than expected, we may be unable to generate significant
revenue, if any.
Even
if any of our product candidates obtain regulatory approval, they
may not gain market acceptance among physicians, patients, and
third-party payers. Physicians may decide not to recommend our
treatments for a variety of reasons including:
●
timing
of market introduction of competitive products;
●
demonstration
of clinical safety and efficacy compared to other
products;
●
cost-effectiveness;
●
limited
or no coverage by third-party payers;
●
convenience
and ease of administration;
●
prevalence
and severity of adverse side effects;
●
restrictions
in the label of the drug;
●
other
potential advantages of alternative treatment methods;
and
●
ineffective
marketing and distribution support of its products.
If
any of our product candidates are approved, but fail to achieve
market acceptance or such market is smaller than anticipated, we
may not be able to generate significant revenue and our business
would suffer.
As we evolve from a company that is primarily involved in clinical
development to a company that is also involved in licensing and
commercialization, we may encounter difficulties in expanding our
operations successfully.
As
we or our potential strategic partners advance our product
candidates through clinical trials, we may need to expand our
development, regulatory, manufacturing, marketing and sales
capabilities and may need to further contract with third parties to
provide these capabilities. As our operations expand, we likely
will need to manage additional relationships with such third
parties, as well as additional collaborators, distributors,
marketers and suppliers.
Maintaining
third party relationships for these purposes will impose
significant added responsibilities on members of our management and
other personnel. We must be able to: manage our development efforts
effectively; recruit and train sales and marketing personnel;
manage our participation in the clinical trials in which our
product candidates are involved effectively; and improve our
managerial, development, operational and finance systems, all of
which may impose a strain on our administrative and operational
infrastructure.
If
we enter into arrangements with third parties to perform sales,
marketing or distribution services, any product revenues that we
receive, or the profitability of these product revenues to us, our
revenues are likely to be lower than if we were to market and sell
any products that we develop without the involvement of these third
parties. In addition, we may not be successful in entering into
arrangements with third parties to license, sell and market our
products or in doing so on terms that are favorable to us. We
likely will have little control over such third parties, and any of
them may fail to devote the necessary resources and attention to
sell and market our products effectively. If we do not establish
sales and marketing capabilities successfully, either on our own or
in collaboration with third parties, we will not be successful in
commercializing our products.
The uncertainty associated with pharmaceutical reimbursement and
related matters may adversely affect our business.
Market
acceptance and sales of any one or more of our product candidates
will depend on reimbursement policies and may be affected by future
healthcare reform measures in the United States and in foreign
jurisdictions. Government authorities and third-party payers, such
as private health insurers and health maintenance organizations,
decide which drugs they will cover and establish payment levels. We
cannot be certain that reimbursement will be available for any of
our product candidates. Also, we cannot be certain that
reimbursement policies will not reduce the demand for, or the price
paid for, our products. If reimbursement is not available or is
available on a limited basis, we may not be able to successfully
commercialize any product candidates that we develop.
In
the United States, the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003, also called the Medicare Modernization
Act, or MMA, changed the way Medicare covers and pays for
pharmaceutical products. The legislation established Medicare Part
D, which expanded Medicare coverage for outpatient prescription
drug purchases by the elderly but provided authority for limiting
the number of drugs that will be covered in any therapeutic class.
The MMA also introduced a new reimbursement methodology based on
average sales prices for physician-administered drugs.
The
United States and several foreign jurisdictions are considering, or
have already enacted, a number of legislative and regulatory
proposals to change the healthcare system in ways that could affect
our ability to sell our products profitably. Among policy makers
and payers in the United States and elsewhere, there is significant
interest in promoting changes in healthcare systems with the stated
goals of containing healthcare costs, improving quality and/or
expanding access to healthcare. In the United States, the
pharmaceutical industry has been a particular focus of these
efforts and has been significantly affected by major legislative
initiatives. We expect to experience pricing pressures in
connection with the sale of any products that it develops due to
the trend toward managed healthcare, the increasing influence of
health maintenance organizations and additional legislative
proposals.
Moreover,
the Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Affordability Reconciliation Act, or
collectively, ACA, is intended to reduce the cost of health care
and substantially change the way health care is financed by both
government and private insurers. While we cannot predict what
impact on federal reimbursement policies this legislation will have
in general or on our business specifically, the ACA may result in
downward pressure on pharmaceutical reimbursement, which could
negatively affect market acceptance of, and the price we charge
for, any products we develop that receive regulatory
approval.
Our ability to generate product and/or licensing revenues will be
diminished if our therapies sell for inadequate prices or patients
are unable to obtain adequate levels of reimbursement.
Our
ability or our potential strategic partners’ abilities to
commercialize our therapies, alone or with collaborators, will
depend in part on the extent to which reimbursement will be
available from private health maintenance organizations and health
insurers and other healthcare payers. Significant uncertainty
exists as to the reimbursement status of newly approved healthcare
products. Healthcare payers are challenging the prices charged for
medical products and services. Cost control initiatives could
decrease the price that we would receive for any products in the
future, which would limit our revenue and profitability. Government
and other healthcare payers increasingly attempt to contain
healthcare costs by limiting both coverage and the level of
reimbursement for drugs and therapeutics. We might need to conduct
post-marketing studies in order to demonstrate the
cost-effectiveness of any future products to such payers’
satisfaction. Such studies might require us to commit a significant
amount of management time and financial and other resources. Our
future products might not ultimately be considered cost-effective.
Even if one of our product candidates is approved by the FDA,
insurance coverage may not be available, and reimbursement levels
may be inadequate, to cover such therapies. If government and other
healthcare payers do not provide adequate coverage and
reimbursement levels for one of our products, once approved, market
acceptance of such product could be reduced.
We only have a limited number of employees to manage and operate
our business.
As
of January 11, 2018, we have a total of 11 full-time
employees and one part-time employee. Our focus on limiting cash
utilization requires us to manage and operate our business in a
highly efficient manner. We cannot assure you that we will be able
to retain adequate staffing levels to run our operations and/or to
accomplish all of the objectives that we otherwise would seek to
accomplish.
We depend heavily on our executive officers, directors, and
principal consultants and the loss of their services would
materially harm our business.
We
believe that our success depends, and will likely continue to
depend, upon our ability to retain the services of our current
executive officers, directors, principal consultants and others. In
addition, we have established relationships with universities,
hospitals and research institutions, which have historically
provided, and continue to provide, us with access to research
laboratories, clinical trials, facilities and patients. The loss of
the services of any of these individuals or institutions would have
a material adverse effect on our business.
Our internal computer systems, or those of our third-party service
providers, licensees, licensors, collaborators or other contractors
or consultants, may fail or suffer security breaches, which could
result in a material disruption in our business and
operations.
Despite
the implementation of security measures, our internal computer
systems and those of our current and future service providers,
licensees, licensors, collaborators and other contractors and
consultants are vulnerable to damage from computer viruses,
unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. While we are not aware
of any such material system failure, accident or security breach to
date, if such an event were to occur and cause interruptions in our
operations, it could result in a material disruption of our
development programs and our business operations. For example, the
loss of clinical trial data from completed, on-going or future
clinical trials could result in delays in our regulatory approval
efforts and significant costs to recover or reproduce the data.
Likewise, we rely on third parties to manufacture our drug
candidates and conduct clinical trials, and similar events relating
to their computer systems could also have a material adverse effect
on our business. To the extent that any disruption or security
breach were to result in a loss of, or damage to, our data or
applications, or inappropriate disclosure of confidential or
proprietary information, we could incur liabilities and the further
development and commercialization of our product candidates could
be delayed.
Due in part to our limited financial resources, we may fail to
select or capitalize on the most scientifically, clinically or
commercially promising or profitable indications or therapeutic
areas for our product candidates or those that are in-licensed,
and/or we may be unable to pursue the clinical trials that we would
like to pursue.
We
have limited technical, managerial and financial resources to
determine the indications on which we should focus the development
efforts related to our product candidates. Due to our limited
available financial resources, we may have curtailed clinical
development programs and activities that might otherwise have led
to more rapid progress of our product candidates through the
regulatory and development processes.
We
may make incorrect determinations with regard to the indications
and clinical trials on which to focus the available resources that
we do have. Furthermore, we cannot assure you that we will be able
to retain adequate staffing levels to run our operations and/or to
accomplish all of the objectives that we otherwise would seek to
accomplish. Our decisions to allocate our research, management and
financial resources toward particular indications or therapeutic
areas for our product candidates may not lead to the development of
viable commercial products and may divert resources from better
opportunities. Similarly, our decisions to delay or terminate drug
development programs may also cause us to miss valuable
opportunities.
If the third parties on which we rely for the conduct of our
clinical trials and results do not perform our clinical trial
activities in accordance with good clinical practices and related
regulatory requirements, we may be unable to obtain regulatory
approval for or commercialize our product candidates.
We
use independent clinical investigators and other third-party
service providers to conduct and/or oversee the clinical trials of
our product candidates and expect to continue to do so for the
foreseeable future. We rely heavily on these parties for successful
execution of our clinical trials. Nonetheless, we are responsible
for confirming that each of our clinical trials is conducted in
accordance with the FDA’s requirements and our general
investigational plan and protocol.
The
FDA requires us and our clinical investigators to comply with
regulations and standards, commonly referred to as good clinical
practices, for conducting and recording and reporting the results
of clinical trials to assure that data and reported results are
credible and accurate and that the trial participants are
adequately protected. Our reliance on third parties that we do not
control does not relieve us of these responsibilities and
requirements. Third parties may not complete activities on schedule
or may not conduct our clinical trials in accordance with
regulatory requirements or the respective trial plans and
protocols. The failure of these third parties to carry out their
obligations could delay or prevent the development, approval and
commercialization of our product candidates or result in
enforcement action against us.
We have limited manufacturing capacity and have relied on, and
expect to continue to rely on, third-party manufacturers to produce
our product candidates.
We
do not own or operate manufacturing facilities for the production
of clinical or commercial quantities of our product candidates, and
we lack the resources and the capabilities to do so. As a result,
we currently rely, and expect to rely for the foreseeable future,
on third-party manufacturers to supply our product candidates.
Reliance on third-party manufacturers entails risks to which we
would not be subject if we manufactured our product candidates or
products ourselves, including:
●
reliance
on third-parties for manufacturing process development, regulatory
compliance and quality assurance;
●
limitations
on supply availability resulting from capacity and scheduling
constraints of third-parties;
●
the
possible breach of manufacturing agreements by third-parties
because of factors beyond our control; and
●
the
possible termination or non-renewal of the manufacturing agreements
by the third-party, at a time that is costly or inconvenient to
us.
If
we do not maintain our key manufacturing relationships, we may fail
to find replacement manufacturers or develop our own manufacturing
capabilities, which could delay or impair our ability to obtain
regulatory approval for our products and substantially increases
our costs or deplete profit margins, if any. If we do find
replacement manufacturers, we may not be able to enter into
agreements with them on terms and conditions favorable to us and
there could be a substantial delay before new facilities could be
qualified and registered with the FDA and other foreign regulatory
authorities.
The
FDA and other foreign regulatory authorities require manufacturers
to register manufacturing facilities. The FDA and corresponding
foreign regulators also inspect these facilities to confirm
compliance with current cGMPs. Contract manufacturers may face
manufacturing or quality control problems causing drug substance
production and shipment delays or a situation where the contractor
may not be able to maintain compliance with the applicable cGMP
requirements. Any failure to comply with cGMP requirements or other
FDA, EMA and comparable foreign regulatory requirements could
adversely affect our clinical research activities and our ability
to develop our product candidates and market our products following
approval.
Our
current and anticipated future dependence upon others for the
manufacture of our product candidates may adversely affect our
future profit margins and our ability to develop our product
candidates and commercialize any products that receive regulatory
approval on a timely basis.
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 $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.
We have been, and in the future may be, subject to securities class
action lawsuits and stockholder 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 stockholder derivative claims. Any such actions or
claims could result in substantial damages and may divert
management’s time and attention from our
business.
Risks Related to our Intellectual Property
It is difficult and costly to protect our proprietary rights, and
we may not be able to ensure their protection.
We have
been issued patents, applied for other patents, and intend on
continuing to seek additional patent protection for our families of
antibodies from our antibody development program, our vaccines,
methods of use and other compounds that we
discover. However, any or all of such compounds, methods
or new uses of known compounds may not be subject to effective
patent protection. Further, the development of regimens for the
administration of our vaccines, which involve specifications for
the frequency, timing and amount of dosages, has been, and we
believe may continue to be, important to our efforts, although
those processes, as such, may not be patentable. In addition, our
issued patents may be declared invalid or our competitors may find
ways to avoid the claims in the patents.
Our
commercial success will depend, in part, on our ability to obtain
and maintain patent protection, protect our trade secrets and
operate without infringing on the proprietary rights of others. Our
commercial success will also depend, in part, on our ability to
market our product candidates during the term of our patent
protection. For example, certain patents including in
foreign countries within our portfolio expired in 2014 and can no
longer be relied on for protection in those countries. As of
January 11, 2018, we were the exclusive licensee or
sole assignee of 14 granted United States patents, 3 pending United
States patent applications, 7 international patents and 19 pending
international patent applications. The patent position
of pharmaceutical and biotechnology firms like us are generally
highly uncertain and involves complex legal and factual questions,
resulting in both an apparent inconsistency regarding the breadth
of claims allowed in United States patents and general uncertainty
as to their legal interpretation and enforceability. No
absolute policy regarding the breadth of claims allowed in
biopharmaceutical patents has emerged to date in the United States
or in many foreign jurisdictions. Changes in either the patent laws
or in interpretations of patent laws in the United States and
foreign jurisdictions may diminish the value of our intellectual
property. Accordingly, we cannot predict the breadth of claims that
may be enforced in the patents that we currently own or that may be
issued from the applications we have filed or may file in the
future or that we have licensed or may license from third parties,
including MSK for the vaccine antigen patents. Further, if any
patents we obtain or license are deemed invalid or unenforceable,
it could impact our ability to commercialize or license our
technology. Thus, patent applications assigned or
exclusively licensed to us may not result in patents being issued,
any issued patents assigned or exclusively licensed to us may not
provide us with competitive protection or may be challenged by
others, and the current or future granted patents of others may
have an adverse effect on our ability to do business and achieve
profitability.
One
of our issued US patents is directed to a candidate antibody
product that will expire in 2034. Other previously filed antibody
patent applications will, if issued, have patent expiration dates
depending on country and filing date between 2034 and
2038. It is possible that the term of the antibody
patent and certain patents issuing from the antibody patent
applications may be extended for a portion of the time the
candidate product was under regulatory review. Patents covering
components of the sarcoma vaccine will expire in
2022. Patents covering the polyvalent ovarian vaccine
will expire between 2018 and 2025. We believe that our
product candidates are eligible for Orphan Drug designation from
FDA depending on the indication for which it is approved by
FDA. Each product that receives an Orphan Drug
designation would be eligible for up to 7 additional years of
patent protection.
The
degree of future protection for our proprietary rights is uncertain
because legal means afford only limited protection and may not
adequately protect our rights or permit us to gain or keep our
competitive advantage. For example:
●
others
may be able to make compounds that are similar to our vaccines and
monoclonal antibody-based candidates and any future product
candidates we may seek to develop but that are not covered by the
claims of our patents;
●
if
we encounter delays in our clinical trials, the period of time
during which we could market our vaccines and monoclonal
antibody-based candidates under patent protection would be
reduced;
●
we
might not have been the first to conceive, make or disclose the
inventions covered by our patents or pending patent
applications;
●
we
might not have been the first to file patent applications for these
inventions;
●
any
patents that we obtain may be invalid or unenforceable or otherwise
may not provide us with any competitive advantages; or
●
the
patents of others may have a material adverse effect on our
business.
Due
to the patent laws of a country, or the decisions of a patent
examiner in a country, or our own filing strategies, we may not
obtain patent coverage for all the product candidates that may be
disclosed or methods involving these candidates that may be
disclosed in the parent patent application. We plan to pursue
divisional patent applications and/or continuation patent
applications in the United States and many other countries to
obtain claim coverage for inventions that were disclosed but not
claimed in the parent patent application, but may not succeed in
these efforts.
Composition
of matter patents on the active biological component are generally
considered to be the strongest form of intellectual property
protection for biopharmaceutical products, as such patents
generally provide protection without regard to any method of use.
We cannot be certain that the claims in our patent applications
covering composition-of-matter of our candidates will be considered
patentable by the U.S. Patent and Trademark Office, or USPTO,
courts in the United States or by the patent offices and courts in
foreign countries. Method of use patents protect the use of a
product for the method recited in the claims. This type of patent
does not prevent a competitor from making and marketing a product
that is identical to our product for an indication that is outside
the scope of the patented method. Moreover, even if competitors do
not actively promote their product for our targeted indications,
physicians may prescribe these products “off-label.”
Although off-label prescriptions may infringe or contribute to or
induce the infringement of method of use patents, the practice is
common and such infringement is difficult to prevent or prosecute.
Interference proceedings provoked by third parties or brought by
the USPTO may be necessary to determine the priority of inventions
with respect to our patents or patent applications or those of our
collaborators or licensors. An unfavorable outcome could require us
to cease using the related technology or to attempt to license
rights to it from the prevailing party. Our business could be
harmed if the prevailing party does not offer us a license on
commercially reasonable terms. Litigation or interference
proceedings may fail, resulting in harm to our business, and, even
if successful, may result in substantial costs and distract our
management and other employees.
There
have been numerous changes to the patent laws and proposed changes
to the rules of the USPTO, which may have a significant impact on
our ability to protect our technology and enforce our intellectual
property rights. For example, in September 2011, President Obama
signed the America Invents Act that codifies several significant
changes to the U.S. patent laws, including, among other things,
changing from a “first to invent” to a “first
inventor to file” system, limiting where a patent holder may
file a patent suit, replacing interference or “first to
invent” proceedings with derivation proceedings and creating
inter partes review and post-grant opposition proceedings to
challenge the validity of patents after they have been issued. The
effects of these changes are currently unclear as the USPTO only
recently has adopted regulations implementing the changes, the
courts have yet to address most of these provisions, and the
applicability of the act and new regulations on specific patents
and patent applications discussed herein have not been determined
and would need to be reviewed.
Periodic
maintenance fees on any issued patent are due to be paid to the
USPTO and foreign patent agencies in several stages over the
lifetime of the patent. The USPTO and various foreign governmental
patent agencies require compliance with many procedural,
documentary, fee payment and other similar provisions during the
patent application process. While an inadvertent lapse can in many
cases be cured by payment of a late fee or by other means in
accordance with the applicable rules, there are situations in which
noncompliance can result in abandonment or lapse of the patent or
patent application, resulting in partial or complete loss of patent
rights in the relevant jurisdiction. Noncompliance events that
could result in abandonment or lapse of a patent or patent
application include, but are not limited to, failure to respond to
official actions within prescribed time limits, non-payment of fees
and failure to properly legalize and submit formal documents. In
such an event, our competitors might be able to enter the market,
which would have a material adverse effect on our
business.
We
also rely on trade secrets to protect our technology, especially
where we do not believe patent protection is appropriate or
obtainable. However, trade secrets are difficult to protect.
Although we use reasonable efforts to protect our trade secrets,
our employees, consultants, contractors, licensees, licensors,
outside scientific collaborators and other advisors may
unintentionally or willfully disclose our information such that our
competitors may obtain it. Enforcing a claim that a third party
illegally obtained and is using any of our trade secrets is
expensive and time consuming, and the outcome is unpredictable.
Moreover, our competitors may independently develop equivalent
knowledge, methods and know-how, such as new therapies, including
therapies for the indications we are targeting. If others seek to
develop similar therapies, their research and development efforts
may inhibit our ability to conduct research in certain areas and to
expand our intellectual property portfolio, and also have a
material adverse effect on our business.
Moreover,
because some of the basic research relating to one or more of our
patent applications and/or patents were performed at various
universities and/or funded by grants, one or more universities,
employees of such universities and/or grantors could assert that
they have certain rights in such research and any resulting
products. Further, others may independently develop similar
products, may duplicate our products, or may design around our
patent rights. In addition, because of the assertion of rights by a
third-party or otherwise, we may be required to obtain licenses to
patents or other proprietary rights of others in or outside of the
United States. Any licenses required under any such patents or
proprietary rights may not be made available on terms acceptable to
us, if at all. If we do not obtain such licenses, we could
encounter delays in product market introductions during our
attempts to design around such patents or could find that the
development, manufacture or sale of products requiring such
licenses is foreclosed. In addition, we could incur substantial
costs in defending suits brought against us or about patents to
which we hold licenses or in suing to protect our own patents
against infringement.
We
require employees and the institutions that perform our preclinical
and clinical trials to enter confidentiality agreements with us.
Those agreements provide that all confidential information
developed or made known to a party to any such agreement during the
relationship with us be kept confidential and not be disclosed to
third-parties, except in specific circumstances. Any such agreement
may not provide meaningful protection for our trade secrets or
other confidential information in the event of unauthorized use or
disclosure of such information.
With
respect to our vaccine programs we have in-licensed rights from
third parties. If these license agreements terminate or expire, we
may lose the licensed rights to some or all our vaccine product
candidates. We may not be able to continue to develop them or, if
they are approved, market or commercialize them.
We
depend on license agreements with third-parties for certain
intellectual property rights relating to our product candidates,
including, but not limited to, the license of certain intellectual
property rights from MSK. In general, our license agreements
require us to make payments and satisfy performance obligations to
keep these agreements in effect and retain our rights under them.
These payment obligations can include upfront fees, maintenance
fees, milestones, royalties, patent prosecution expenses, and other
fees. These performance obligations typically include diligence
obligations. If we fail to pay, be diligent or otherwise perform as
required under our license agreements, we could lose the rights
under the patents and other intellectual property rights covered by
these agreements. If disputes arise under any of our license
agreements, including our license agreement with MSK, we could lose
our rights under these agreements. Any such dispute may not be
resolvable on favorable terms, or at all. Whether any disputes of
this kind are favorably resolved, our management’s time and
attention and our other resources could be consumed by the need to
attend to these disputes and our business could be harmed by the
emergence of such a dispute.
If
we lose our rights under these agreements, we might not be able to
develop any related product candidates further, or following
regulatory approval, if any, we might be prohibited from marketing
or commercializing these product candidates. In particular, patents
previously licensed to us might, after termination of an agreement,
be used to stop us from conducting these activities.
We are dependent on MSK for the establishment of our intellectual
property rights related to the vaccine program, and if MSK has not
established our intellectual property rights with sufficient scope
to protect our vaccine candidates, we may have limited or no
ability to assert intellectual property rights to our vaccine
candidates.
Under
our agreement with MSK, MSK was responsible for establishing the
intellectual property rights to the vaccine antigen conjugates,
mixtures of vaccine antigen conjugates that make up polyvalent
vaccine candidates and methods of use. As we were not responsible
for the establishment of our intellectual property rights to these
vaccine antigen conjugates, mixtures of vaccine antigen conjugates
and methods of use, we have less visibility into the strength of
our intellectual property rights to our vaccine candidates than if
we had been responsible for the establishment of these rights. If
MSK did not establish those rights so they are of sufficient scope
to protect the vaccine candidates, then we may not be able to
prevent others from using or commercializing some or all of our
vaccine candidates, and others may be able to assert intellectual
property rights in our vaccine candidates and prevent us from
further pursuing the development and commercialization of our
vaccine candidates.
We may not obtain exclusive rights to intellectual property created
because of our strategic collaborative agreements.
We
are party to collaborative research agreements, such as with
Rockefeller University and MSK, and expect to enter into agreements
with other parties in the future, each of which involve research
and development efforts. Under certain circumstances, we
may not have exclusive rights to jointly developed intellectual
property and would have to license the collaborative
partner’s interest in the jointly developed intellectual
property to obtain exclusive rights. We may not be able to
license our collaborative partner’s interest or license their
interest at reasonable terms. If we are unable to
license their interest we would not have exclusive rights to the
jointly developed intellectual property and, in some
collaborations, the collaborative partner may be free to license
their interest in the jointly developed intellectual property to a
competitor. In other collaborations, if we are unable to
license the collaborative partner’s interest we may not have
sufficient rights to practice the jointly developed intellectual
property. Such provisions to the jointly developed
intellectual property may limit our ability to gain commercial
benefit from some of or all the intellectual property we jointly
develop with our collaborative partners and may lead to costly or
time-consuming disputes with parties with whom we have
collaborative relationships over rights to certain innovations or
with other third parties that may result from the activities of the
collaborative arrangements.
We may incur substantial costs because of litigation or other
proceedings relating to patent and other intellectual property
rights and we may be unable to enforce or protect our rights to, or
use, our technology.
If
we choose to go to court to stop another party from using the
inventions claimed in any patents we obtain, that individual or
company has the right to ask the court to rule that such patents
are invalid or should not be enforced. These lawsuits are expensive
and would consume time and resources and divert the attention of
managerial and scientific personnel even if we were successful in
stopping the infringement of such patents or sustaining their
validity and enforceability. In addition, there is a risk that the
court will decide that such patents are not valid and that we do
not have the right to enforce them. There is also the risk that,
even if the validity of such patents is upheld, the court will
refuse to stop the other party on the grounds that such other
party’s activities do not infringe such patents. In addition,
the United States Court of Appeals for the Federal Circuit and the
Supreme Court of the United States continue to address issues under
the United States patent laws, and the decisions of those and other
courts could adversely affect our ability to sustain the validity
of our issued or licensed patents and obtain new
patents.
Furthermore,
a third party may claim that we or our manufacturing or
commercialization partners or customers are using inventions
covered by the third party’s patent rights and may go to
court to stop us or our partners and/or customers from engaging in
our operations and activities, including making or selling our
vaccine and monoclonal antibody-based candidates and any future
product candidates we may seek to develop. These lawsuits are
costly and could affect our results of operations and divert the
attention of managerial and scientific personnel. There is a risk
that a court would decide that we or our commercialization partners
or customers are infringing the third party’s patents and
would order us or our partners or customers to stop the activities
covered by the patents. In that event, we or our commercialization
partners or customers may not have a viable way around the patent
and may need to halt commercialization or use of the relevant
product. In addition, there is a risk that a court will order us or
our partners or customers to pay the other party damages for having
violated the other party’s patents or obtain one or more
licenses from third parties, which may be impossible or require
substantial time and expense. We cannot predict whether any license
would be available at all or whether it would be available on
commercially reasonable terms. Furthermore, even in the absence of
litigation, we may need to obtain licenses from third parties to
advance our research or allow commercialization of our candidates,
and we have done so from time to time. We may fail to obtain any of
these licenses at a reasonable cost or on reasonable terms, if at
all. In such events, we would be unable to further develop and
commercialize one or more of our drug candidates, which could harm
our business significantly. In the future, we may agree to
indemnify our commercial partners and/or customers against certain
intellectual property infringement claims brought by third parties
which could increase our financial expense, increase our
involvement in litigation and/or otherwise materially adversely
affect our business.
Because
of the substantial amount of discovery required in connection with
intellectual property litigation, there is a risk that some of our
confidential information could be compromised by disclosure during
this type of litigation, which could adversely affect our
intellectual property rights and our business. In addition, there
could be public announcements of the results of hearings, motions
or other interim proceedings or developments. If securities
analysts or investors perceive these results to be negative, it
could have a substantial adverse effect on the price of our common
stock.
The
pharmaceutical and biotechnology industries have produced a
proliferation of patents, and it is not always clear to industry
participants, including us, which patents cover various types of
products or methods of use. The coverage of patents is subject to
interpretation by the courts, and the interpretation is not always
uniform. If we are sued for patent infringement, we would need to
demonstrate that our products or methods either do not infringe the
patent claims of the relevant patent or that the patent claims are
invalid or unenforceable, and we may not be able to do this.
Proving invalidity or unenforceability is difficult. For example,
in the United States, proving invalidity requires a showing of
clear and convincing evidence to overcome the presumption of
validity enjoyed by issued patents.
Because
some patent applications in the United States may be maintained in
secrecy until the patents are issued, because patent applications
in the United States and many foreign jurisdictions are typically
not published until eighteen months after filing, because searches
and examinations of patent applications by the USPTO and other
patent offices may not be comprehensive, and because publications
in the scientific literature often lag behind actual discoveries,
we cannot be certain that others have not filed patent applications
for technology covered by our patents or pending applications. Our
competitors may have filed, and may in the future file, patent
applications and may have obtained patents covering technology
similar to ours. Any such patents or patent application may have
priority over our patent applications, which could further require
us to obtain or license rights to issued patents covering such
technologies. If another party has obtained a U.S. patent or filed
a U.S. patent application on inventions similar to ours, we may
have to participate in a proceeding before the USPTO or in the
courts to determine which patent or application has priority. The
costs of these proceedings could be substantial, and it is possible
that our application or patent could be determined not to have
priority, which could adversely affect our intellectual property
rights and business.
We
have received confidential and proprietary information from
collaborators, prospective licensees and other third parties. In
addition, we employ individuals who were previously employed at
other biotechnology or pharmaceutical companies. We may be subject
to claims that we or our employees, consultants or independent
contractors have improperly used or disclosed confidential
information of these third parties or our employees’ former
employers. Litigation may be necessary to defend against these
claims. Even if we are successful in defending against these
claims, litigation could result in substantial cost and be a
distraction to our management and employees. If we are not
successful, our ability to continue our operations and our business
could be materially, adversely affected.
Some
of our competitors may be able to sustain the costs of complex
intellectual property litigation more effectively than we can
because they have substantially greater resources. In addition, any
uncertainties resulting from the initiation and continuation of any
litigation could have a material adverse effect on our ability to
raise the funds necessary to continue our operations, on our
ability to hire or retain employees, or otherwise on our
business.
Risks Related to our Common Stock
Our restated certificate of incorporation, our amended and restated
by-laws and Delaware law could deter a change of our management
which could discourage or delay offers to acquire us; certain
restrictions in our agreements with existing stockholders could
also discourage or delay offers to acquire us.
Certain
provisions of Delaware law and of our restated certificate of
incorporation, as amended, and amended and restated by-laws, could
discourage or make it more difficult to accomplish a proxy contest
or other change in our management or the acquisition of control by
a holder of a substantial amount of our voting stock. It is
possible that these provisions could make it more difficult to
accomplish, or could deter, transactions that stockholders may
otherwise consider to be in their best interests or in our best
interests. These provisions include:
●
establishing
a classified board of directors requiring that members of the board
be elected in different years, which lengthens the time needed to
elect a new majority of the board;
●
authorizing
the issuance of “blank check” preferred stock that
could be issued by our board of directors to increase the number of
outstanding shares or change the balance of voting control and
thwart a takeover attempt;
●
prohibiting
cumulative voting in the election of directors, which would
otherwise allow for less than a majority of stockholders to elect
director candidates;
●
limiting
the ability of stockholders to call special meetings of the
stockholders;
●
prohibiting
stockholder action by written consent and requiring all stockholder
actions to be taken at a meeting of our stockholders;
and
●
establishing
90 to 120-day advance notice requirements for nominations for
election to the board of directors and for proposing matters that
can be acted upon by stockholders at stockholder
meetings.
The rights of our common stockholders are limited by and
subordinate to the rights of the holders of Series D Preferred
Stock, Series E Preferred Stock, Series I Preferred Stock, Series J
Preferred Stock, Series K Preferred Stock and Series L Preferred
Stock; these rights may have a negative effect on the value of
shares of our common stock.
The holders of our Series D Preferred Stock,
Series E Preferred Stock, Series I Preferred Stock, Series J
Preferred Stock, Series K Preferred Stock and Series L 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 D Preferred Stock certificate of designations, Series E
Preferred Stock certificate of designations, Series I Preferred
Stock certificate of designations, Series J Preferred Stock
certificate of designations, Series K Preferred Stock certificate of
designations, and Series L Preferred Stock certificate of
designations, respectively, and include, but are not limited to 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 $0.01 per share, or $441 for the Series D
Preferred Stock; $0.01 per share, or $333, for the Series E
Preferred Stock; $0.01 per share, or $7,985, for the Series I
Preferred Stock; $687.50 per share, or $531,252, for the Series J
Preferred Stock; $0.01 per
share, or $632, for the Series K Preferred Stock; and $100.00 per
share, or $5,800,000, for the Series L Preferred
Stock.
We may fail to regain compliance for continued listing on the
NASDAQ Capital Market and a delisting of our stock could make it
more difficult for investors to sell their shares
Our
common stock was approved for listing on the NASDAQ
Capital Market in August 2016 where it continues to be listed. The
listing rules of the NASDAQ
Capital Market require the Company to meet certain requirements.
These continued listing standards include specifically enumerated
criteria, such as:
●
a $1.00
minimum closing bid price;
●
stockholders’
equity of $2.5 million;
●
500,000
shares of publicly-held common stock with a market value of at
least $1 million;
●
300
round-lot stockholders; and
●
compliance with
the NASDAQ
Capital Market’s corporate governance requirements, as well
as additional or more stringent criteria that may be applied in the
exercise of the NASDAQ
Capital Market’s discretionary authority.
On
September 6, 2017, the NASDAQ
Capital Market informed the Company that it had failed to maintain
a minimum bid price of $1.00 per share for more than 30 consecutive
business days. The Company can regain compliance if, at any time
during the 180-day period ending March 5, 2018, the closing bid
price of the common stock is at least $1.00 for a minimum of ten
consecutive business days. On October 2, 2017, at a special meeting
of stockholders, our Board of
Directors received approval, if the Board deems to be necessary to
achieve a higher stock price to continue to meet the continued
listing qualifications for the NASDAQ
Capital Market, to amend our Amended
and Restated Certificate of Incorporation to effect a reverse stock
split of our issued and outstanding common stock by a ratio of not
less than one-for-two and not more than one-for-twenty at any time
prior to September 28, 2018, with the exact ratio to be set at a
whole number within this range as determined by the Board of
Directors in its sole direction
to continue to meet the continued listing qualifications for
the NASDAQ
Capital Market. No decision has
been made yet by our Board of Directors to implement a reverse
split. However, if we were to effect such a reverse stock split,
our stockholders may bring actions against us in connection with
that reverse stock split that could divert management resources,
cause us to incur significant expenses or cause our common stock to
be further diluted. Continued listing during this period is also
contingent on our continued compliance with all listing
requirements other than for the minimum bid price. On August 22, 2017,
the NASDAQ Capital Market notified us that we also no longer
satisfied the minimum $2.5 million stockholders’ equity
requirement as of June 30, 2017. As of September 30, 2017, we
regained compliance with the stockholders’ equity
requirement.
If we
fail to comply with the NASDAQ
Capital Market’s continued listing standards, we may be
delisted and our common stock will trade, if at all, only on the
over-the-counter market, such as the OTC Bulletin Board or OTCQX
market, and then only if one or more registered broker-dealer
market makers comply with quotation requirements. In
addition, delisting of our common stock could depress our stock
price, substantially limit liquidity of our common stock and
materially adversely affect our ability to raise capital on terms
acceptable to us, or at all.
Finally, delisting
of our common stock would likely result in our common stock
becoming a “penny stock” under the Exchange
Act. The principal result or effect of being designated
a “penny stock” is that securities broker-dealers
cannot recommend the shares but must trade it on an unsolicited
basis. Penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from those rules,
to deliver a standardized risk disclosure document prepared by the
SEC, which specifies information about penny stocks and the nature
and significance of risks of the penny stock market. A
broker-dealer must also provide the customer with bid and offer
quotations for the penny stock, the compensation of the
broker-dealer and sales person in the transaction, and monthly
account statements indicating the market value of each penny stock
held in the customer’s account. In addition, the penny stock
rules require that, prior to a transaction in a penny stock not
otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser’s
written agreement to the transaction. These disclosure requirements
may have the effect of reducing the trading activity in the
secondary market for shares that become subject to those penny
stock rules. Under such circumstances, shareholders may find it
more difficult to sell, or to obtain accurate quotations, for our
common stock, and our common stock would become substantially less
attractive to certain purchasers such as financial institutions,
hedge funds and other similar investors.
Future sales of our securities, or the perception in the markets
that these sales may occur, could depress our stock
price.
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. As of
January 11, 2018, we had 18,668,610 shares held by our
existing shareholders available for resale pursuant to Rule 144 or
resale registration statements, upon conversion of Series D
Preferred Stock, Series E Preferred Stock, Series I Preferred
Stock, Series J Preferred Stock, Series K Preferred Stock and
Series L Preferred 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. Moreover, to the extent
that additional shares of our outstanding stock are registered, or
otherwise become eligible for resale, and are sold, or the holders
of such shares are perceived as intended to sell them, this could
further depress the market price of our common
stock. These factors could also make it more difficult
for us to raise capital or make acquisitions through the issuance
of additional shares of our common stock or other equity
securities.
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, during the 12 months
ended January 11, 2018, our common stock traded
between $0.427 per share and $4.25 per share. 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:
●
developments
regarding, or the results of, our clinical trials;
●
announcements
of technological innovations or new commercial products by our
competitors or us;
●
our
issuance of equity or debt securities, or disclosure or
announcements relating thereto;
●
developments
concerning proprietary rights, including patents;
●
developments
concerning our collaborations;
●
publicity
regarding actual or potential medical results relating to products
under development by our competitors or us;
●
regulatory
developments in the United States and foreign
countries;
●
litigation;
●
economic
and other external factors or other disaster or crisis;
or
●
period-to-period
fluctuations in our financial results.
Our common stock may be affected by limited trading volume and
price fluctuations which could adversely impact the value of our
common stock.
While
there has been relatively active trading in our common stock over
the past twelve months, there can be no assurance that an active
trading market in our common stock will be maintained. Our common
stock has experienced, and is likely to experience in the future,
significant price and volume fluctuations which could adversely
affect the market price of our common stock without regard to our
operating performance. In addition, we believe that factors such as
quarterly fluctuations in our financial results and changes in the
overall economy or the condition of the financial markets could
cause the price of our common stock to fluctuate substantially.
These fluctuations may also cause short sellers to periodically
enter the market in the belief that we will have poor results in
the future. We cannot predict the actions of market participants
and, therefore, can offer no assurances that the market for our
common stock will be stable or appreciate over time.
The number of shares of issued and outstanding common stock as of
January 11, 2018, represents approximately
50% of our fully diluted shares of common stock.
Additional issuances of shares of common stock upon conversion
and/or exercise of preferred stock, options to purchase common
stock and warrants to purchase common stock will cause substantial
dilution to existing stockholders.
At
January 11, 2018, we had 22,982,695
shares of common stock issued and outstanding. Up to an additional
18,668,610 shares may be issued upon conversion of our Series D
Preferred Stock, Series E Preferred Stock, Series I Preferred
Stock, Series J Preferred Stock, Series K Preferred Stock, and
Series L Preferred Stock; 1,268,056 shares issuable upon exercise
of warrants at a weighted average price of $6.37; 2,756,092 shares
upon exercise of all outstanding options to purchase our common
stock at a weighted average price of $4.77; and
102,741 shares issuable upon vesting of restricted
stock units granted, resulting in a total of up to 45,778,194
shares that may be issued and outstanding. The issuance of any and
all of the 22,795,499 shares issuable upon exercise or
conversion of our outstanding convertible securities will cause
substantial dilution to existing stockholders and may depress the
market price of our common stock.
If our common stock is not listed on a national securities
exchange, compliance with applicable state securities laws may be
required for subsequent offers, transfers and sales of the shares
of common stock offered hereby.
The
securities offered hereby are being offered pursuant to one or more
exemptions from registration and qualification under applicable
state securities laws. Because our common stock is listed on
the
NASDAQ Capital Market, we are not required to register or
qualify in any state the subsequent offer, transfer or sale of the
common stock. If our common stock is delisted from the NASDAQ
Capital Market and is not eligible to be listed on another national
securities exchange, subsequent transfers of the shares of our
common stock offered hereby by U.S. holders may not be exempt from
state securities laws. In such event, it will be the responsibility
of the holder of shares or warrants to register or qualify the
shares for any subsequent offer, transfer or sale in the United
States or to determine that any such offer, transfer or sale is
exempt under applicable state securities laws.
The rights of our common stockholders are limited by and
subordinate to the rights of the holders of Series D Preferred
Stock, Series E Preferred Stock, Series I Preferred Stock, Series J
Preferred Stock, Series K Preferred Stock and Series L Preferred
Stock; these rights may have a negative effect on the value of
shares of our common stock.
The
holders of our Series D Preferred Stock, Series E Preferred Stock,
Series I Preferred Stock, Series J Preferred Stock, Series K
Preferred Stock and Series L 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 D Preferred
Stock certificate of designations, Series E Preferred Stock
certificate of designations, Series I Preferred Stock certificate
of designations, Series J Preferred Stock certificate of
designations, Series K Preferred Stock certificate of designations,
and Series L Preferred Stock certificate of designations,
respectively, and include, but are not limited to 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
$0.01 per share or $441 for the Series D Preferred Stock, $0.01 per
share or $333 for the Series E Preferred Stock, $0.01 per share or
$7,985 for the Series I Preferred Stock, $687.50 per share or
approximately $531,252 for the Series J Preferred Stock, $0.01 per
share or $632 for the Series K Preferred Stock and $100.00 per
share or approximately $5.8 million for the Series L Preferred
Stock.
Risks Related to the Offering
Because there is no minimum number of shares that we must sell in
this offering, we may not raise sufficient capital to implement our
planned business and your entire investment could be
lost.
We are
offering up to $2,500,000 of shares of common stock on a
“best-efforts basis” and there is no minimum number of
securities that we must sell. Funds raised pursuant to this
offering will not be held in any escrow account and all funds
raised regardless of the amount will be available to
us. We may close this offering having raised
substantially less than $2,500,000, which could leave us without
sufficient capital to fund our near or longer-term operations
including the evaluation of strategic options under consideration
by the Company and our financial advisor Greenhill & Co. to
maximize stockholder value. In the event that we do not
raise sufficient capital to implement our planned operations, your
entire investment could be lost.
You will experience immediate and substantial
dilution.
Since
the public offering price of the securities offered pursuant to
this prospectus is higher than the net tangible book value per
share of our common stock, you will suffer substantial dilution in
the net tangible book value of the common stock you purchase in
this offering. See “Dilution” in this prospectus for a
more detailed discussion of the dilution you will incur if you
purchase securities in this offering. In addition, we may
have issued options and warrants to acquire common stock at prices
below the expected public offering price of the shares of common
stock offered hereby, although no warrants at the present time are
below the current offering price. To the extent outstanding
options, warrants or other derivative securities are ultimately
exercised or converted, or if we issue restricted stock to our
employees under our equity incentive plans, there will be further
dilution to investors who purchase shares in this
offering.
Management will have broad discretion as to the use of the net
proceeds from this offering, and we may not use these proceeds
effectively.
We
have not designated any portion of the net proceeds from this
offering to be used for any particular purposes. Our management
will have broad discretion in the application of the net proceeds
from this offering and could spend the proceeds in ways that do not
improve our results of operations or enhance the value of our
common stock. Accordingly, you will be relying on the judgment of
our management with regard to the use of these net proceeds, and
you will not have the opportunity, as part of your investment
decision, to assess whether the proceeds are being used
appropriately. Our failure to apply these funds effectively could
have a material adverse effect on our business, delay the
development of our product candidates and cause the price of our
common stock to decline.
You will experience future dilution as a result of future equity
offerings
We
may in the future offer additional shares of our common stock or
other securities convertible into or exchangeable for our common
stock. Although no assurances can be given that we will
consummate a financing, in the event we do, or in the event we sell
shares of common stock or other securities convertible into shares
of our common stock in the future, additional and substantial
dilution will occur. In addition, investors purchasing
shares or other securities in the future could have rights superior
to investors in this offering.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements, which reflect the
views of our management with respect to future events and financial
performance. These forward-looking statements are subject to a
number of uncertainties and other factors that could cause actual
results to differ materially from such statements. Forward-looking
statements are identified by words such as
“anticipates,” “believes,”
“estimates,” “expects,”
“intends,” “plans,” “projects,”
“targets” and similar expressions. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which are based on the information available to
management at this time and which speak only as of this date. We
undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. For a discussion of some of the factors that may
cause actual results to differ materially from those suggested by
the forward-looking statements, please read carefully the
information under “Risk Factors.” Examples of our
forward-looking statements include:
●
Our
need for additional capital to fund our operations;
●
Our
history of losses and our expectation of future
losses;
●
The
clinical development of our product candidates and our expectations
for the completion of associated clinical trials;
●
Our
expectations regarding the safety and efficacy of our product
candidates;
●
The
expected costs of our clinical trials;
●
Our
expectations regarding the use of our existing cash and the
expected net proceeds of this offering;
●
Our
expectations regarding our ability to obtain regulatory approval
for any of our product candidates and any requirements that may be
imposed in connection with any regulatory approval we
receive;
●
Our
plans to commercialize any product candidate that receives
regulatory approval;
●
Expectations
regarding the willingness of doctors to use any approved product
and the availability and amount of any third-party reimbursement
for such use;
●
Our
expectations regarding the cost and effect of ongoing regulatory
oversight for any approved product;
●
The
effect of the loss of any of our executive officers, directors and
principal consultants on our business;
●
Our
expectations regarding the ability of our clinical research
organizations to properly oversee our clinical trials;
●
Our
expectations regarding the ability of our contract manufacturers to
manufacture sufficient amounts of product candidates to satisfy our
needs in accordance with cGMP, including the availability of raw
materials and intermediates used to manufacture our product
candidates;
●
Our
ability to obtain and enforce patents and other proprietary rights
to our technology; and
●
The
performance by third party collaborators of their obligations under
their agreements with us
You
should read this prospectus and the documents that we have filed as
exhibits to the registration statement, of which this prospectus is
a part, completely and with the understanding that our actual
future results may be materially different from what we
expect. You should assume that the information appearing in
this prospectus is accurate as of the date on the front cover of
this prospectus only. Because the risk factors referred to above
could cause actual results or outcomes to differ materially from
those expressed in any forward-looking statements made by us or on
our behalf, you should not place undue reliance on any
forward-looking statements. These risks and uncertainties,
along with others, are described above under the heading
“Risk Factors” beginning on page 7 of this
prospectus. We qualify all of the information presented
in this prospectus, and particularly our forward-looking
statements, by these cautionary statements.
CAPITALIZATION
The
following table sets forth our cash and cash equivalents and
capitalization as of September 30, 2017, on an actual basis, and as
adjusted for the following:
●
the
October 2017 offering of $500,000, before offering expenses of
$15,000,
various conversions of Series I Preferred Stock, Series J Preferred
Stock and Series K Preferred Stock into 480,450 shares of common
stock, and issuance of 415,000 shares of common stock in
connection
with services.
You
should read this table together with the section entitled
“Use of Proceeds” and with the financial statements and
related notes and the other information, including our Annual
Report on Form 10-K and Quarterly Reports on Form
10-Q.
|
September
30, 2017
|
||
|
Actual
|
As Adjusted (1)
|
As Adjusted
(2)
|
Cash and cash
equivalents
|
$3,052,778
|
$3,537,778
|
$5,872,778
|
Total
assets
|
$11,098,583
|
$11,583,583
|
$13,918,583
|
|
|
|
|
Working
capital
|
$(2,918,271)
|
$(2,433,271)
|
$(98,281)
|
Long term
debt
|
$2,008,105
|
$2,008,105
|
$2,008,105
|
Stockholders’
equity
|
$2,520,416
|
$3,005,416
|
$5,340,416
|
Total liabilities
and stockholders’ equity
|
$11,098,583
|
$11,583,583
|
$13,918,583
|
(1)
For
the October 2017 offering of $500,000, before offering
expenses.
(2)
For
this offering of up to $2,500,000 before estimated offering
expenses of $165,000.
The
table above excludes the following shares issuable as of September
30, 2017:
●
2,815,240 shares of
our common stock issuable upon exercise of outstanding options
under our equity incentive plans at a weighted-average exercise
price of $4.87 per share;
●
2,073,416
shares of our common stock issuable upon exercise of outstanding
warrants with a weighted-average exercise price of $6.78 per
share;
●
11,633,387 shares
of our common stock issuable upon conversion of all of our
outstanding shares of our Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred
Stock, Series H Preferred Stock, Series I Preferred Stock, Series J
Preferred Stock and Series K Preferred Stock;
●
181,839
shares of our common stock that are reserved for equity awards that
may be granted under our equity incentive plans; and
●
953,706
shares of our common stock issuable upon vesting of restricted
stock units granted.
-23-
USE
OF PROCEEDS
We
estimate that the net proceeds of this offering will be
approximately $2,335,000, assuming the sale of
2,551,020 shares of our common stock at an assumed
public offering price of $0.98 per share, the closing
bid price of our common stock on the NASDAQ Capital Market on
January 11, 2018, after deducting the estimated
offering expenses payable by us.
A $0.25
increase (decrease) in the assumed public offering price of
$0.98 per share would increase (decrease) the expected
net proceeds of this offering by approximately
$638,000, assuming the number of shares offered by us
remains the same and after deducting the estimated underwriting
discount and estimated offering expenses payable by us. A 100,000
increase (decrease) in the assumed number of shares of our common
stock sold in this offering would increase (decrease) the expected
net proceeds of this offering by approximately
$98,000, assuming the assumed public offering price
per share remains the same.
We
intend to use the net proceeds received from this offering to fund
the continuation of two Phase I clinical trials of our lead
antibody therapeutic product candidates, MVT-1075 and MVT-5873 in
combination with a chemotherapy agent, and for working capital and
general corporate purposes.
We have
not yet determined the amount of net proceeds to be used
specifically for any of the foregoing purposes. Accordingly, we
will retain broad discretion over the use of these
proceeds. Pending any use as described above, we intend
to invest the net proceeds in high-quality, short-term,
interest-bearing securities.
However, readers
are cautioned that we are permitted to close this offering having
raised substantially less than $2,500,000, and there is no minimum
amount that we are required to raise in order to close this
offering. If we close this offering having raised less than
$2,500,000, we may be unable to allocate the proceeds from the
offering as set forth above in order to accomplish our objectives
including the pursuit of strategic options with our financial
advisor Greenhill & Co. that are intended on maximizing
stockholder value.
PRICE RANGE OF COMMON
STOCK
Our
common stock has been listed on the NASDAQ Capital Market since
August 17, 2016 under the symbol “MBVX” and, prior to
that, on the OTCQB under the symbol “MBVX”. The
following table sets forth the high and low bid prices for our
common stock for the periods indicated. The prices set forth below
represent inter-dealer quotations, without adjustment for retail
mark-up, mark-down or commission, and may not represent the prices
of actual transactions. All stock prices included in the
following table are adjusted for the 1 for 8 reverse split of our
common stock effected on September 8, 2014 and the Listing
Reverse Split.
|
High
|
Low
|
2018
|
|
|
Quarter
ended March 31, 2018 (through January 11, 2018)
|
$1.07
|
$0.74
|
|
|
|
2017
|
|
|
Quarter
ended March 31, 2017
|
$3.59
|
$2.10
|
Quarter
ended June 30, 2017
|
$2.60
|
$1.35
|
Quarter
ended September 30, 2017
|
$1.45
|
$0.43
|
Quarter
ended December 31, 2017
|
$0.97
|
$0.57
|
|
|
|
2016
|
|
|
Quarter
ended March 31, 2016
|
$6.51
|
$3.03
|
Quarter
ended June 30, 2016
|
$6.44
|
$3.48
|
Quarter
ended September 30, 2016
|
$6.05
|
$3.63
|
Quarter
ended December 31, 2016
|
$4.50
|
$3.10
|
On
January 11, 2018, the closing bid price of our common
stock was $0.98.
As
of January 11, 2018, there were 96
stockholders of record of our common stock, one of which is Cede
& Co., a nominee for Depository Trust Company, or DTC. Shares
of common stock that are held by financial institutions as nominees
for beneficial owners are deposited into participant accounts at
DTC, and are considered to be held of record by Cede & Co. as
one stockholder.
Dividend Policy
We
have never paid our stockholders cash dividends, and we do not
anticipate paying any cash dividends in the foreseeable future as
we intend to retain any earnings for use in our business. Any
future determination to pay dividends will be at the discretion of
our board of directors.
If you
purchase shares of our common stock in this offering, you will
experience dilution to the extent of the difference between the
price per share you pay in this offering and the net tangible book
value per share of our common stock immediately after this
offering.
The net
tangible book value of our common stock as of September 30, 2017,
as adjusted for the issuance of 769,231 shares of common stock in
connection with the October 11, 2017 offering of $500,000 before
offering expenses of $15,000, various conversions of Series I
Preferred Stock, Series J Preferred Stock and Series K Preferred
Stock into 480,450 shares of common stock, and issuance of 415,000
shares of common stock in connection with services, was
approximately $(3.8 million), or approximately $(0.19) per share.
Net tangible book value per share is equal to the amount of our
total tangible assets, less total liabilities, divided by the
aggregate number of shares of our common stock
outstanding.
After
giving effect to the assumed sale by us of
2,551,020 shares of common stock in this
offering at an assumed public offering price of $0.92 per share
(the closing bid price of our common stock on the NASDAQ Capital
Market on January 11, 2018), and after deducting
estimated offering expenses payable by us, our as adjusted net
tangible book value as of September 30, 2017, would have been
approximately $(1.5 million), or approximately
$(0.06) per share. This represents an immediate increase in
net tangible book value of approximately $0.13 per share to
existing stockholders and an immediate dilution of approximately
$0.98 per share to new investors purchasing shares of our common
stock in this offering. The following table illustrates this per
share dilution:
Assumed public
offering price per share
|
|
$0.98
|
Pro forma net
tangible book value per share as of September 30, 2017
|
$(0.19)
|
|
Increase in net
tangible book value per share attributable to this
offering
|
$0.13
|
|
Pro forma as
adjusted net tangible book value per share after this
offering
|
|
$(0.06)
|
Dilution in pro
forma net tangible book value per share to new
investors
|
|
$1.04
|
A $0.25
increase in the assumed public offering price of $0.98
per share would increase our as adjusted net tangible book value
after this offering by approximately $638,000, or
approximately $0.03 per share, and increase the dilution to new
investors by approximately $0.22 per share, assuming that the
number of shares of common stock offered by us, as set forth above,
remains the same and after deducting the estimated underwriting
discount and estimated offering expenses payable by us. A $0.25
decrease in the assumed public offering price of $0.98
per share would decrease our as adjusted net tangible book value
after this offering by approximately $638,000, or
approximately $0.03 per share, and decrease the dilution per share
to new investors by approximately $0.22 per share, assuming that
the number of shares of common stock offered by us, as set forth
above, remains the same and after deducting the estimated
underwriting discount and estimated offering expenses payable by
us. We may also increase or decrease the number of
shares of common stock we are offering from the assumed number of
shares set forth above. An increase (decrease) of 100,000 in the
assumed number of shares of common stock sold in this offering
would increase (decrease) our as adjusted net tangible book value
after this offering by approximately $98,000, or less
than $0.01 per share, and increase (decrease) the dilution per
share to new investors by less than $0.01 per share, assuming that
the public offering price of $0.98 per share remains
the same. The information discussed above is illustrative only and
will adjust based on the actual public offering price, the actual
number of shares of common stock that we offer in this offering,
and other terms of this offering determined at
pricing.
This
table does not take into account further dilution to new investors
that could occur upon the exercise of outstanding options and
warrants having a per share exercise price less than the public
offering price per share in this offering. In addition,
we may choose to raise additional capital due to market conditions
or strategic considerations even if we believe we have sufficient
funds for our current or future operating plans. To the extent that
additional capital is raised through the sale of equity or
convertible debt securities, the issuance of these securities could
result in further dilution to our stockholders.
The table and discussion above are based on 20,588,765 shares
outstanding as of September 30, 2017, as adjusted for 769,231
shares of common stock issued in connection with the October 11,
2017 offering of $500,000 before offering expenses of $15,000,
various conversions of Series I Preferred Stock, Series J Preferred
Stock and Series K Preferred Stock into 480,450 shares of common
stock, and issuance of 415,000 shares of common stock in connection
with services, and excludes as of that date:
●
2,815,240 shares of
our common stock issuable upon exercise of outstanding options
under our equity incentive plans at a weighted-average exercise
price of $4.87 per share;
●
2,073,416 shares of
our common stock issuable upon exercise of outstanding warrants
with a weighted-average exercise price of $6.78 per
share;
●
11,633,387 shares
of our common stock issuable upon conversion of outstanding shares
of our Series D Preferred Stock, Series E Preferred Stock, Series I
Preferred Stock, Series J Preferred Stock, and Series K Preferred
Stock;
●
181,839
shares of our common stock that are reserved for equity awards that
may be granted under our equity incentive plans; and
●
953,706
shares of our common stock issuable upon vesting of restricted
stock units granted.
MANAGEMENT’S DISCUSSION AND
ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and
results of operations should be read together with our financial
statements and accompanying notes appearing elsewhere in this
Prospectus. This Management’s Discussion and Analysis
contains forward-looking statements that involve risks and
uncertainties. Please see “Forward-Looking Statements”
set forth in the beginning of this Prospectus, and see “Risk
Factors” beginning on page 7 for a discussion of certain risk
factors applicable to our business, financial condition, and
results of operations. Operating results are not necessarily
indicative of results that may occur in future periods. Management
and our independent registered public accounting firm identified
certain material weaknesses in internal control over financial
reporting. If we are unable to remediate these material weaknesses
and maintain effective internal control, we may not be able to
produce timely and accurate financial statements, and we and our
independent registered public accounting firm could conclude that
our internal control over financial reporting are not effective,
which could adversely impact investor confidence and our stock
price. See "Risk Factors" on page 7.
Overview
We
are a clinical-stage biotechnology company focused on the
development of antibody-based products to address unmet medical
needs in the treatment of cancer. We have discovered a
pipeline of human monoclonal antibody products based on the
protective immune responses generated by patients who have been
vaccinated against targeted cancers with our proprietary
vaccines. Our lead development program is centered on our
HuMab-5B1 antibody, which is fully human and discovered from the
immune response of cancer patients vaccinated with an
antigen-specific vaccine during a Phase I trial at Memorial Sloan
Kettering Cancer Center, or MSK. The antigen the
antibody targets is expressed on more than 90% of pancreatic
cancers, and expressed in significant percentages on small cell
lung cancer, stomach, colon and other cancers, making the antibody
potentially broadly applicable to many types of cancers. We
have other antibody candidates that are in preclinical
development.
Monoclonal
antibodies are produced from a single DNA sequence encoded into
multiple cells that all produce the same single antibody. We
generate our pipeline of antibody-based product candidates from
patients who have been vaccinated with proprietary vaccines
licensed from MSK. Our approach involves surveying the protective
immune response from many patients to identify a monoclonal
antibody candidate against a specific target on the surface of a
cancer cell. We believe this approach provides us with a novel
next-generation human antibody technology platform. We believe our
approach to antibody discovery allows us to identify antibody
candidates with superior performance characteristics while
minimizing many of the toxicity and off target binding drawbacks
(phenomenon occurring when antibodies bind to non-cancer cells) of
other discovery technologies.
Our
lead clinical development program is a Phase 1 clinical trial of
our HuMab-5B1 radioimmunotherapy (“RIT”) product that
we have designated as MVT-1075. The development of MVT-1075 is
based on experience we gained through clinical studies of over 50
patients with either our antibody we designate as MVT-5873, or our
imaging agent we designate as MVT-2163 that are discussed in more
detail in our descriptions and results to date of our clinical
development programs. We initiated the Phase 1 clinical trial of
MVT-1075 in June 2017 and completed enrollment and dosing of the last patient in the
initial cohort of patients in December 2017. The clinical program
is intended to evaluate the product for the treatment of
pancreatic, colon and lung cancer. The primary objective is to
determine the maximum tolerated dose in patients who have failed
prior therapies. Secondary endpoints include evaluating tumor
response rate and duration of response by RECIST 1.1, and to
determine dosimetry and pharmacokinetics. This dose-escalation
study utilizes a traditional 3+3 design. We expect to
receive and report on interim safety data and tumor assessment
using standard RECIST measurement criteria for cohort 1 in the
first quarter 2018.
We also
intend to continue clinical development of the antibody MVT-5873 in
combination with gemcitabine and nab-paclitaxal in first line
therapy for the treatment of patients newly diagnosed with
pancreatic cancer. We have treated two cohorts of patients in our
combination therapy, for a total of six patients to date in this
study. In November, we expanded enrollment of an additional cohort
of three patients in the combination therapy with the objective of
confirming early observations. We expect to receive and report on
interim response data for the latest cohort in the first quarter of
2018.
In
September 2017, we announced our engagement of Greenhill & Co.
(NYSE: GHL) to serve as an advisor to assist the Company in
exploring and evaluating strategic options with the goal of
maximizing stockholder value. MabVax is currently in advanced
discussions with several potential strategic partners that could
result in multiple licensing and partnering transactions in early
2018. Greenhill and Co’s sole mandate has been to provide
MabVax with opportunities in exploring and evaluating strategic
options while continuing to identify new opportunities. We have now
reached the stage where several of our discussions with third
parties have led to preliminary terms for potential licensing
and/or partnering of certain antibody assets for defined fields of
use. We expect to retain rights to certain key aspects of our
antibody development program so that we can continue developing
some of these assets on our own using funds from the strategic
transactions. However,
there is no guarantee that we will retain such rights or enter into
binding agreements at all with parties introduced to us by
Greenhill & Co. In parallel with the strategic
initiatives efforts led byGreenhill & Co., MabVax continues to
advance its Phase 1 clinical programs including the MVT-1075
radioimmunotherapy clinical trial for the treatment of pancreatic,
colon and lung cancers, and the MBT-5873 clinical trial in
combination with one or more chemotherapy agents in first line
therapy for patients newly diagnosed with pancreatic
cancer.
We
operate in only one business segment. We have incurred substantial
losses since inception, and we expect to incur additional
substantial losses for the foreseeable future as we continue our
research and development activities. To date, we have funded our
operations primarily through government grants, proceeds from the
sale of common and preferred stock, the issuance of debt, the
issuance of common stock in lieu of cash for services, payments
from collaborators and interest income. The process of
developing our product candidates will require significant
additional research and development, preclinical testing and
clinical trials, as well as regulatory approval. We expect these
activities, together with general and administrative expenses, to
result in substantial operating losses for the foreseeable future.
We will not receive product revenue unless we, or our collaborative
partners, complete clinical trials, obtain regulatory approval and
successfully commercialize one or more of our
products. We cannot provide assurance that we will ever
generate revenues or achieve and sustain profitability in the
future or obtain the necessary working capital for our
operations.
During
the nine months ended September 30, 2017, our loss from operations
was $13,681,746, our net loss was $14,424,883, and our loss
allocable to common stockholders was $22,784,296. Net cash used in
operating activities for the nine months ended September 30, 2017
was $8,702,932 and cash and cash equivalents and working capital
deficit as of September 30, 2017, were $3,052,778 and $2,918,271,
respectively. As of September 30, 2017, we had an accumulated
deficit of $101,046,557 and a stockholders’ equity of
$2,520,416.
During
the year ended December 31, 2016, our loss from operations was
$16,663,119, our net loss and our loss allocable to common
stockholders was $17,660,483. Net cash used in operating activities
for the year ended December 31, 2016 was $12,363,411 and cash and
cash equivalents and working capital deficit as of December 31,
2016, were $3,979,290 and $1,396,656, respectively. As of December
31, 2016, we had an accumulated deficit of $78,262,261 and a
stockholders’ equity of $3,342,522.
We
are subject to risks common to biopharmaceutical companies,
including the need for capital, risks inherent in our research,
development and commercialization efforts, preclinical testing,
clinical trials, uncertainty of regulatory and marketing approvals,
enforcement of patent and proprietary rights, potential competition
and retention of key employees. In order for a product to be
commercialized, it will be necessary for us to conduct preclinical
tests and clinical trials, demonstrate efficacy and safety of our
product candidates to the satisfaction of regulatory authorities,
obtain marketing approval, enter into manufacturing, distribution
and marketing arrangements, obtain market acceptance and, in many
cases, obtain adequate reimbursement from government and private
insurers. We cannot provide assurance that we will ever generate
revenues or achieve and sustain profitability in the future or
obtain the necessary working capital for our
operations.
Reverse Stock Split and Listing on the NASDAQ Capital
Market
On
August 16, 2016, we filed a certificate of amendment to our Amended
and Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware in order to effectuate a reverse
stock split of our issued and outstanding common stock on a 1 for
7.4 basis, effective on August 16, 2016. The reverse split was
effective with The Financial Industry Regulatory Authority (FINRA),
and the Company’s common stock began trading on the NASDAQ
Capital Market at the open of business on August 17, 2016. All
share and per share amounts, and number of shares of common stock
into which each share of preferred stock will convert, in the
financial statements and notes thereto have been retroactively
adjusted for all periods presented to give effect to the Listing
Reverse Split, including reclassifying an amount equal to the
reduction in par value of common stock to additional paid-in
capital.
Our Clinical Development Programs
MVT-1075 – our lead development program as a
Radioimmunotherapy for Pancreatic Cancer
In
June 2017, we initiated a Phase 1 clinical trial of our HuMab-5B1
radioimmunotherapy product MVT-1075 based on experience we gained
through clinical studies of over 50 patients with either the
antibody MVT-5873, or our imaging agent we designate as
MVT-2163.
MVT-1075
combines the demonstrated targeting specificity of the HuMab-5B1
antibody with the proven clinical success of a low-energy radiation
emitter, 177Lutetium [177Lu]. We dosed MVT-1075 in our first
patient in June 2017. This Phase 1 first-in-human clinical trial is
an open-label, multi-center study evaluating the safety and
efficacy of MVT-1075 in up to 22 patients with CA19-9 positive
malignancies. The primary objective is to determine the maximum
tolerated dose and safety profile in patients with recurring
disease who have failed prior therapies. Secondary endpoints are to
evaluate tumor response rate and duration of response by RECIST
1.1, and to determine dosimetry and pharmacokinetics. This
dose-escalation study utilizes a traditional 3+3 design that is
commonly used by companies as a dose escalation strategy typical
for phase I trials for the treatment of cancer. The investigative
sites are Honor Health in Scottsdale, Arizona, and Memorial Sloan
Kettering Cancer Center in New York City.
In April, the Company reported preclinical results for MVT-1075
at the American Association of Clinical Research (AACR) Annual
Meeting, demonstrating
suppression, and in some instances, regression, of tumor growth in
xenograft animal models of pancreatic cancer, potentially making
this product an important new therapeutic agent in the treatment of
pancreatic, colon and lung cancers. Supporting the MVT-1075 RIT
clinical investigation are the Company's successful MVT-5873 and
MVT-2163 Phase 1a safety and target specificity data which were
reported earlier this year at the annual meetings of the American
Society for Clinical Oncology (ASCO) and the Society for Nuclear
Medicine and Molecular Imaging (SNMMI), respectively. The combined
results from 50 patients in the Phase 1 MVT-5873 and MVT-2163
studies established safety and provided significant insight into
drug biodistribution and an optimal dosing strategy, which the
Company has incorporated into the MVT-1075
program.
MVT-5873 – for the Treatment of Pancreatic
Cancer
MVT-5873 as a Monotherapy in Late Stage Cancer Patients
– We reported results from our
Phase 1a clinical trial of 32 patients being treated with our
therapeutic antibody MVT-5873 as a monotherapy, which was
evaluated for safety and tolerability in patients with advanced
pancreatic cancer and other CA19-9 positive cancers, in a poster
presentation at the American Society of Clinical Oncology (ASCO)
Annual Meeting on June 3, 2017. The Company highlighted that the
single agent MVT-5837 appears safe and well tolerated in patients
at biologically active doses. Furthermore, all patients were
evaluated by RECIST 1.1 for tumor response, and the Company
reported 11 patients achieved stable disease in this dose
escalation safety trial of 32 patients.
The
results of the Phase 1a trial with MVT-5873 indicate that this
fully-human antibody targeting CA19-9 cancers can be administered
at doses with acceptable safety and with a potentially positive
impact on disease. CA19-9 is broadly expressed in various cancers
including pancreatic, colon, and small cell lung cancer making this
antibody potentially useful for a larger patient population.
Clinical signals from an identifiable subset of subjects enabled us
to understand those patients most likely to respond to a MVT-5873
based therapy. At the maximum tolerated dose (MTD) established in
this trial, we have demonstrated an acceptable safety margin for
the antibody.
MVT-5873 in Combination with a Standard of Care Chemotherapy
– Based upon observations from
the first two cohorts of patients treated, the Company is
continuing clinical development of MVT-5873 in combination with
gemcitabine and nab-paclitaxal as a first line therapy for the
treatment of patients newly diagnosed with pancreatic cancer.
MabVax has treated six patients as of October 12, 2017 and is
actively enrolling additional patients with the objective of
obtaining additional safety and tumor response (RECIST 1.1) data.
Dr. Eileen O’Reilly, Associate Director of the David M.
Rubenstein Center for Pancreatic Cancer Research, attending
physician, member at Memorial Sloan Kettering Cancer Center and
Professor of Medicine at Weill Cornell Medical College, is the lead
investigator in the MVT-5873 Phase 1 clinical
trial.
MVT-2163 –as an Imaging Agent for Pancreatic
Cancer
We
reported results from our Phase 1a clinical trial of ImmunoPET
imaging agent, MVT-2163, in 12 patients with locally advanced or
metastatic adenocarcinoma of the pancreas (PDAC) or other CA19-9
positive malignancies in a poster presentation and podium talk at
the Society of Nuclear Medicine and Molecular Imaging (SNMMI)
Annual Meeting held in Denver, CO on June 10-14, 2017.
The
Phase Ia clinical trial of MVT-2163 was intended to evaluate our
next generation diagnostic PET imaging agent in patients with
locally advanced or metastatic adenocarcinoma of the pancreas
(PDAC) or other CA19-9 positive malignancies. MVT-2163
(89Zr-HuMab-5B1) combines the well-established PET imaging
radiolabel Zirconium-89 [89Zr] with the targeting specificity of
MVT-5873. We designed the trial to establish safety,
pharmacokinetics, biodistribution, optimal time to obtain the PET
image, and the amount of MVT-5873 to be administered as a blocking
dose prior to administration of MVT-2163 to obtain optimized PET
scan images.
As
of September 30, 2017, 12 patients had been treated in this
first-in-human trial evaluating the safety and feasibility of
MVT-2163 to image pancreatic tumors and other CA19-9 positive
malignancies. MVT-2163 was administered alone and in combination
with MVT-5873 and was well tolerated in all cohorts. The only
toxicities were infusion reactions that resolved on the day of the
injection, with some patients requiring standard supportive
medication.
Uptake
of MVT-2163 was observed in primary tumors and metastases as early
as day two and continuously through day seven. Standard Uptake
Values (SUV), a measurement of activity in PET imaging, reached as
high as 101 in the study. The investigators reported that the high
SUVs are amongst the highest lesion uptake values they have ever
seen for a radiolabeled antibody. Bone and soft tissue disease were
readily visualized and lesion uptake of the radiotracer was higher
than typically seen with PET imaging agents. The correlation with
Computerized Tomography (CT) scans was high.
We
reported that administering MVT-5873 prior to dosing MVT-2163
reduces liver uptake facilitating detection of liver metastases. In
addition, we determined that the MVT-5873 cold antibody pre-dose
does not interfere with the uptake of MVT-2163 on cancer
lesions.
In
summary, the MVT-2163 product produced acceptable safety
tolerability, pharmacokinetics and biodistribution. MVT-2163 also
produced high quality PET images identifying both primary tumor and
metastatic sites. There was a promising correlation with diagnostic
CT that warrants further studies correlating these findings with
histopathology to assess the accuracy of MVT-2163 in identifying
smaller metastatic nodes below the detection level of standard CT
scans. The continual increase in high SUV values on cancer lesions
in this study supports the use of the Company’s MVT-1075
radioimmunotherapy product, which utilizes the same antibody to
deliver a radiation dose for the treatment of patients with
pancreatic, lung and colon cancers.
Plan for 2018
Based
on inquiries from third parties regarding their interest in MabVax
assets and clinical progress to date with MVT-5873, MVT-1075, and
MVT-2163, and with the assistance of investment advisor Greenhill
& Co., we expect to be able to decide on one or more strategic
alternatives for the Company in the first quarter of
2018.
We
currently plan to continue clinical development of MVT-1075 for the
treatment of locally advanced or metastatic pancreatic cancer
patients, by completing additional cohorts of patients in a dose
escalation safety trial to continue to assess the safety and
potential efficacy of this treatment, and expect to report results
in the first quarter of 2018.
We also
currently intend to continue clinical development of MVT-5873 in
combination with gemcitabine and nab-paclitaxal in first line
therapy for the treatment of patients newly diagnosed with
pancreatic cancer. We have treated two cohorts of patients for a
total of six patients through September 22, 2017 in this study; and
have initiated enrollment for an additional cohort of patients with
the objective of confirming early observations in the first quarter
2018.
Our plans beyond
the first quarter 2018 will depend substantially on which product
portfolios are licensed and/or sold to potential acquirers and/or
licensees in the remainder of 2017 and early 2018, and the
availability of financial resources resulting from such potential
transactions that are under consideration when we enter
2018.
Comparison of the Year Ended December 31, 2016 and
2015
Results of Operations
Revenues
Revenues
for the years ended December 31, 2016 and 2015 were $148,054
and $1,267,036, respectively, primarily from grant revenues. This
decrease was primarily due to the completion of the current phase
of our contract with the National Institutes of Health, or NIH (the
“NIH Imaging Contract”), during the first quarter of
2016.
|
Years Ended December 31,
|
% change
|
|
|
2016
|
2015
|
2015 to 2016
|
Revenues
|
$148,054
|
$1,267,036
|
(88)%
|
Future
revenues will depend upon the extent to which we obtain approval of
new grants or enter into new collaborative research agreements and
the amounts of payments relating to such agreements.
Research and Development Expenses
Research
and development expenses for the years ended December 31, 2016
and 2015 were $7,800,723 and $9,596,768, respectively. Our research
and development costs consist primarily of clinical trial site
costs, clinical data management and statistical analysis support,
drug manufacture, storage and distribution, regulatory services and
other outside services related to drug development.
|
Years Ended December 31,
|
% change
|
|
|
2016
|
2015
|
2015 to 2016
|
Research
and development
|
$7,800,723
|
$9,596,768
|
(19)%
|
Total
research and development expenses for the year ended
December 31, 2016 decreased by 19%, or $1,796,045, compared to
the same period in 2015. Expenses for the year ended December 31,
2016 were primarily for our clinical trials, and in-house staffing
to support preclinical and clinical development efforts in support
of our programs. Expenses in the same period a year ago
were primarily for GMP manufacturing development of our lead
antibody candidate HuMab 5B1 at Patheon (f.k.a. Gallus
BioPharmaceuticals). In addition, during the current quarter the
Company negotiated a release of approximately $363,000 of
previously accrued manufacturing costs related to failed
manufacturing batches.
Stock-based
compensation expense included in research and development expenses
for the years ended December 31, 2016 and 2015 were $1,192,126
and $929,633, respectively.
We
expect our total research and development expenditures in the next
twelve months to increase as we continue to fund the clinical
studies of MVT-5873 and MVT-2163 and begin clinical trials
in MVT-1075 in 2017. In the event we are unable to obtain
sufficient funding for clinical development of our therapies, we
will need to defer completion of clinical trials until such funding
is in place. If we are unable to obtain additional funding for our
trials to complete clinical development, our total research and
development expenditures will decrease substantially until the
additional funding is raised.
The
process of conducting the clinical research necessary to obtain FDA
approval is costly and time consuming. Current FDA requirements for
a new human drug to be marketed in the United States
include:
●
the
successful conclusion of preclinical laboratory and animal tests,
if appropriate, to gain preliminary information on the
product’s safety;
●
filing
with the FDA of an IND, to conduct initial human clinical trials
for drug candidates;
●
the
successful completion of adequate and well-controlled human
clinical trials to establish the safety and efficacy of the product
candidate; and
●
filing
by the Company and acceptance and approval by the FDA of an NDA for
a product candidate to allow commercial distribution of the drug,
which is beyond the scope of our financial resources. We intend on
licensing or selling the technology prior to filing an
NDA.
We
consider the active management and development of our clinical
pipeline to be crucial to our long-term success. The actual
probability of success for each product candidate and clinical
program may be impacted by a variety of factors, including, among
others, the quality of the candidate, the validity of the target
and disease indication, early clinical data, investment in the
program, competition, manufacturing capability and commercial
viability. Due to these and other factors, it is difficult to give
accurate guidance on the anticipated proportion of our research and
development investments or the future cash inflows from these
programs.
General and Administrative Expenses
General
and administrative expenses for the years ended December 31,
2016 and 2015 were $9,010,450 and $9,795,163,
respectively.
|
Years Ended December 31,
|
% change
|
|
|
2016
|
2015
|
2015 to 2016
|
General
and administrative
|
$9,010,450
|
$9,795,163
|
(8)%
|
The
decrease in general and administrative expenses of 8%, or $784,713
in 2016, compared to the same period in 2015, was primarily due to
decreases of approximately $1,614,000 in business development
expenses primarily related to restricted stock grants to
consultants for services and approximately $915,000 in investor
relations expenses primarily related to restricted stock grants to
outside consultants, partially offset by increases of approximately
$516,000 in facility expenses associated with the larger space
starting in February 2016, approximately $797,000 in stock based
compensation costs, and approximately $392,000 in salaries and
wages primarily related to additional headcount in business
development.
Stock-based
compensation expense included in general and administrative
expenses for the years ended December 31, 2016 and 2015 was
$3,211,152 and $3,534,062, respectively. Stock-based compensation
expense for the year ended December 31, 2016 included $592,329 in
restricted stock for services.
We
expect future general and administrative expenses to stay
relatively stable in 2017.
Interest Income and Interest Expense
|
Years Ended December 31,
|
% change
|
|
|
2016
|
2015
|
2015 to 2016
|
Interest
and other income (expense), net
|
$(997,364)
|
$(227)
|
*%
|
*Not meaningful
Interest
and other income and expense, net was $997,364 and $227 for the
years ended December 31, 2016 and 2015, respectively. Expenses
in 2016 consisted primarily of $603,875 interest expense related to
interest on the Company’s term loan from Oxford Finance,
$174,475 of financing cost amortization, and $219,039 of warrant
amortization partially offset by interest income of
$25.
The
fair value of the warrants issued to Oxford Finance related to the
term loan was recorded as a discount to the value of the note
payable, and is amortized over the term of the loan. In
addition, financing costs incurred related to the term loan are
amortized over the term of the loan.
Warrant Liability
Change
in fair value of warrant liability for the year ended
December 31, 2016 and 2015 was $0 and $19,807, respectively.
The decrease was mainly due to the restructuring the
Company’s capital structure resulting in the elimination of
the warrant liability as of December 31, 2015. We calculate the
value of our warrant liability on a quarterly basis, or when other
events and circumstances occur, using the Black-Scholes-Merton
valuation model.
Critical Accounting Policies and Significant Judgments and
Estimates
Our
management’s discussion and analysis of our financial
condition and results of operations are based on our consolidated
financial statements, which have been prepared in accordance with
GAAP. The preparation of these consolidated financial statements
requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements as well as the reported revenues and expenses
during the reporting periods. On an on-going basis, we evaluate our
estimates and judgments related to our operating costs. We base our
estimates on historical experience and on various other factors
that we believe are reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying
value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ significantly from these
estimates under different assumptions or conditions.
Our critical accounting policies include:
Revenue
recognition. Revenue from
grants is based upon internal and subcontractor costs incurred that
are specifically covered by the grant, including a facilities and
administrative rate that provides funding for overhead expenses.
NIH grants are recognized when MabVax Therapeutics incurs internal
expenses that are specifically related to each grant, in clinical
trials at the clinical trial sites, by subcontractors who manage
the clinical trials, and provided the grant has been approved for
payment. U.S. grant awards are based upon internal research and
development costs incurred that are specifically covered by the
grant, and revenues are recognized when MabVax Therapeutics incurs
internal expenses that are related to the approved
grant.
Any
amounts received by MabVax Therapeutics pursuant to the NIH grants
prior to satisfying our revenue recognition criteria are recorded
as deferred revenue.
Clinical
trial expenses. We accrue
clinical trial expenses based on work performed. In determining the
amount to accrue, we rely on estimates of total costs incurred
based on the enrollment of subjects, the completion of trials and
other events defined in contracts. We follow this method because we
believe reasonably dependable estimates of the costs applicable to
various stages of a clinical trial can be made. However, the actual
costs and timing of clinical trials are highly uncertain, subject
to risks, and may change depending on a number of factors.
Differences between the actual clinical trial costs and the
estimated clinical trial costs that we have accrued in any prior
period are recognized in the subsequent period in which the actual
costs become known. Historically, these differences have not been
material; however, material differences could occur in the
future.
Stock-based
compensation. Our
stock-based compensation programs include grants of stock options
and restricted stock to employees, non-employee directors and
non-employee consultants. Stock-based compensation cost is measured
at the grant date, based on the calculated fair value of the award,
and is recognized as an expense, under the straight-line method,
over the employee, non-employee director or non-employee
consultant’s requisite service period (generally the vesting
period of the equity grant).
We
account for equity instruments, including stock options and
restricted stock, issued to employees and non-employees in
accordance with authoritative guidance for equity based payments.
Stock options issued are accounted for at their estimated fair
value determined using the Black-Scholes-Merton option-pricing
model and restricted stock is accounted for using the grant date
fair value of our common stock granted. The fair value of options
and restricted stock granted to non-employees is re-measured as
they vest, and the resulting increase in value, if any, is
recognized as expense during the period the related services are
rendered.
Warrant
liability. We calculate the value of our warrant
liability on a quarterly basis, or when other events and
circumstances occur, using as a first step the Black-Scholes-Merton
valuation model, taking into consideration the warrant exercise
price, the probability of certain exercise price re-pricing
scenarios, the market price for the common stock on the date of
measurement, the risk-free interest rate, the dividend yield, the
volatility of a comparable period in which the warrant may be
exercised, and the remaining life of the warrant, and then as a
second step we test our valuation for reasonableness based on
settlement offers we have received from the holder of the warrant.
If the settlement offer is within a reasonable period of time from
when we do our calculation, and is not materially different from
the value we recorded using the Black-Scholes-Merton model, then we
retain the value established with our model. If the settlement
offer were to reflect a materially different amount near the date
of our calculation, then we would record the settlement
offer.
Income
taxes. Significant
judgment is required by management to determine our provision for
income taxes, our deferred tax assets and liabilities, and the
valuation allowance to record against our net deferred tax assets,
which are based on complex and evolving tax regulations throughout
the world. Our tax calculation is impacted by tax rates in the
jurisdictions in which we are subject to tax and the relative
amount of income earned in each jurisdiction. Our deferred tax
assets and liabilities are determined using the enacted tax rates
expected to be in effect for the years in which those tax assets
are expected to be realized.
The
effect of an uncertain income tax position is recognized as the
largest amount that is “more-likely-than-not” to be
sustained under audit by the taxing authority. An uncertain income
tax position will not be recognized if it has less than a 50%
likelihood of being sustained.
The
realization of our deferred tax assets is dependent upon our
ability to generate sufficient future taxable income. We establish
a valuation allowance when it is more-likely-than-not that the
future realization of all or some of the deferred tax assets will
not be achieved. The evaluation of the need for a valuation
allowance is performed on a jurisdiction-by-jurisdiction basis, and
includes a review of all available evidence, both positive and
negative. As of December 31, 2016, MabVax Therapeutics
concluded that it was more-likely-than-not that its deferred tax
assets would not be realized, and a full valuation allowance has
been recorded.
Liquidity and Capital Resources
From
inception to December 31, 2016, we have financed our operations
principally through net proceeds received from private equity and
preferred stock financings, debt financings, and grants through the
NIH and SBIR programs. We have experienced negative cash flows from
operations each year since our inception. As of December 31,
2016, we had an accumulated deficit of $78,262,261. We expect to
continue to incur increased expenses, resulting in losses, over at
least the next several years due to, among other factors, our
continuing and planned clinical trials and anticipated research and
development activities.
|
2016
|
2015
|
December 31:
|
|
|
Cash
and cash equivalents
|
$3,979,290
|
$4,084,085
|
Working
capital/(deficit)
|
$(1,396,656)
|
$350,621
|
Current
ratio
|
0.75:1
|
1.07:1
|
|
||
December 31:
|
|
|
Cash
provided by (used in):
|
|
|
Operating
activities
|
$(12,363,411)
|
$(10,525,182)
|
Investing
activities
|
$(563,196)
|
$(78,416)
|
Financing
activities
|
$12,821,812
|
$13,210,540
|
Sources and Uses of Cash
Due
to the 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 government grants and contracts,
sales of equity, debt, collaborative arrangements with corporate
partners, and interest earned on investments. At December 31,
2016, we had available cash and cash equivalents of $3,979,290. Our
cash and cash equivalents balances are held primarily in checking
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.
Cash Flows
from Operating Activities. Cash used in operating activities for 2016
was $12,363,411 compared to $10,525,182 for the same period in
2015. Net loss of $17,660,483 in 2016 included non-cash charges of
$4,403,278 for stock-based compensation and $96,553 in depreciation
and amortization. Cash used in 2015 resulted from a net loss of
$18,105,315 and included non-cash charges of $4,463,695 for
stock-based compensation and $21,360 in depreciation, partially
offset by a $19,807 reduction in fair value of the Series B
warrants.
Cash Flows
from Investing Activities. Cash used in investing activities for 2016
was $563,196 compared to $78,416 during the same period in 2015.
Cash used in both 2016 and 2015 was primarily used to purchase
property and equipment.
Cash Flows
from Financing Activities. Cash provided by financing activities for
2016 was $12,821,812 compared to $13,210,540 provided in 2015. Cash
provided by financing activities in 2016 included $4,610,324 from
net proceeds from the January 2016 Oxford Finance term loan and
$8,567,448 from sale of common stock and warrants in a registered
offering completed in August 2016. Cash provided by financing
activities in 2015 included $10,709,740 from net proceeds from the
sale of common stock and warrants in a private placement completed
in April 2015, as well as a public offering completed in October
2015 for $2,750,000.
Working
Capital. Working capital decreased to a working
capital deficit of $1,396,656 at December 31, 2016 compared to
a working capital surplus of $350,621 at December 31, 2015.
The decrease in working capital was primarily due to increased
capital usage during 2016 primarily related to the company’s
clinical development programs.
We
believe our cash and cash equivalents as of December 31, 2016
will be sufficient to fund our projected operating requirements
through approximately April 2017. In order to continue our current
and future operations and continue our clinical product development
programs through 2017, we will depend on our ability to obtain
additional funding in a timely manner or if at all. We are
uncertain about our ability to raise sufficient funds to continue
our existing operations after April 2017. We continue to explore
alternatives that could include partnerships involving one or more
of our product candidates, licensing arrangements with one or more
of our product development candidates, merger with or acquisition
by another company, or some other arrangement through which the
value of our assets to stockholders could be enhanced. We may raise
funds through arrangements with collaborators or others that may
require us to relinquish rights to certain product candidates that
we might otherwise seek to develop or commercialize independently.
Our failure to raise capital when needed could materially harm our
business, financial condition and results of operations. See Risk
Factors.
Our
future capital uses and requirements depend on numerous factors,
including the following:
●
the
progress and success of preclinical studies and clinical trials of
our product candidates;
●
the
progress and number of research programs in
development;
●
the
costs associated with conducting Phase I and II clinical
trials;
●
the
costs and timing of obtaining regulatory approvals;
●
our
ability to establish, and the scope of, any new
collaborations;
●
our
ability to meet the milestones identified in our collaborative
agreements that trigger payments;
●
the
costs and timing of obtaining, enforcing and defending our patent
and intellectual property rights; and
●
competing
technological and market developments.
Future Contractual Obligations
On
September 2, 2015, the Company entered into a lease (the
“Lease”) with AGP Sorrento Business Complex, L.P., for
certain premises consisting of a total of approximately 14,971
square feet of office and laboratory space in buildings located at
11535-11585 Sorrento Valley Rd., San Diego, California, to
serve as the Company’s corporate offices and laboratories
(the “New Premises”). Due to the fact that certain
tenant improvements needed to be made to the New Premises before
the Company could occupy the New Premises, the term of the Lease
commenced on February 5, 2015. The Lease terminates six years after
such term commencement date, unless earlier terminated in
accordance with the Lease. Pursuant to the terms of the Lease, the
current monthly base rent paid by the Company is $35,631, subject
to annual increases as set forth in the Lease.
The
Company has an option to extend the Lease term for a single,
five-year period. If the Lease term is extended for the optional
five-year period, the monthly base rent will be adjusted based on
fair market rental value. In addition to rent, the Company agreed
to pay a portion of the taxes and utility, maintenance and other
operating costs paid or accrued in connection with the ownership
and operation of the property.
Our
master lease and sublease of our facility located at 3165 Porter
Drive in Palo Alto, California were terminated on February 28, 2013
and we entered into a termination agreement with ARE-San Francisco
No. 24 (“ARE”) on February 19, 2013 to voluntarily
surrender its premises. 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 $700,000. In addition to the
termination fee, if we receive $15 million or more in additional
financing in the aggregate, an additional termination fee of
$590,504 will be due to ARE. The additional financing was achieved
in 2015 and the termination fee is reflected on the balance sheet
as an accrued lease contingency fee.
We
anticipate that we will continue to incur substantial net losses
into the foreseeable future as we: (i) continue our Phase I
clinical trial for our stand-alone therapeutic HuMab 5b-1, or
MVT-5873, which was initiated in the first quarter of 2016, (ii)
initiate our Phase I clinical trial of our PET imaging agent
89Zr-HuMab-5B1, or MVT-2163, (iii) continue to conduct preclinical
development activities related to other product development
candidates in our library, and (iv) monitor patients in clinical
trials that have already completed their treatment regimens. Based
on management’s assumptions for continuing to develop its
existing pipeline of products without additional funding, we expect
we will have sufficient funds to meet our obligations through April
2017.
We
plan to continue to fund our research and development and operating
activities through public or private equity financings, debt
financings, strategic partnerships or other arrangements with
organizations that have capabilities and/or products that are
complementary to our own capabilities and/or products, licensing
arrangements, government grants, or other arrangements. However, we
cannot be sure that such additional funds will be available on
reasonable terms, or at all. If we are unable to secure adequate
additional funding, we may be forced to reduce spending, extend
payment terms with suppliers, liquidate assets where possible,
and/or suspend or curtail planned programs. In addition, if we do
not meet our payment obligations to third parties as they come due,
we may be subject to litigation claims. Even if we are successful
in defending against these claims, litigation could result in
substantial costs and be a distraction to our management. Any of
these actions could materially harm our business, results of
operations, and future prospects.
If
we raise additional funds by issuing equity securities, substantial
dilution to our existing stockholders would result. If we raise
additional funds by incurring debt financing, the terms of the debt
may involve significant cash payment obligations as well as
covenants and specific financial ratios that may restrict our
ability to operate our business.
Off-Balance Sheet Arrangements
We
have no material off-balance sheet arrangements as defined in
Regulation S-K 303(a)(4)(ii).
Comparison of the Three and Nine Months Ended September 30, 2017
and 2016
Results of Operations
We
are providing the following information about our revenues,
expenses, cash and liquidity.
Revenues
|
Three
Months Ended September
30,
|
%
Increase/
|
Nine
Months Ended September
30,
|
%
Increase/
|
||
|
2017
|
2016
|
(Decrease)
|
2017
|
2016
|
(Decrease)
|
Revenues
|
$—
|
$—
|
(0)%
|
$—
|
$148,054
|
(100)%
|
For
the three months ended September 30, 2017 and 2016, we had no
revenues recorded. We had completed the current Phase of the NIH
Imaging Contract during the first quarter of the prior
year.
For
the nine months ended September 30, 2017, we recognized no
revenues, as compared to $148,054 for the same period in the prior
year. This decrease was due to the completion of the current Phase
of the NIH Imaging Contract during the first quarter of the prior
year.
Research and development expenses
|
Three
Months Ended September
30,
|
%
Increase/
|
Nine Months Ended September
30,
|
%
Increase/
|
||
|
2017
|
2016
|
(Decrease)
|
2017
|
2016
|
(Decrease)
|
Research and
development
|
$1,017,061
|
$1,671,181
|
(39.1)%
|
$6,168,125
|
$4,967,695
|
24.2%
|
For
the three months ended September 30, 2017, we incurred research and
development expenses of $1,017,061, as compared to $1,671,181 for
the same period a year ago. Stock-based compensation expense
included in research and development expenses for the three months
ended September 30, 2017 and 2016 was $292,523 and $301,985,
respectively. Expenses decreased during the three months ended
September 30, 2017, compared to the same period in the prior year
due to decreases in the following expenses: antibody research and
development $162,251, stability and pharmacology studies $144,292,
lab expenses $63,677, recruiting expenses $62,580, antibody
manufacturing $48,677, clinical expenses $58,938, consortium costs
$96,301 and the remaining decrease is predominately due to a
reduction in payroll related costs as a result of the reduction in
force beginning in August 2017.
For
the nine months ended September 30, 2017, we incurred research and
development expenses of $6,168,125, as compared to $4,967,695 for
the same period a year ago. Stock-based compensation expense
included in research and development expenses for the nine months
ended September 30, 2017 and 2016 was $989,884 and $889,666,
respectively. Increased expenses in the nine months ended
September 30, 2017, compared to the same period in the prior year
are primarily due to increased spending on our Phase I clinical
trials of MVT-5873 as a therapeutic and MVT-2163 as a diagnostic
for pancreatic cancer and other CA 19.9 malignancies, and in-house
staffing to support preclinical and clinical development efforts in
support of our programs during the first two quarters of the
year.
General and administrative expenses
|
Three
Months Ended September
30,
|
% Increase/
|
Nine Months Ended September
30,
|
%
Increase/
|
||
|
2017
|
2016
|
(Decrease)
|
2017
|
2016
|
(Decrease)
|
General and
administrative expense
|
$1,831,629
|
$2,420,516
|
(24.3)%
|
$7,513,621
|
$7,001,521
|
(7.3)%
|
For
the three months ended September 30, 2017, we incurred general and
administrative expenses of $1,831,629, as compared to $2,420,516
for the same period a year ago. Stock-based compensation expense
included in general and administrative expenses for the three
months ended September 30, 2017 and 2016 was $721,213 and $666,556,
respectively. Stock-based compensation expense for the three months
ended September 30, 2017 and 2016 included $68,250 and $8,333 in
restricted stock for services, respectively. The decrease in
general and administrative expenses was predominately due to a
decrease in investor relations expenses of $437,394, board fees of
$98,000, office facility expenses of $36,196, travel expenses of
$20,383, franchise state taxes of $20,125, and payroll related
costs of $14,588 as a result of the reduction in force beginning in
August 2017. The remaining variance was offset by an increase in
legal fees.
For
the nine months ended September 30, 2017, we incurred general and
administrative expenses of $7,513,621, as compared to $7,001,520
for the same period a year ago. Stock-based compensation expense
included in general and administrative expenses for the nine months
ended September 30, 2017 and 2016 was $3,526,488 and $2,570,326,
respectively. Stock-based compensation expense for the nine months
ended September 30, 2017 and 2016 included $131,800 and $592,329 in
restricted stock for services, respectively. The increase in
general and administrative expenses was primarily due to an
increase in stock-based compensation expenses of $1,548,490 as a
result of option granted during the second quarter. This increase
was offset predominately by a decrease in investor relations of
$313,661, business development consulting of $535,528, board fees
of $136,953, insurance $30,929, and facility expenses
$28,292.
Interest income and other expense
|
Three
Months Ended September
30,
|
% Increase/
|
Nine Months Ended September
30,
|
%
Increase/
|
||
|
2017
|
2016
|
(Decrease)
|
2017
|
2016
|
(Decrease)
|
Interest and other
expense
|
$(231,471)
|
$(266,051)
|
(13.0)%
|
$(743,137)
|
$(729,331)
|
1.9%
|
Interest
and other expense was $231,471 and $266,051 for the three months
ended September 30, 2017 and 2016, respectively. The amount of
interest for the three months ended September 30, 2017, consisted
of $142,007 related to Oxford Finance, First Insurance financing,
and the Company's capital lease, $39,654 of financing cost
amortization, $49,782 of warrant amortization and other items of
$28. The amount for the three months ended September 30, 2016,
consisted primarily of $158,735 of interest expense related to
interest on the Company’s term loan from Oxford Finance,
$47,584 of financing cost amortization, and $59,738 of warrant
amortization.
The
amount of interest and other expense for the nine months ended
September 30, 2017, consisted primarily of $449,300 interest
expense related to the Company’s term loan from Oxford
Finance, $130,416 of financing cost amortization, $163,727 of
warrant amortization and other items of $306. The amount for the
nine months ended September 30, 2016, consisted primarily of
$443,175 interest expense related to interest on the
Company’s term loan from Oxford Finance, $126,891 of
financing cost amortization, and $159,302 of warrant amortization
partially offset by interest income of $18.
The
fair value of the warrants issued to Oxford Finance related to the
term loan was recorded as a discount to the value of the note
payable, and is amortized over the term of the loan. Financing
costs incurred related to the term loan are also amortized over the
term of the loan.
Critical Accounting Policies and Significant Judgments and
Estimates
Our
management’s discussion and analysis of our financial
condition and results of operations are based on our consolidated
financial statements, which have been prepared in accordance with
generally accepted accounting principles in the United States
(“GAAP”). The preparation of these consolidated
financial statements requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the
condensed consolidated financial statements as well as the reported
revenues and expenses during the reporting periods. On an on-going
basis, we evaluate our estimates and judgments related to our
operating costs. We base our estimates on historical experience and
on various other factors that we believe are reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that
are not readily apparent from other sources. Actual results may
differ significantly from these estimates under different
assumptions or conditions.
Our critical accounting policies include:
Revenue
recognition. Revenue from
grants is based upon internal and subcontractor costs incurred that
are specifically covered by the grant, including a facilities and
administrative rate that provides funding for overhead expenses.
NIH grants are recognized when we incur internal expenses that are
specifically related to each grant, in clinical trials at the
clinical trial sites, by subcontractors who manage the clinical
trials, and provided the grant has been approved for payment. U.S.
grant awards are based upon internal research and development costs
incurred that are specifically covered by the grant, and revenues
are recognized when we incur internal expenses that are related to
the approved grant.
Any
amounts received by us pursuant to the NIH grants prior to
satisfying our revenue recognition criteria are recorded as
deferred revenue.
Clinical
trial expenses. We accrue
clinical trial expenses based on work performed. In determining the
amount to accrue, we rely on estimates of total costs incurred
based on the enrollment of subjects, the completion of trials and
other events defined in contracts. We follow this method because we
believe reasonably dependable estimates of the costs applicable to
various stages of a clinical trial can be made. However, the actual
costs and timing of clinical trials are highly uncertain, subject
to risks, and may change depending on several factors. Differences
between the actual clinical trial costs and the estimated clinical
trial costs that we have accrued in any prior period are recognized
in the subsequent period in which the actual costs become known.
Historically, these differences have not been material; however,
material differences could occur in the future.
Stock-based
compensation. Our
stock-based compensation programs include grants of stock options
and restricted stock to employees, non-employee directors and
non-employee consultants. Stock-based compensation cost is measured
at the grant date, based on the calculated fair value of the award,
and is recognized as an expense, under the straight-line method,
over the employee, non-employee director or non-employee
consultant’s requisite service period (generally the vesting
period of the equity grant).
We
account for equity instruments, including stock options and
restricted stock, issued to employees and non-employees in
accordance with authoritative guidance for equity based payments.
Stock options issued are accounted for at their estimated fair
value determined using the Black-Scholes-Merton option-pricing
model, and restricted stock is accounted for using the grant date
fair value of our common stock granted. The fair value of options
and restricted stock granted to non-employees is re-measured as
they vest, and the resulting increase in value, if any, is
recognized as expense during the period the related services are
rendered.
Impairment
of Goodwill. The
Company applies the GAAP principles related to Intangibles –
Goodwill and Other related to performing a test for goodwill
impairment annually. During the quarter ended September 30, 2017,
due to the Company’s determination to explore and evaluate strategic
options, we performed a
step 1 analysis and assessed the market value of the Company to
determine whether an impairment had taken place. Based upon the
analysis performed no impairment was noted, therefore performing
step 2 was not required. We concluded that no impairment of
Goodwill had taken place during the quarter ended September 30,
2017. Further, in performing a qualitative assessment, we concluded
no events and circumstances had taken place that would have
indicated that an impairment had taken place.
Income
taxes. Significant
judgment is required by management to determine our provision for
income taxes, our deferred tax assets and liabilities, and the
valuation allowance to record against our net deferred tax assets,
which are based on complex and evolving tax regulations throughout
the world. Our tax calculation is impacted by tax rates in the
jurisdictions in which we are subject to tax and the relative
amount of income earned in each jurisdiction. Our deferred tax
assets and liabilities are determined using the enacted tax rates
expected to be in effect for the years in which those tax assets
are expected to be realized.
The
effect of an uncertain income tax position is recognized as the
largest amount that is “more-likely-than-not” to be
sustained under audit by the taxing authority. An uncertain income
tax position will not be recognized if it has less than a 50%
likelihood of being sustained.
The
realization of our deferred tax assets is dependent upon our
ability to generate sufficient future taxable income. We establish
a valuation allowance when it is more-likely-than-not that the
future realization of all or some of the deferred tax assets will
not be achieved. The evaluation of the need for a valuation
allowance is performed on a jurisdiction-by-jurisdiction basis, and
includes a review of all available evidence, both positive and
negative. As of September 30, 2017, the Company concluded that it
was more-likely-than-not that its deferred tax assets would not be
realized, and a full valuation allowance has been
recorded.
The
above listing is not intended to be a comprehensive list of all of
our accounting policies. In many cases, the accounting treatment of
a particular transaction is specifically dictated by GAAP. See our
audited consolidated financial statements and notes thereto
included in our 2016 Annual Report on Form 10-K, which contain
additional accounting policies and other disclosures required by
GAAP.
Liquidity and Capital Resources
To
date, we have funded our operations primarily through government
grants, proceeds from the sale of common and preferred stock, the
issuance of debt, the issuance of common stock in lieu of cash for
services, payments from collaborators and interest income. We have
experienced negative cash flow from operations each year since our
inception. As of September 30, 2017, we had an accumulated deficit
of $101,046,557 and stockholders’ equity of $2,520,416.
We expect to continue to incur increased expenses, resulting in
losses, over the next several years due to, among other factors,
our continuing and planned clinical trials and anticipated research
and development activities, unless we can achieve a major license
of one or more of our products under development. There can be no
assurance that we will be able to achieve a license and earn
revenues large enough to offset our operating expenses. We had cash
of $3,052,778 and a working capital deficit of $2,918,271 as of
September 30, 2017.
|
September 30,
2017
|
December 31,
2016
|
Cash and cash
equivalents
|
$3,052,778
|
$3,979,290
|
Working capital
deficit
|
$(2,918,271)
|
$(1,396,656)
|
Current
ratio
|
0.54:1
|
0.75:1
|
|
Nine
Months Ended September
30,
|
|
|
2017
|
2016
|
Cash provided by
(used in):
|
|
|
Operating
activities
|
$(8,702,932)
|
$(9,622,309)
|
Investing
activities
|
$(21,072)
|
$(412,498)
|
Financing
activities
|
$7,797,492
|
$12,891,935
|
Sources and
Uses of Net Cash for the Nine Months Ended September 30,
2017
Net
cash used in operating activities was $8,702,932 for the nine
months ended September 30, 2017, compared to $9,622,309 in the
comparable period a year ago. The net cash used in both periods was
primarily attributable to the net losses, adjusted to exclude
certain non-cash items, primarily stock-based compensation and
amortization of finance costs related to the term loan. Net cash
used in operating activities for the nine months ended September
30, 2017 was also impacted by an increase of $403,210 in accounts
payable and an increase in accrued clinical operation and site
costs of $283,864.
The
net cash used in investing activities for the nine months ended
September 30, 2017 and 2016, amounted to $21,072 and $412,498,
respectively, primarily as a result of discontinuing our in-house
lab operations in the corresponding period.
Net
cash provided by financing activities was $7,797,492 for the nine
months ended September 30, 2017, compared to $12,891,935 in the
comparable period in 2016. Net cash provided by financing
activities for the nine months ended September 30, 2017 was
attributable to the net proceeds from the May 2017 Private
Placement and Public Offering during the second quarter of 2017, a
Private Placement and Underwritten Offering in August 2017 and two
Registered Direct Offerings in September 2017. Net cash provided by
financing activities for the nine months ended September 30, 2016
was attributable to the net proceeds from the term loan during the
first quarter in 2016.
On May 3, 2017, we sold 850 shares
of Series H Preferred
Stock at a stated value of
$1,000 per share, representing an aggregate of $850,000 in the May
2017 Private Placement, to certain existing
investors. The shares of Series H Preferred Stock are
convertible into shares of common stock based on a conversion
calculation equal to the stated value of the Series H Preferred
Stock, plus the base amount, if any, on such Series H Preferred
Stock, as of such date of determination, divided by the conversion
price. The stated value of each share of Series H Preferred Stock
is $1,000 and the initial conversion price is $1.75 per share, each
subject to adjustment for stock splits, stock dividends,
recapitalizations, combinations, subdivisions or other similar
events. This financing is discussed in further detail in Note 5,
Convertible Preferred Stock, Common Stock and Warrants of the Notes
to Unaudited Condensed Consolidated Financial Statements included
herein.
On
May 19, 2017, we closed a public offering of 1,342,858 shares of
common stock and 1,000,000 shares of newly designated Series G
Preferred Stock, at $1.75 per share of common stock and Series G
Preferred Stock. The Series G Preferred Stock is initially
convertible into 1,000,000 shares of common stock, subject to
adjustment for stock splits, stock dividends, recapitalizations,
combinations, subdivisions or other similar events, to certain
existing investors in the offering who, as a result of their
purchases of common stock, would hold in excess of 4.99% of our
issued and outstanding common stock, and elect to receive shares of
our Series G Preferred Stock. This offering is discussed in further
detail in Note 5, Convertible Preferred Stock, Common Stock and
Warrants of the Notes to Unaudited Condensed Consolidated Financial
Statements included herein. We received $4,100,000 in gross
proceeds, before estimate underwriting discounts, commissions and
offering expenses of $452,609.
On July
27, 2017, we entered into a subscription agreement with an
accredited investor pursuant to which we agreed to sell 152,143
restricted shares of common stock for $125,000. As part of the July
2017 Private Placement, the Company agreed to reprice the
investor’s warrant to purchase 225,225 shares of common stock
from $11.10 to $2.00 per warrant share and remove the cashless
exercise feature. The transaction closed on August 2, 2017.
The impact of repricing the warrants to $2.00 a share, which took
effect on August 2, 2017, was immaterial, as the stock price on the
date of the closing of the transaction was $0.70 and the warrants
at $2.00 a share expired on October 10, 2017,
unexercised.
On August 11, 2017, we entered into securities
purchase agreements to sell 2,386.36 shares of Series J Preferred
Stock with a stated value of $550 per share. The Series J
Preferred Stock is convertible into common stock at $0.55 per
share, subject to adjustment for stock splits, stock dividends,
recapitalizations, combinations, subdivisions or other similar
events and was purchased by the Prior Investors. The total amount
of the securities purchase agreements amounted to approximately
$1,312,500, before estimated expenses of
$123,083. The Certificate of
Designation for the Series J Preferred Stock includes a 4.99%
beneficial ownership conversion blocker, a 19.99% blocker provision
to comply with the NASDAQ Capital Market rules until stockholders
have approved any or all shares of common stock issuable upon
conversion of the Series J Preferred Stock, which was approved at
the October 2017 Special Meeting, and a 125% liquidation
preference. All shares of the Company’s capital stock will be
junior in rank to the Series J Preferred Stock at the time of
creation, with respect to the preferences as to dividends,
distributions and payments upon the liquidation, dissolution and
winding-up of the Company, except for the Company’s Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock, Series H Preferred Stock, and
Series I Preferred Stock.
In
connection with the August 2017 Offering, we agreed with the Lead
Investor pursuant to the August 2017 Letter Agreement, to issue the
Incentive Shares to Prior Investors as an incentive to invest in
the August 2017 Offering. Such Prior Investors received a portion
of 65,000 shares in the form of a new Series K Preferred Stock,
allocated by the Lead Investor, and convertible into 6,500,000
shares of common stock, subject to stockholder approval, which was
also approved in the October 2017 Special Meeting. The stated value
of each share of Series K Preferred Stock is $0.01 and the
conversion rate is the stated value of $0.01 divided by .0001, or
one hundred (100) shares of common stock upon conversion of one (1)
share of Series K Preferred Stock, each subject to adjustment for
stock splits, stock dividends, recapitalizations, combinations,
subdivisions or other similar event, and have a 4.99% beneficial
ownership conversion blocker. In the event of a liquidation,
dissolution or winding up of the Company, each share of Series K
Preferred Stock will be entitled to a per share preferential
payment equal to the par value, or $0.01 per share. All shares of
the Company’s capital stock will be junior in rank to the
Series K Preferred Stock at the time of creation, with respect to
the preferences as to dividends, distributions and payments upon
the liquidation, dissolution and winding-up of the Company, except
for the Company’s Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred
Stock, Series H Preferred Stock, Series I Preferred Stock and
Series J Preferred Stock. The Company recorded a deemed dividend of
$3,120,000 in August 2017 in connection with issuing the Incentive
Shares.
The
August 2017 Letter Agreement also specified the
following:
●
That the Company files a proxy
statement for a special meeting of stockholders within 10 days of
closing the August 2017 Offering. Proposals shall include
(i) an amendment to the Company’s Certificate of
Incorporation to effect a reverse stock split of its issued and
outstanding common stock by a ratio of not less than one-for-two
and not more than one-for-twenty at any time prior to one year from
the date of the special meeting, with the exact ratio to be set at
a whole number within this range as determined by the Board of
Directors, (ii) the issuance of securities in one or more
non-public offerings where the maximum discount at which securities
will be offered will be equivalent to a discount of 30% below the
market price of the common stock, as required by and in accordance
with Nasdaq Marketplace Rule 5635(d), (iii) the issuance of
securities in one or more non-public offerings where the maximum
discount at which securities will be offered will be equivalent to
a discount of 20% below the market price of the Common Stock, as
required by and in accordance with Nasdaq Marketplace Rule 5635(d),
(iv) the issuance of the Series J Conversion Shares and (v) the
issuance of the Inducement Shares.
●
Lead
Investor will commit to investing an additional $1,000,000 in a new
private or public offering of up to $8,000,000. The $8,000,000
Financing shall sign and close following shareholder approval of
each of the proposals identified in the August 2017 Letter
Agreement.
●
That
the employment terms of all
management be reduced to two years from three years and that
management defer portions of their salary for the remainder of the
year, which shall be paid upon the earlier of completion of the
$8,000,000 Financing or a business transaction that represents, or
transactions in the aggregate that represent, in excess of
$10,000,000.
Effective with the Company’s pay period
ending August 10, 2017, and without changing their employment
agreements dated July 1, 2017, several members of management
volunteered to defer receiving portions of their salaries for the
remainder of 2017. The voluntary deferral of cash payments is
intended to help with the Company’s cash flow for the
remainder of the year, with voluntary reductions by the management
team committed to remain in effect until the earlier of completing
a successful financing of at least $8.0 million, a business
transaction that represents, or business transactions in the
aggregate that represent, an amount of $10.0 million or greater, or
the end of the year, whichever occurs first. The employment
agreements with the Company remain unchanged, except that the
executives have volunteered to reduce the terms of their employment
agreements to two years from three in connection with
the August 11, 2017 registered direct
offering and Letter Agreement with the Lead
Investor.
On August 14, 2017, the Chairman of
the Compensation Committee, acting on behalf of the Board of
Directors sent a letter to each executive of the Company stating
that the Board deems it in the best interests of the Company to
request that the executive voluntarily defer a portion of his
regular salary to help with cash flow of the Company. On August 16
and August 21, 2017, Paul Resnick, M.D. and Paul Maffuid, Ph.D.,
respectively gave notice of good reason (as that term is defined in
their employment agreements or “Good Reason”) for
termination of their employment. The Company had 30 days from the
notification date under each of their employment agreements to cure
their concerns. In oral discussions with each executive the
President and Chief Executive Officer communicated on behalf of the
Compensation Committee the Company’s intention to provide
additional equity compensation in return for salary deferrals.
Given the perceived uncertainty about the Company’s plans at
the time for addressing the concerns of Dr. Resnick and Dr.
Maffuid, and that nothing in writing had been provided as possible
equity compensation, they each submitted their notices to the
Company of good reason for termination. Further, they each
expressed in oral conversations that they wanted to remain employed
by the Company. The Company cured each executive’s concerns
within the 30-day cure period, by reinstating the deferred salary
for Dr. Resnick in one instance, and in granting restricted stock
to all executives with vesting over time, as disclosed in the
filings of Form 4s following the approvals. Both executives
rescinded their notices of good reason for termination on September
7, 2017, and all executives’ employment agreements remain
unchanged as the salary deferrals remain to be
voluntary.
In
order to meet the NASDAQ Capital Market rules in the August 2017
Offering, we were not obligated to issue any shares of common stock
upon conversion of the Series J Preferred Stock which would cause
the Company to breach our obligations under the rules and
regulations of the NASDAQ Capital Market, which limit the aggregate
number of shares issued at a discount to market at 19.99% of the
number of shares outstanding on the closing date of the August 2017
Offering, except that such limitation shall not apply in the event
that we obtain the approval of our stockholders as required by the
applicable rules of the NASDAQ Capital Market for issuances of
common stock in excess of such amount. Similarly, none of the
Series K Preferred Stock may be converted into common stock until
we obtain the approval of our stockholders. At the October 2017
Special Meeting, we obtained approval to issue shares underlying
all of the Series J Preferred Stock and the Series K Preferred
Stock.
On
September 11, 2017, we
entered into an agreement to sell 4.0 million shares of common
stock at $0.50 a share for gross proceeds of approximately
$2.0 million, before estimated expenses of $147,639. The
shares were offered and sold to certain accredited investors in a
registered direct offering. Laidlaw
& Company (UK) Ltd. acted as placement agent for the
offering.
On
September 22, 2017, we entered into a subscription agreement with
select accredited investors relating to the Company’s
registered direct offering, issuance and sale of 2,016,129 shares
of the Company’s common stock, $0.01 par value per share. The
purchase price per share was $0.62. The total amount of the
subscription agreements amounted to $1,250,000, before estimated
expenses of $35,000.
On
October 10, 2017, the Company entered into additional subscription
agreements with select accredited investors relating to the
Company’s registered direct offering, issuance and sale of
769,231 shares of the Company’s common stock. The purchase
price per share was $0.65. We received $500,000 in gross proceeds,
before offering expenses totaling approximately $15,000. The
offering closed on October 11, 2017.
We
plan to continue to fund the Company’s losses from operations
and capital funding needs through equity or debt financings,
strategic collaborations, licensing arrangements, government grants
or other arrangements. Further, to extend availability of existing
cash available for our programs for the purpose of achieving
milestones or a strategic transaction, we have cut personnel from
25 full time people to 10, and reduced other operating expenses
following the completion of two phase 1a clinical trials of our
lead antibody HuMab 5B1, which has enabled us to reduce our
expenditures on clinical trials. We continue to develop our
radioimmunotherapy product MVT-1075 discussed further in
Management’s Discussion and Analysis of Financial Condition
and Results of Operations. Several members of management have
volunteered to defer receiving portions of their salaries until one
or more business transactions can be achieved. However, we
cannot be sure that capital funding will be available on reasonable
terms, or at all. If we are unable to secure adequate additional
funding, we may be forced to make additional reductions in
spending, incur further cutbacks in personnel, extend payment terms
with suppliers, liquidate assets where possible, and/or suspend or
curtail planned programs. In addition, if the Company does not meet
its payment obligations to third parties as they come due, it may
be subject to litigation claims. Even if we are successful in
defending against these claims, litigation could result in
substantial costs and be a distraction to management.
We
anticipate that the Company will continue to incur net losses into
the foreseeable future as we: (i) continue our clinical trial for
the development of MVT1075 as a radioimmunotherapy, (ii) continue
our clinical trial of MVT-5873 in combination with gemcitabine
and nab-paclitaxal in first line therapy for the treatment of
patients newly diagnosed with pancreatic cancer.; and (iii)
continue operations as a public company. Based on receipt of the
$125,000 private placement in July 2017, and financings of $1.3
million in August 2017, $2.0 million on September 14, $1.25 million
on September 22, 2017, and $500,000 on October 10, 2017, and
without any other additional funding or receipt of payments from
potential licensing agreements, we expect we will have sufficient
funds to meet our obligations until February 2018. These conditions
give rise to substantial doubt as to the Company’s ability to
continue as a going concern. Any of these actions could materially
harm the Company’s business, results of operations, and
prospects. These conditions give rise to substantial doubt as to
the Company’s ability to continue as a going concern. The
accompanying condensed consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
If
the Company raises additional funds by issuing equity securities,
substantial dilution to existing stockholders would result. If the
Company raises additional funds by incurring debt financing, the
terms of the debt may involve significant cash payment obligations
as well as covenants and specific financial ratios that may
restrict the Company’s ability to operate its
business.
Future Contractual Obligations
On
September 2, 2015, the Company entered into the Lease with AGP
Sorrento Business Complex, L.P., for certain premises consisting of
a total of approximately 14,971 square feet of office and
laboratory space in buildings located at 11535-11585
Sorrento Valley Rd., San Diego, California, to serve as the
Company’s corporate offices and laboratories. Because certain
tenant improvements needed to be made to the New Premises before
the Company could occupy the New Premises, the term of the Lease
commenced on February 5, 2015. The Lease terminates six years after
such term commencement date, unless earlier terminated in
accordance with the Lease. Pursuant to the terms of the Lease, the
current monthly base rent paid by the Company is $36,699, subject
to annual increases as set forth in the Lease.
The
Company has an option to extend the Lease term for a single,
five-year period. If the Lease term is extended for the optional
five-year period, the monthly base rent will be adjusted based on
fair market rental value. In addition to rent, the Company agreed
to pay a portion of the taxes and utility, maintenance and other
operating costs paid or accrued in connection with the ownership
and operation of the property.
Our
master lease and sublease of our facility located at 3165 Porter
Drive in Palo Alto, California were terminated on February 28,
2013, and we entered into a termination agreement with ARE-San
Francisco No. 24 (“ARE”) on February 19, 2013 to
voluntarily surrender its premises. Because of the termination
agreement, we were relieved of further obligations under the master
lease and further rights to rental income under the sublease and
paid a termination fee of approximately $700,000. In addition to
the termination fee, if we receive $15 million or more in
additional financing, in the aggregate, an additional termination
fee of $590,504 will be due to ARE. The additional financing was
achieved in 2015 and the termination fee is reflected on the
condensed consolidated balance sheet as an accrued lease
contingency fee.
Recent Accounting Pronouncements
In May 2014, the FASB issued
ASU 2014-09, "Revenue from Contracts with Customers
(Topic 606)", which contains new accounting literature relating to
how and when a company recognizes revenue. Under ASU 2017-09,
a company will recognize revenue when it transfers promised goods
or services to customers in an amount that reflects the
consideration to which the company expects to be entitled in
exchange for those goods and services. ASU 2014-09 is
effective for the Company’s fiscal year beginning January 1,
2018, which reflects a one year deferral approved by the FASB in
July 2015, and will be adopted by the Company from January 1,
2018. We expect the
adoption of this new standard will not have a material impact on
our condensed consolidated financial
statements.
In
February 2016, the FASB issued ASU 2016-2, "Leases (Topic
842)." This update will increase transparency and
comparability by recognizing lease assets and lease liabilities on
the balance sheet and disclosing key information about leasing
arrangements. Under the new guidance, lessees will be
required to recognize the following for all leases (except for
short-term leases) at the commencement date (i) a lease liability,
which is a lessee’s obligation to make lease payments arising
from a lease, measured on a discounted basis; and (ii) a
right-of-use asset, which is an asset that represents the
lessee’s right to use, or control the use of, a specified
asset for the lease term. Under the new guidance, lessor accounting
is largely unchanged, and it simplified the accounting for sale and
leaseback transactions. Lessees will no longer be provided with a
source of off-balance sheet financing. Lessees (for capital and
operating leases) and lessors (for sales-type, direct financing,
and operating leases) must apply a modified retrospective
transition approach for leases existing at, or entered into after,
the beginning of the earliest comparative period presented in the
financial statements. The modified retrospective approach would not
require any transition accounting for leases that expired before
the earliest comparative period presented. Lessees and lessors may
not apply a full retrospective transition approach. The standard is
effective for fiscal years beginning after December 15, 2018,
including interim periods within those fiscal years. We are
currently in the process of assessing what impact this new standard
may have on our condensed consolidated financial
statements.
In
March 2016, the FASB issued ASU 2016-09,
“Compensation—Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting.”
This update includes multiple provisions intended to simplify
various aspects of the accounting for share-based payment
transactions including accounting for excess tax benefits and tax
deficiencies, classification of excess tax benefits in the
statement of cash flows and accounting for award forfeitures. This
update is effective for annual and interim reporting periods of
public entities beginning after December 15, 2016, with early
adoption permitted. The adoption of this new standard did not
have a material impact on our condensed consolidated financial
statements.
In June 2016, the FASB issued ASU
No. 2016-13, “Financial Instruments—Credit Losses
(Topic326): Measurement of Credit Losses on Financial
Instruments”. This ASU requires instruments measured at
amortized cost to be presented at the net amount expected to be
collected. Entities are also required to record allowances for
available-for-sale debt securities rather than reduce the carrying
amount. This ASU is effective for fiscal years beginning after
December 15, 2019, including interim periods within those
fiscal years. We expect
the adoption of this new standard will not have a material impact
on our condensed consolidated financial
statements.
In
August 2016, the FASB issued ASU No. 2016-15 (“ASU
2016-15”), “Statement of Cash Flows (Topic 230):
Classification of Certain Cash Receipts and Cash Payments.”
The standard provides guidance on eight (8) cash flow issues: (1)
debt prepayment or debt extinguishment costs; (2) settlement of
zero-coupon bonds; (3) contingent consideration payments after a
business combination; (4) proceeds from the settlement of insurance
claims; (5) proceeds from the settlement of corporate-owned life
insurance policies; (6) distributions received from equity method
investees;(7) beneficial interests in securitization transactions;
and (8) separately identifiable cash flows and application of the
predominance principle. ASU 2016-15 addresses how certain cash
receipts and cash payments are presented and classified in the
statement of cash flows. ASU 2016-15 is effective for fiscal years,
and interim periods within those years, beginning after December
15, 2017 with early adoption permitted. We expect the adoption of
this new standard will not have a material impact on our condensed
consolidated financial statements.
In August 2016, the FASB issued ASU
No. 2016-16, “Income Taxes (Topic 740): Intra-Entity
Transfers of Assets Other Than Inventory.” This ASU requires
the recognition of the income tax consequences of an intra-entity
transfer of an asset other than inventory when the transfer occurs.
The amendments in this ASU should be applied on a modified
retrospective basis through a cumulative-effect adjustment directly
to retained earnings as of the beginning of the period of
adoption. We expect the
adoption of this new standard will not have a material impact on
our condensed consolidated financial
statements.
In January 2017, the FASB issued ASU
No. 2017-03, “Accounting Changes and Error Corrections
(Topic 250) and Investments—Equity Method and Joint Ventures
(Topic 323).” This ASU amends the disclosure requirements for
ASU No. 2014-09, “Revenue from Contracts with Customers
(Topic 606),” ASU No. 2016-02, “Leases (Topic 842) and ASU
No. 2016-13, Financial Instruments—Credit Losses
(Topic 326): Measurement of Credit Losses on Financial
Instruments.” This ASU states that if a registrant does not
know or cannot reasonably estimate the impact that the adoption of
the above ASUs is expected to have on the financial statements,
then in addition to making a statement to that effect, the
registrant should consider additional qualitative financial
statement disclosures to assist the reader in assessing the
significance of the impact that the standard will have on the
financial statements of the registrant when adopted. This ASU was
effective upon issuance. The adoption of this new standard did not
have a material impact on our condensed consolidated financial
statements.
In January 2017, the FASB issued ASU
No. 2017-04, “Intangibles—Goodwill and Other (Topic
350): Simplifying the Test for Goodwill Impairment.” This ASU
eliminates Step 2 from the goodwill impairment test. Instead, an
entity should recognize an impairment charge for the amount by
which the carrying value exceeds the reporting unit’s fair
value, not to exceed the total amount of goodwill allocated to that
reporting unit. This ASU is effective for annual or any interim
goodwill impairment tests in fiscal years beginning after
December 15, 2019. We
expect the adoption of this new standard will not have a material
impact on our condensed consolidated financial
statements.
In January 2017, the FASB issued ASU
No. 2017-01, “Business Combinations (Topic 805):
Clarifying the Definition of a Business.” This ASU clarifies
the definition of a business with the objective of adding guidance
to assist entities with evaluating whether transactions should be
accounted for as acquisitions (or disposals) of assets or
businesses. This ASU is effective for annual periods beginning
after December 15, 2017, including interim periods within
those periods. We expect
the adoption of this new standard will not have a material impact
on our condensed consolidated financial
statements.
Management
does not believe that any other recently issued, but not yet
effective, accounting standards if currently adopted would have a
material effect on the accompanying condensed consolidated
financial statements.
Off-Balance Sheet Arrangements
We
have no material off-balance sheet arrangements.
BUSINESS
Company Background
We are a Delaware corporation, originally
incorporated in 1988 under the name Terrapin Diagnostics, Inc. in
the state of Delaware and subsequently renamed “Telik,
Inc.” in 1998, and thereafter renamed MabVax Therapeutics
Holdings, Inc. in September 2014. Our principal corporate office is
located at 11535 Sorrento Valley Road, Suite 400, San Diego, CA
92121 and our telephone number is (858) 259-9405. On July 8, 2014,
we consummated a merger with MabVax Therapeutics, pursuant to which
our subsidiary Tacoma Acquisition Corp. merged with and into MabVax
Therapeutics, with MabVax Therapeutics surviving as our wholly
owned subsidiary. This transaction is referred to as the
“Merger.” Our internet address
is www.mabvax.com.
Information on our website is not incorporated into this
prospectus.
Listing Reverse Split
On
August 2, 2016, the Board approved a 1-for-7.4 reverse stock split,
or the Listing Reverse Split. The Listing Reverse Split was
intended to allow us to meet the minimum share price requirement of
the NASDAQ Capital Market. On August 11, 2016, we received approval
from the NASDAQ Capital Market for the listing of our common stock
under the symbol “MBVX”, subject to implementation of
the Listing Reverse Split and closing of our August 2016 Public
Offering. On August 16, 2016, we implemented the Listing
Reverse Split, closed on the August 2016 Public Offering and began
trading on the NASDAQ Capital Market at the open of business on
August 17, 2016.
Overview
We are
a clinical-stage biotechnology company focused on the development
of antibody-based products to address unmet medical needs in the
treatment of cancer. MabVax has discovered a pipeline of
human monoclonal antibody products based on the protective immune
responses generated by patients who have been vaccinated against
targeted cancers with our proprietary vaccines.
MabVax’s lead development program is centered around our
HuMab-5B1 antibody, which is fully human and discovered from the
immune response of cancer patients vaccinated with an
antigen-specific vaccine during a Phase I trial at Memorial Sloan
Kettering Cancer Center, or MSK. The antigen the
antibody targets is expressed on more than 90% of pancreatic
cancers, and expressed in significant percentages on small cell
lung cancer, stomach, colon and other cancers, making the antibody
potentially broadly applicable to many types of cancers. We
have other antibody candidates that are in preclinical
development.
Monoclonal
antibodies are produced from a single DNA sequence encoded into
multiple cells that all produce the same single antibody. We
generate our pipeline of antibody-based product candidates from
patients who have been vaccinated with proprietary vaccines
licensed from MSK. Our approach involves surveying the protective
immune response from many patients to identify a monoclonal
antibody candidate against a specific target on the surface of a
cancer cell. We believe this approach provides us with a novel
next-generation human antibody technology platform. We believe our
approach to antibody discovery allows us to identify antibody
candidates with superior performance characteristics while
minimizing many of the toxicity and off target binding drawbacks
(phenomenon occurring when antibodies bind to non-cancer cells) of
other discovery technologies.
Our
lead clinical development program is a Phase 1 clinical trial of
our HuMab-5B1 radioimmunotherapy (“RIT”) product that
we have designated as MVT-1075. The development of MVT-1075 is
based on experience we gained through clinical studies of over 50
patients with either our antibody we designate as MVT-5873, or our
imaging agent we designate as MVT-2163 that are discussed in more
detail in our descriptions and results to date of our clinical
development programs. We initiated the Phase 1 clinical trial of
MVT-1075 in June 2017 and completed enrollment and dosing of the last patient in the
initial cohort of patients in December 2017. The clinical program
is intended to evaluate the product for the treatment of
pancreatic, colon and lung cancer. The primary objective is to
determine the maximum tolerated dose in patients who have failed
prior therapies. Secondary endpoints include evaluating tumor
response rate and duration of response by RECIST 1.1, and to
determine dosimetry and pharmacokinetics. This dose-escalation
study utilizes a traditional 3+3 design. We expect to
receive and report on interim safety data and tumor assessment
using standard RECIST measurement criteria for cohort 1 in the
first quarter 2018.
We also
intend to continue clinical development of the antibody MVT-5873 in
combination with gemcitabine and nab-paclitaxal in first line
therapy for the treatment of patients newly diagnosed with
pancreatic cancer. We have treated two cohorts of patients in our
combination therapy, for a total of six patients to date in this
study. In November, we expanded enrollment of an additional cohort
of three patients in the combination therapy with the objective of
confirming early observations. We expect to receive and report on
interim response data for the latest cohort in the first quarter of
2018.
In September 2017, we announced our engagement of Greenhill &
Co. (NYSE: GHL) to serve as an advisor to assist the Company in
exploring and evaluating strategic options with the goal of
maximizing stockholder value. MabVax is currently in advanced
discussions with several potential strategic partners that could
result in multiple licensing and partnering transactions in early
2018. Greenhill and Co’s sole mandate has been to provide
MabVax with opportunities in exploring and evaluating strategic
options while continuing to identify new opportunities. We have now
reached the stage where several of our discussions with third
parties have led to preliminary terms for potential licensing
and/or partnering of certain antibody assets for defined fields of
use. We expect to retain rights to certain key aspects of our
antibody development program so that we can continue developing
some of these assets on our own using funds from the strategic
transactions. However,
there is no guarantee that we will retain such rights or enter into
binding agreements at all with parties introduced to us by
Greenhill & Co. In parallel with the strategic
initiatives efforts led byGreenhill & Co., MabVax continues to
advance its Phase 1 clinical programs including the MVT-1075
radioimmunotherapy clinical trial for the treatment of pancreatic,
colon and lung cancers, and the MBT-5873 clinical trial in
combination with one or more chemotherapy agents in first line
therapy for patients newly diagnosed with pancreatic
cancer.
Our Growth and Core Business Strategy
Our
primary business strategy is to develop our early antibody product
candidates through proof of concept clinical trials, which may
represent either phase I or phase II clinical trials depending on
the program and extent of progress. Once through proof of concept
clinical trials, we will decide whether to license, partner or sell
those product candidates, or continue to develop the candidates
depending on several variables such as access to additional
capital, cost of later stage clinical trials, risk of such
development efforts, and the value derived from licensing,
partnering or selling those assets.
Our Clinical Development Programs
MVT-1075 – our lead development program as a
Radioimmunotherapy for Pancreatic Cancer
In June
2017, we initiated a Phase 1 clinical trial of our HuMab-5B1
radioimmunotherapy product MVT-1075 based on experience we gained
through clinical studies of over 50 patients with either the
antibody MVT-5873, or our imaging agent we designate as
MVT-2163.
MVT-1075 combines
the demonstrated targeting specificity of the HuMab-5B1 antibody
with the proven clinical success of a low-energy radiation emitter,
177Lutetium [177Lu]. We dosed MVT-1075 in our first patient in June
2017. This Phase 1 first-in-human clinical trial is an open-label,
multi-center study evaluating the safety and efficacy of MVT-1075
in up to 22 patients with CA19-9 positive malignancies. The primary
objective is to determine the maximum tolerated dose and safety
profile in patients with recurring disease who have failed prior
therapies. Secondary endpoints are to evaluate tumor response rate
and duration of response by RECIST 1.1, and to determine dosimetry
and pharmacokinetics. This dose-escalation study utilizes a
traditional 3+3 design that is commonly used by companies as a dose
escalation strategy typical for phase I trials for the treatment of
cancer. The investigative sites are Honor Health in Scottsdale,
Arizona, and Memorial Sloan Kettering Cancer Center in New York
City.
In April, the Company reported preclinical results for MVT-1075
at the American Association of Clinical Research (AACR) Annual
Meeting, demonstrating suppression, and in some instances, regression, of
tumor growth in xenograft animal models of pancreatic cancer,
potentially making this product an important new therapeutic agent
in the treatment of pancreatic, colon and lung cancers. Supporting
the MVT-1075 RIT clinical investigation are the Company's
successful MVT-5873 and MVT-2163 Phase 1a safety and target
specificity data which were reported earlier this year at the
annual meetings of the American Society for Clinical Oncology
(ASCO) and the Society for Nuclear Medicine and Molecular Imaging
(SNMMI), respectively. The combined results from 50 patients in the
Phase 1 MVT-5873 and MVT-2163 studies, established safety and
provided significant insight into drug biodistribution and an
optimal dosing strategy, which the Company has incorporated into
the MVT-1075 program.
MVT-5873 – for the Treatment of Pancreatic
Cancer
MVT-5873 as a Monotherapy in Late Stage Cancer
Patients – We reported results from our Phase 1a
clinical trial of 32 patients being treated with our therapeutic
antibody MVT-5873 as a monotherapy, which was evaluated for
safety and tolerability in patients with advanced pancreatic cancer
and other CA19-9 positive cancers, in a poster presentation at the
American Society of Clinical Oncology (ASCO) Annual Meeting on June
3, 2017. The Company highlighted that the single agent MVT-5837
appears safe and well tolerated in patients at biologically active
doses. Furthermore, all patients were evaluated by RECIST 1.1 for
tumor response, and the Company reported 11 patients achieved
stable disease in this dose escalation safety trial of 32
patients.
The
results of the Phase 1a trial with MVT-5873 indicate that this
fully-human antibody targeting CA19-9 cancers can be administered
at doses with acceptable safety and with a potentially positive
impact on disease. CA19-9 is broadly expressed in various cancers
including pancreatic, colon, and small cell lung cancer making this
antibody potentially useful for a larger patient population.
Clinical signals from an identifiable subset of subjects enabled us
to understand those patients most likely to respond to a MVT-5873
based therapy. At the maximum tolerated dose (MTD) established in
this trial, we have demonstrated an acceptable safety margin for
the antibody.
MVT-5873 in Combination with a Standard of Care
Chemotherapy –Based upon observations from the first
two cohorts of patients treated, the Company is continuing clinical
development of MVT-5873 in combination with gemcitabine and
nab-paclitaxal as a first line therapy for the treatment of
patients newly diagnosed with pancreatic cancer. MabVax has treated
six patients as of October 12, 2017 and is actively enrolling
additional patients with the objective of obtaining additional
safety and tumor response (RECIST 1.1) data. Dr. Eileen O’Reilly, Associate
Director of the David M. Rubenstein Center for Pancreatic Cancer
Research, attending physician, member at Memorial Sloan Kettering
Cancer Center and Professor of Medicine at Weill Cornell Medical
College, is the lead investigator in the MVT-5873 Phase 1 clinical
trial.
MVT-2163 –as an Imaging Agent for Pancreatic
Cancer
We
reported results from our Phase 1a clinical trial of ImmunoPET
imaging agent, MVT-2163, in 12 patients with locally advanced or
metastatic adenocarcinoma of the pancreas (PDAC) or other CA19-9
positive malignancies in a poster presentation and podium talk at
the Society of Nuclear Medicine and Molecular Imaging (SNMMI)
Annual Meeting held in Denver, CO on June 10-14, 2017.
The
Phase Ia clinical trial of MVT-2163 phase I trial was intended to
evaluate our next generation diagnostic PET imaging agent in
patients with locally advanced or metastatic adenocarcinoma of the
pancreas (PDAC) or other CA19-9 positive malignancies. MVT-2163
(89Zr-HuMab-5B1) combines the well-established PET imaging
radiolabel Zirconium-89 [89Zr] with the targeting specificity of
MVT-5873. We designed the trial to establish safety,
pharmacokinetics, biodistribution, optimal time to obtain the PET
image, and the amount of MVT-5873 to be administered as a blocking
dose prior to administration of MVT-2163 to obtain optimized PET
scan images.
As of
July 2017, 12 patients had been treated in this first-in-human
trial evaluating the safety and feasibility of MVT-2163 to image
pancreatic tumors and other CA19-9 positive malignancies. MVT-2163
was administered alone and in combination with MVT-5873 and was
well tolerated in all cohorts. The only toxicities were infusion
reactions that resolved on the day of the injection, with some
patients requiring standard supportive medication.
Uptake
of MVT-2163 was observed in primary tumors and metastases as early
as day two and continuously through day seven. Standard Uptake
Values (SUV), a measurement of activity in PET imaging, reached as
high as 101 in the study. The investors reported that the high SUVs
are amongst the highest lesion uptake values they have ever seen
for a radiolabeled antibody. Bone and soft tissue disease were
readily visualized and lesion uptake of the radiotracer was higher
than typically seen with PET imaging agents. The correlation with
Computerized Tomography (CT) scans was high.
We
reported that administering MVT-5873 prior to dosing MVT-2163
reduces liver uptake facilitating detection of liver metastases. In
addition, we determined that the MVT-5873 cold antibody pre-dose
does not interfere with the uptake of MVT-2163 on cancer
lesions.
In
summary, the MVT-2163 product produced acceptable safety
tolerability, pharmacokinetics and biodistribution. MVT-2163 also
produced high quality PET images identifying both primary tumor and
metastatic sites. There was a promising correlation with diagnostic
CT that warrants further studies correlating these findings with
histopathology to assess the accuracy of MVT-2163 in identifying
smaller metastatic nodes below the detection level of standard CT
scans. The continual increase in high SUV values on cancer lesions
in this study supports the use of the Company’s MVT-1075
radioimmunotherapy product which utilizes the same antibody to
deliver a radiation dose for the treatment of patients with
pancreatic, lung and colon cancers.
Plan for 2018
Based
on inquiries from third parties regarding their interest in MabVax
assets and clinical progress to date with MVT-5873, MVT-1075, and
MVT-2163, and with the assistance of investment advisor Greenhill
& Co., we expect to be able to decide on one or more strategic
alternatives for the Company in the first quarter of
2018.
We
currently plan to continue clinical development of MVT-1075 for the
treatment of locally advanced or metastatic pancreatic cancer
patients, by completing additional cohorts of patients in a dose
escalation safety trial to continue to assess the safety and
potential efficacy of this treatment, and expect to report results
in the first quarter of 2018.
We also
currently intend to continue clinical development of MVT-5873 in
combination with gemcitabine and nab-paclitaxal in first line
therapy for the treatment of patients newly diagnosed with
pancreatic cancer. We have treated two cohorts of patients for a
total of six patients through September 22, 2017 in this study; and
have initiated enrollment for an additional cohort of patients with
the objective of confirming early observations in the first quarter
2018.
Our
plans beyond the first quarter 2018 will depend substantially on
which product portfolios are licensed and/or sold to potential
acquirors and/or licensees, and the availability of financial
resources resulting from such potential transactions that are under
consideration when we enter 2018.
Financing Activities
July 2017 Private Placement – On
July 27, 2017, we entered into a subscription agreement with an
accredited investor pursuant to which we agreed to sell 152,143
restricted shares of common stock for $125,000. As part of the July
2017 Private Placement, the Company agreed to reprice the
investor’s warrant to purchase 225,225 shares of common stock
from $11.10 to $2.00 per warrant share and remove the cashless
exercise feature. The transaction closed on August 2, 2017.
The impact of repricing the warrants to $2.00 a share, which took
effect on August 2, 2017, was immaterial, as the stock price on the
date of the closing of the transaction was $0.70 and the warrants
at $2.00 a share expired on October 10, 2017,
unexercised.
August 11, 2017 Registered
Direct Offering – On
August 11, 2017, we entered into securities purchase agreements to
sell 2,386.36 shares of Series J Preferred Stock with a stated
value of $550 per share. The Series J Preferred Stock is
convertible into common stock at $0.55 per share, subject to
adjustment for stock splits, stock dividends, recapitalizations,
combinations, subdivisions or other similar events and was
purchased by the Prior Investors. The total amount of the
securities purchase agreements amounted to approximately
$1,312,500, before estimated expenses of
$123,083. The Certificate of
Designation for the Series J Preferred Stock includes a 4.99%
beneficial ownership conversion blocker, a 19.99% blocker provision
to comply with the NASDAQ Capital Market rules until stockholders
have approved any or all shares of common stock issuable upon
conversion of the Series J Preferred Stock, which was approved at
the October 2017 Special Meeting, and a 125% liquidation
preference. All shares of the Company’s capital stock will be
junior in rank to the Series J Preferred Stock at the time of
creation, with respect to the preferences as to dividends,
distributions and payments upon the liquidation, dissolution and
winding-up of the Company, except for the Company’s Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock, Series H Preferred Stock, and
Series I Preferred Stock.
In
connection with the August 2017 Offering, we agreed with the Lead
Investor pursuant to the August 2017 Letter Agreement, to issue the
Incentive Shares to Prior Investors as an incentive to invest in
the August 2017 Offering. Such Prior Investors received a portion
of 65,000 shares in the form of a new Series K Preferred Stock,
allocated by the Lead Investor, and convertible into 6,500,000
shares of common stock, subject to stockholder approval, which was
also approved in the October 2017 Special Meeting. The stated value
of each share of Series K Preferred Stock is $0.01 and the
conversion rate is the stated value of $0.01 divided by .0001, or
one hundred (100) shares of common stock upon conversion of one (1)
share of Series K Preferred Stock, each subject to adjustment for
stock splits, stock dividends, recapitalizations, combinations,
subdivisions or other similar event, and have a 4.99% beneficial
ownership conversion blocker. In the event of a liquidation,
dissolution or winding up of the Company, each share of Series K
Preferred Stock will be entitled to a per share preferential
payment equal to the par value, or $0.01 per share. All shares of
the Company’s capital stock will be junior in rank to the
Series K Preferred Stock at the time of creation, with respect to
the preferences as to dividends, distributions and payments upon
the liquidation, dissolution and winding-up of the Company, except
for the Company’s Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred
Stock, Series H Preferred Stock, Series I Preferred Stock and
Series J Preferred Stock. The Company recorded a deemed dividend of
$3,120,000 in August 2017 in connection with issuing the Incentive
Shares.
The
August 2017 Letter Agreement also specified the
following:
●
That the Company files a proxy
statement for a special meeting of stockholders within 10 days of
closing the August 2017 Offering. Proposals shall include
(i) an amendment to the Company’s Certificate of
Incorporation to effect a reverse stock split of its issued and
outstanding common stock by a ratio of not less than one-for-two
and not more than one-for-twenty at any time prior to one year from
the date of the special meeting, with the exact ratio to be set at
a whole number within this range as determined by the Board of
Directors, (ii) the issuance of securities in one or more
non-public offerings where the maximum discount at which securities
will be offered will be equivalent to a discount of 30% below the
market price of the common stock, as required by and in accordance
with Nasdaq Marketplace Rule 5635(d), (iii) the issuance of
securities in one or more non-public offerings where the maximum
discount at which securities will be offered will be equivalent to
a discount of 20% below the market price of the Common Stock, as
required by and in accordance with Nasdaq Marketplace Rule 5635(d),
(iv) the issuance of the Series J Conversion Shares and (v) the
issuance of the Inducement Shares.
●
Lead
Investor will commit to investing an additional $1,000,000 in a new
private or public offering of up to $8,000,000. The $8,000,000
Financing shall sign and close following shareholder approval of
each of the proposals identified in the August 2017 Letter
Agreement.
●
That
the employment terms of all
management be reduced to two years from three years and that
management defer portions of their salary for the remainder of the
year, which shall be paid upon the earlier of completion of the
$8,000,000 Financing or a business transaction that represents, or
transactions in the aggregate that represent, in excess of
$10,000,000.
Effective with the Company’s pay period
ending August 10, 2017, and without changing their employment
agreements dated July 1, 2017, several members of management
volunteered to defer receiving portions of their salaries for the
remainder of 2017. The voluntary deferral of cash payments is
intended to help with the Company’s cash flow for the
remainder of the year, with voluntary reductions by the management
team committed to remain in effect until the earlier of completing
a successful financing of at least $8.0 million, a business
transaction that represents, or business transactions in the
aggregate that represent, an amount of $10.0 million or greater, or
the end of the year, whichever occurs first. The employment
agreements with the Company remain unchanged, except that the
executives have volunteered to reduce the terms of their employment
agreements to two years from three in connection with
the August 11, 2017 registered direct
offering and Letter Agreement with the Lead
Investor.
On August 14, 2017, the Chairman of
the Compensation Committee, acting on behalf of the Board of
Directors sent a letter to each executive of the Company stating
that the Board deems it in the best interests of the Company to
request that the executive voluntarily defer a portion of his
regular salary to help with cash flow of the Company. On August 16
and August 21, 2017, Paul Resnick, M.D. and Paul Maffuid, Ph.D.,
respectively gave notice of good reason (as that term is defined in
their employment agreements or “Good Reason”) for
termination of their employment. The Company had 30 days from the
notification date under each of their employment agreements to cure
their concerns. In oral discussions with each executive the
President and Chief Executive Officer communicated on behalf of the
Compensation Committee the Company’s intention to provide
additional equity compensation in return for salary deferrals.
Given the perceived uncertainty about the Company’s plans at
the time for addressing the concerns of Dr. Resnick and Dr.
Maffuid, and that nothing in writing had been provided as possible
equity compensation, they each submitted their notices to the
Company of good reason for termination. Further, they each
expressed in oral conversations that they wanted to remain employed
by the Company. The Company cured each executive’s concerns
within the 30-day cure period, by reinstating the deferred salary
for Dr. Resnick in one instance, and in granting restricted stock
to all executives with vesting over time, as disclosed in the
filings of Form 4s following the approvals. Both executives
rescinded their notices of good reason for termination on September
7, 2017, and all executives’ employment agreements remain
unchanged as the salary deferrals remain to be
voluntary.
In
order to meet the Nasdaq Capital Market rules in the August 2017
Offering, we were not obligated to issue any shares of common stock
upon conversion of the Series J Preferred Stock which would cause
the Company to breach our obligations under the rules and
regulations of the Nasdaq Capital Market, which limit the aggregate
number of shares issued at a discount to market at 19.99% of the
number of shares outstanding on the closing date of the August 2017
Offering, except that such limitation shall not apply in the event
that we obtain the approval of our stockholders as required by the
applicable rules of the Nasdaq Capital Market for issuances of
common stock in excess of such amount. Similarly, none of the
Series K Preferred Stock may be converted into common stock until
we obtain the approval of our stockholders. At the October 2017
Special Meeting, we obtained approval to issue shares underlying
all of the Series J Preferred Stock and the Series K Preferred
Stock.
September 11, 2017 Registered
Direct Offering – On September 11, 2017, we entered into an agreement to
sell 4.0 million shares of common stock at $0.50 a share for gross
proceeds of approximately $2.0 million, before estimated
expenses of $147,639. The shares were offered and sold to certain
accredited investors in a registered direct offering. Laidlaw & Company (UK) Ltd. acted as
placement agent for the offering.
September 22, 2017 Registered
Direct Offering – On September 22, 2017, we entered
into a subscription agreement with select accredited investors
relating to the Company’s registered direct offering,
issuance and sale of 2,016,129 shares of the Company’s common
stock, $0.01 par value per share. The purchase price per share was
$0.62. The total amount of the subscription agreements amounted to
$1,250,000, before estimated expenses of
$35,000.
October 10, 2017 Registered Direct
Offering – On October 10, 2017, we entered into a
subscription agreement with select accredited investors relating to
the Company’s registered direct offering, issuance and sale
of 769,231 shares of the Company’s common stock, $0.01 par
value per share. The purchase price per share was $0.65. The total
amount of the subscription agreements amounted to $500,000, before
estimated expenses of $15,000. The securities were offered by means
of the Company’s shelf registration statement on Form S-3
(File #333-219291) which was declared effective on July 27, 2017 by
the Securities and Exchange Commission.
October 18, 2017 Preferred Stock Exchange
Agreement – On October 18, 2017, we entered into
the Exchange Agreements with the holders of all of the
Company’s outstanding shares of Series F Preferred Stock,
Series G Preferred Stock and Series H Preferred Stock, pursuant to
which an aggregate of 665,281 shares of Series F Preferred Stock,
1,000,000 shares of Series G Preferred Stock and 850 shares of
Series H Preferred Stock were exchanged for an aggregate of 58,000
newly authorized shares of Series L Preferred Stock convertible
into 9,666,669 Conversion Shares, subject to a conversion
restriction until stockholder approval is obtained. On December 1,
2017, we obtained the necessary stockholder approval.
The terms of
the Exchange Agreements and Series L Preferred Stock were
determined by arms-length negotiation between the parties. No
commission or other payment was received by the Company in
connection with the Exchange Agreements. Such exchange was
conducted and the Series L Preferred Stock issuable pursuant to the
Exchange Agreements, including the Conversion Shares, were issued
pursuant to the exemption provided by Section 3(a)(9) of the
Securities Act.
Pursuant to a
registration rights agreement entered into between the Company and
the holders on October 18, 2017, we agreed to use reasonable best
efforts to file a registration statement registering the Conversion
Shares for resale within ten days of closing and cause the
registration statement to be declared effective within 30 days of
filing.
Antibody Market Opportunity
The global monoclonal antibodies market was valued
at $85 billion in 2015 and is expected to reach a value of $138
billion by 2024 (The Pharma
Letter, February 11, 2016).
Over the past couple of decades, the US FDA has approved more than
a dozen monoclonal antibodies to treat certain cancers
(cancer.org). Focused development of new monoclonal antibody based
drugs is expected to continue for multiple reasons. Over
the last few years much has been learned about using the human
immune system to treat cancer. Several recently approved
antibody therapies have demonstrated efficacy in stimulating the
human immune system to attack certain cancers. Targeted therapies
can attack cancer cells while minimizing damage to normal cells in
the patient. Antibodies are complex molecules and are difficult and
expensive to duplicate with biosimilars and therefore have a
potentially longer commercial life. Currently approved monoclonal
antibodies are reimbursed at favorable levels from federal, state,
and private insurance providers.
Our
lead antibody candidate targets an antigen that is over expressed
on many metastatic pancreatic, colon, breast, and small cell lung
cancers. The term "over expressed" refers to the antigen being
present on the surface of the cancer cell in very large
numbers. The amount of antigen present in blood samples is
used to monitor patients as elevated levels occur in the blood due
to shedding into the blood from these cancer cells. Patients who
develop metastatic disease have a significantly poorer prognosis
for survival.
We
believe there is a critical unmet medical need for new and better
treatment for metastatic pancreatic and colon cancer. According to
NCI’s SEER database (seer.cancer.gov), the five-year survival
rate for patients with pancreatic cancer is just 7.7%. There are
53,000 new patients with pancreatic cancer diagnosed per year and
more than half of these patients present at initial diagnosis with
metastatic disease (Pancreatic Cancer Network’s Pancreatic
Facts 2016). In 2016 pancreatic cancer moved from the fourth
leading cause of cancer related death in the U.S. to third,
surpassing breast cancer (American Cancer Society Cancer statistics
2016 report,). According to the SEER database, there are about
134,000 patients diagnosed with cancer of the colon and rectum per
year in the US. The five-year survival rate for the 35% of patients
with metastatic colon cancer that is locally spread is 71% and the
five-year survival of the 35% of patients that have regional spread
is only 13.5%.
Pancreatic Cancer Imaging and Diagnosis
We
believe that our radiolabeled HuMab-5B1 PET imaging antibody
represents the only fully human derived monoclonal antibody agent
in development with the potential of improving imaging in
pancreatic cancer diagnosis over the standard of care (FDG-PET).
Since the antigen targeted by the HuMab-5B1 antibody is over
expressed on metastatic pancreatic cancer cells, this development
effort represents a potentially important step forward in the
diagnosis, staging, and assessment of patients newly diagnosed with
pancreatic cancers. We believe that the market opportunity for
a HuMab-5B1antibody-based radiopharmaceutical is
significant in multiple ways. The ability of physicians to
accurately diagnose, stage, and assess treatment outcomes in
pancreatic cancer would be very important. Accurate determinations
on the extent of disease and resectability are essential to improve
outcomes in this cancer. We believe that limitations in FDG-PET
imaging offers significant room for improvement in diagnostic
technique and that accurate determinations on extent of disease and
resectability are essential to improving outcomes in this cancer.
Improvements in the sensitivity and specificity over FDG-PET could
have a significant impact on improving diagnosis and clinical
outcome.
Radioimmunotherapy: Therapeutic Treatment Product
In addition to developing our HuMab-5B1 as a
stand-alone therapeutic agent as well as a PET imaging agent, we
have developed MVT-1075 a HuMab-5B1 based radioimmunotherapy, or
RIT, product candidate as a potential treatment for pancreatic
cancer and other CA19-9 positive tumors. In June 2017,
we initiated a Phase 1 clinical trial of our HuMab-5B1
radioimmunotherapy product MVT-1075 based on experience we gained
through clinical studies of 50 patients with either the naked
antibody MVT-5873, or our imaging agent MVT-2163.
MVT-1075 combines
the demonstrated targeting specificity of the HuMab-5B1 antibody
with the proven clinical success of a low-energy radiation emitter,
177Lutetium [177Lu]. We dosed MVT-1075 in our first patient in June
2017. This Phase 1 first-in-human clinical trial is an open-label,
multi-center study evaluating the safety and efficacy of MVT-1075
in up to 22 patients with CA19-9 positive malignancies. The primary
objective is to determine the maximum tolerated dose and safety
profile in patients with recurring disease who have failed prior
therapies. Secondary endpoints are to evaluate tumor response rate
and duration of response by RECIST 1.1, and to determine dosimetry
and pharmacokinetics. This dose-escalation study utilizes a
traditional 3+3 design that is commonly used by companies as a dose
escalation strategy typical for phase I trials for the treatment of
cancer. The investigative sites are Honor Health in Scottsdale,
Arizona, and Memorial Sloan Kettering Cancer Center in New York
City.
License and Development Agreements
Memorial Sloan Kettering
We
have licensed from MSK the exclusive world-wide developmental and
commercial rights to receive biological materials from vaccinated
clinical trial participants enrolled in any of the clinical trials
involving the vaccines licensed to us, allowing us to discover
human monoclonal antibody-based therapeutics. MSK has issued
patents or has pending patent applications on the vaccine antigen
conjugates, mixtures of vaccine antigen conjugates and methods of
use. This patent portfolio includes 20 issued patents in the US and
the rest of world. We own all monoclonal antibodies
produced by the antibody discovery program and we generally file
patent applications directed to these antibodies once their
potential therapeutic utility has been sufficiently demonstrated in
animal models. A United States and an international patent
application for each of the anti-sLea antibodies and the anti GD2
antibodies described in this document has been filed.
Life Technologies Licensing Agreement
On
September 24, 2015, we entered into a licensing agreement with Life
Technologies Corporation, a subsidiary of ThermoFisher Scientific
(“Life Technologies”). Under the agreement
we agreed to license certain cell lines from Life Technologies to
be used in the production of recombinant proteins for our clinical
trials. The amount of the contract is for $450,000 and
was fully expensed during 2015. We paid $225,000 during
2015 related to this contract with the remaining amount paid in
2016.
Rockefeller University Collaboration
In July
2015, we entered into a research collaboration agreement with
Rockefeller University's Laboratory of Molecular Genetics and
Immunology (“Rockefeller”). We provided antibody
material to Rockefeller, which is exploring the mechanism of action
of constant region (Fc) variants of the HuMab 5B1 in the role of
tumor clearance. We will supply additional research materials as
requested by the university, which is evaluating ways to optimize
the function. Rockefeller is using that material to explore
the mechanism of action of constant region (Fc) variants of the
HuMab-5B1 in the role of tumor clearance and to seek to optimize
the therapeutic effect. The current agreement allows researchers at
Rockefeller to conduct research on antibodies discovered by us with
the objective of improving their ability to kill cancer
cells. If a viable drug candidate emerges from this
collaboration, we have the first option to negotiate a royalty
bearing license to Rockefeller’s technology or
Rockefellers’ interest in technology jointly owned with us to
improve our antibody for clinical and commercial
development. If we and Rockefeller fail to reach
agreement to a license of the drug candidate containing the
combined technologies within six months’ notice by either
party seeking a license, then either party may freely license
jointly owned property to any third party and share equally any
consideration received from the licensee.
Juno Option Agreement
On
August 29, 2014, we entered into an Option Agreement with Juno
Therapeutics, Inc. (“Juno”) in exchange for a one-time
up-front option fee in the low five figures. Pursuant to the option
agreement, we granted Juno the option to obtain an exclusive,
world-wide, royalty-bearing license authorizing Juno to develop,
make, have made, use, import, have imported, sell, have sold, offer
for sale and otherwise exploit certain patents we developed with
respect to fully human antibodies with binding specificity against
human GD2 or sialyl-Lewis A antigens and certain of our controlled
biologic materials. As of June 30, 2016, the option agreement
expired and Juno no longer has a contractual right for use of our
binding domains for use in the construction of CAR
T-cells.
Patents
We
strive to protect the proprietary technology that we believe is
important to our business, including seeking and maintaining
patents intended to cover our vaccines and monoclonal
antibody-based candidates, their methods of use and processes for
their manufacture and any other inventions that are commercially
important to the development of our business. We also rely on trade
secrets to protect aspects of our business that are not amenable
to, or that we do not consider appropriate for, patent
protection.
We are the exclusive licensee or sole assignee of
14 granted United States patents, 2 pending United States patent
applications, 7 international patents and 19 pending international
patent applications. The patents and patent applications
include claims to vaccine antigen conjugates, mixtures of vaccine
antigen conjugates that makeup polyvalent vaccine candidates,
processes for their preparation and their use as a
vaccine. Two of the pending patent applications in the
United States and 2 international patent applications have claims
to human anti-sLea and anti-GD2 monoclonal antibodies, nucleic
acids encoding the human anti-sLea and anti-GD2 monoclonal antibodies,
processes for their preparation and their use as therapeutic
agents.
Our
success will depend significantly on our ability to obtain and
maintain patents and other proprietary protection for commercially
important technology, inventions and know-how related to our
business, defend and enforce our patents, maintain our licenses to
use intellectual property owned by third parties, preserve the
confidentiality of our trade secrets and operate without infringing
the valid and enforceable patents and other proprietary rights of
third parties. We also rely on know-how, continuing technological
innovation and in-licensing opportunities to develop, strengthen,
and maintain our proprietary position in the field of fully human
monoclonal antibodies.
We
believe that we have a sufficient intellectual property position
and substantial know-how relating to the development and
commercialization of our vaccine and monoclonal antibody-based
candidates in the markets described herein, consisting of patents
or patent applications that we have licensed from MSK or that we
have filed ourselves. We cannot be sure that patents will be
granted with respect to any of our pending patent applications or
with respect to any patent applications filed by us in the future,
nor can we be sure that any of our existing patents or any patents
that may be granted to us in the future will be commercially useful
in protecting our technology.
Our
objective is to continue to expand our intellectual property estate
by filing patent applications directed to our vaccine and
monoclonal antibody programs. We intend to pursue, maintain, and
defend patent rights, whether developed internally or licensed from
third parties, and to protect the technology, inventions, and
improvements that are commercially important to the development of
our business.
Marketing and Sales
We
currently do not have an internal sales force and do not intend to
commercialize on our own any of our product candidates that receive
FDA approval. We intend to license, or enter into
strategic alliances with, larger companies in the biopharmaceutical
businesses, which are equipped to manufacture, market and/or sell
our products, if any, through their well-developed manufacturing
capabilities and distribution networks. We intend to license some
or all of our worldwide patent rights to more than one third party
to achieve the fullest development, marketing and distribution of
any products we develop.
Manufacturing and Raw Materials
We
currently use, and expect to continue the use of, contract
manufacturers for the manufacture of our product candidates. Our
contract manufacturers are subject to extensive governmental
regulation. Regulatory authorities in our markets require that
pharmaceutical products be manufactured, packaged and labeled in
conformity with current cGMPs. We intend to establish a quality
control and quality assurance program, which will include a set of
standard operating procedures and specifications designed to ensure
that our products are manufactured in accordance with cGMPs, and
other applicable domestic and foreign regulations.
We
currently do not have any clinical or commercial antibody-based
therapeutic manufacturing capabilities. We may or may not
manufacture the products we develop, if any. We intend to use
contract manufacturers for the manufacture of our product
candidates.
Competition
The
drug development and medical diagnostic industries are
characterized by rapidly evolving technology and intense
competition. Our competitors include development and
diagnostic companies that have significantly more financial,
technical, and marketing resources. In addition, there are a
significant number of biotechnology companies working on evolving
technologies that may supplant our technology or make it
obsolete. Academic institutions, government agencies, and
other public and private research organizations are also conducting
research activities and may commercialize product candidates either
on their own or through joint ventures that compete with one or
more of our product candidates. We are aware of certain
development projects for products to prevent or treat certain
diseases targeted by us. The existence of these potential
products or other products or treatments of which we are not aware,
or products or treatments that may be developed in the future, may
adversely affect the desirability and commercial success of any
product candidate for which we receive FDA approval.
There
are a number of companies working in the area of human antibody
development and imaging that could compete in similar clinical
areas, including disease detection, therapeutic response monitoring
and minimal disease detection. These companies include
AbCellera Biologics, Inc., Agenus Inc., Atreca, Inc., Immunomedics,
Inc., Theraclone Sciences Inc., and Trellis
Bioscience.
Government Regulation
In
the United States, pharmaceutical products are subject to extensive
regulation by the FDA. The Federal Food, Drug and Cosmetic Act and
other federal and state statutes and regulations, govern, among
other things, the research, development, testing, manufacture,
storage, recordkeeping, approval, labeling, promotion and
marketing, distribution, post-approval monitoring and reporting,
sampling, and import and export of pharmaceutical products. The FDA
has very broad enforcement authority and failure to abide by
applicable regulatory requirements can result in administrative or
judicial sanctions being imposed on us, including warning letters,
refusals of government contracts, clinical holds, civil or criminal
penalties, injunctions, restitution, disgorgement of profits,
recall or seizure of products, total or partial suspension of
production or distribution, withdrawal of approval, refusal to
approve pending applications, and criminal
prosecution.
FDA Approval Process
We
believe that our product candidates will be regulated by the FDA as
drugs. No manufacturer may market a new drug until it has submitted
a New Drug Application (“NDA”), to the FDA, and the FDA
has approved it. The steps required before the FDA may approve an
NDA generally include:
●
preclinical
laboratory tests and animal tests conducted in compliance with
FDA’s good laboratory practice requirements;
●
development,
manufacture and testing of active pharmaceutical product and dosage
forms suitable for human use in compliance with current good
manufacturing practices, or GMP;
●
the
submission to the FDA of an investigational new drug application
(“IND”), for human clinical testing, which must become
effective before human clinical trials may begin;
●
adequate
and well-controlled human clinical trials to establish the safety
and efficacy of the product for its specific intended
use(s);
●
the
submission to the FDA of a NDA; and
●
FDA
review and approval of the NDA.
Preclinical
tests include laboratory evaluation of the product candidate, as
well as animal studies to assess the potential safety and efficacy
of the product candidate. The conduct of the pre-clinical tests
must comply with federal regulations and requirements including
good laboratory practices. We must submit the results of the
preclinical tests, together with manufacturing information,
analytical data and a proposed clinical trial protocol to the FDA
as part of an IND, which must become effective before we may
commence human clinical trials. The IND will automatically become
effective 30 days after its receipt by the FDA, unless the FDA
raises concerns or questions before that time about the conduct of
the proposed trials. In such a case, we must work with the FDA to
resolve any outstanding concerns before clinical trials can
proceed. We cannot be sure that submission of an IND will result in
the FDA allowing clinical trials to begin, or that, once begun,
issues will not arise that suspend or terminate such trials. The
study protocol and informed consent information for patients in
clinical trials must also be submitted to an institutional review
board for approval. An institutional review board may also require
the clinical trial at the site to be halted, either temporarily or
permanently, for failure to comply with the institutional review
board’s requirements or may impose other
conditions.
Clinical
trials involve the administration of the product candidate to
humans under the supervision of qualified investigators, generally
physicians not employed by or under the trial sponsor’s
control. Clinical trials are typically conducted in three
sequential phases, though the phases may overlap or be combined. In
Phase 1, the initial introduction of the drug into healthy
human subjects, the drug is usually tested for safety (adverse
effects), dosage tolerance and pharmacologic action, as well as to
understand how the drug is taken up by and distributed within the
body. Phase 2 usually involves studies in a limited patient
population (individuals with the disease under study)
to:
●
evaluate
preliminarily the efficacy of the drug for specific, targeted
conditions;
●
determine
dosage tolerance and appropriate dosage as well as other important
information about how to design larger Phase 3 trials;
and
●
identify
possible adverse effects and safety risks.
Phase 3
trials generally further evaluate clinical efficacy and test for
safety within an expanded patient population. The conduct of the
clinical trials is subject to extensive regulation, including
compliance with good clinical practice regulations and
guidance.
The
FDA may order the temporary or permanent discontinuation of a
clinical trial at any time or impose other sanctions if it believes
that the clinical trial is not being conducted in accordance with
FDA requirements or presents an unacceptable risk to the clinical
trial patients. We may also suspend clinical trials at any time on
various grounds.
The
results of the preclinical and clinical studies, together with
other detailed information, including the manufacture and
composition of the product candidate, are submitted to the FDA in
the form of an NDA requesting approval to market the drug as well
as a user fee of over $2 million. FDA approval of the NDA is
required before marketing of the product may begin in the U.S. If
the NDA contains all pertinent information and data, the FDA will
“file” the application and begin review. The FDA may
“refuse to file” the NDA if it does not contain all
pertinent information and data. In that case, the applicant may
resubmit the NDA when it contains the missing information and data.
Once the submission is accepted for filing, the FDA begins an
in-depth review. The FDA has agreed to certain performance goals in
the review of NDAs. Most such applications for non-priority drug
products are reviewed within 10 months. The review process,
however, may be extended by FDA requests for additional
information, preclinical or clinical studies, clarification
regarding information already provided in the submission, or
submission of a risk evaluation and mitigation strategy. The FDA
may refer an application to an advisory committee for review,
evaluation and recommendation as to whether the application should
be approved. The FDA is not bound by the recommendations of an
advisory committee, but it considers such recommendations carefully
when making decisions. Before approving an NDA, the FDA will
typically inspect the facilities at which the product candidate
and/or the active pharmaceutical ingredient is manufactured and
will not approve the product candidate unless GMP compliance is
satisfactory. FDA also typically inspects facilities responsible
for performing animal testing, as well as clinical investigators
who participate in clinical trials. The FDA may refuse to approve
an NDA if applicable regulatory criteria are not satisfied, or may
require additional testing or information. The FDA may also limit
the indications for use and/or require post-marketing testing and
surveillance to monitor the safety or efficacy of a product. Once
granted, product approvals may be withdrawn if compliance with
regulatory standards is not maintained or problems are identified
following initial marketing.
The
testing and approval process requires substantial time, effort and
financial resources, and our product candidates may not be approved
on a timely basis, if at all. The time and expense required to
perform the clinical testing necessary to obtain FDA approval for
regulated products can frequently exceed the time and expense of
the research and development initially required to create the
product. The results of preclinical studies and initial clinical
trials of our product candidates are not necessarily predictive of
the results from large-scale clinical trials, and clinical trials
may be subject to additional costs, delays or modifications due to
a number of factors, including difficulty in obtaining enough
patients, investigators or product candidate supply. Failure by us
to obtain, or any delay in obtaining, regulatory approvals or in
complying with requirements could adversely affect the
commercialization of product candidates and our ability to receive
product or royalty revenues.
Other Regulatory Requirements
After
approval, drug products are subject to extensive continuing
regulation by the FDA, which include company obligations to
manufacture products in accordance with Good Manufacturing
Practice, or GMP, maintain and provide to the FDA updated safety
and efficacy information, report adverse experiences with the
product, keep certain records and submit periodic reports, obtain
FDA approval of certain manufacturing or labeling changes, and
comply with FDA promotion and advertising requirements and
restrictions. Failure to meet these obligations can result in
various adverse consequences, both voluntary and FDA-imposed,
including product recalls, withdrawal of approval, restrictions on
marketing, and the imposition of civil fines and criminal penalties
against the NDA holder. In addition, later discovery of previously
unknown safety or efficacy issues may result in restrictions on the
product, manufacturer or NDA holder.
We
and any manufacturers of our products are required to comply with
applicable FDA manufacturing requirements contained in the
FDA’s GMP regulations. GMP regulations require among other
things, quality control and quality assurance as well as the
corresponding maintenance of records and documentation. The
manufacturing facilities for our products must meet GMP
requirements to the satisfaction of the FDA pursuant to a
pre-approval inspection before we can use them to manufacture our
products. We and any third-party manufacturers are also subject to
periodic inspections of facilities by the FDA and other
authorities, including procedures and operations used in the
testing and manufacture of our products to assess our compliance
with applicable regulations.
With
respect to post-market product advertising and promotion, the FDA
imposes a number of complex regulations on entities that advertise
and promote pharmaceuticals, which include, among others, standards
for direct-to-consumer advertising, promoting drugs for uses or
in-patient populations that are not described in the drug’s
approved labeling (known as “off-label use”),
industry-sponsored scientific and educational activities, and
promotional activities involving the internet. Failure to comply
with FDA requirements can have negative consequences, including
adverse publicity, enforcement letters from the FDA, mandated
corrective advertising or communications with doctors, and civil or
criminal penalties. Although physicians may prescribe legally
available drugs for off-label uses, manufacturers may not market or
promote such off-label uses.
Changes
to some of the conditions established in an approved application,
including changes in indications, labeling, or manufacturing
processes or facilities, require submission and FDA approval of a
new NDA or NDA supplement before the change can be implemented. An
NDA supplement for a new indication typically requires clinical
data similar to that in the original application, and the FDA uses
the same procedures and actions in reviewing NDA supplements as it
does in reviewing NDAs.
Adverse
event reporting and submission of periodic adverse experience
reports is required following FDA approval of an NDA. The FDA also
may require post-marketing testing, known as Phase 4 testing,
risk evaluation and minimization strategies, action plans and
surveillance, as well as annual reports on matters relating to the
NDA, to monitor the effects of an approved product or place
conditions on an approval that could restrict the distribution or
use of the product.
Outside
the United States, our ability to market a product is contingent
upon receiving marketing authorization from the appropriate
regulatory authorities. The requirements governing marketing
authorization, pricing and reimbursement vary widely from
jurisdiction to jurisdiction. At present, foreign marketing
authorizations are applied for at a national level, although within
the European Union registration procedures are available to
companies wishing to market a product in more than one European
Union member state.
We
are also subject to various environmental, health and safety
regulations including those governing laboratory procedures and the
handling, use, storage, treatment, and disposal of hazardous
materials. From time to time, and in the future, our operations may
involve the use of hazardous materials.
Orphan Drugs
Under
the Orphan Drug Act of 1983, the FDA may grant orphan drug
designation to drugs or biologics intended to treat a rare disease
or condition, which is generally defined as a disease or condition
that affects fewer than 200,000 individuals in the United States.
Orphan drug designation must be requested before submitting an NDA.
After the FDA grants orphan drug designation, the generic identity
of the drug and its potential orphan use are disclosed publicly by
the FDA. Orphan drug designation does not convey any advantage in,
or shorten the duration of, the regulatory review and approval
process. The first applicant to receive FDA approval for a
particular active ingredient to treat a particular disease with FDA
orphan drug designation is entitled to a seven-year exclusive
marketing period in the United States for that product, for that
indication. During the seven-year exclusivity period, the FDA may
not approve any other applications to market the same drug or
biologic for the same disease, except in limited circumstances,
such as a showing of clinical superiority to the product with
orphan drug exclusivity. Orphan drug exclusivity does not prevent
the FDA from approving a different drug or biologic for the same
disease or condition, or the same drug or biologic for a different
disease or condition. Among the other benefits of orphan drug
designation are tax credits for certain research and a waiver of
the NDA application user fee.
Non-U.S. Regulation
Before
our products can be marketed outside of the United States, they are
subject to regulatory approval of the respective authorities in the
country in which the product should be marketed. The requirements
governing the conduct of clinical trials, product licensing,
pricing and reimbursement vary widely from country to country. No
action can be taken to market any product in a country until an
appropriate application has been approved by the regulatory
authorities in that country. The current approval process varies
from country to country, and the time spent in gaining approval
varies from that required for FDA approval. In certain countries,
the sales price of a product must also be approved. The pricing
review period often begins after market approval is granted. Even
if a product is approved by a regulatory authority, satisfactory
prices might not be approved for such product.
In
Europe, marketing authorizations may be submitted at a centralized,
a decentralized or national level; however, the centralized
procedure is mandatory for the approval of biotechnology products
and provides for the grant of a single marketing authorization that
is valid in all European Union member states. There can be no
assurance that the chosen regulatory strategy will secure
regulatory approval on a timely basis or at all.
While
we intend to market our products outside the United States in
compliance with our respective license agreements, we have not made
any applications with non-U.S. authorities and have no timeline for
such applications or marketing.
Properties
We
entered into a lease agreement in August 2012 as amended in August
2015 with a lease term that ended on September 30, 2015, for 5,955
square feet of office space at 11588 Sorrento Valley Road in San
Diego, California. Upon expiration of the lease in September 2015,
prior to the availability of our new facility, we continued
to lease this space on a month-to-month basis from October
2015 through January 2016 at the rate of $11,017 per
month.
In
September 2015, we entered into a lease agreement with AGP Sorrento
Business Complex, L.P. for a lease of approximately 14,971 rentable
square feet of office and research facilities located at 11535
Sorrento Valley Road, San Diego, California 92121 to serve as our
corporate offices and laboratories. Due to the fact that
certain tenant improvements needed to be made to the premises
before we could take occupancy, the facilities were not ready until
early 2016. We moved from our previous facility at 11588
Sorrento Valley Road, into our new space in and took occupancy on
February 4, 2016. Monthly rent commenced upon occupancy
at $2.38 per square foot, totaling $35,631, and will escalate
at an annual rate of 3% a year over the six-year term of the lease
as set forth in the Lease.
Legal Proceedings
From
time to time, we have become involved in various legal proceedings
that arise in the ordinary course of business or otherwise.
Legal proceedings are subject to inherent uncertainties as to
timing, outcomes, costs, expenses and time expenditures by our
management and others on our behalf. Although there can be no
assurance, based on information currently available, we believe
that the outcome of legal proceedings that are pending or
threatened against us will not have a material effect on our
financial condition. However, the outcome of any of these matters
is neither probable nor reasonably estimable.
Employees
As
of January 11, 2018, we had 11 full time employees and
one part-time employee. Our employees are not
represented by any collective bargaining unit, and we believe our
relations with our employees are good.
MANAGEMENT
Board of Directors
Name
|
|
Position
|
|
|
|
J. David Hansen
|
|
Chairman of the Board of Directors, President and Chief Executive
Officer
|
|
|
|
Kenneth M. Cohen
|
|
Director (1)(2)(3)(4)
|
|
|
|
Jeffrey F. Eisenberg
|
|
Director (2)(3)(4)
|
|
|
|
Philip O. Livingston, M.D.
|
|
Director, Chief Science Officer
|
|
|
|
Paul V. Maier
|
|
Director (1)(3)(4)
|
|
|
|
Thomas C. Varvaro
|
|
Director (1)(2)(3)(4)
|
(1)
|
Member of our audit committee
|
(2)
|
Member of our compensation committee
|
(3)
|
Member of our nominating and governance committee
|
(4)
|
Independent member of the board
|
The
following is a summary of the background of each of our
directors:
J. David
Hansen, 66, serves as our
President, Chief Executive Officer (“CEO”), and as
Chairman of our Board of Directors and, prior to the merger with
Telik, Inc. on July 8, 2014 (the “Merger”), served as
President, CEO, and Chairman of the Board of Directors of MabVax
Therapeutics, Inc. after co-founding the Company in 2006. Mr.
Hansen is an experienced biopharmaceutical executive with more than
30 years of industry experience. He has held senior management
roles in both private start-up companies as well as small to
mid-sized public companies. His senior level experience includes
executive management, finance and accounting, corporate
development, sales and marketing. During his career, Mr. Hansen has
executed a wide variety of in and out licensing agreements,
research and development collaborations, joint ventures,
divestitures, and acquisitions. Mr. Hansen has developed expertise
in the therapeutic areas of immunology, oncology, and infectious
disease. Mr. Hansen gained executive management experience at
several life sciences companies prior to co-founding the Company
that make him particularly suited for his leadership role in the
Company. For example, he was a corporate officer of Avanir
Pharmaceuticals where he held the titles of Vice President of
Commercial Development, Senior Vice President of Corporate
Development, and President and Chief Operations Officer of the
Avanir subsidiary Xenerex Biosciences. Prior to Avanir, Mr. Hansen
served in multiple roles at Dura Pharmaceuticals including National
Sales Director, Director of Marketing, and Director of Business
Development. He has additional management experience with Merck
& Co. (Schering-Plough), Key Pharmaceuticals, and Bristol Myers
Squibb. We believe that Mr. Hansen’s extensive experience in
leadership roles with public and private pharmaceutical companies
qualifies him to serve as the Chairman of our Board of Directors
and as our President and Chief Executive
Officer.
Kenneth M.
Cohen, 62, serves as a
member of our Board of Directors and, prior to the Merger, served
as a member of the Board of Directors of MabVax Therapeutics, Inc.
since July of 2014. Since 2007, Mr. Cohen has served
either as a board member, executive officer or advisor to various
companies, entrepreneurs and investors in the life sciences
area. From January 2011 to August 2014, he served as a
member of the Board of Directors of Adamis Pharmaceuticals
Corporation (NASDAQ: ADMP). He was a co-founder of publicly
held Somaxon Pharmaceuticals, served as its President and CEO from
2003 through 2007 and continued as a director until June 2008.
Prior to Somaxon Pharmaceuticals, Mr. Cohen gained executive
management and board experience through various executive
positions. He was President and CEO of Synbiotics
Corporation; Executive Vice President and Chief Operating Officer
for Canji Incorporated, a human gene-therapy company that was
acquired by Schering-Plough Corporation; Vice President of Business
Affairs at Argus Pharmaceuticals, Inc.; and Vice President of
Marketing and Business Development for LifeCell
Corporation. Mr. Cohen began his career at Eli Lilly and
Company where, among many different responsibilities over ten
years, he directed business planning for the Medical Instrument
Systems Division and managed the launch of Prozac. He received an
A.B. in biology and chemistry from Dartmouth College and an M.B.A.
from the Wharton School of the University of Pennsylvania. We
believe that Mr. Cohen’s 20 years of experience serving as an
executive officer including chief executive officer of several life
sciences companies, and serving as a member of the board of several
life sciences companies qualifies him to serve as a member of the
Board of Directors.
Jeffrey F. Eisenberg,
52, has served as a member of our Board of
Directors since February 2016. Mr. Eisenberg
has served in a variety of senior management positions, and
has developed significant experience in the areas of corporate
transactions, strategic alliances, product development,
commercialization, manufacturing and talent
management. Since December 2016, Mr. Eisenberg has
served as Chief Executive Officer and since July 2016 as a member
of the board of directors of Xenetic Biosciences, Inc. (NASDAQ:
XBIO) a biopharmaceutical company developing next-generation
biologic drugs and novel oncology therapeutics. From November 1998
to December 2015 Mr. Eisenberg held various executive management
positions including President, CEO and a board member of Noven
Pharmaceuticals, Inc., the U.S. prescription pharmaceutical
division of Hisamitsu Pharmaceutical Inc., a Japanese
pharmaceutical company and the world's largest manufacturer of
transdermal drug patches. Mr. Eisenberg led the
post-acquisition integration of JDS Pharmaceuticals, a private
specialty pharmaceutical company purchased by Noven in 1997, as
well as the integration of Noven and Hisamitsu following the 2009
acquisition. From 2007 to August 2014 Mr. Eisenberg also
served as President of Novogyne Pharmaceuticals, a Women's Health
commercial joint venture between Noven and Novartis Pharmaceuticals
Corporation. Mr. Eisenberg was appointed President and Chief
Executive Officer of Noven following Hisamitsu's acquisition of
Noven. Prior to Noven Pharmaceuticals, Inc., Mr.
Eisenberg gained extensive legal experience serving as Associate
General Counsel and then as Acting General Counsel of IVAX
Corporation, at the time a publicly-traded pharmaceutical company
with global operations. Prior to serving at IVAX, Mr. Eisenberg was
a lawyer in the corporate securities department of
the Florida law firm of Steel Hector & Davis, where
he began his professional career in 1990.
Mr.
Eisenberg holds a BS, Economics degree from the Wharton School of
the University of Pennsylvania, and a JD degree
from Columbia University Law School. We
believe that Mr. Eisenberg’s extensive experience in
corporate transactions, product development, corporate governance
and executive leadership, qualifies him to serve as a member of our
Board of Directors.
Philip O. Livingston,
M.D., 75, serves as a
member of our Board of Directors and our Chief Science Officer and,
prior to the Merger, served as a member of the Board of Directors
and Chief Science Officer of MabVax Therapeutics, Inc. since 2012.
He received his MD degree from Harvard Medical School and was
Professor of Medicine in the Joan and Sanford Weill Medical College
at Cornell University and Attending Physician and Member in
Memorial Sloan-Kettering Cancer Center where he treated melanoma
patients and ran the Cancer Vaccinology Laboratory research lab for
over 30 years until his retirement from MSK October 1, 2011. Dr.
Livingston’s research focused on: identification of suitable
targets for immunotherapy of a variety of cancers, construction of
polyvalent conjugate vaccines specifically designed to augment
antibody responses against these targets, and identification of
optimal immunological adjuvants to further augment the potency of
these vaccines. He has over 108 publications and 4 issued and 3
pending patents concerning cancer vaccines. Recently, Dr.
Livingston helped establish MabVax Therapeutics, Inc., and another
biotech company, Adjuvance Technologies, Inc. MabVax supported two
randomized Phase II trials with these MSK polyvalent vaccines and
establishment of human monoclonal antibodies from the blood of
immunized patients. We believe that Dr. Livingston’s
extensive expertise in immunotherapy qualifies him to serve as a
member of our Board of Directors and our Chief Science
Officer.
Paul V. Maier, 70,
joined our
Board of Directors in July 2014. Since 2007, Mr. Maier
has served as a member of the Board of Directors of International
Stem Cell Corporation (OTCQB: ISCO) and currently serves as the
Chairperson of its Audit Committee and as a member of its
Compensation and Governance Committees. Since 2012 Mr. Maier has
served as Chairman of the Audit Committee and a member of the
Governance Committee of the Board of Directors of Apricus
Biosciences, Inc. (NASDAQ: APRI). Since 2015, Mr. Maier has served
as Chairman of the Audit Committee and member of the Compensation
Committee of the Board of Directors of Ritter Pharmaceuticals
(NASDAQ: RTTR). Mr. Maier also serves as a Director of Biological
Dynamics and Eton Pharmaceuticals, both private life sciences
companies. From 2009 to June 2014, Mr. Maier served as the CFO of
Sequenom, Inc., (acquired by Laboratory Corporation of America
Holdings). Prior to Sequenom, Inc., Mr. Maier gained executive management experience
through various management positions that make him suitable for
membership on the Board of Directors of the Company. For
example, Mr. Maier served as
Senior Vice President and CFO of Ligand Pharmaceuticals, Inc.,
where he helped build Ligand from a venture stage company to a
commercial, integrated biopharmaceutical
organization. Prior to Ligand Pharmaceuticals, Inc., he
held various management and finance positions at ICN
Pharmaceuticals. Mr. Maier received his M.B.A. from Harvard
Business School and a B.S. from Pennsylvania State University. We
believe that Mr. Maier’s over 25 years of experience in life
sciences as a chief financial officer and serving on the board of
several life sciences public companies qualifies him to serve as a
member of the Board of Directors and as chair of the Audit
Committee.
Thomas
C. Varvaro, 48, has
served as a member of our Board of Directors since April
2015. Mr. Varvaro has served in a number of executive
level and board member positions at ChromaDex Corp.
(NASDAQ:
CDXC) since January 2004, including Senior Vice President Finance
from October 2017 to the present, CFO from January 2004 to October
2017, Corporate Secretary from March 2006 to October 2017, and as a
member of the board of directors from March 2006 until May 2010. As
CFO of ChromaDex, Mr. Varvaro was responsible for overseeing all
aspects of ChromaDex’s accounting, information technology,
intellectual property management and human resources management.
Mr. Varvaro has extensive process-mapping and business process
improvement skills, along with a solid information technology
background that includes management and implementation experiences
ranging from custom application design to enterprise wide system
deployment. Mr. Varvaro also has hands-on experience in integrating
acquisitions and in new facility startups. In working with
manufacturing organizations, Mr. Varvaro has overseen plant
automation, reporting and bar code tracking implementations. Mr.
Varvaro also has broad legal experience in intellectual property,
contract and employment law. Prior to ChromaDex, Mr. Varvaro gained
substantial management experience in a number of positions
that make him suitable for membership on the Board of Directors of
the Company. For example, he was employed by Fast Heat Inc., a
Chicago, Illinois based Global supplier to the plastics, HVAC,
packaging, and food processing industries, where he began as
controller and was promoted to chief information officer and then
chief financial officer during his tenure. During his time there
Mr. Varvaro was responsible for all financial matters including
accounting, risk management and human resources. Earlier in his
career Mr. Varvaro gained additional experience in other areas of
information technology and accounting roles. For
example, Mr. Varvaro was employed by Maple Leaf Bakery, Inc.,
Chicago, Illinois, during its rise to becoming a national leader in
specialty bakery products. During his tenure, Mr. Varvaro served in
information technology and accounting roles, helping to shepherd
the company from a single facility to national leader in specialty
food products. Mr. Varvaro has a B.S. in Accounting from University
of Illinois, Urbana-Champaign and is a Certified Public
Accountant. We believe Mr. Varvaro’s extensive
industry experience as an officer and director, as well as his
extensive financial and accounting training and management
experience qualify him to serve as a member of our Board of
Directors, and as an Audit Committee financial
expert.
Family Relationships
None
of our Directors are related by blood, marriage, or adoption to any
other Director, executive officer, or other key
employees.
Other
Directorships
Other
than as disclosed above, none of the Directors of the Company are
also directors of issuers with a class of securities registered
under Section 12 of the Exchange Act (or which otherwise are
required to file periodic reports under the Exchange
Act).
Legal Proceedings
We
are not aware of any of our directors or officers being involved in
any legal proceedings in the past ten years relating to any matters
in bankruptcy, insolvency, criminal proceedings (other than traffic
and other minor offenses) or being subject to any of the items set
forth under Item 401(f) of Regulation S-K.
BOARD LEADERSHIP STRUCTURE
The
Board of Directors is currently chaired by the President and Chief
Executive Officer of the Company, Mr. Hansen. The Company believes
that combining the positions of Chief Executive Officer and
Chairman of the Board of Directors helps to ensure that the Board
of Directors and management act with a common purpose. Integrating
the positions of Chief Executive Officer and Chairman can provide a
clear chain of command to execute the Company’s strategic
initiatives. The Company also believes that it is advantageous to
have a Chairman with an extensive history with and knowledge of the
Company, and extensive technical and industry experience.
Notwithstanding the combined role of Chief Executive Officer and
Chairman, key strategic initiatives and decisions involving the
Company are discussed and approved by the entire Board of
Directors. In addition, meetings of the independent directors of
the Company are regularly held, which Mr. Hansen does not attend.
The Company believes that the current leadership structure and
processes maintains an effective oversight of management and
independence of the Board of Directors as a whole without separate
designation of a lead independent director. However, the Board of
Directors will continue to monitor its functioning and will
consider appropriate changes to ensure the effective independent
function of the Board of Directors in its oversight
responsibilities.
ROLE OF THE BOARD IN RISK OVERSIGHT
One
of the Board of Director’s key functions is informed
oversight of the Company’s risk management process. The Board
of Directors does not have a standing risk management committee,
but rather administers this oversight function directly through the
Board of Directors as a whole, as well as through various Board of
Directors standing committees that address risks inherent in their
respective areas of oversight. In particular, our Board of
Directors is responsible for monitoring and assessing strategic
risk exposure, including a determination of the nature and level of
risk appropriate for the Company. The Audit Committee considers and
discusses with management the Company’s major financial risk
exposures and related monitoring and control of such exposures as
well as compliance with legal and regulatory requirements. The
Nominating & Governance Committee monitors the effectiveness of
our corporate governance guidelines. The Compensation Committee
assesses and monitors whether our compensation policies and
programs have the potential to encourage excessive risk-taking. Any
findings regarding material risk exposure to the Company are
reported to and discussed with the Board of Directors.
INDEPENDENCE OF THE BOARD OF DIRECTORS AND ITS
COMMITTEES
|
After review of all relevant transactions or
relationships between each director and nominee for director, or
any of his or her family members, and the Company, its senior
management and its Independent Registered Public Accounting Firm,
the Board of Directors has determined that all of the
Company’s directors and the Company’s nominees for
director are independent within the meaning of the applicable
listing standards of the NASDAQ Capital Market, except Mr. Hansen, the Chairman of the Board of
Directors, Chief Executive Officer and President, of the Company
and Dr. Livingston, Chief Science Officer. As required under the
listing standards of the NASDAQ Capital Market, the Company’s independent directors meet
in regularly scheduled executive sessions at which only independent
directors are present. The Board of Directors met 6
times and acted by unanimous written
consent 11 times during the
fiscal year ended December 31, 2016. Each member of the
Board of Directors attended 75% or more of the aggregate of the
meetings of the Board of Directors held in the last fiscal year
during the period for which he was a director and of the meetings
of the committees on which he served, held in the last fiscal year
during the period for which he was a committee member except Philip
Livingston who was unable to
attend certain meetings due to travel and other
commitments.
The
Board of Directors has three committees: the Audit Committee, the
Compensation Committee and the Nominating & Governance
Committee. Below is a description of each committee of the Board of
Directors. The Board of Directors has determined that each member
of each committee meets the applicable rules and regulations
regarding “independence” and that each member is free
of any relationship that would interfere with his individual
exercise of independent judgment with regard to the
Company.
AUDIT COMMITTEE
The
Audit Committee of the Board of Directors oversees the
Company’s corporate accounting and financial reporting
process. For this purpose, the Audit Committee performs several
functions. The Audit Committee, among other things: evaluates the
performance, and assesses the qualifications, of the Independent
Registered Public Accounting Firm; determines and pre-approves the
engagement of the Independent Registered Public Accounting Firm to
perform all proposed audit, review and attest services; reviews and
pre-approves the retention of the Independent Registered Public
Accounting Firm to perform any proposed, permissible non-audit
services; determines whether to retain or terminate the existing
Independent Registered Public Accounting Firm or to appoint and
engage a new Independent Registered Public Accounting Firm for the
ensuing year; confers with management and the Independent
Registered Public Accounting Firm regarding the effectiveness of
internal controls over financial reporting; establishes procedures,
as required under applicable law, for the receipt, retention and
treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters and
the confidential and anonymous submission by employees of concerns
regarding questionable accounting or auditing matters; reviews the
financial statements to be included in the Company’s Annual
Report on Form 10-K and recommends whether or not such financial
statements should be so included; and discusses with management and
the Independent Registered Public Accounting Firm the results of
the annual audit and review of the Company’s quarterly
financial statements.
The Audit Committee is currently composed of three
outside directors: Mr. Maier, Mr. Cohen, and Mr. Varvaro, as of
January 11, 2018. The Audit Committee met 5
times during the fiscal year ended December 31, 2016.
The Audit Committee Charter was last amended in March 2015 and is
available on the Company’s website,
www.mabvax.com.
The Board of Directors periodically reviews
the NASDAQ Capital Market’s listing standards’ definition of
independence for Audit Committee members and has determined that
all members of the Company’s Audit Committee are independent
(as independence is currently defined in Rule 5605(c)(2)(A) of
the NASDAQ Capital Market’s listing standards and Rule 10A-3(b)(1) of the
Securities Exchange Act of 1934, as amended). Although the Company
is not currently NASDAQ-listed we believe it is in the
Company’s interests to comply with these NASDAQ
Capital Market standards as a matter
of good governance. The Board of Directors has determined that Mr.
Maier qualifies as an “audit committee financial
expert,” as defined in applicable SEC rules. The Board of
Directors made a qualitative assessment of Mr. Maier’s level
of knowledge and experience based on a number of factors, including
his formal education and his service in executive capacities having
financial oversight responsibilities. These positions include Chief
Financial Officer, Senior Vice President, and member of the boards
of directors and audit committees of, a number of biotechnology and
genomics companies, pursuant to which he has experience preparing,
reviewing and supervising the preparation of financial reports. In
addition, Mr. Maier holds an M.B.A from Harvard Business School.
For further information on Mr. Maier’s experience, please see
his biography above.
COMPENSATION COMMITTEE
The
Compensation Committee of the Board of Directors reviews, modifies
and approves the overall compensation strategy and policies for the
Company. The Compensation Committee, among other things: reviews
and approves corporate performance goals and objectives relevant to
the compensation of the Company’s officers; determines and
approves the compensation and other terms of employment of the
Company’s Chief Executive Officer; determines and approves
the compensation and other terms of employment of the other
officers of the Company; and administers the Company’s stock
option and purchase plans, pension and profit sharing plans and
other similar programs.
As of January 11, 2018, the
Compensation Committee was composed of three outside directors: Mr.
Cohen, Mr. Eisenberg, and Mr. Varvaro. All members of
the Compensation Committee are independent (as independence is
currently defined in Rule 5605(a)(2) of the NASDAQ Capital
Market’s listing standards). The
Compensation Committee met 4 times and acted 3 times by written consent during the fiscal year ended
December 31, 2016. The Compensation Committee Charter was last
amended in March 2015 and is available on the Company’s
website, www.mabvax.com.
Compensation Committee Interlocks and Insider
Participation
No
member of our compensation committee has at any time been an
employee of ours. None of our executive officers serves as a member
of the board of directors or compensation committee of any entity
that has one or more executive officers serving as a member of our
board of directors or compensation committee.
NOMINATING & GOVERNANCE COMMITTEE
The
Nominating & Governance Committee of the Board of Directors is
responsible for, among other things: identifying, reviewing and
evaluating candidates to serve as directors of the Company;
reviewing, evaluating and considering incumbent directors;
recommending to the Board of Directors for selection candidates for
election to the Board of Directors; making recommendations to the
Board of Directors regarding the membership of the committees of
the Board of Directors; and assessing the performance of the Board
of Directors.
The Nominating & Governance Committee is
currently composed of four outside directors: Messrs. Cohen,
Eisenberg, Maier and Varvaro, as of January 11,
2018. All members of the Nominating &
Governance Committee are independent (as independence is currently
defined in Rule 5605(a)(2) of the NASDAQ Capital
Market’s listing standards). The
Nominating & Governance Committee met 3 times during the fiscal year ended December 31,
2016. The Nominating & Governance Committee Charter was last
amended in March 2015 and is available on the Company’s
website, www.mabvax.com.
The
Nominating & Governance Committee has not established any
specific minimum qualifications that must be met for recommendation
for a position on the Board of Directors. Instead, in considering
candidates for director the Nominating & Governance Committee
will generally consider all relevant factors, including among
others the candidate’s applicable education, expertise and
demonstrated excellence in his or her field, the usefulness of the
expertise to the Company, the availability of the candidate to
devote sufficient time and attention to the affairs of the Company,
the candidate’s reputation for personal integrity and ethics
and the candidate’s ability to exercise sound business
judgment. Other relevant factors, including diversity, experience
and skills, will also be considered. Candidates for director are
reviewed in the context of the existing membership of the Board of
Directors (including the qualities and skills of the existing
directors), the operating requirements of the Company and the
long-term interests of its stockholders.
The
Nominating & Governance Committee considers each
director’s executive experience leading biopharmaceutical
companies, his familiarity and experience with the various
operational, scientific and/or financial aspects of managing
companies in our industry, and his involvement in building
collaborative biopharmaceutical development and commercialization
relationships.
With
respect to diversity, the Nominating & Governance Committee
seeks a diverse group of individuals who have executive leadership
experience in life sciences companies, and a complementary mix of
backgrounds and skills necessary to provide meaningful oversight of
the Company’s activities. As a clinical stage drug
development company focused on discovering and developing small
molecule drugs, we seek directors who have experience in the
medical, regulatory and pharmaceutical industries in general, and
also look for individuals who have experience with the operational
issues that we face in our dealings with clinical and pre-clinical
drug development, collaborations with third parties and
commercialization and manufacturing issues. Some of our directors
have strong financial backgrounds and experience in dealing with
public companies, to help us in our evaluation of our operations
and our financial model. We also face unique challenges as we
implement our strategy to develop, manufacture and commercialize
our products by entering into relationships with pharmaceutical
companies. The Nominating & Governance Committee annually
reviews the Board’s composition in light of the
Company’s changing requirements. The Nominating &
Governance Committee uses the Board of Director’s network of
contacts when compiling a list of potential director candidates and
may also engage outside consultants. Pursuant to its charter, the
Nominating & Governance Committee will consider, but not
necessarily recommend to the Board of Directors, potential director
candidates recommended by stockholders. All potential director
candidates are evaluated based on the factors set forth above, and
the Nominating & Governance Committee has established no
special procedure for the consideration of director candidates
recommended by stockholders.
Director Nominations
There
have been no material changes to the procedures by which a
stockholder may recommend nominees to the Board of Directors since
our last disclosure of these procedures.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The
Nominating & Governance Committee of the Board of Directors has
adopted a process by which stockholders may communicate with the
Board of Directors or any of its individual directors. Stockholders
who wish to communicate with the Board of Directors may do so by
sending a written communication addressed as follows: Board
Communication, MabVax Therapeutics Holdings, Inc., 11535 Sorrento
Valley Rd., Suite 400, San Diego, CA 92121. All communications must
state the number and class(es) of shares owned by the stockholder
making the communication. The Company’s Secretary
or other officer will review each communication and forward the
communication to the Board of Directors, to any individual director
to whom the communication is addressed, and/or to any other officer
of the Company considered to be necessary or
appropriate.
EXECUTIVE OFFICERS
The
following table sets forth information regarding the
Company’s executive officers and key personnel.
Executive Officers:
Name
|
|
Position
|
J. David Hansen
|
|
Chairman of the Board of Directors, President and Chief Executive
Officer
|
|
|
|
Gregory P. Hanson, CMA, MBA
|
|
Chief Financial Officer
|
|
|
|
Paul W. Maffuid, Ph.D.
|
|
Executive Vice President of Research and Development
|
|
|
|
Paul Resnick, M.D., MBA
|
|
Vice President and Chief Business Officer
|
The following is a brief summary of the background of each of our
executive officers.
J. David
Hansen, 65, serves as our
President, Chief Executive Officer (“CEO”), and as
Chairman of our Board of Directors. Biographical
information regarding Mr. Hansen is provided above under Board of
Directors.
Gregory P. Hanson, CMA,
MBA, 71, serves as our CFO, and prior to the Merger served
as CFO of MabVax Therapeutics, Inc. since February of 2014. Mr.
Hanson has over 30 years serving as CFO/financial executive and
board member of public and private life sciences and hi-tech
companies. From January 2008 to February 2014 Mr. Hanson
was Managing Director of First Cornerstone, a board and management
advisory service to companies and executives. Since
November 2016, Mr. Hanson has served on the board of directors of
WCCT Global, a full-service CRO. From November 2009 to November
2016, Mr. Hanson served as Advisory Board Member of Menon
International, Inc. a developer of renewable products and
biodetection devices. From October 2011 to September
2016, Mr. Hanson served on the Life Sciences Advisory Board of
Brinson Patrick Securities, a boutique investment bank. Mr.
Hanson is Past-President and 11-year Member of the Board of
Directors of San Diego Financial Executives International (FEI),
and a member of the Capital Formation Committee at BIOCOM since
2011. Earlier in his career Mr. Hanson was able to gain substantial
executive management experience that help qualify him in his role
as CFO. For example, he served as Senior Vice President
of Brinson Patrick Securities, where he opened up the San Diego
branch and introduced at-the-market financing strategies to public
life sciences companies. Prior to Brinson Patrick Securities, Mr.
Hanson served as Senior Vice President and CFO of Savara, Inc.
(NASDAQ: SVRA) (formerly Mast Therapeutics and Adventrx
Pharmaceuticals), and prior to Savara, Inc. was Vice President and
CFO, Chief Accounting Officer, Compliance Officer and Corporate
Secretary of Avanir Pharmaceuticals, Inc. (acquired by Otsuka
Holdings Co., Ltd.), the developer of the cold sore product
Abreva™, and Neudexta™, for the treatment of
Pseudobulbar Affect, a central nervous system disorder. During the
course of his career, Mr. Hanson has completed approximately $1
billion in financing, licensing and partnering arrangements. Mr.
Hanson was a founding and 6-year member of the Small Business
Advisory Committee to the Financial Accounting Standards Board, and
has spoken at various national conferences, industry organizations
and panels on financing strategy and mergers and acquisitions, and
twice spoken to the SEC’s Committee on Improvements to
Financial Reporting.
Mr.
Hanson has passed the examination for Certified Public Accountants
and is a Certified Management Accountant. He has an MBA
with distinction from the University of Michigan, and a BS in
Mechanical Engineering from Kansas State
University. From 2008 to September 2016 Mr. Hanson
maintained Series 7 & Series 63 securities
licenses.
Paul W.
Maffuid, Ph.D., 62, serves as
Executive Vice President of Research and Development. Dr. Maffuid
joined the Company in July 2014. From 2011 to June 2014,
he worked for AAIPHARMA Services Corporation where he held various
management positions including Executive Vice President, Pharma
Operations. His responsibilities included formulation, process
development, technology transfer, stability and analytical services
for clients developing biologic and small molecule therapeutics. He
was a member of the Executive Team that transformed a declining
business into one of the world’s leading providers of
integrated development services for the biopharmaceutical
sector. Dr. Maffuid has been able to gain extensive
experience to qualify him in his executive leadership role over
research and development at the Company. For example,
prior to joining AAIPHARMA he was the founder of Biopharmalogics,
Inc. a consulting service providing Chemistry Manufacturing and
Controls (CMC) as well as Drug Metabolism-Pharmacokinetics (DMPK)
services for the development of pharmaceutical products which he
operated from 2008 to 2011. Earlier in his career Dr. Maffuid was
Senior Vice President of Irvine Pharmaceutical Services, Inc., and
Vice President of Pharmaceutical Development for Arena
Pharmaceuticals. While at Arena Pharmaceuticals Dr. Maffuid was a
member of the Executive Management team responsible for all CMC and
DMPK in support of discovery, development, and commercial
operations. He led the design and construction of a 40,000 sq. ft.
cGMP compliant pilot manufacturing facility. Dr. Maffuid had
management roles at Magellan Laboratories, Cabrillo Laboratories,
and Amylin Pharmaceuticals.
Paul F.
Resnick, M.D., MBA, 60, serves
as Vice President and Chief Business Officer. Dr.
Resnick joined the Company in March 2016. From January
2013 to March 2016 Dr. Resnick was Senior Vice President, Business
Development for Juventas Therapeutics, where he was responsible for
business and commercial strategy and working with executive
management overseeing corporate clinical development, and financial
and business strategies. From February 2012 to December
2012, Dr. Resnick was an advisor to several companies in the life
sciences area. From January 2008 to January 2012 he was
Vice President, Business Development for Intellikine, Inc.
(acquired by Takeda Pharmaceuticals), responsible for managing
alliances and leading the business development strategy that
resulted in securing an acquisition by Takeda
Pharmaceuticals. During the course of Dr.
Resnick’s career, he has been able to gain extensive
experience to qualify him in his executive leadership role for
business development for the Company. For example, Dr.
Resnick held Senior Director positions for Worldwide Business
Development, and for Strategic Alliances, at Pfizer Inc., where he
was responsible for networking with leaders from biotechnology
companies, universities, and research institutions to gain early
insights into emerging technologies, and for leading technical and
business diligence, negotiations, and alliance management of
science and technology initiatives for Pfizer’s Biotechnology
and Bio-innovation Center. Prior to Pfizer Dr. Resnick
held Director and Senior Director positions at Rinat Neuroscience
(acquired by Pfizer), Intermune, Inc. and Roche
Pharmaceuticals. Dr. Resnick has an M.D. from The
Medical College of Wisconsin and an MBA from The Wharton School of
the University of Pennsylvania.
Code of Conduct
We
have adopted the MabVax Therapeutic Holdings, Inc. Code of Conduct,
a code of ethics with which every person who works for us is
expected to comply, including without limitation our principal
executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar
functions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors and executive officers, and persons who own more than
ten percent of a registered class of our equity securities, to file
with the SEC initial reports of ownership and reports of changes in
ownership of our common stock and our other equity securities.
Officers, directors and greater than ten percent stockholders are
required by SEC regulations to furnish us with copies of all
Section 16(a) forms they file.
Based solely on a review of the copies of such
forms furnished to us during 2016, SEC filings and certain written
representations that no other reports were required during the
fiscal year ended December 31, 2016, our officers, directors and
greater than ten percent stockholders complied with all applicable
Section 16(a) filing requirement, except for Kenneth M. Cohen,
Jeffrey F. Eisenberg, Paul V.
Maier, Jeffrey V. Ravetch
(a former board member), and Thomas C.
Varvaro who were late on a
Section 16(a) filing that took place on July 28,
2016.
EXECUTIVE COMPENSATION
2017 Summary Compensation Table
The
following table sets forth, for the fiscal years 2017
and 2016, compensation awarded or paid to, or earned by, our
Chief Executive Officer, our Chief Financial Officer and our other
two executive officers at December 31, 2017 (the
“Named Executive Officers” or
“NEOs”).
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Restricted Stock Unit
Awards
($)(2)
|
Option Awards
($)(3)
|
All Other Compensation
($)
|
Total
($)
|
J.
David Hansen
|
2017
|
427,876
|
135,450
|
79,224
|
1,256,029
|
36,634
|
1,935,213
|
President,
Chief Executive Officer and Chairman
|
2016
|
418,438
|
141,400
|
—
|
393,702
|
35,717
|
989,257
|
Gregory
P. Hanson
|
2017
|
309,312
|
58,590
|
48,933
|
224,945
|
36,928
|
678,708
|
Chief
Financial Officer
|
2016
|
276,014
|
62,790
|
—
|
99,743
|
15,055
|
453,602
|
Paul
W. Maffuid
|
2017
|
321,859
|
61,425
|
44,272
|
263,259
|
39,607
|
730,422
|
Executive
Vice President, Research and Development
|
2016
|
278,737
|
61,950
|
—
|
91,213
|
34,121
|
466,021
|
Paul
F. Resnick
|
2017
|
269,192
|
51,030
|
3,262
|
111,967
|
36,408
|
471,859
|
Vice
President, Chief Business Officer (1)
|
2016
|
210,781
|
44,094
|
—
|
323,532
|
20,680
|
599,087
|
(1)
|
Mr. Resnick was appointed as Vice President and Chief Business
Officer of the Company in March 2016.
|
(2)
|
The amounts in this column represent the aggregate full grant date
fair value of restricted stock units (RSUs) granted. Such RSU
awards were granted during 2017 and 2016 with vesting
dates after December 31, 2017.
|
(3)
|
The amounts in this column represent the aggregate full grant date
fair values of stock options granted, computed in accordance with
Accounting Standards Codification 718, or ASC 718,
“Compensation—Stock Compensation” using the
Black-Scholes option valuation model.
|
Outstanding Equity Awards at 2017 Fiscal
Year-End
The
following table summarizes the number of outstanding equity awards
held by each of our Named Executive Officers at December 31, 2016
and after giving effect to the Listing Reverse Split. Each option
grant is shown separately for each Named Executive Officer. The
vesting schedule for each option grant is shown following this
table.
Name and Principal Position
|
Option Grant Date
|
Number of Securities Underlying Unexercised Options Exercisable
(#)
|
Number of Securities Underlying Unexercised Options Un-exercisable
(#)
|
Equity Incentive Plan Awards: Number of Securities Underlying
Unexercised Unearned Options (#)
|
Option Exercise Price per Share ($)
|
Option Expiration
Date
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
Market Value of Shares or Units of Stock That Have Not Vested
($)
|
J. David Hansen
|
2/1/2010
|
1,690
|
-0-
|
-0-
|
5.33
|
2/1/2020
|
-0-
|
-0-
|
President, Chief Executive Officer and Chairman
|
2/28/2013
|
3,380
|
-0-
|
-0-
|
10.66
|
2/28/2023
|
-0-
|
-0-
|
|
4/2/2015
|
81,374
|
40,686
|
-0-
|
17.02
|
4/2/2025
|
40,687
|
28,481
|
|
2/16/2016
|
22,524
|
45,045
|
-0-
|
3.63
|
2/16/2026
|
-0-
|
-0-
|
|
8/29/2016
|
21,134
|
42,266
|
-0-
|
5.00
|
8/29/2026
|
-0-
|
-0-
|
|
1/1/2017
|
21,132
|
42,268
|
-0-
|
3.38
|
1/1/2027
|
-0-
|
-0-
|
|
2/62017
|
-0-
|
250,000
|
-0-
|
2.99
|
2/6/2027
|
-0-
|
-0-
|
|
5/19/2017
|
500,000
|
-0-
|
-0-
|
2.00
|
5/19/2027
|
-0-
|
-0-
|
|
9/6/2017
|
-0-
|
-0-
|
-0-
|
-0-
|
1/1/2099
|
176,054
|
123,238
|
|
10/2/2017
|
-0-
|
-0-
|
-0-
|
-0-
|
1/1/2099
|
551,156
|
385,809
|
|
|
|
|
|
|
|
|
|
Gregory P. Hanson
|
3/13/2014
|
2,439
|
190
|
-0-
|
59.94
|
3/13/2024
|
-0-
|
-0-
|
Chief Financial Officer
|
4/2/2015
|
42,127
|
21,063
|
-0-
|
17.02
|
4/2/2025
|
21,063
|
142,389
|
|
2/16/2016
|
901
|
1,802
|
-0-
|
3.63
|
2/16/2026
|
-0-
|
-0-
|
|
8/29/2016
|
8,800
|
17,600
|
-0-
|
5.00
|
8/29/2026
|
-0-
|
-0-
|
|
1/1/2017
|
8,798
|
17,602
|
-0-
|
3.38
|
1/1/2027
|
-0-
|
-0-
|
|
2/62017
|
-0-
|
75,000
|
-0-
|
2.99
|
2/6/2027
|
-0-
|
-0-
|
|
9/6/2017
|
-0-
|
-0-
|
-0-
|
-0-
|
1/1/2099
|
108,739
|
76,117
|
|
10/2/2017
|
-0-
|
-0-
|
-0-
|
-0-
|
1/1/2099
|
340,420
|
238,294
|
|
|
|
|
|
|
|
|
|
Paul W. Maffuid
|
9/8/2014
|
1,522
|
356
|
-0-
|
62.75
|
9/8/2024
|
-0-
|
-0-
|
Executive Vice President, Research and
Development
|
4/2/2015
|
30,092
|
15,044
|
-0-
|
17.02
|
4/2/2025
|
15,044
|
10,532
|
|
2/16/2016
|
2,703
|
5,406
|
-0-
|
3.63
|
2/16/2026
|
-0-
|
-0-
|
|
8/29/2016
|
6,700
|
13,400
|
-0-
|
5.00
|
8/29/2026
|
-0-
|
-0-
|
|
1/1/2017
|
-0-
|
20,100
|
-0-
|
3.38
|
1/1/2027
|
-0-
|
-0-
|
|
2/62017
|
-0-
|
100,000
|
-0-
|
2.99
|
2/6/2027
|
-0-
|
-0-
|
|
9/6/2017
|
-0-
|
-0-
|
-0-
|
-0-
|
1/1/2099
|
98,383
|
68,868
|
|
10/2/2017
|
-0-
|
-0-
|
-0-
|
-0-
|
1/1/2099
|
307,999
|
215,599
|
|
|
|
|
|
|
|
|
|
Paaul F. Resnick (2)
|
3/16/2016
|
15,136
|
30,270
|
-0-
|
5.48
|
3/16/2026
|
-0-
|
-0-
|
Vice President, Chief Business Officer
|
3/16/2016
|
10,091
|
20,180
|
-0-
|
12.95
|
3/16/2026
|
-0-
|
-0-
|
|
8/29/2016
|
5,067
|
10,133
|
-0-
|
5.00
|
8/29/2026
|
-0-
|
-0-
|
|
1/1/2017
|
5,066
|
10,134
|
-0-
|
3.38
|
1/1/2027
|
-0-
|
-0-
|
|
2/62017
|
-0-
|
35,000
|
-0-
|
2.99
|
2/6/2027
|
-0-
|
-0-
|
|
9/6/2017
|
-0-
|
-0-
|
-0-
|
-0-
|
1/1/2099
|
7,249
|
5,074
|
|
10/2/2017
|
-0-
|
-0-
|
-0-
|
-0-
|
1/1/2099
|
22,695
|
15,887
|
Retirement Plans
The
Company does not maintain any defined benefit or defined
contribution pension or retirement plans, other than a 401(k) Plan
that is offered through our payroll provider. The Company made no
matching contributions to the 401(k) Plan in 2015 or
2016.
Hansen Employment Agreement
Our
prior employment agreement with Mr. Hansen, which became effective
July 1, 2014, had an initial term of 3 years, with an option to
renew or extend the terms if notice is provided by either Mr.
Hansen or the Company at least 60 days prior to the end of the
term. Under the terms of his prior agreement, Mr.
Hansen received an initial base salary of $315,660. Mr.
Hansen’s base salary may be increased at the discretion of
the Board of Directors or the Compensation Committee. Mr. Hansen
was also entitled to an annual cash bonus, based on certain
performance-based objectives established by the Compensation
Committee of the Board. On July 1, 2017, we entered into a renewed
employment agreement with Mr. Hansen (the “Hansen Employment
Agreement”), which extended the term of Mr. Hansen’s
employment through July 1, 2020. The Hansen Employment Agreement
contains substantially the same terms as the prior employment
agreement, except that Mr. Hanson’s base salary was increased
to $430,000, he is eligible to receive a bonus of up to 50% of this
base salary, based on certain performance-based objectives
established by the Company, and he may receive equity compensation
at the discretion of the Board.
The
Hansen Employment Agreement may be terminated upon death,
disability, with or without Cause (as defined by the Hansen
Employment Agreement) by the Company, with Good Reason (as defined
in the Hansen Employment Agreement), 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 the Company for
Disability or without Cause, by Mr. Hansen for Good Reason,
non-renewal by the Company 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 and a pro rata
bonus payment, 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 the Company 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.
Hanson Employment Agreement
Our
prior employment agreement with Mr. Hanson, which became effective
July 1, 2014, had an initial term of 3 years, with an option to
renew or extend the terms if notice is provided by either Mr.
Hanson or us at least 60 days prior to the end of the term. Under
the terms of his prior agreement, Mr. Hanson was
entitled to receive an initial annual base salary of $215,000,
which may be increased at the discretion of the Board of Directors
or the Compensation Committee. Mr. Hanson was also entitled to an
annual cash bonus, based on certain performance-based objectives
established by the Company. In addition, prior to the merger MabVax
Therapeutics had granted Mr. Hanson options which are currently
exercisable to purchase up to 2,629 shares of the Company common
stock at an exercise price of $59.94 under the terms of the Company
2014 Employee, Director and Consultant Equity Incentive Plan as
assumed by the Company pursuant to the Merger Agreement. On July 1,
2017, we entered into a renewed employment agreement with Mr.
Hanson (the “Hanson Employment Agreement”), which
extended the term of Mr. Hanson’s employment through July 1,
2020. The Hanson Employment Agreement contains substantially the
same terms as the prior employment agreement, except that Mr.
Hanson’s base salary was increased to $310,000, he is
eligible to receive a bonus of up to 30% of this base salary, based
on certain performance-based objectives established by the Company,
and he may receive equity compensation at the discretion of the
Board.
The
Hanson Employment Agreement may be terminated upon death,
disability, with or without Cause (as defined by the Hanson
Employment Agreement) by the Company, with Good Reason (as defined
in the Hanson Employment Agreement), 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 the Company for
Disability or without Cause, by Mr. Hanson for Good Reason,
non-renewal by the Company 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 and a pro rata
bonus payment, 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 the Company 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.
Maffuid Employment Agreement
On
July 21, 2014, we entered into a prior employment agreement with
Paul Maffuid, Ph.D., which had an initial term of 3 years, with an
option to renew or extend the terms if notice is provided by either
Dr. Maffuid or the Company at least 60 days prior to the end of the
term. Under the terms of his prior agreement, Dr.
Maffuid was entitled to receive an initial base salary of $225,000
which may be increased at the discretion of the Board of Directors
or the Compensation Committee. Dr. Maffuid was also entitled to an
annual bonus, based on certain performance-based objectives
established by the Company’s Chief Executive Officer. In
addition, the Company previously granted Dr. Maffuid options to
purchase up to 1,878 shares of the Company’s common stock at
an exercise price of $62.75 per share under the terms of the
Amended and Restated 2014 Employee, Director and Consultant Equity
Incentive Plan which was assumed by the Company pursuant to the
Merger Agreement. On July 1, 2017, we entered into a renewed
employment agreement with Dr. Maffuid (the “Maffuid
Employment Agreement”), which extended the term of Dr.
Maffuid’s employment through July 1, 2020. The Maffuid
Employment Agreement contains substantially the same terms as the
prior employment agreement, except that Dr. Maffuid’s base
salary was increased to $325,000, he is eligible to receive a bonus
of up to 30% of this base salary, based on certain
performance-based objectives established by the Company, and he may
receive equity compensation at the discretion of the
Board.
The
Maffuid Employment Agreement may be terminated upon death,
disability, with or without Cause (as defined by the Maffuid
Employment Agreement) by the Company, with Good Reason (as defined
in the Maffuid Employment Agreement and upon a Change in Control
(as defined in the Employment Agreement), by Dr. Maffuid or at
either party’s election not to renew the employment
agreement. In the event the Maffuid Employment Agreement is
terminated as a result of Dr. Maffuid’s death, Dr.
Maffuid’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
Maffuid Employment Agreement is terminated by the Company for
Disability or without Cause, by Dr. Maffuid for Good Reason,
non-renewal by the Company or in connection with a Change in
Control, Dr. Maffuid would be entitled to receive all Accrued
Obligations, full acceleration of vesting of all issued and
outstanding stock options, unpaid bonus amounts and a pro rata
bonus payment, benefits for up to one year or until Dr. Maffuid
obtains coverage through subsequent employment (whichever is
earlier) and severance payments equal to Dr. Maffuid’s annual
base salary payable in 12 equal monthly installments. In the event
the employment agreement is terminated by the Company for Cause,
without Good Reason by Dr. Maffuid, or the parties elect not to
renew the agreement, Dr. Maffuid 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 Maffuid Employment
Agreement.
Resnick Employment Agreement
On
March 16, 2016, we entered into an Employment Agreement with Paul
F. Resnick, M.D., or the Resnick Employment
Agreement. The Resnick Employment Agreement provides
that Dr. Resnick’s employment is “at-will” and is
not for any specified term or length of time. Under the terms of
his agreement, Dr. Resnick was entitled to receive an initial base
salary of $265,000 which may be increased at the discretion of the
Company. Dr. Resnick is also entitled to an annual bonus of up to
30% of his base salary. In connection with hiring Dr. Resnick, the
Company granted Dr. Resnick options to purchase up to 30,271 shares
of the Company’s common stock at an exercise price of
$12.95 per share and 45,406 shares of the Company’s
common stock at an exercise price of $5.48 per share under the
terms of the Amended and Restated 2014 Employee, Director and
Consultant Equity Incentive Plan.
The
Resnick Employment Agreement may be terminated upon death,
disability, with or without Cause (as defined by the Resnick
Employment Agreement) by the Company, with Good Reason (as defined
in the Resnick Employment Agreement), and upon a Change in Control
(as defined in the Employment Agreement) or at either party’s
election to terminate upon 30 days’ prior written notice. In
the event the Resnick Employment Agreement is terminated as a
result of Dr. Resnick’s death, Dr. Resnick’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 Resnick Employment Agreement is
terminated by the Company for Disability or without Cause, by Dr.
Resnick for Good Reason, or in connection with a Change in Control,
Dr. Resnick would be entitled to receive all Accrued Obligations,
full acceleration of vesting of all issued and outstanding stock
options, unpaid bonus amounts and a pro rata bonus payment,
benefits for up to one year or until Dr. Resnick obtains coverage
through subsequent employment (whichever is earlier) and severance
payments equal to Dr. Resnick’s annual base salary payable in
12 equal monthly installments.
2015 Management Bonus Plan
On
April 2, 2015, our Compensation Committee approved the 2015
Management Bonus Plan outlining maximum target bonuses of the base
salaries of certain of our executive officers. Under the
terms of the 2015 Management Bonus Plan, the Company’s Chief
Executive Officer shall receive a maximum target bonus of up to 50%
of his annual base salary, the Chief Financial Officer shall
receive a maximum target bonus of up to 35% of his annual base
salary and the Company’s Vice President shall receive a
maximum target bonus of up to 25% of his annual base salary.
On February 16, 2016, our Compensation Committee approved a 2016
Management Bonus Plan outlining maximum target bonuses of the base
salaries of certain of our executive officers. Under the terms of
the 2016 Management Plan, the Company's Chief Executive Officer
shall receive a maximum target bonus of up to 50% of his annual
base salary, and the Chief Financial Officer and each of the
Company's Vice Presidents of Discovery and Development shall
receive a maximum target bonus of up to 30% of his annual base
salary.
DIRECTOR
COMPENSATION
On
April 1, 2016, we entered into a two-year consulting agreement with
Dr. Ravetch, whereby Dr. Ravetch will provide key technology,
predevelopment, corporate development, and other consulting
services in exchange for $100,000 in cash compensation each year of
the agreement. During the year ended December 31, 2017,
non-named-executive-officer directors received the compensation
described below for their services as director.
2017 Director Compensation Table
Name of Director
|
Fees Earned or
Paid in Cash ($)
|
Option
Awards ($) (1)
|
Stock
Awards ($) (2)
|
Total ($)
|
Philip
O. Livingston, M.D. (3)
|
—
|
58,295
|
$61,674
|
$119,969
|
Robert
E. Hoffman (4)(7)
|
$8,500
|
$68,281
|
$—
|
$76,781
|
Jeffrey
Ravetch, M.D. (5)(7)(9)
|
$7,000
|
$596,478
|
$—
|
$582,906
|
Paul
V. Maier (4)(5)(6)(7)
|
$10,250
|
$88,853
|
$61,674
|
$140,205
|
Kenneth
M. Cohen (4)(5)(6)(7)
|
$9,250
|
$88,853
|
$61,674
|
$139,205
|
Tom
Varvaro (4)(5)(6)(10)
|
$7,000
|
$88,125
|
$61,674
|
$136,227
|
Jeffrey
F. Eisenberg (4)(5)(6)(8)
|
$7,000
|
$84,482
|
$61,674
|
$132,585
|
*
|
Former
director
|
(1)
|
The
amounts in this column represent the aggregate full grant date fair
values of stock options granted to each of the non-employee
directors computed in accordance with Accounting Standards
Codification 718, or ASC 718, “Compensation—Stock
Compensation,” excluding the effect of estimated forfeitures.
The amounts reported for these options may not represent the actual
economic values that the Company’s non-employee directors
will realize from these options, as the actual value realized will
depend on the Company’s performance, stock price and their
continued services.
|
(2)
|
Represents
the aggregate grant date fair value of restricted stock and
restricted stock units granted in accordance with Accounting
Standards Codification 718, or ASC 718,
“Compensation—Stock
Compensation.”
|
(3)
|
Dr.
Livingston does not receive any cash compensation as a
director. Dr. Livingston’s employee compensation in
2017 consisted of $60,000 in cash compensation. In addition to his
employee compensation, Dr. Livingston was granted 700 options on
January 1, 2017 at an exercise price of $3.38 with a grant date
fair value of $1,700 vesting over three years. Also, he was granted
24,210 restricted stock units on September 6, 2017 with a grant
date fair value of $10,895, and 75,790 restricted stock units on
October 10, 2017 with a grant date fair value of $50,779 both
restricted stock issuances will fully vest on January 8,
2018.
|
(4)
|
Mr.
Cohen, Mr. Eisenberg, Mr. Hoffman, Mr. Maier, and Mr. Varvaro were
each granted 50,000 options on May 19, 2017 at an exercise price of
$1.80 per share with a grant date fair value of $58,325 which were
fully vested upon issuance and outstanding as of December 31,
2017.
|
(5)
|
In
addition to the options granted to all non-employee directors, Mr.
Cohen, Mr. Eisenberg, Mr. Maier, Mr. Ravetch and Mr. Varvaro were
each granted 20,000 options on June12,2017 at an exercise price of
$1.57 per share with a grant date fair value of $20,572 which fully
vested upon issuance.
|
(6)
|
In
addition to the options granted to all non-employee directors, Mr.
Cohen, Mr. Eisenberg, Mr. Maier and Mr. Varvaro were each granted
24,210 restricted stock units on September 6, 2017 with a grant
date fair value of $10,895, and 75,790 restricted stock units on
October 10, 2017 with a grant date fair value of $50,779 both
restricted stock issuances will fully vest on January 8,
2018.
|
(7)
|
In
addition to the options granted to all non-employee directors, Mr.
Cohen, Mr. Hoffman, Mr. Maier and Mr. Ravetch were each granted
4,100 options on January 1, 2017 at an exercise price of $3.38 per
share with a grant date fair value of $9,956 vesting over three
years.
|
(8)
|
In
addition to the options granted to all non-employee directors, Mr.
Eisenberg was granted 2,300 options on January 1, 2017 at an
exercise price of $3.38 per share with a grant date fair value of
$5,585 vesting over three years.
|
(9)
|
In
addition to the options granted to all non-employee directors, Mr.
Ravetch was granted 500,000 options on May 19, 2017 at an exercise
price of $2.00 per share with a grant date fair value of
$565,950.
|
(10)
|
In
addition to the options granted to all non-employee directors, Mr.
Varvaro was granted 3,800 options on January 1, 2017 at an exercise
price of $3.38 per share with a grant date fair value of $9,228
vesting over three years.
|
Non-employee
director option awards and restricted stock units outstanding at
December 31, 2017 were:
Name of Director
|
Option Awards
|
Stock Awards
|
Philip
O. Livingston, M.D.
|
54,405
|
100,000
|
Robert
E. Hoffman*
|
73,792
|
1,543
|
Jeffrey
Ravetch, M.D.*
|
541,292
|
1,543
|
Paul
V. Maier
|
73,792
|
101,543
|
Kenneth
M. Cohen
|
73,792
|
101,543
|
Tom
Varvaro
|
71,689
|
101,543
|
Jeffrey
F. Eisenberg
|
66,087
|
100,000
|
*Former
Director
Amended and Restated Director Compensation Policy
In
2015, under our Non-Employee Director Compensation Policy, or the
Policy, members of the Board of Directors who are not employees of,
or compensated consultants to the Company or any of its affiliates
(an “Outside Director”), were entitled to receive
certain stock option grants.
Under
the Policy, each newly appointed or elected Outside Director was
granted a non-qualified stock option to purchase up to 1,502 shares
of our common stock on the date of his or her initial appointment
or election to our Board of Directors. These initial option grants
were fully vested on the date of the grant, and had an exercise
price equal to the fair market value of shares of our common stock
as determined in the Stock Plan on the date of grant.
Under
the Policy in 2015, our Outside Directors were entitled to receive
annual cash payments of $12,000 payable on a monthly pro-rata basis
and cash payments of $1,250 per meeting attended in person and $750
per meeting attended telephonically. On April 3, 2015, the Board
ratified the Compensation Committee’s amendment to the Policy
and implementation of the below compensation for all Outside
Directors:
●
Each
Non-employee Board member shall receive a cash retainer of $24,000
per year. Chairmen of each committee shall receive an additional
cash retainer as follows: (i) $12,000 for the Chairman of the Audit
Committee; (ii) $8,000 for the Chairman of the Compensation
Committee; and (iii) $5,000 for the Chairman of the Nominating
Committee. All such retainers will be paid on a quarterly
basis;
●
Each
current Board member received a one-time grant, and each new member
going forward shall receive an initial one-time grant of: 9,257
shares of common stock, half of which shall be comprised of
restricted stock units and half of which shall be comprised of
stock option with three-year annual vesting; and
●
Each
Non-employee Board member will also receive an automatic annual
grant of 4,780 stock options, with one year vesting.
On
April 3, 2015, the Board approved the following Non-Employee
Director Policy with respect to an incumbent non-employee member of
the Board that is replaced before their term expires:
●
A
one-time issuance of 2,703 restricted shares of common
stock;
●
The
issuance of all vested options and restricted stock grants held on
such date; and
●
The
payment of all earned but unpaid cash compensation for their
services on the Board and its committees, as of such
date.
On
February 16, 2016, the Compensation Committee of the Board of
Directors of the Company approved the following
amendments to Company's policy for compensating non-employee
members of the Board:
●
The
initial equity grant upon first appointment (or election) of future
non-employee directors to the Board shall be a 10-year option to
purchase 6,757 shares of the Company's common stock, under the
Company's Second Amended and Restated 2014 Equity Incentive Plan
with 3-year annual vesting and a strike price equal the closing
price of the Company's common stock on the effective date of the
appointment (or election);
●
The
annual cash retainer for each non-employee director, paid
quarterly, is increased by $1,000 per calendar quarter to a total
of $7,000 per quarter, effective April 1, 2016; and
●
The
additional annual cash retainer for the chairperson of each of the
Audit, Compensation, and Nominating and Governance Committees, paid
quarterly, is increased by $1,000 per calendar year, such that each
chairperson retainer shall be as follows, effective April 1, 2016:
Audit Committee: $13,000; Compensation Committee: $9,000;
Nominating and Governance Committee: $6,000
On
August 25, 2016, the Compensation Committee of the Board of
Directors of the Company approved the following amendments to
Company's policy for compensating non-employee members of the
Board:
●
The
initial equity grant upon first appointment (or election) of future
non-employee directors to the Board shall be a 10-year option to
purchase 25,000 shares of the Company's common stock, under the
Company's Second Amended and Restated 2014 Equity Incentive Plan
with 3-year annual vesting and a strike price equal the closing
price of the Company's common stock on the effective date of the
appointment (or election);
●
The
additional automatic annual option grant to each non-employee
director on the date of the Company's annual meeting shall be a
10-year option to purchase 17,500 shares of the Company's common
stock, under the Company's Second Amended and Restated 2014 Equity
Incentive Plan with 1-year vesting and a strike price equal the
closing price of the Company's common stock on the date of the
annual meeting.
On
February 6, 2017, the Compensation Committee of the Board of
Directors of the Company approved the following amendments to
Company's policy for compensating non-employee members of the
Board:
●
The
initial equity grant upon first appointment (or election) of future
non-employee directors to the Board shall be a 10-year option to
purchase 30,000 shares of the Company's Common Stock, under the
Company's Second Amended and Restated 2014 Equity Incentive Plan
with 3-year annual vesting and a strike price equal the closing
price of the Company's common stock on the effective date of the
appointment (or election);
●
The
additional automatic annual option grant to each non-employee
director on the date of the Company's annual meeting shall be a
10-year option to purchase 20,000 shares of the Company's Common
Stock, under the Company's Second Amended and Restated 2014 Equity
Incentive Plan with 1-year vesting and a strike price equal the
closing price of the Company's common stock on the date of the
annual meeting.
SECURITY OWNERSHIP
OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information known to us concerning the
beneficial ownership of our Common Stock for:
●
each
person known by us to beneficially own more than 5% of our Common
Stock;
●
each
of our directors;
●
each
of our executive officers; and
●
all
of our directors and executive officers as a group.
Beneficial
ownership is determined in accordance with the rules and
regulations of the SEC. In general, a person is deemed to be the
beneficial owner of (i) any shares of the Company’s Common
Stock over which such person has sole or shared voting power or
investment power, plus (ii) any shares which such person has the
right to acquire beneficial ownership of within 60 days of the
above date, whether through the exercise of options, warrants or
otherwise. Percentage ownership calculations for beneficial
ownership are based on 22,982,695 shares outstanding
as of January 11, 2018, adjusted as required by rules
promulgated by the SEC.
Name and Address of Beneficial Owner
|
Number of Shares of Common Stock
|
Percentage of Common Stock
|
5% Stockholders
|
|
|
None
|
|
|
Directors and Executive Officers
|
|
|
J. David Hansen (1)
|
1,235,221
|
5.23%
|
Philip O. Livingston, M.D. (2)
|
309,492
|
1.34%
|
Gregory P. Hanson CMA (3)
|
424,987
|
1.84%
|
Kenneth M. Cohen (4)
|
174,480
|
*
|
Paul W. Maffuid, Ph.D. (5)
|
368,627
|
1.60%
|
Paul V. Maier (6)
|
164,447
|
*
|
Thomas C. Varvaro (7)
|
162,169
|
*
|
Jeffrey F. Eisenberg (8)
|
153,020
|
*
|
Paul Resnick M.D. (9)
|
51,697
|
*
|
All executive officers and directors as a group (9
persons)
|
3,044,131
|
12.67%
|
(1)
|
Includes 630,100 shares subject to options exercisable within 60
days of January 11, 2018.
|
(2)
|
Consists of (i) 176,675 shares held by RTP Venture Fund, (ii)
14,885 shares held by Philip O. Livingston, (iii) 1,721 shares held
by the Joan L. Tweedy 2011 Revocable Trust, or the Tweedy Trust,
and (iv) 53,238 shares subject to options exercisable
within 60 days of January 11, 2018 held by Philip O.
Livingston. Voting and dispositive decisions of RTP Venture Fund,
LLC are made by Philip Livingston, and Philip O. Livingston is a
trustee of the Tweedy Trust. The address for RTP Venture Fund, LLC
is 156 E. 79th Street, Apt. 6C, New York, NY 10075.
|
(3)
|
Includes 53,964 shares subject to options exercisable within 60
days of January 11, 2018.
|
(4)
|
Includes (i) 60,685 shares subject to options exercisable within 60
days of January 11, 2018, and (ii) 6,238
common stock warrants purchased in the August 2016 financing
transaction.
|
(5)
|
Includes 40,785 shares subject to options exercisable within 60
days of January 11, 2018.
|
(6)
|
Includes 60,685 shares subject to options exercisable within 60
days of January 11, 2018.
|
(7)
|
Includes 59,083 shares subject to options exercisable within 60
days of January 11, 2018.
|
(8)
|
Includes 53,020 shares subject to options exercisable within 60
days of January 11, 2018.
|
(9)
|
Includes 30,293 shares subject to options exercisable within 60
days of January 11, 2018.
|
Securities Authorized for Issuance under Equity Compensation
Plans
The
following table provides certain information with respect to all of
the Company’s equity compensation plans in effect as of
December 31, 2017.
|
(a)
|
(b)
|
(c)
|
Plan Category
|
Number of
Securities
to be Issued
Upon Exercise
of Outstanding
Options,
Warrants and Rights
|
Weighted-average
Exercise
Price of
Outstanding
Options,
Warrants and Rights
|
Number of
Securities
Remaining
Available
for Future
Issuance Under
Equity
Compensation Plans
(Excluding Securities
Reflected in Column (a)
|
Equity
compensation plans approved by security holders (1)
|
2,856,092
|
$ 4.65
|
4,566,621
|
Equity
compensation plans not approved by security holders
|
—
|
N/A
|
—
|
Total
|
2,856,092
|
|
4,566,621
|
(1)
|
The information presented in this table is as of December 31,
2017 and after giving effect to the Listing Reverse
Split.
|
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We
entered into Separation and Release Agreements and are and were
parties to the employment agreements with each of our officers as
set forth in the section entitled “Executive and Director
Compensation” above. Pursuant to our Audit Committee Charter,
the Audit Committee is responsible for reviewing and approving,
prior to our entry into any such transaction, all transactions in
which we are a participant and in which any parties related to us
have or will have a direct or indirect material
interest.
Ravetch Grant
On April
3, 2015, the Board approved the issuance of an additional
restricted stock award of 17,770 shares to Jeffrey
Ravetch. This award is for future services covering at least a
one-year period. The award was granted in addition to the prior
award to Dr. Ravetch on April 2, 2015 of: (i) 4,629 restricted
shares and (ii) options to purchase 4,629 shares of common stock
with an exercise price of $17.02 per share, for a total grant
of 27,028 restricted shares and options.
Livingston Grant
On
March 23, 2015, the Board of Directors approved a restricted stock
award by the Company of 135,135 shares of common stock, to be
negotiated with Phil Livingston, Ph.D. for his continuing service
to the Company. On April 4, 2015, the Company awarded
and issued the shares to Dr. Livingston by virtue of a common stock
purchase agreement, in exchange for Dr. Livingston’s ongoing
services as a member of the Company’s Board of
Directors. On May 13, 2015, the Compensation Committee
of the Board clarified that the award is being granted in
consideration for at least one year of Dr. Livingston’s
services.
Ravetch Agreement
On
April 1, 2016, we entered into a consulting agreement with Dr.
Ravetch to provide key technology and product development, as well
as corporate development and consulting services, in addition to
his services as a Board member. The term of the
agreement is 2 years beginning January 1, 2016, and Dr. Ravetch
will receive $100,000 cash compensation per year.
Director Independence
After review of all relevant transactions or
relationships between each director and nominee for director, or
any of his or her family members, and the Company, its senior
management and its Independent Registered Public Accounting Firm,
the Board of Directors has determined that all of the
Company’s directors are independent, as of December 31,
2017 within the meaning of the applicable SEC rules
and the NASDAQ Capital Market’s listing standards, except Mr. Hansen, the Chairman
of the Board of Directors and Chief Executive Officer and President
of the Company and Dr. Livingston, Chief Science Officer of the
Company.
DESCRIPTION OF
SECURITIES
The following summary description of our capital stock is based on
the provisions of our amended and restated certificate of
incorporation, or certificate of incorporation, and amended and
restated bylaws, or bylaws, and the applicable provisions of the
Delaware General Corporation Law. This information is qualified
entirely by reference to the applicable provisions of our
certificate of incorporation, bylaws and the Delaware General
Corporation Law. Copies of our certificate of
incorporation and our bylaws, copies have been filed as exhibits to
the registration statement of which this prospectus is a
part. See “Where You Can Find More
Information.”
Authorized Capital Stock
Our
authorized capital stock consists of 150,000,000 shares of common
stock, $0.01 par value, and 15,000,000 shares of preferred stock,
$0.01 par value. As of January 11, 2018, there were
(i) 20,588,765 shares of common stock outstanding, (ii) 44,104
shares of Series D Preferred Stock outstanding that are convertible
into 596,000 shares of common stock, (iii) 33,333 shares of Series
E Preferred Stock outstanding that are convertible into 519,751
shares of common stock (iv) 798,460 shares of Series I Preferred
Stock outstanding that are convertible into 798,460 shares of
common stock, (vi) 772.73 shares of Series J Preferred Stock
outstanding that are convertible into 772,730 shares of common
stock, (vii) 63,150 shares of Series K Preferred Stock outstanding
that are convertible into 6,315,000 shares of common stock and
(viii) 58,000 shares of Series L Preferred Stock outstanding that
are convertible into 9,666,669 shares of common stock.
Common Stock
The
holders of our common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of the
stockholders and do not have cumulative voting rights. Accordingly,
holders of a majority of the shares of common stock and preferred
stock entitled to vote in any election of directors may elect all
of the directors standing for election. Subject to preferences that
may be applicable to any outstanding shares of preferred stock, the
holders of common stock are entitled to receive ratably such
dividends as may be declared by the board of directors out of funds
legally available therefor. Upon the liquidation, dissolution or
winding up of the Company, holders of our common stock are entitled
to share ratably in all assets remaining after payment of
liabilities and the liquidation preferences of any outstanding
shares of preferred stock. Holders of common stock have no
preemptive rights and no right to convert their common stock into
any other securities. Our common stock has no redemption or sinking
fund provisions. All outstanding shares of common stock are fully
paid and non-assessable.
Preferred Stock
Pursuant
to our certificate of incorporation, our board of directors has the
authority, without further action by the stockholders, to issue up
to 15,000,000 shares of preferred stock, in one or more
series. Our articles of incorporation, as amended, provide
that our Board of Directors has the authority, without further
action by the shareholders, to issue shares of preferred stock in
one or more series and to fix the rights, preferences, privileges
and restrictions granted to or imposed upon the preferred stock.
Preferred stock may be designated and issued without authorization
of shareholders unless such authorization is required by applicable
law, the rules of the NASDAQ Capital Market or other securities
exchange or market on which our stock is then listed or admitted to
trading.
Our
Board of Directors may authorize the issuance of preferred stock
with voting or conversion rights that could adversely affect the
voting power or other rights of the holders of common stock. The
issuance of preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes
could, under some circumstances, have the effect of delaying,
deferring or preventing a change in control of the
Company.
The
description of preferred stock in this prospectus and the
description of the terms of a particular series of preferred stock
in any applicable prospectus supplement are not complete. You
should refer to any applicable certificate of designation for
complete information.
All
shares of preferred stock offered hereby will, when issued, be
fully paid and nonassessable, including shares of preferred stock
issued upon the exercise of preferred stock warrants or
subscription rights, if any.
0% Series L Convertible Preferred Stock
On
October 16, 2017, we filed with the Secretary of State of the State
of Delaware a Certificate of Designation of Preferences, Rights and
Limitations of Series L Preferred Stock (the “Series L
Certificate of Designations”), and on October 18, 2017, we
filed a Certificate of Correction to the Series L Certificate of
Designations to include a sentence that was inadvertently omitted.
Pursuant to the Series L Certificate of Designations, the Company
designated 58,000shares of its blank check preferred stock as
Series L Preferred Stock. Each share of Series L Preferred Stock
has a stated value of $100 per share. In the event of a
liquidation, dissolution or winding up of the Company, each share
of Series L Preferred Stock will be entitled to a per share
preferential payment equal to the stated value. Each share of
Series L Preferred Stock is convertible into 167 shares of common
stock. The conversion ratio is subject to adjustment in the
event of stock splits, stock dividends, combination of shares and
similar recapitalization transactions. The Company is
prohibited from effecting the conversion of the Series L Preferred
Stock to the extent that, as a result of such conversion, the
holder beneficially owns more than 4.99%, in the aggregate, of the
issued and outstanding shares of the Company’s Common Stock
calculated immediately after giving effect to the issuance of
shares of Common Stock upon the conversion of the Series L
Preferred Stock. Each share of Series L Preferred Stock
entitles the holder to vote on all matters voted on by holders of
Common Stock substituting the consolidated closing bid price on
October 13, 2017 of $0.75, but not in excess of the beneficial
ownership limitations.
As
of January 11, 2018, 58,000 shares of our Series L
Preferred Stock are outstanding and convertible into 9,666,669
shares of our common stock.
0% Series K Convertible Preferred Stock
Pursuant
to a Series K Preferred Stock Certificate of Designations, on
August 14, 2017, we designated 65,000 shares of our blank check
preferred stock as Series K Preferred Stock, par value of $0.01 per
share.
The
shares of Series K Preferred Stock are convertible into shares of
common stock based on a conversion calculation equal to the stated
value of the Series K Preferred Stock divided by the conversion
price. The stated value of each share of Series K Preferred Stock
is $0.01 and the initial conversion price is $0.0001 per share,
each subject to adjustment for stock splits, stock dividends,
recapitalizations, combinations, subdivisions or other similar
events.
The
holders of Series K Preferred Stock will be entitled to receive
dividends if and when declared by our board of directors. The
Series K Preferred Stock shall participate on an “as
converted” basis, with all dividends declared on our common
stock. In addition, if we grant, issue or sell any
rights to purchase our securities pro rata to all our record
holders of our common stock, each holder will be entitled to
acquire such securities applicable to the granted purchase rights
as if the holder had held the number of shares of common stock
acquirable upon complete conversion of all Series K Preferred Stock
then held.
We are prohibited from effecting any conversion of
the Series K Preferred Stock if the Company has not obtained
shareholder approval for the full conversion of the Series J
Preferred Stock and Series K Preferred Stock in accordance with the
rules of the NASDAQ Capital Market or to the extent that, as a result of such
conversion, the holder would beneficially own more than 4.99% of
the number of shares of common stock outstanding immediately after
giving effect to the issuance of shares of common stock upon
conversion of the Series K Preferred Stock, which beneficial
ownership limitation may be increased by the holder up to, but not
exceeding, 9.99%. Each holder is entitled to vote on all matters
submitted to stockholders of the Company, and shall have the number
of votes equal to the number of shares of common stock issuable
upon conversion of such holder’s Series K Preferred
Stock, substituting the consolidated closing bid price of the
common stock on August 10, 2017 for the then-applicable conversion
price, and not in excess of the beneficial ownership
limitations.
As
of January 11, 2018, 63,150 shares of our Series K
Preferred Stock are outstanding and convertible into 6,315,000
shares of our common stock.
0% Series J Convertible Preferred Stock
Pursuant
to a Series J Preferred Stock Certificate of Designations, on
August 14, 2017, we designated 3,400 shares of our blank check
preferred stock as Series I Preferred Stock, par value of $0.01 per
share.
The
shares of Series J Preferred Stock are convertible into shares of
common stock based on a conversion calculation equal to the stated
value of the Series J Preferred Stock, plus the base amount, if
any, on such Series J Preferred Stock, as of such date of
determination, divided by the conversion price. The stated value of
each share of Series J Preferred Stock is $550 and the initial
conversion price is $0.55 per share, each subject to adjustment for
stock splits, stock dividends, recapitalizations, combinations,
subdivisions or other similar events.
In the event of a liquidation, dissolution or
winding up of the Company, each share of Series J Preferred Stock
will be entitled to a per share preferential payment equal to $0.17
per share, based on the shares of common stock outstanding after
this offering including the shares underlying the Series J
Preferred Stock, subject to adjustment for stock splits, stock
dividends, recapitalizations, combinations, subdivisions or other
similar events, or an aggregate of $2.3
million. All shares of our
capital stock, other than the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock, Series F Preferred Stock, Series G
Preferred Stock, Series H Preferred Stock and Series I Preferred
Stock, will be junior in rank
to Series J Preferred Stock with respect to the preferences as to
dividends, distributions and payments upon the liquidation,
dissolution and winding-up of the Company. The holders of Series J Preferred Stock will
be entitled to receive dividends if and when declared by our board
of directors. The Series J Preferred Stock shall participate on an
“as converted” basis, with all dividends declared on
our common stock. In addition, if we grant, issue or
sell any rights to purchase our securities pro rata to all our
record holders of our common stock, each holder will be entitled to
acquire such securities applicable to the granted purchase rights
as if the holder had held the number of shares of common stock
acquirable upon complete conversion of all Series J Preferred Stock
then held.
Except
as otherwise expressly required by law, each holder of Series J
Preferred Stock shall be entitled to vote on all matters submitted
to shareholders of the Company and shall be entitled to the number
of votes for each Preferred Share owned at the record date for the
determination of shareholders entitled to vote on such matter or,
if no such record date is established, at the date such vote is
taken or any written consent of shareholders is solicited, equal to
the number of shares of common stock such Series J Preferred Stock
are convertible into (voting as a class with common stock)
substituting the consolidated closing bid price on the date prior
to execution of the Purchase Agreement for the conversion rate of
$0.55, but not in excess of the conversion limitations set forth in
the Series J Preferred Stock certificate of designation. Except as
otherwise required by law, the holders of Series J Preferred Stock
shall vote together with the holders of common stock on all matters
and shall not vote as a separate
class.
We
are prohibited from effecting a conversion of the Series J
Preferred Stock to the extent that, as a result of such conversion,
the holder would beneficially own more than 4.99% of the number of
shares of common stock outstanding immediately after giving effect
to the issuance of shares of common stock upon conversion of the
Series J Preferred Stock, which beneficial ownership limitation may
be increased by the holder up to, but not exceeding, 9.99%. Each
holder is entitled to vote on all matters submitted to stockholders
of the Company, and shall have the number of votes equal to the
number of shares of common stock issuable upon conversion of such
holder’s Series J Preferred Stock, but not in excess of the
beneficial ownership limitations.
As
of January 11, 2018, 772.73 shares of our Series J
Preferred Stock are outstanding and convertible into 772.730 shares
of our common stock.
0% Series I Convertible Preferred Stock
Pursuant
to a Series I Preferred Stock Certificate of Designations, on May
26, 2017, we designated 1,968,664 shares of our blank check
preferred stock as Series I Preferred Stock, par value of $0.01 per
share.
Each
share of Series I Preferred Stock has a stated value of $0.01 per
share. In the event of a liquidation, dissolution or winding
up of the Company, each share of Series I Preferred Stock will be
entitled to a per share preferential payment equal to the stated
value. Each share of Series I Preferred Stock is convertible into
one share of common stock. The conversion ratio is subject to
adjustment in the event of stock splits, stock dividends,
combination of shares and similar recapitalization
transactions. The Company is prohibited from effecting the
conversion of the Series I Preferred Stock to the extent that, as a
result of such conversion, the holder beneficially owns more than
4.99%, in the aggregate, of the issued and outstanding shares of
the Company’s Common Stock calculated immediately after
giving effect to the issuance of shares of Common Stock upon the
conversion of the Series I Preferred Stock (the “Beneficial
Ownership Limitation”), which beneficial ownership limitation
may be increased by the holder up to, but not exceeding,
9.99%. Each share of Series I Preferred Stock entitles the
holder to vote on all matters voted on by holders of Common Stock.
With respect to any such vote, each share of Series I Preferred
Stock entitles the holder to cast such number of votes equal to the
number of shares of Common Stock such shares of Series I Preferred
Stock are convertible into at such time, but not in excess of the
Beneficial Ownership Limitation.
As
of January 11, 2018, 798,460 shares of our Series I
Preferred Stock are outstanding and convertible into 798,460 shares
of our common stock.
0% Series H Convertible Preferred Stock, 0% Series G Convertible
Preferred Stock and 0% Series F Convertible Preferred
Stock
On December 21,
2017, following the completion of the exchange of our Series L
Preferred Stock for all outstanding Series F Preferred Stock,
Series G Preferred Stock and Series H Preferred Stock, we filed
with the Secretary of State of the State of Delaware a Certificate
of Elimination eliminating from our Amended and Restated
Certificate of Incorporation the designation of shares of its
preferred stock as Series F Preferred Stock, Series G Preferred
Stock and Series H Preferred Stock. As a result, all shares of
preferred stock previously designated as Series F, Series G and
Series H Preferred Stock were eliminated and returned to the status
of authorized but unissued shares of preferred stock, without
designation.
0% Series E Convertible Preferred Stock
On
March 30, 2015, we filed a Certificate of Designations,
Preferences and Rights of the 0% Series E Convertible Preferred
Stock with the Delaware Secretary of State, designating one hundred
thousand shares of preferred stock as Series E Preferred Stock, par
value of $0.01 per share.
Each share of Series E Preferred Stock is
convertible into shares of common stock based on a conversion
calculation equal to the stated value of the of such Series E
Preferred Stock, plus all accrued and unpaid dividends, if any, on
such Series E Preferred Stock, as of such date of determination,
divided by the conversion price. The stated value of each share of
Series E Preferred Stock is $75 and the initial conversion price is
$5.55 per share, each subject to adjustment for stock splits,
stock dividends, recapitalizations, combinations, subdivisions or
other similar events. In addition, during the period proscribed by
the certificate of designations, subject to certain exceptions, in
the event the Company issues or sells, or is deemed to issue or
sell, shares of common stock at a per share price that is less than
the conversion price then in effect, the conversion price shall be
reduced to such lower price. On August 16, 2016, we revised
the conversion price to $4.81 per share as a result of entering
into an underwriting agreement at $4.81 per share on the date. As a
result of listing on the NASDAQ Capital Market on August 17, 2016, the provision for price
adjustment is no longer in effect.
In
the event of a liquidation, dissolution or winding up of the
Company, each share of Series E Preferred Stock will be entitled to
a per share preferential payment equal to the par value. All
shares our capital stock will be junior in rank to Series F
Preferred Stock with respect to the preferences as to dividends,
distributions and payments upon the liquidation, dissolution and
winding-up of the Company, except for the Company’s Series D
Preferred Stock and Series G Preferred Stock through Series I
Preferred Stock. The holders of Series E Preferred Stock will
be entitled to receive dividends if and when declared by our board
of directors. The Series E Preferred Stock shall participate on an
“as converted” basis, with all dividends declared on
our common stock. In addition, if we grant, issue or
sell any rights to purchase our securities pro rata to all our
record holders of our common stock, each holder will be entitled to
acquire such securities applicable to the granted purchase rights
as if the holder had held the number of shares of common stock
acquirable upon complete conversion of all Series E Preferred Stock
then held.
We
are prohibited from effecting a conversion of the Series E
Preferred Stock to the extent that, as a result of such conversion,
the holder would beneficially own more than 4.99% of the number of
shares of common stock outstanding immediately after giving effect
to the issuance of shares of common stock upon conversion of the
Series E Preferred Stock, which beneficial ownership limitation may
be increased by the holder up to, but not exceeding, 9.99%. Each
holder is entitled to vote on all matters submitted to stockholders
of the Company, and shall have the number of votes equal to the
number of shares of common stock issuable upon conversion of such
holder’s Series E Preferred Stock, but not in excess of the
beneficial ownership limitations. The Series E Preferred Stock bear
no interest.
As
of April 10, 2015, we entered into separate subscription
agreements with accredited investors relating to the issuance and
sale of $11,714,498 of units at a purchase price of
$5.55 per unit, with each unit consisting of one share
of common stock (or, at the election of any investor
who, as a result of receiving common stock would hold in excess of
4.99% of our issued and outstanding common stock, shares of our
newly designated Series E Preferred Stock) and a thirty month
warrant to purchase one half of one share of common stock at an
initial exercise price of $11.10 per share. In connection with the
above described offering we issued $2,500,000 of units consisting
of Series E Preferred Stock on April 10, 2015.
We
have also granted each investor, prior to the expiration of 24
months following the final closing date of the offering, a right of
participation in our financings. In the event we conduct certain
private or public offerings of our securities, each investor has
agreed, if requested by the underwriter or placement agent so
engaged by us in connection with such offering, to refrain from
selling any of our securities for a period of up to 60
days.
On
April 14, 2015, as a condition to participation by OPKO Health,
Inc., or OPKO, and Frost Gamma Investments Trust, or FGIT, in the
offering, we entered into an Escrow Deposit Agreement with
Signature Bank N.A. and OPKO pursuant to which the subscriptions of
OPKO and FGIT, totaling, $3.5 million, were deposited into and held
at Signature Bank as escrowed funds for a period of 10 weeks, to be
released subject to the approval of OPKO. On June 22,
2015, the term of the escrow was extended to 16
weeks. As further consideration for the amendment, on
June 30, 2015, we entered into a letter agreement with OPKO
pursuant to which we granted OPKO the right, but not the
obligation, until June 30, 2016, to nominate and appoint up to two
additional members to our Board of Directors, or to approve the
person(s) nominated by us pursuant to the agreement in
consideration for the release of the escrowed funds. The nominees
will be subject to the satisfaction of standard corporate
governance practices and any applicable national securities
exchange requirements. Upon signing the agreement, the
escrowed funds were released to us.
As
of January 11, 2018, 33,333 shares of our Series E
Preferred Stock are outstanding and convertible into 519,751 shares
of our common stock.
0% Series D Convertible Preferred Stock
On
March 25, 2015, we filed a Certificate of Designations,
Preferences and Rights of the 0% Series D Convertible Preferred
Stock with the Delaware Secretary of State, designating 1,000,000
shares of our blank check preferred stock as Series D Preferred
Stock, par value of $0.01 per share.
Each
share of Series D Preferred Stock has a stated value of $0.01 per
share. In the event of a liquidation, dissolution or winding up of
our company, each share of Series D Preferred Stock will be
entitled to a per share preferential payment equal to the stated
value. Each share of Series D Preferred Stock is convertible
into 13.51 shares of common stock. The conversion ratio is
subject to adjustment in the event of stock splits, stock
dividends, combination of shares and similar recapitalization
transactions. We are prohibited from effecting the conversion of
the Series D Preferred Stock to the extent that, as a result of
such conversion, the holder beneficially owns more than 4.99%
(provided that certain investors elected to block their beneficial
ownership initially at 2.49%, in the aggregate, of the issued and
outstanding shares of our common stock calculated immediately after
giving effect to the issuance of shares of common stock upon the
conversion of the Series D Preferred Stock, which beneficial
ownership limitation may be increased by the holder up to, but not
exceeding, 9.99%. Each share of Series D Preferred Stock entitles
the holder to vote on all matters voted on by holders of common
stock. With respect to any such vote, each share of Series D
Preferred Stock entitles the holder to cast such number of votes
equal to the number of shares of common stock such shares of Series
D Preferred Stock are convertible into at such time, but not in
excess of the beneficial ownership limitation.
On
March 25, 2015, we entered into separate exchange agreements with
certain holders of our then outstanding Series A-1 Preferred Stock
and A-1 Warrants and holders of our Series B Preferred Stock and
Series B Warrants, all previously issued by us. Pursuant to the
exchange agreements, the holders exchanged such securities and
relinquished any and all other rights they may in connection
therewith, their respective governing agreements and certificates
of designation, including any related registration rights, in
exchange for an aggregate of 342,906 shares of our common stock,
and an aggregate of 238,156 shares of our newly designated Series D
Preferred Stock.
As
of January 11, 2018, 44,104 shares of our Series D
Preferred Stock are outstanding and convertible into 596,000 shares
of our common stock.
Stock Options and Restricted Stock Units under Equity
Plans
As
of January 11, 2018, there were 10,128,406 shares of
common stock reserved for issuance under our stock option and
equity plans. Of this number, 2,756,092 shares are reserved
for issuance upon exercise of outstanding options and 2,704,862
restricted stock units that have been granted, net of forfeitures,
under our equity plans, and 4,667,452 shares may be granted in
the future under our equity plans.
Anti-Takeover Effects of Provisions of Delaware Law and Our Charter
Documents.
Delaware Takeover
Statute. We are subject to the
provisions of Section 203 of the Delaware General Corporation
Law, or the DGCL. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a business combination with
an interested stockholder for a period of three years after the
date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a
prescribed manner. For purposes of Section 203, a business
combination includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder, and
an interested stockholder is a person who, together with affiliates
and associates, owns (or within three years prior, did own) 15% or
more of the corporation’s voting stock.
Charter
Documents. Our certificate of
incorporation requires that any action required or permitted to be
taken by its stockholders must be effected at a duly called annual
or special meeting of stockholders and may not be effected by a
consent in writing. Additionally, our amended and restated
certificate of incorporation:
●
substantially
limits the use of cumulative voting in the election of
directors;
●
provides
for a board of directors, classified into three classes of
directors;
●
provides
that the authorized number of directors may be changed only by
resolution of our board of directors;
●
our
board of directors may appoint new directors to fill vacancies or
newly created directorships; and
●
authorizes our board of directors to issue blank check
preferred stock to increase the amount of outstanding
shares.
Our
bylaws provide that candidates for director may be nominated only
by our board of directors or by a stockholder who gives written
notice to us no later than 90 days prior to nor earlier than
120 days prior to the first anniversary of the last annual
meeting of stockholders, provided, however, that in the event that
the date of the annual meeting is advanced more than 30 days
prior to or delayed by more than 30 days after the anniversary
of the preceding year’s annual meeting, notice should be
delivered not earlier than 120 days prior to the annual
meeting nor later than the later of 90 days prior to such
annual meeting or 10 days after the first public announcement
of the date of such annual meeting. Our bylaws also limit who may
call a special meeting of stockholders.
Delaware
law and these charter provisions may have the effect of deterring
hostile takeovers or delaying changes in control of our management,
which could depress the market price of our common
stock.
Listing
Our common
stock is listed on the NASDAQ Capital Market under the symbol
“MBVX.” On December 8¸ 2017, the last reported bid
price for our common stock on the NASDAQ Capital Market was $0.92
per share. As of January 11, 2018, we had
approximately 97 stockholders of record.
Transfer Agent and Registrar
The
transfer agent and registrar for our common stock is Computershare
Trust Company, N.A. Its address is 250 Royall Street, Canton, MA
02021 and its telephone number is (800) 884-4225.
PLAN OF
DISTRIBUTION
We are
offering up to 2,551,020 shares of our common stock on
a self-underwritten “best efforts” basis for
aggregate gross proceeds of up to $2,500,000 at an estimated price
of $0.98 per share, to be issued in one or more
closings. There can be no assurance that the offering will be fully
subscribed. Accordingly, we may sell substantially less than
$2,500,000 of our shares of common stock, in which case our gross
proceeds would be substantially reduced.
We
expect to enter into securities purchase or subscription agreements
directly with investors in connection with this offering, and we
will only sell to investors who have entered into such agreement
with us.
This
prospectus forms a part of a registration statement that permits
our officers and directors to sell the shares directly to the
public, with no commission or other remuneration payable to them
for any shares they sell. There are no plans or arrangements to
enter into any contracts or agreements to sell the shares with a
broker or dealer. In offering the securities on our behalf, our
officers and directors will rely on the safe harbor from
broker/dealer registration set out in Rule 3a4-1 under the Exchange
Act, which sets forth those conditions under which a person
associated with an issuer may participate in the offering of the
issuer’s securities and not be deemed to be a
broker/dealer.
There
is no requirement to sell any specific number or dollar amount of
securities and we may raise substantially less than the $2,500,000
in common stock offered hereby. Our officers will use their best
efforts to sell the securities offered. We will pay all expenses
incurred in this offering.
The
assumed number of shares offered hereby as reflected in this
prospectus is based on the last reported sale price of our common
stock on January 11, 2018. However, this final
public offering price will be a negotiated price and the final
number of shares offered hereby will be based on such negotiated
offering price.
The
offering will close on _______, 2018, 90 days after the
effectiveness of the registration statement of which this
prospectus is a part, unless all the securities are sold before
that date, we extend the offering another 90 days or we otherwise
decide to close the offering early or cancel it, in each case in
our sole discretion. If we extend the offering, we will provide
that information in an amendment to this prospectus. If we close
the offering early or cancel it, including during any extended
offering period, we may do so without notice to investors, although
if we cancel the offering we will promptly return any funds
investors may already have paid.
There
is no minimum number of shares that we must sell in this offering.
Because there is no minimum offering amount required as a condition
to closing in this offering, the actual public offering amount and
proceeds to us, if any, are not presently determinable and may be
substantially less than all of the securities offered
hereby. As a result, the actual amount of gross proceeds from
the sale of shares, if any, might not be sufficient to cover the
expenses of the offering. Funds raised pursuant to this offering
will not be held in any escrow account and all funds raised
regardless of the amount will be available to us. In the event that
we do not raise sufficient capital to implement our planned
operations, your entire investment could be lost.
We
estimate the total offering expenses of this offering that will be
payable by us will be approximately $185,000, which includes legal,
auditor, and printing costs, and various other fees.
Listing
Our
common stock is listed on the NASDAQ
Capital Market under the symbol “MBVX.”
Electronic
Distribution
This
prospectus may be made available in electronic format on websites.
Other than this prospectus in electronic format, the information on
any website and any information contained in any other website is
not part of this prospectus or the registration statement of which
this prospectus forms a part, has not been approved and/or endorsed
by us, and should not be relied upon by
The
foregoing does not purport to be a complete statement of the terms
and conditions of the securities purchase agreements, copies of
which are included as exhibits to the registration statement of
which this prospectus forms a part.
Transfer Agent
The
transfer agent for our common stock is Computershare, 8742 Lucent
Blvd., Suite 225, Highlands Ranch, CO 80129,
303-601-4860
LEGAL
MATTERS
The
validity of the securities being offered by this prospectus has
been passed upon for us by Sichenzia Ross Ference Kesner LLP, New
York, New York.
EXPERTS
The
consolidated financial statements of MabVax Therapeutics Holdings,
Inc. as of December 31, 2016 and 2015, and for the years then ended
included in this registration statement have been so included in
reliance on the report of CohnReznick LLP, an independent
registered public accounting firm, which included an explanatory
paragraph about MabVax Therapeutics Holdings, Inc.’s ability
to continue as a going concern, given on the authority of the said
firm as experts in auditing and accounting.
WHERE YOU CAN
FIND MORE
INFORMATION
We have filed with the SEC a registration
statement on Form S-1 under the Securities Act with respect to the
securities offered hereby. This prospectus, which constitutes a
part of the registration statement, does not contain all of the
information set forth in the registration statement or the exhibits
filed with the registration statement. For further information
about us and the securities offered hereby, we refer you to the
registration statement and the exhibits filed with the registration
statement. Statements contained in this prospectus regarding the
contents of any contract or any other document that is filed as an
exhibit to the registration statement are not necessarily complete,
and each such statement is qualified in all respects by reference
to the full text of such contract or other document filed as an
exhibit to the registration statement. A copy of the registration
statement and the filed exhibits may be inspected without charge at
the public reference room maintained by the SEC, located at 100 F
Street, NE, Washington, DC 20549, and copies of all or any part of
the registration statement may be obtained from that office at
prescribed rates. Please call the SEC at 1-800-SEC-0330 for further
information about the public reference room. The SEC also maintains
a website that contains reports, proxy and information statements
and other information regarding registrants that file
electronically with the SEC. The address of the website is
www.sec.gov.
We
are subject to the information and reporting requirements of the
Exchange Act and, in accordance with this law, are required to file
periodic reports, proxy statements and other information with the
SEC. These periodic reports, proxy statements and other information
are available for inspection and copying at the SEC’s public
reference facilities and the website of the SEC referenced above.
We make available free of charge, on or through the investor
relations section of our website, annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange Act as soon as reasonably
practicable after we electronically file such material with, or
furnish it to, the SEC. The information found on our website is not
part of this prospectus.
INDEX TO FINANCIAL
STATEMENTS
|
|
|
|
|
F-1
|
|
|
|
|
|
|
|
F-2
|
|
|
|
|
|
|
|
F-3
|
|
|
|
|
|
|
|
F-4
|
|
|
|
|
|
|
|
F-5
|
|
|
|
|
|
F-32
|
|
|
|
|
|
|
|
F-33
|
|
|
|
|
|
|
|
F-34
|
|
|
|
|
|
|
|
F-35
|
|
|
|
|
|
|
|
F-39
|
|
|
|
|
|
|
|
F-40
|
|
-76-
MABVAX
THERAPEUTICS HOLDINGS,
INC.
|
September
30,
|
December
31,
|
|
2017
|
2016
|
|
(Unaudited)
|
(Note
1)
|
Assets
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$3,052,778
|
$3,979,290
|
Prepaid
expenses
|
303,543
|
281,858
|
Other current
assets
|
118,454
|
32,830
|
Total current
assets
|
3,474,775
|
4,293,978
|
Property and
equipment, net
|
619,208
|
731,712
|
Goodwill
|
6,826,003
|
6,826,003
|
Other long-term
assets
|
178,597
|
168,597
|
Total
assets
|
$11,098,583
|
$12,020,290
|
Liabilities
and Stockholders' Equity
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$1,550,113
|
$1,137,903
|
Accrued
compensation
|
742,285
|
770,592
|
Accrued clinical
operations and site costs
|
1,502,505
|
1,218,641
|
Accrued lease
contingency fee
|
590,504
|
590,504
|
Other accrued
expenses
|
255,098
|
315,034
|
Interest
payable
|
42,029
|
51,295
|
Current portion of
notes payable
|
1,693,065
|
1,589,661
|
Current portion of
capital leases payable
|
17,447
|
17,004
|
Total current
liabilities
|
6,393,046
|
5,690,634
|
Long-term
liabilities:
|
|
|
Long-term portion
of notes payable, net
|
1,957,657
|
2,774,627
|
Long-term portion
of capital lease payable
|
50,448
|
68,113
|
Other long-term
liabilities
|
177,016
|
144,394
|
Total long-term
liabilities
|
2,185,121
|
2,987,134
|
Total
liabilities
|
8,578,167
|
8,677,768
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
Series D
convertible preferred stock, $0.01 par value, 1,000,000 shares
authorized,
44,104 and 132,489
shares issued and outstanding with a liquidation preference
of
$441 and $1,325 as
of September 30, 2017, and December 31, 2016,
respectively
|
441
|
1,325
|
Series E
convertible preferred stock, $0.01 par value, 100,000 shares
authorized,
33,333 shares
issued and outstanding with a liquidation preference of
$333
|
333
|
333
|
Series F
convertible preferred stock, $0.01 par value, 1,559,252 shares
authorized,
665,281 shares
issued and outstanding with a liquidation preference of
$6,653
|
6,653
|
6,653
|
Series G
convertible preferred stock, $0.01 par value, 5,000,000 shares
authorized,
1,000,000 and 0
issued and outstanding with a liquidation preference of $10,000 and
$0
as of September 30,
2017, and December 31, 2016, respectively
|
10,000
|
—
|
Series H
convertible preferred stock, $0.01 par value, 2,000 shares
authorized,
850 and 0 shares
issued and outstanding with a liquidation preference of $850,000
and $0
as of September 30,
2017, and December 31, 2016, respectively
|
9
|
—
|
Series I
convertible preferred stock, $0.01 par value, 1,968,664 shares
authorized,
1,048,460 and 0
issued and outstanding with a liquidation preference of $10,485 and
$0
as of September 30,
2017, and December 31, 2016, respectively
|
10,485
|
—
|
Series J
convertible preferred stock, $0.01 par value, 3,400 shares
authorized,
818.18 and 0 shares
issued and outstanding with a liquidation preference
of
$562,500 and $0 as
of September 30, 2017, and December 31, 2016,
respectively
|
8
|
—
|
Series K
convertible preferred stock, $0.01 par value, 65,000 shares
authorized,
65,000 and 0 shares
issued and outstanding with a liquidation preference
of
$650 and $0 as of
September 30, 2017, and December 31, 2016,
respectively
|
650
|
—
|
Common stock, $0.01
par value; 150,000,000 shares authorized,
18,924,085 and
6,296,110 shares issued and outstanding as of September 30,
2017,
and December 31,
2016, respectively
|
189,241
|
62,961
|
Additional paid-in
capital
|
103,349,153
|
81,533,511
|
Accumulated
deficit
|
(101,046,557)
|
(78,262,261)
|
Total stockholders'
equity
|
2,520,416
|
3,342,522
|
Total liabilities
and stockholders' equity
|
$11,098,583
|
$12,020,290
|
See Accompanying
Notes to Condensed Consolidated Financial Statements
MABVAX
THERAPEUTICS HOLDINGS,
INC.
Condensed
Consolidated Statements of Operations
(Unaudited)
|
Three
Months Ended
|
Nine
Months Ended
|
||
|
September
30,
|
September
30,
|
||
|
2017
|
2016
|
2017
|
2016
|
Revenues:
|
|
|
|
|
Grants
|
$—
|
$—
|
$—
|
$148,054
|
Total
revenues
|
—
|
—
|
—
|
148,054
|
|
|
|
|
|
Operating costs and
expenses:
|
|
|
|
|
Research
and development
|
1,017,061
|
1,671,181
|
6,168,125
|
4,967,695
|
General
and administrative
|
1,831,629
|
2,420,516
|
7,513,621
|
7,001,521
|
Total operating
costs and expenses
|
2,848,690
|
4,091,697
|
13,681,746
|
11,969,216
|
Loss from
operations
|
(2,848,690)
|
(4,091,697)
|
(13,681,746)
|
(11,821,162)
|
Interest and other
expense
|
(231,471)
|
(266,051)
|
(743,137)
|
(729,331)
|
Net
loss
|
(3,080,161)
|
(4,357,748)
|
(14,424,883)
|
(12,550,493)
|
Deemed dividend on
inducement shares
|
—
|
—
|
(5,220,000)
|
—
|
Deemed dividend on
incentive shares
|
(3,120,000)
|
—
|
(3,120,000)
|
—
|
Deemed dividend on
warrant reprice
|
—
|
—
|
(19,413)
|
—
|
Net loss allocable
to common stockholders
|
$(6,200,161)
|
$(4,357,748)
|
$(22,784,296)
|
$(12,550,493)
|
Basic and diluted
net loss per share
|
$(0.54)
|
$(0.86)
|
$(2.68)
|
$(2.87)
|
Shares used to
calculate basic and diluted net loss per share
|
11,490,839
|
5,041,408
|
8,504,076
|
4,374,801
|
See Accompanying
Notes to Condensed Consolidated Financial Statements
MABVAX THERAPEUTICS HOLDINGS, INC.
Condensed
Consolidated Statement of Stockholders’ Equity
For
the Nine Months Ended September 30, 2017
(Unaudited)
|
Series D thru K Convertible
Preferred Stock
|
Common Stock
|
Additional
Paid-in
|
Accumulated
|
Total
Stockholders'
|
||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
831,103
|
$8,311
|
6,296,110
|
$62,961
|
$81,533,511
|
$(78,262,261)
|
$3,342,522
|
|
|
|
|
|
|
|
|
Private
placement, net of costs, May 2017
|
850
|
9
|
—
|
—
|
820,562
|
—
|
820,571
|
Underwritten
offering, net of costs, May 2017
|
1,000,000
|
10,000
|
1,342,858
|
13,429
|
3,623,962
|
—
|
3,647,391
|
Private
placement, net of costs, August 2017
|
—
|
—
|
152,143
|
1,521
|
123,479
|
—
|
125,000
|
Underwritten
offering, net of costs, August 2017
|
2,386
|
24
|
—
|
—
|
1,189,393
|
—
|
1,189,417
|
Registered
Direct offering, net of costs, September 2017
|
—
|
—
|
4,000,000
|
40,000
|
1,812,361
|
—
|
1,852,361
|
Registered
Direct offering, net of costs, September 2017
|
—
|
—
|
2,016,129
|
20,162
|
1,194,838
|
—
|
1,215,000
|
Issuance
of inducement shares, May 2017
|
1,968,664
|
19,687
|
931,336
|
9,313
|
(29,000)
|
—
|
—
|
Deemed
dividends on inducement shares, May 2017
|
—
|
—
|
—
|
—
|
5,220,000
|
(5,220,000)
|
—
|
Deemed
dividends on incentive shares, August 2017
|
65,000
|
650
|
—
|
—
|
3,119,350
|
(3,120,000)
|
—
|
Repricing
of warrants
|
—
|
—
|
—
|
—
|
19,413
|
(19,413)
|
—
|
Stock
issued for services
|
—
|
—
|
400,000
|
4,000
|
232,666
|
—
|
236,666
|
Preferred
stock conversions – Series D
|
(88,385)
|
(884)
|
1,194,391
|
11,944
|
(11,060)
|
—
|
—
|
Preferred stock conversions – Series
I
|
(920,204)
|
(9,202)
|
920,204
|
9,202
|
—
|
—
|
—
|
Preferred
stock conversions – Series J
|
(1,568)
|
(16)
|
1,568,171
|
15,682
|
(15,666)
|
—
|
—
|
Stock
issued upon vesting of RSUs
|
—
|
—
|
102,743
|
1,027
|
(1,027)
|
—
|
—
|
Stock-based
compensation
|
—
|
—
|
—
|
—
|
4,516,371
|
—
|
4,516,371
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(14,424,883)
|
(14,424,883)
|
Balance at September 30, 2017
|
2,857,846
|
$28,579
|
18,924,085
|
$189,241
|
$103,349,153
|
$(101,046,557)
|
$2,520,416
|
See Accompanying
Notes to Condensed Consolidated Financial Statements
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
For
the Nine
Months
Ended September 30,
|
|
|
2017
|
2016
|
Operating
activities
|
|
|
Net
loss
|
$(14,424,883)
|
$(12,550,493)
|
Adjustments to
reconcile net loss to net cash used in operating activities:
|
|
|
Depreciation and
amortization
|
122,315
|
60,058
|
Stock-based
compensation
|
4,516,372
|
3,459,992
|
Issuance of
restricted common stock for services
|
236,666
|
164,000
|
Amortization and
accretion related to notes payable
|
309,213
|
337,151
|
Increase (decrease)
in operating assets and liabilities:
|
|
|
Grants
receivable
|
—
|
757,562
|
Other
receivables
|
(7,061)
|
—
|
Prepaid expenses
and other
|
(62,672)
|
122,522
|
Accounts
payable
|
403,210
|
(2,476,130)
|
Accrued clinical
operations and site costs
|
283,864
|
275,105
|
Accrued
compensation
|
(28,307)
|
77,437
|
Other accrued
expenses
|
(51,649)
|
150,487
|
Net cash used in
operating activities
|
(8,702,932)
|
(9,622,309)
|
Investing
activities
|
|
|
Purchases of
property and equipment
|
(21,072)
|
(412,498)
|
Net cash used in
investing activities
|
(21,072)
|
(412,498)
|
Financing
activities
|
|
|
Cash receipt from
bank loan, net of financing costs
|
—
|
4,610,324
|
Private placement,
net of issuance costs (May 3, 2017)
|
820,571
|
—
|
Underwritten
offering, net of issuance costs (May 19, 2017)
|
3,647,391
|
8,572,343
|
Private placement,
net of issuance costs (July 27, 2017)
|
125,000
|
—
|
Underwritten
offering, net of issuance costs (August 11, 2017)
|
1,189,417
|
—
|
Registered direct
offering, net of issuance costs (September 14, 2017)
|
1,852,361
|
—
|
Registered direct
offering, net of issuance costs (September 22, 2017)
|
1,215,000
|
—
|
Principal payments
on bank loan
|
(972,223)
|
—
|
Principal payments
on financed insurance policies
|
(69,240)
|
(106,405)
|
Principal payments
on capital lease
|
(10,785)
|
(6,504)
|
Purchase of vested
employee stock in connection with tax withholding
obligation
|
—
|
(177,823)
|
Net cash provided
by financing activities
|
7,797,492
|
12,891,935
|
Net change in cash
and cash equivalents
|
(926,512)
|
2,857,128
|
Cash and cash
equivalents at beginning of period
|
3,979,290
|
4,084,085
|
Cash and cash
equivalents at end of period
|
$3,052,778
|
$6,941,213
|
|
|
|
Supplemental
disclosures:
|
|
|
Cash paid during
the period for income taxes
|
$1,600
|
$1,600
|
Cash paid during
the period for interest on term note
|
$443,495
|
$379,560
|
Supplemental
disclosures of non-cash investing and financing
information:
|
|
|
Purchase of
equipment in accounts payable
|
$—
|
$82,006
|
Fair value of
warrants issued
|
$—
|
$607,338
|
Fair value of
repricing of warrants issued in previous financing
|
$19,413
|
$—
|
Conversion of
Series D preferred stock to common stock
|
$11,944
|
$7,974
|
Conversion of
Series I preferred stock to common stock
|
$9,202
|
$—
|
Conversion of
Series J preferred stock to common stock
|
$15,682
|
$—
|
Deemed dividends on
inducement shares
|
$5,220,000
|
$—
|
Deemed dividends on
incentive shares
|
$3,120,000
|
$—
|
Capital lease in
connection with purchase of equipment
|
$—
|
$95,656
|
Financing
transaction costs not yet paid
|
$52,317
|
$2,500
|
See Accompanying
Notes to Condensed Consolidated Financial Statements
MABVAX THERAPEUTICS
HOLDINGS, INC.
Notes
to Unaudited Condensed Consolidated Financial
Statements
1.
Basis of Presentation
We
are a Delaware corporation, originally incorporated in 1988 under
the name Terrapin Diagnostics, Inc. in the State of Delaware, and
subsequently renamed “Telik, Inc.” in 1998, and
thereafter renamed MabVax Therapeutics Holdings, Inc.
(“MabVax”) in September 2014. Our principal corporate
office is located at 11535 Sorrento Valley Road, Suite 400, San
Diego, CA 92121 telephone: (858) 259-9405. On July 8, 2014, we
consummated a merger with MabVax Therapeutics, Inc. (“MabVax
Therapeutics”), pursuant to which our subsidiary Tacoma
Acquisition Corp. merged with and into MabVax Therapeutics, with
MabVax Therapeutics surviving as our wholly owned subsidiary. This
transaction is referred to as the
“Merger.” Unless the context otherwise
requires, references to “we,” “our,”
“us,” or the “Company” in this Quarterly
Report mean MabVax Therapeutics Holdings, Inc. on a condensed
consolidated financial statement basis with our wholly-owned
subsidiary following the Merger, MabVax Therapeutics, as
applicable. Beginning October 10, 2014, our common stock was quoted
on the OTCQB under the symbol “MBVX.” Since August 17,
2016, our common stock has been trading on the NASDAQ Capital
Market under the symbol “MBVX.”
The
balance sheet data at December 31, 2016, has been derived from
audited financial statements at that date. It does not include,
however, all the information and notes required by accounting
principles generally accepted in the United States of America
(“GAAP”) for complete financial statements. The
condensed consolidated financial statements as presented reflect
certain reclassifications from previously issued financial
statements to conform to the current year
presentation.
On August 16, 2016,
we filed a certificate of amendment to our Amended and Restated
Certificate of Incorporation with the Secretary of State of the
State of Delaware in order to effectuate a reverse stock split of
our issued and outstanding common stock on a 1 for 7.4 basis,
effective on August 16, 2016 (the “Reverse Stock
Split”). The Reverse Stock Split was effective with The
Financial Industry Regulatory Authority (FINRA) and the
Company’s common stock began trading on the NASDAQ Capital
Market at the open of business on August 17, 2016. All share and per share amounts, and number of
shares of common stock into which each share of preferred stock
will convert, in the financial statements and notes thereto have
been retroactively adjusted for all periods presented to give
effect to the Reverse Stock Split, including reclassifying an
amount equal to the reduction in par value of common stock to
additional paid-in capital.
MabVax
is a clinical stage biopharmaceutical company engaged in the
discovery, development and commercialization of proprietary human
monoclonal antibody products for the treatment of a variety of
cancers. We have discovered a pipeline of human monoclonal antibody
products based on the protective immune responses generated by
patients who have been vaccinated against targeted cancers with our
proprietary vaccines. We have the exclusive license to the vaccines
from Memorial Sloan Kettering Cancer Center (“MSK”). We
operate in only one business segment.
We
have incurred net losses since inception and expect to incur
substantial losses for the foreseeable future as we continue our
research, development and clinical activities. To date, we have
funded operations primarily through government grants, proceeds
from the sale of common and preferred stock, the issuance of debt,
the issuance of common stock in lieu of cash for services, payments
from collaborators, and interest income. The process of developing
products will require significant additional research and
development, preclinical testing and clinical trials, as well as
regulatory approvals. We expect these activities, together with
general and administrative expenses, to result in substantial
operating losses for the foreseeable future. We will not receive
substantial revenue unless we or our collaborative partners
complete clinical trials, obtain regulatory approvals and
successfully commercialize one or more products; or we license our
technology after achieving one or more milestones of interest to a
potential partner.
The
accompanying unaudited condensed consolidated financial statements
were prepared using GAAP for interim financial information and the
instructions to Regulation S-X. While these statements reflect all
normal recurring adjustments, which are, in the opinion of
management, necessary for a fair presentation of the results of the
interim period, they do not include all information or notes
required by GAAP for annual financial statements and should be read
in conjunction with the Audited Financial Statements of MabVax
Therapeutics Holdings, Inc. for the year ended December 31,
2016, filed in our Annual Report on Form 10-K on March 1,
2017.
The preparation of
condensed consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the condensed
consolidated financial statements and the reported amounts of
expenses during the reporting period. Management believes that
these estimates are reasonable; however, actual results may differ
from these estimates.
Recent
Accounting Pronouncements
In May 2014, the FASB issued
ASU 2014-09, “Revenue
from Contracts with Customers (Topic 606)”, which
contains new accounting literature relating to how and when a
company recognizes revenue. Under ASU 2014-09, a company will
recognize revenue when it transfers promised goods or services to
customers in an amount that reflects the consideration to which the
company expects to be entitled in exchange for those goods and
services. ASU 2014-09 is effective for the
Company’s fiscal year beginning January 1, 2018, which
reflects a one year deferral approved by the FASB in July 2015, and
will be adopted by the Company beginning January 1, 2018. We
expect the adoption of this new standard will not have a material
impact on our condensed consolidated financial
statements.
In February 2016, the FASB issued ASU
2016-2, “Leases (Topic
842).” This update will increase transparency and
comparability by recognizing lease assets and lease liabilities on
the balance sheet and disclosing key information about leasing
arrangements. Under the new guidance, lessees will be
required to recognize the following for all leases (with the
exception of short-term leases) at the commencement date (i) a
lease liability, which is a lessee’s obligation to make lease
payments arising from a lease, measured on a discounted basis; and
(ii) a right-of-use asset, which is an asset that represents the
lessee’s right to use, or control the use of, a specified
asset for the lease term. Under the new guidance, lessor accounting
is largely unchanged, and it simplified the accounting for sale and
leaseback transactions. Lessees will no longer be provided with a
source of off-balance sheet financing. Lessees (for capital and
operating leases) and lessors (for sales-type, direct financing,
and operating leases) must apply a modified retrospective
transition approach for leases existing at, or entered into after,
the beginning of the earliest comparative period presented in the
financial statements. The modified retrospective approach would not
require any transition accounting for leases that expired before
the earliest comparative period presented. Lessees and lessors may
not apply a full retrospective transition approach. The standard is
effective for fiscal years beginning after December 15, 2018,
including interim periods within those fiscal years. We are
currently in the process of assessing what impact this new standard
may have on our condensed consolidated financial
statements.
In March 2016, the FASB issued ASU 2016-09,
“Compensation—Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting.”
This update includes multiple provisions intended to simplify
various aspects of the accounting for share-based payment
transactions including accounting for excess tax benefits and tax
deficiencies, classification of excess tax benefits in the
statement of cash flows and accounting for award forfeitures. This
update is effective for annual and interim reporting periods of
public entities beginning after December 15, 2016, with early
adoption permitted. The adoption of this new standard did
not have a material impact on our condensed consolidated financial
statements.
In June 2016, the FASB issued ASU
No. 2016-13, “Financial Instruments—Credit Losses
(Topic326): Measurement of Credit Losses on Financial
Instruments.”
This ASU requires instruments measured
at amortized cost to be presented at the net amount expected to be
collected. Entities are also required to record allowances for
available-for-sale debt securities rather than reduce the carrying
amount. This ASU is effective for fiscal years beginning after
December 15, 2019, including interim periods within those
fiscal years. We expect the adoption of this new standard
will not have a material impact on our condensed consolidated
financial statements.
In August 2016, the
FASB issued ASU No. 2016-15 (“ASU 2016-15”),
“Statement of Cash Flows (Topic 230): Classification of
Certain Cash Receipts and Cash Payments.” The standard
provides guidance on eight (8) cash flow issues: (1) debt
prepayment or debt extinguishment costs; (2) settlement of
zero-coupon bonds; (3) contingent consideration payments after a
business combination; (4) proceeds from the settlement of insurance
claims; (5) proceeds from the settlement of corporate-owned life
insurance policies; (6) distributions received from equity method
investees; (7) beneficial interests in securitization transactions;
and (8) separately identifiable cash flows and application of the
predominance principle. ASU 2016-15 addresses how certain cash
receipts and cash payments are presented and classified in the
statement of cash flows. ASU 2016-15 is effective for fiscal years,
and interim periods within those years, beginning after December
15, 2017 with early adoption permitted. We expect the adoption of
this new standard will not have a material impact on our condensed
consolidated financial statements.
In August 2016, the FASB issued ASU
No. 2016-16, “Income Taxes (Topic 740):
Intra-Entity Transfers of Assets Other Than
Inventory.” This ASU requires the recognition of
the income tax consequences of an intra-entity transfer of an asset
other than inventory when the transfer occurs. The amendments in
this ASU should be applied on a modified retrospective basis
through a cumulative-effect adjustment directly to retained
earnings as of the beginning of the period of adoption. We
expect the adoption of this new standard will not have a material
impact on our condensed consolidated financial
statements.
In January 2017, the FASB issued ASU
No. 2017-03, “Accounting Changes and Error Corrections
(Topic 250) and Investments—Equity Method and Joint Ventures
(Topic 323).” This ASU amends the disclosure requirements for
ASU No. 2014-09, Revenue from Contracts with Customers
(Topic 606), ASU No. 2016-02, Leases (Topic 842) and
ASU No. 2016-13, Financial Instruments—Credit
Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments. This ASU states that if a registrant does not know or
cannot reasonably estimate the impact that the adoption of the
above ASUs is expected to have on the financial statements, then in
addition to making a statement to that effect, the registrant
should consider additional qualitative financial statement
disclosures to assist the reader in assessing the significance of
the impact that the standard will have on the financial statements
of the registrant when adopted. This ASU was effective upon
issuance. The adoption of this new standard did not have a
material impact on our condensed consolidated financial
statements.
In January 2017, the FASB issued ASU
No. 2017-04, “Intangibles—Goodwill and Other
(Topic 350): Simplifying the Test for Goodwill
Impairment.” This ASU eliminates Step 2 from the
goodwill impairment test. Instead, an entity should recognize an
impairment charge for the amount by which the carrying value
exceeds the reporting unit’s fair value, not to exceed the
total amount of goodwill allocated to that reporting unit. This ASU
is effective for annual or any interim goodwill impairment tests in
fiscal years beginning after December 15, 2019. We
expect the adoption of this new standard will not have a material
impact on our condensed consolidated financial
statements.
In January 2017, the FASB issued ASU
No. 2017-01, “Business Combinations (Topic 805):
Clarifying the Definition of a Business.” This ASU
clarifies the definition of a business with the objective of adding
guidance to assist entities with evaluating whether transactions
should be accounted for as acquisitions (or disposals) of assets or
businesses. This ASU is effective for annual periods beginning
after December 15, 2017, including interim periods within
those periods. We expect the adoption of this new standard
will not have a material impact on our condensed consolidated
financial statements.
Management
believes that any other recently issued, but not yet effective,
accounting standards if currently adopted would not have a material
effect on the accompanying condensed consolidated financial
statements.
2.
Liquidity and Going Concern
The accompanying
condensed consolidated financial statements have been prepared on
the going concern basis, which assumes that the Company will
continue to operate as a going concern and which contemplates the
realization of assets and the satisfaction of liabilities and
commitments in the normal course of business. As reflected in the
accompanying condensed consolidated financial statements, the
Company had a net loss of $14,424,883, net cash used in operating
activities of $8,702,932, net cash used in investing activities of
$21,072, and net cash provided by financing activities of
$7,797,492 for the nine months ended September 30, 2017. As of
September 30, 2017, the Company had $3,052,778 in cash and cash
equivalents, a working capital deficit of $2,918,271, an
accumulated deficit of $101,046,557 and stockholders’ equity
of $2,520,416.
On
January 15, 2016, we and Oxford Finance, LLC, as collateral agent
and lender, entered into a Loan and Security Agreement (the
“Loan Agreement”) providing for senior secured term
loans to the Company in an aggregate principal amount of up to
$10,000,000, subject to the terms and conditions set forth in the
Loan Agreement (the “January 2016 Term
Loan”). On January 15, 2016, the Company received
an initial loan of $5,000,000 under the Loan Agreement, before fees
and issuance costs of approximately $390,000. The option to draw
the second $5,000,000 expired on September 30, 2016.
On March 31, 2017, we and Oxford Finance, LLC,
signed a First Amendment to the Loan Agreement (the
“Amendment”), providing that the payment of principal
of $138,889 on the January 2016 Term Loan that otherwise would have
been due on the Amortization Date of April 1, 2017, will be due and
payable on May 1, 2017 along with any other payment of principal
due on May 1, 2017. We were obligated to pay a fully earned and
non-refundable amendment fee of $15,000 to Oxford Finance LLC. On
May 1, 2017, we paid the principal that was due on May 1, 2017,
along with the $15,000 amendment fee.
On May 3, 2017, we
sold 850 shares of 0% Series H convertible
preferred stock (the “Series H Preferred
Stock”), at a stated value of $1,000 per share,
representing an aggregate of $850,000 before offering costs of
$29,429 in a private placement (the “May 2017 Private
Placement”), to certain existing investors. The shares of Series H Preferred Stock are
convertible into shares of common stock based on a conversion
calculation equal to the stated value of the Series H Preferred
Stock, plus all accrued and unpaid dividends, if any, on such
Series H Preferred Stock, as of such date of determination, divided
by the conversion price. The stated value of each share of Series H
Preferred Stock is $1,000 and the initial conversion price is $1.75
per share, each subject to adjustment for stock splits, stock
dividends, recapitalizations, combinations, subdivisions or other
similar events. This May 2017 Private Placement is discussed in
further detail in Note 5, Convertible Preferred Stock, Common Stock
and Warrants.
On
May 19, 2017, we closed a public offering of 1,342,858 shares of
common stock and 1,000,000 shares of newly designated 0% Series G
convertible preferred stock (the “Series G Preferred
Stock”), at $1.75 per share of common stock and Series G
Preferred Stock (the “May 2017 Public Offering”).
The Series G Preferred Stock is initially convertible into
1,000,000 shares of common stock, subject to adjustment for stock
splits, stock dividends, recapitalizations, combinations,
subdivisions or other similar events, to certain existing investors
in the offering who, as a result of their purchases of common
stock, would hold in excess of 4.99% of our issued and outstanding
common stock, and elect to receive shares of our Series G Preferred
Stock. We received $4,100,000 in gross proceeds, before
underwriting discounts and commissions and offering expenses
estimated at $452,609. The May 2017 Public Offering is described in
more detail in Note 5, Convertible Preferred Stock, Common Stock
and Warrants.
On July 27, 2017,
we entered into a subscription agreement with an accredited
investor pursuant to which we agreed to sell 152,143 restricted
shares of common stock for $125,000 (the “July 2017 Private
Placement”). The July 2017 Private Placement closed on August
2, 2017.
On August 11, 2017,
we entered into a security purchase
agreement with a group of existing investors in the Company,
where we sold 2,386.36 shares of 0% Series J convertible
preferred stock (“the Series J Preferred
Stock”), at a stated value of $550 per share,
representing an aggregate of approximately $1,312,500 before
offering costs estimated at $123,083 in a registered direct
offering (the “August 2017 Financing”). The shares of Series J Preferred Stock are
convertible into shares of common stock based on a conversion
calculation equal to the stated value of the Series J Preferred
Stock plus the base amount on such Series J Preferred Stock, as of
such date of determination, divided by the conversion price. The
stated value of each share of Series J Preferred Stock is $550 and
the initial conversion price is $0.55 per share, each subject to
adjustment for stock splits, stock dividends, recapitalizations,
combinations, subdivisions or other similar
events.
On August 23, 2017,
we engaged Greenhill & Co. (NYSE: GHL) to serve as a financial
advisor to assist us in exploring and evaluating strategic options
with the goal of maximizing shareholder value. We are evaluating
inbound inquiries and transaction options, as well as identifying
new opportunities, which could include the acquisition of MabVax by
another company, the sale or divestiture of specific assets coupled
with a reverse merger, merging with another company, or licensing
of selected technologies. We do not have a defined timeline for the
exploration of strategic alternatives and are not confirming that
the evaluation will result in any strategic alternative being
announced or consummated. We do not intend to discuss or
disclose further developments during this process unless and until
our Board of Directors has approved a specific action or otherwise
determined that further disclosure is appropriate. While Greenhill
& Co. continues as our financial advisor, we will continue to
advance our Phase 1 clinical programs including our MVT-1075
radioimmunotherapy clinical trial for the treatment of pancreatic,
colon and lung cancers, and our MVT-5873 clinical trial in
combination with one or more chemotherapy agents in first line
therapy for patients newly diagnosed with pancreatic
cancer.
On
September 14, 2017, the Company entered into subscription
agreements with select accredited investors relating to the
Company’s registered direct offering, issuance and sale of
4,000,000 shares of the Company’s common stock. The purchase
price per share was $0.50. We received $2.0 million in gross
proceeds, before offering expenses estimated at $147,639. The
offering closed September 14, 2017.
On
September 22, 2017, the Company entered into additional
subscription agreements with select accredited investors relating
to the Company’s registered direct offering, issuance and
sale of 2,016,129 shares of the Company’s common stock. The
purchase price per share was $0.62. We received $1.25 million in
gross proceeds, before offering expenses estimated at $35,000. The
offering closed on September 27, 2017.
On
October 10, 2017, the Company entered into additional subscription
agreements with select accredited investors relating to the
Company’s registered direct offering, issuance and sale of
769,231 shares of the Company’s common stock. The purchase
price per share was $0.65. We received $500,000 in gross proceeds,
before offering expenses totaling approximately $15,000. The
offering closed on October 11, 2017.
We plan to continue to fund the Company’s
losses from operations and capital funding needs through equity or
debt financings, strategic collaborations, licensing arrangements,
government grants or other arrangements. Further, to extend
availability of existing cash available for our programs for the
purpose of achieving milestones or a strategic transaction, we have
cut personnel from 25 full time people to 10, and reduced other
operating expenses following the completion of two phase 1a
clinical trials of our lead antibody HuMab 5B1, which has enabled
us to reduce our expenditures on clinical trials. We continue to
develop our radioimmunotherapy product MVT-1075 discussed further
in Management’s Discussion and Analysis of Financial
Condition and Results of Operations. Several members of
management have volunteered to defer receiving portions of
their salaries until the earlier of achieving one or more business
transactions or the end of 2017. However, we cannot be sure that capital funding
will be available on reasonable terms, or at all. If we are unable
to secure adequate additional funding, we may be forced to make
additional reductions in spending, incur further cutbacks in
personnel, extend payment terms with suppliers, liquidate assets
where possible, and/or suspend or curtail planned programs. In
addition, if the Company does not meet its payment obligations to
third parties as they come due, it may be subject to litigation
claims. Even if we are successful in defending against these
claims, litigation could result in substantial costs and be a
distraction to management.
We anticipate that the Company will continue to
incur net losses into the foreseeable future as we: (i) continue
our clinical trial for the development of MVT1075 as a
radioimmunotherapy, (ii) continue our clinical trial of
MVT-5873 in combination with gemcitabine and nab-paclitaxal
in first line therapy for the treatment of patients newly diagnosed
with pancreatic cancer; and (iii)
continue operations as a public company. Based on receipt of the
$125,000 private placement in July 2017, and financings of $1.3
million in August 2017, $2.0 million on September 14, $1.25 million
on September 22, 2017, and $500,000 on October 10, 2017, before
offering expenses, and without any other additional funding or
receipt of payments from potential licensing agreements, we expect
we will have sufficient funds to meet our obligations until
February 2018. These conditions give rise to substantial doubt as
to the Company’s ability to continue as a going
concern. Any of these actions
could materially harm the Company’s business, results of
operations, and prospects. The accompanying condensed consolidated
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
If
the Company raises additional funds by issuing equity securities,
substantial dilution to existing stockholders would result. If the
Company raises additional funds by incurring debt financing, the
terms of the debt may involve significant cash payment obligations
as well as covenants and specific financial ratios that may
restrict the Company’s ability to operate its
business.
3.
Cash and Cash Equivalents
We consider all
highly liquid investments purchased with original maturities of
three months or less to be cash equivalents. The Company limits its
exposure to credit loss by holding cash in U.S. dollars, or, from
time to time, placing cash and investments in U.S. government,
agency and government-sponsored enterprise
obligations.
4.
Fair value of financial instruments
Our
financial instruments consist of cash and cash equivalents and
accounts payable, both of which are generally considered to be
representative of their respective fair values because of the
short-term nature of those instruments.
5.
Convertible Preferred Stock, Common Stock and Warrants
Dividends
on Preferred Stock
We
immediately recognize the changes in the redemption value on
preferred stock as they occur and the carrying value of the
security is adjusted to equal what the redemption amount would be
as if redemption were to occur at the end of the reporting date
based on the conditions that exist as of that date.
No
dividends were ever declared by our Board of Directors since our
inception on any series of convertible preferred
stock.
Series D Preferred Stock
As
of September 30, 2017, and December 31, 2016, there were 44,104 and
132,489 shares of Series D convertible preferred stock
(“Series D Preferred Stock”) issued and outstanding
that are convertible into an aggregate of 596,000 and 1,790,392
shares of common stock, respectively.
The
Series D Preferred Stock had been issued on March 25, 2015, to
certain holders of the Company’s Series A-1 Preferred Stock
and Merger warrants (the “Series A-1 Exchange
Securities”) and holders of the Company’s Series B
Preferred Stock and Series B warrants (the “Series B Exchange
Securities” and, collectively with the Series A-1 Exchange
Securities, the “Exchange Securities”), all previously
issued by the Company. Pursuant to the exchange agreements, the
holders exchanged the Exchange Securities and relinquished any and
all other rights they may have had pursuant to the Exchange
Securities, their respective governing agreements and certificates
of designation, including any related registration rights, in
exchange for an aggregate of 342,906 shares of the Company’s
common stock and an aggregate of 238,156 shares of the
Company’s newly designated Series D Preferred Stock,
convertible into 3,218,325 shares of common stock.
As
contemplated by the exchange agreements and as approved by the
Company’s Board of Directors, the Company filed with the
Secretary of State of the State of Delaware a Certificate of
Designation of Preferences, Rights and Limitations of Series D
Convertible Preferred Stock (the “Series D Certificate of
Designations”), on March 25, 2015. Pursuant to the
Series D Certificate of Designations, the Company designated
1,000,000 shares of its blank check preferred stock as Series D
Preferred Stock. Each share of Series D Preferred Stock has a
stated value of $0.01 per share. In the event of a
liquidation, dissolution or winding up of the Company, each share
of Series D Preferred Stock will be entitled to a per share
preferential payment equal to the stated value. Each share of
Series D Preferred Stock is convertible into 13.5135 shares of
common stock. The conversion ratio is subject to adjustment in
the event of stock splits, stock dividends, combination of shares
and similar recapitalization transactions. The Company is
prohibited from effecting the conversion of the Series D Preferred
Stock to the extent that, as a result of such conversion, the
holder beneficially would own more than 4.99% (provided that
certain investors elected to block their beneficial ownership
initially at 2.49% in the exchange agreements), in the aggregate,
of the issued and outstanding shares of the Company’s common
stock calculated immediately after giving effect to the issuance of
shares of common stock upon the conversion of the Series D
Preferred Stock. Each share of Series D Preferred Stock
entitles the holder to vote on all matters voted on by holders of
common stock. With respect to any such vote, each share of Series D
Preferred Stock entitles the holder to cast such number of votes
equal to the number of shares of common stock such shares of Series
D Preferred Stock are convertible into at such time, but not in
excess of the beneficial ownership limitations.
Series E Preferred Stock
As
of September 30, 2017, and December 31, 2016, there were 33,333
shares of Series E convertible preferred stock (“Series E
Preferred Stock”) issued and outstanding, convertible into
519,751 shares of common stock.
On
March 30, 2015, the Company filed with the Secretary of State of
the State of Delaware a Certificate of Designation of Preferences,
Rights and Limitations of Series E Convertible Preferred Stock (the
“Series E Certificate of Designations”) to designate
100,000 shares of its blank check preferred stock as Series E
Preferred Stock.
The
shares of Series E Preferred Stock are convertible into shares of
common stock based on a conversion calculation equal to the stated
value of such preferred share, plus all accrued and unpaid
dividends, if any, on such share of Series E Preferred Stock, as of
such date of determination, divided by the conversion price. The
stated value of each share of Series E Preferred Stock is $75 and
the initial conversion price is $5.55 per share, each subject to
adjustment for stock splits, stock dividends, recapitalizations,
combinations, subdivisions or other similar events. In addition,
during the period proscribed for in the Series E Certificate of
Designations, in the event the Company issues or sells, or is
deemed to issue or sell, shares of common stock at a per share
price that is less than the conversion price then in effect, the
conversion price shall be reduced to such lower price, subject to
certain exceptions. The Company is prohibited from effecting a
conversion of the share of Series E Preferred Stock to the extent
that, as a result of such conversion, such holder would
beneficially own more than 4.99% of the number of shares of common
stock outstanding immediately after giving effect to the issuance
of shares of common stock upon conversion of the Series E Preferred
Stock, which beneficial ownership limitation may be increased by
the holder up to, but not exceeding, 9.99%. Each holder is entitled
to vote on all matters submitted to stockholders of the Company,
and shall have the number of votes equal to the number of shares of
common stock issuable upon conversion of such holder’s share
of Series E Preferred Stock, but not in excess of beneficial
ownership limitations. The shares of Series E Preferred Stock bear
no interest.
On
August 22, 2016, when the Company closed on the August 2016 Public
Offering, the current Series E Preferred Stock conversion price of
$5.55 per share was reduced to $4.81 per share under the terms of
the Series E Certificate of Designations, resulting in an increase
in the number of shares of common stock to 519,751 that the Series
E Preferred Stock may be converted into. There is no further
adjustment required by the Series E Certificate of Designations in
the event of an offering of shares below $4.81 per share by the
Company.
Series F Preferred Stock
As
of September 30, 2017, and December 31, 2016, there were 665,281
shares of Series F convertible preferred stock (the “Series F
Preferred Stock”), par value of $0.01 per share, issued and
outstanding, convertible into 665,281 shares of common
stock.
On August 16, 2016,
we filed a Certificate of Designations, Preferences and Rights of
the 0% Series F Convertible Preferred Stock with the Delaware
Secretary of State, designating 1,559,252 shares of preferred stock
as 0% Series F Preferred
Stock.
The shares of
Series F Preferred Stock are
convertible into shares of common stock based on a conversion
calculation equal to the stated value of such Series F Preferred Stock, plus all accrued and
unpaid dividends, if any, on such Series F Preferred Stock, as of such date of
determination, divided by the conversion price. The stated value of
each share of Series F Preferred
Stock is $4.81 and the initial conversion price is $4.81 per
share, each subject to adjustment for stock splits, stock
dividends, recapitalizations, combinations, subdivisions or other
similar events. In the event of a liquidation, dissolution or
winding up of the Company, each share of Series F Preferred Stock will be entitled to a per
share preferential payment equal to the par value. All shares of
the Company’s capital stock will be junior in rank to Series
F Preferred Stock with respect
to the preferences as to dividends, distributions and payments upon
the liquidation, dissolution and winding-up of the Company, except
for the Company’s Series D Preferred Stock and Series E Preferred Stock.
The holders of
Series F Preferred Stock will
be entitled to receive dividends if and when declared by our Board
of Directors. The Series F Preferred
Stock shall participate on an “as converted”
basis, with all dividends declared on the Company’s common
stock. In addition, if we grant, issue or sell any rights to
purchase our securities pro rata to all our record holders of our
common stock, each holder will be entitled to acquire such
securities applicable to the granted purchase rights as if the
holder had held the number of shares of common stock acquirable
upon complete conversion of all Series F Preferred Stock then held.
We are prohibited
from effecting a conversion of the Series F Preferred Stock to the extent that, as a
result of such conversion, the holder would beneficially own more
than 4.99% of the number of shares of common stock outstanding
immediately after giving effect to the issuance of shares of common
stock upon conversion of the Series F Preferred Stock, which beneficial ownership
limitation may be increased by the holder up to, but not exceeding,
9.99%. Each holder is entitled to vote on all matters submitted to
stockholders of the Company, and shall have the number of votes
equal to the number of shares of common stock issuable upon
conversion of such holder’s Series F Preferred Stock, but not in excess of the
beneficial ownership limitations.
Series G Preferred Stock
As
of September 30, 2017, and December 31, 2016, there were 1,000,000
and no shares of our Series G Preferred Stock issued and
outstanding and convertible into 1,000,000 and no shares of our
common stock, respectively.
Pursuant
to a Series G Preferred Stock Certificate of Designations, on May
15, 2017, we designated 5,000,000 shares of our blank check
preferred stock as Series G Preferred Stock, par value of $0.01 per
share. The shares of Series G Preferred Stock are convertible into
shares of common stock based on a conversion calculation equal to
the stated value of the of such Series G Preferred Stock, plus all
accrued and unpaid dividends, if any, on such Series G Preferred
Stock, as of such date of determination, divided by the conversion
price. The stated value of each share of Series G Preferred Stock
is $1.75 and the initial conversion price is $1.75 per share, each
subject to adjustment for stock splits, stock dividends,
recapitalizations, combinations, subdivisions or other similar
events. The holder of a majority of the Series G
Preferred Stock shall have the right to nominate a candidate for
the Board, such right to expire on December 31, 2017.
In the event of a liquidation, dissolution or
winding up of the Company, each share of Series G Preferred Stock
will be entitled to a per share preferential payment equal to the
par value. All shares our
capital stock will be junior in rank to Series G Preferred Stock
with respect to the preferences as to dividends, distributions and
payments upon the liquidation, dissolution and winding-up of the
Company, except for the Company’s Series D Preferred Stock,
Series E Preferred Stock and Series F Preferred
Stock. The holders of
Series G Preferred Stock will be entitled to receive dividends if
and when declared by our Board of Directors. The Series G Preferred
Stock shall participate on an “as converted” basis,
with all dividends declared on our common stock. In
addition, if we grant, issue or sell any rights to purchase our
securities pro rata to all our record holders of our common stock,
each holder will be entitled to acquire such securities applicable
to the granted purchase rights as if the holder had held the number
of shares of common stock acquirable upon complete conversion of
all Series G Preferred Stock then held.
We
are prohibited from effecting a conversion of the Series G
Preferred Stock to the extent that, as a result of such conversion,
the holder would beneficially own more than 4.99% of the number of
shares of common stock outstanding immediately after giving effect
to the issuance of shares of common stock upon conversion of the
Series G Preferred Stock, which beneficial ownership limitation may
be increased by the holder up to, but not exceeding, 9.99%. Each
holder is entitled to vote on all matters submitted to stockholders
of the Company, and shall have the number of votes equal to the
number of shares of common stock issuable upon conversion of such
holder’s Series G Preferred Stock, but not in excess of the
beneficial ownership limitations.
Series H Preferred Stock
As
of September 30, 2017, and December 31, 2016, there were 850 and no
shares of our Series H Preferred Stock issued and outstanding and
convertible into 485,714 and no shares of our common stock,
respectively.
Pursuant
to a Series H Preferred Stock Certificate of Designations, on May
3, 2017, we designated 2,000 shares of our blank check preferred
stock as Series H Preferred Stock, par value of $0.01 per
share.
The
shares of Series H Preferred Stock are convertible into shares of
common stock based on a conversion calculation equal to the stated
value of the Series H Preferred Stock, plus the base amount, if
any, on such Series H Preferred Stock, as of such date of
determination, divided by the conversion price. The stated value of
each share of Series H Preferred Stock is $1,000 and the initial
conversion price is $1.75 per share, each subject to adjustment for
stock splits, stock dividends, recapitalizations, combinations,
subdivisions or other similar events.
In the event of a liquidation, dissolution or
winding up of the Company, each share of Series H Preferred Stock
will be entitled to a per share preferential payment equal to the
base amount. All shares of our
capital stock will be junior in rank to Series H Preferred Stock
with respect to the preferences as to dividends, distributions and
payments upon the liquidation, dissolution and winding-up of the
Company other than Series A through G Preferred
Stock. The holders of
Series H Preferred Stock will be entitled to receive dividends if
and when declared by our Board of Directors. The Series H Preferred
Stock shall participate on an “as converted” basis,
with all dividends declared on our common stock. In
addition, if we grant, issue or sell any rights to purchase our
securities pro rata to all our record holders of our common stock,
each holder will be entitled to acquire such securities applicable
to the granted purchase rights as if the holder had held the number
of shares of common stock acquirable upon complete conversion of
all Series H Preferred Stock then held.
We
are prohibited from effecting a conversion of the Series H
Preferred Stock to the extent that, as a result of such conversion,
the holder would beneficially own more than 4.99% of the number of
shares of common stock outstanding immediately after giving effect
to the issuance of shares of common stock upon conversion of the
Series H Preferred Stock, which beneficial ownership limitation may
be increased by the holder up to, but not exceeding, 9.99%. Each
holder is entitled to vote on all matters submitted to stockholders
of the Company, and shall have the number of votes equal to the
number of shares of common stock issuable upon conversion of such
holder’s Series H Preferred Stock, but not in excess of the
beneficial ownership limitations.
Series I Preferred Stock
As
of September 30, 2017, and December 31, 2016, there were 1,048,460
and no shares of our Series I convertible preferred stock (the
“Series I Preferred Stock”) issued and outstanding and
convertible into 1,048,460 and no shares of our common stock,
respectively.
Pursuant
to a Series I Preferred Stock Certificate of Designations, on May
26, 2017, we designated 1,968,664 shares of our blank check
preferred stock as Series I Preferred Stock, par value of $0.01 per
share.
Each
share of Series I Preferred Stock has a stated value of $0.01 per
share. In the event of a liquidation, dissolution or winding
up of the Company, each share of Series I Preferred Stock will be
entitled to a per share preferential payment equal to the stated
value. Each share of Series I Preferred Stock is convertible into
one share of common stock. The conversion ratio is subject to
adjustment in the event of stock splits, stock dividends,
combination of shares and similar recapitalization
transactions. The Company is prohibited from effecting the
conversion of the Series I Preferred Stock to the extent that, as a
result of such conversion, the holder beneficially owns more than
4.99%, in the aggregate, of the issued and outstanding shares of
the Company’s Common Stock calculated immediately after
giving effect to the issuance of shares of Common Stock upon the
conversion of the Series I Preferred Stock (the “Beneficial
Ownership Limitation”), which beneficial ownership limitation
may be increased by the holder up to, but not exceeding,
9.99%. Each share of Series I Preferred Stock entitles the
holder to vote on all matters voted on by holders of Common Stock.
With respect to any such vote, each share of Series I Preferred
Stock entitles the holder to cast such number of votes equal to the
number of shares of Common Stock such shares of Series I Preferred
Stock are convertible into at such time, but not in excess of the
Beneficial Ownership Limitation.
Series J Preferred Stock
As
of September 30, 2017, and December 31, 2016, there were 818.18 and
no shares of our Series J Preferred Stock issued and outstanding
and convertible into 818,180 and no shares of our common stock,
respectively.
On
August 14, 2017, the Company filed a Certificate of Designations,
Preferences and Rights of the 0% Series J Convertible Preferred
Stock with the Delaware Secretary of State, designating 3,400
shares of preferred stock as Series J Preferred Stock.
The
shares of Series J Preferred Stock are convertible into shares of
common stock based on a conversion calculation equal to the stated
value of the Series J Preferred Stock, plus all accrued and unpaid
dividends, if any, on such Series J Preferred Stock, as of such
date of determination, divided by the conversion price. The stated
value of each share of Series J Preferred Stock is $550 and the
initial conversion price is $0.55 per share, each subject to
adjustment for stock splits, stock dividends, recapitalizations,
combinations, subdivisions or other similar events.
For
so long as the holder has Series J Preferred Stock, if the Company
sells, or is deemed to have sold, common stock, or common
equivalent shares, for consideration per share less than the
conversion price in effect immediately prior to the issuance (the
“Lower Issuance Price”), then the conversion price in
effect immediately prior to such issuance will be adjusted to the
Lower Issuance Price, provided however the Lower Issuance Price
shall not be less than $0.10.
The
holders of Series J Preferred Stock will be entitled to receive
dividends if and when declared by our board of directors. The
Series J Preferred Stock shall participate on an “as
converted” basis, with all dividends declared on our common
stock. In addition, if we grant, issue or sell any
rights to purchase our securities pro rata to all our record
holders of our common stock, each holder will be entitled to
acquire such securities applicable to the granted purchase rights
as if the holder had held the number of shares of common stock
acquirable upon complete conversion of all Series J Preferred Stock
then held.
We
are prohibited from effecting a conversion of the Series J
Preferred Stock to the extent that, as a result of such conversion,
the holder would beneficially own more than 4.99% of the number of
shares of common stock outstanding immediately after giving effect
to the issuance of shares of common stock upon conversion of the
Series J Preferred Stock, which beneficial ownership limitation may
be increased by the holder up to, but not exceeding, 9.99%. Each
holder is entitled to vote on all matters submitted to stockholders
of the Company, and shall have the number of votes equal to the
number of shares of common stock issuable upon conversion of such
holder’s Series J Preferred Stock, substituting the
consolidated closing bid price of the common stock on August 10,
2017 for the then-applicable conversion price, and not in
excess of the beneficial ownership limitations.
The
Company shall not be obligated to issue any shares of common stock
upon conversion of the Series J Preferred Stock, and the holder of
any shares of Series J Preferred Stock shall not have the right to
receive upon conversion of any shares of the Series J Preferred
Stock if the issuance of such shares of common stock would exceed
the aggregate number of shares of common stock which the Company
may issue upon conversion of the Series J Preferred Stock without
breaching the Company's obligations under the rules or regulations
of the
NASDAQ Capital Market, which aggregate number equals 19.99%
of the number of shares outstanding on the closing date, except
that such limitation shall not apply in the event that the Company
obtains the approval of its stockholders as required by the
applicable rules of the
NASDAQ Capital Market for issuances of common stock in
excess of such amount. Such approval was obtained in October
2017.
Holders
of Series J Preferred Stock will be entitled to a preferential
payment of cash per share equal to the greater of 125% of the base
amount on the date of payment or the amount per share had the
holders converted such preferred shares immediately prior to the
date of payment upon the liquidation, dissolution or winding up of
the affairs of the Company, or a consolidation or merger of the
Company with or into any other corporation or corporations, or a
sale of all or substantially all of the assets of the Company, or
the effectuation by the Company of a transaction or series of
transactions in which more than 50% of the voting shares of the
Company is disposed of or conveyed.
Series K Preferred Stock
As
of September 30, 2017, and December 31, 2016, there were 65,000 and
no shares of our Series K convertible preferred stock
(“Series K Preferred Stock”) issued and outstanding and
convertible into 6,500,000 and no shares of our common stock,
respectively.
On
August 14, 2017, the Company filed a Certificate of Designations,
Preferences and Rights of the Series K Convertible Preferred Stock
with the Delaware Secretary of State, designating 65,000 shares of
preferred stock as Series K Preferred Stock.
The
shares of Series K Preferred Stock are convertible into shares of
common stock based on a conversion calculation equal to the stated
value of the Series K Preferred Stock divided by the conversion
price. The stated value of each share of Series K Preferred Stock
is $0.01 and the initial conversion price is $0.0001 per share,
each subject to adjustment for stock splits, stock dividends,
recapitalizations, combinations, subdivisions or other similar
events.
The
holders of Series K Preferred Stock will be entitled to receive
dividends if and when declared by our board of directors. The
Series K Preferred Stock shall participate on an “as
converted” basis, with all dividends declared on our common
stock. In addition, if we grant, issue or sell any
rights to purchase our securities pro rata to all our record
holders of our common stock, each holder will be entitled to
acquire such securities applicable to the granted purchase rights
as if the holder had held the number of shares of common stock
acquirable upon complete conversion of all Series K Preferred Stock
then held.
We
are prohibited from effecting any conversion of the Series K
Preferred Stock if the Company has not obtained shareholder
approval for the full conversion of the Series J Preferred Stock
and Series K Preferred Stock in accordance with the rules of the
NASDAQ Capital Market or to the extent that, as a result of such
conversion, the holder would beneficially own more than 4.99% of
the number of shares of common stock outstanding immediately after
giving effect to the issuance of shares of common stock upon
conversion of the Series K Preferred Stock, which beneficial
ownership limitation may be increased by the holder up to, but not
exceeding, 9.99%. Each holder is entitled to vote on all matters
submitted to stockholders of the Company, and shall have the number
of votes equal to the number of shares of common stock issuable
upon conversion of such holder’s Series K Preferred
Stock, substituting the consolidated closing bid price of the
common stock on August 10, 2017 for the then-applicable conversion
price, and not in excess of the beneficial ownership limitations.
Such approval was obtained in October 2017.
Warrants Issued in Connection with April 2015 Private
Placement
As
of September 30, 2017, there were warrants outstanding to purchase
481,036 shares at $11.10 per share and 324,324 shares at $2.00 per
share; and as of December 31, 2016, there were warrants outstanding
to purchase 805,361 shares of common stock at $11.10 per share. All
of the warrants at $11.10 and $2.00 per share that were outstanding
on September 30, 2017, expired on October 10, 2017.
The warrants priced at $11.10 and $2.00 per share
were remaining from our private offering in March and April 2015
(the “April 2015 Private Placement”) in which we sold
$8,546,348 worth of units (the “Units”), net of
$668,150 in issuance costs, of which $2,500,000 of the Units
consisted of Series E Preferred Stock and the balance consisted of
1,660,271 shares of common stock, together with warrants to all
investors to purchase 1,055,361 shares of common stock at $11.10
per share. Each Unit was sold at a purchase price of
$5.55 per Unit. OPKO Health, Inc., the lead investor in the April
2015 Private Placement, purchased $2,500,000 worth of Units
consisting of all of the shares of the Series E Preferred
Stock.
In connection with
the May 2017 Public Offering, the Company had agreed to amend the
terms of a portion of the outstanding warrants, or warrants to
purchase 324,324 shares of common stock that had an exercise price
of $11.10 per share, such that the amended warrants shall have an
exercise price of $2.00 per share and no cashless exercise feature,
for those investors who made a certain minimum required investment
to qualify for repricing. After the repricing, the stock price
never reached above $2.00 in order for the warrants to be exercised
prior to the expiration date of October 10, 2017.
Warrants Issued in Connection with October 2015 Public
Offering
As
of September 30, 2017, and December 31, 2016, there were warrants
outstanding to purchase 168,919 shares of common stock at $9.77 per
share in connection with a public offering on October 5,
2015.
The
warrants at $9.77 per share were issued in connection with our
public offering on October 5, 2015, which consisted of 337,838
shares of common stock and warrants to purchase 168,919 shares of
common stock, at an offering price of $8.14 per share. For
every two shares of common stock sold, the Company issued one
warrant to purchase one share of common stock. We received
$2,750,000 in gross proceeds, before underwriting discounts and
commissions and offering expenses totaling approximately $586,608.
The shares and warrants were separately issued and sold in equal
proportions. The warrants are immediately exercisable, expire
September 30, 2018, and have an exercise price of $9.77 per
share. The warrants are not listed on any securities
exchange or other trading market.
August 2016 Public Offering
As
of September 30, 2017, there were warrants outstanding to purchase
436,332 shares at $5.55 per share and 436,332 shares at $6.29 per
share. As of December 31, 2016, there were warrants outstanding to
purchase 1,962,319 shares at $5.55 per share and 1,962,319 shares
at $6.29 per share.
The
warrants at $5.55 per share and $6.29 per share were issued on
August 22, 2016, in connection with a public offering of 1,297,038
shares of common stock and 665,281 shares of Series F preferred
stock, and warrants to purchase 1,962,319 shares of common stock at
$5.55 per share and warrants to purchase 1,962,319 shares of common
stock at $6.29 per share, at an offering price of $4.81 per share.
For every one share of common stock or Series F preferred
stock sold, we issued one warrant to purchase one share of common
stock at $5.55 per share and one warrant to purchase one share of
common stock at $6.29 per share. We received $9,438,753 in
gross proceeds, before underwriting discounts and commissions and
offering expenses totaling $871,305. The gross proceeds include the
underwriter’s over-allotment option, which it exercised on
the closing date.
May
2017 Private Placement
On May 3, 2017, we
entered into separate subscription agreements with accredited
investors pursuant to which we sold an aggregate of $850,000, or
850 shares, of Series H Preferred
Stock, at a stated value of $1,000 per share, before
offering costs of $29,429, in the May 2017 Private
Placement. The shares of Series H Preferred Stock are
convertible into shares of common stock based on a conversion
calculation equal to the stated value of the Series H Preferred
Stock, plus the base amount, if any, on such Series H Preferred
Stock, as of such date of determination, divided by the conversion
price. The initial conversion price is $1.75 per share, each
subject to adjustment for stock splits, stock dividends,
recapitalizations, combinations, subdivisions or other similar
events.
In the event of a liquidation, dissolution or
winding up of the Company, each share of Series H Preferred Stock
will be entitled to a per share preferential payment equal to the
base amount. All shares of our
capital stock will be junior in rank to Series H Preferred Stock
with respect to the preferences as to dividends, distributions and
payments upon the liquidation, dissolution and winding-up of the
Company other than Series A through G Preferred Stock.
The holders of Series H Preferred
Stock will be entitled to receive dividends if and when declared by
our Board of Directors. The Series H Preferred Stock shall
participate on an “as converted” basis, with all
dividends declared on our common stock. In addition, if
we grant, issue or sell any rights to purchase our securities pro
rata to all our record holders of our common stock, each holder
will be entitled to acquire such securities applicable to the
granted purchase rights as if the holder had held the number of
shares of common stock acquirable upon complete conversion of all
Series H Preferred Stock then held.
We
are prohibited from effecting a conversion of the Series H
Preferred Stock to the extent that, as a result of such conversion,
the holder would beneficially own more than 4.99% of the number of
shares of common stock outstanding immediately after giving effect
to the issuance of shares of common stock upon conversion of the
Series H Preferred Stock, which beneficial ownership limitation may
be increased by the holder up to, but not exceeding, 9.99%. Each
holder is entitled to vote on all matters submitted to stockholders
of the Company, and shall have the number of votes equal to the
number of shares of common stock issuable upon conversion of such
holder’s Series H Preferred Stock, but not in excess of the
beneficial ownership limitations.
The shares were
offered and sold solely to “accredited investors” in
reliance on the exemption from registration afforded by Rule 506 of
Regulation D and Section 4(a)(2) of the Securities Act of 1933, as
amended (the “Securities Act”). On the closing date, we
entered into registration rights agreements with each of the
investors, pursuant to which we agreed to undertake to file a
registration statement to register the resale of the shares within
thirty (30) days following the closing date, to cause such
registration statement to be declared effective by the Securities
and Exchange Commission (“SEC”) within sixty (60) days
of the closing date and to maintain the effectiveness of the
registration statement until all of such shares have been sold or
are otherwise able to be sold pursuant to Rule 144 under the
Securities Act, without any restrictions.
On May 10, 2017, we
entered into exchange agreements with each of the holders of our
Series H Preferred Stock representing an aggregate of $850,000 of
our Series H Preferred Stock with such exchange to be effective on
the closing of our May 2017 Public Offering. Prior to the closing
of the May 2017 Public Offering, we and the holders rescinded and
cancelled the exchange agreements and they have no force and effect
and no transaction contemplated by the Exchange Agreements was
consummated.
May
2017 Public Offering
On
May 19, 2017, we closed a public offering of 1,342,858 shares of
common stock and 1,000,000 shares of newly designated 0% Series G
Convertible Preferred Stock, or Series G Preferred Stock, at $1.75
per share of common stock and Series G Preferred Stock, or the May
2017 Public Offering. The Series G Preferred Stock is
initially convertible into 1,000,000 shares of common stock,
subject to adjustment for stock splits, stock dividends,
recapitalizations, combinations, subdivisions or other similar
events and was purchased by certain existing investors of the
Company who, as a result of their purchases of common stock, would
hold in excess of 4.99% of our issued and outstanding common stock.
We received $4,100,000 in gross proceeds, before estimated
underwriting discounts, commissions and offering expenses of
$452,609.
The May 2017 Public Offering was consummated
pursuant to an underwriting agreement that we signed on May 15,
2017, with Laidlaw & Company (UK) Ltd. (“Laidlaw”),
as underwriter (the
“Underwriter”) pursuant to which, among other things,
we agreed to issue and sell to the Underwriter, and the Underwriter
agreed to purchase from us, in an underwritten public offering, an
aggregate of 1,342,858 shares of common stock and 1,000,000 shares
of Series G Preferred Stock. We granted the Underwriters an
option for a period of up to 45 days from the date of our
prospectus to purchase up to an aggregate of 201,428 additional
shares of our common stock at the public offering price of $1.75
per share, less the underwriting discount, solely to cover
overallotments, which was not exercised.
In connection with the May 2017 Public Offering,
we agreed with the lead investor of the August 2016 Public Offering
(the “August Lead Investor”) pursuant to a Letter
Agreement, dated May 18, 2017, to issue the Inducement Shares to
the investors in the August 2016 Public Offering (the “August
2016 Investors”), as incentive shares to those investors to
make a minimum required investment in this public offering of at
least 50% of their investment in the $9,400,000 August 2016 Public
Offering, or the Minimum Required Investment, and who still hold
100% of the shares of common stock previously acquired. Such August
2016 Investors shall be entitled to receive their pro rata share of
2,900,000 shares, after the Lead Investor in this offering receives
the first 10%. For the August 2016 Investors who purchased Series F
Preferred Stock and made the Minimum Required Investment and who
still held 100% of the shares of Series F Preferred Stock at the
closing of the May 2017 Public Offering, they may, instead of
receiving a pro rata share of the 2,610,000 shares remaining after
the August Lead Investor receives the first 290,000 shares, elect
to receive their Inducement Shares in the form of a new Series I
Preferred Stock to be created with similar rights as currently
exist in the Series G Preferred Stock. The stated value of
each share of Series I Preferred Stock will be $0.01 and the
conversion rate shall be one (1) share of common stock for one (1)
share of Series I Preferred Stock, each subject to adjustment for
stock splits, stock dividends, recapitalizations, combinations,
subdivisions or other similar events. In the event of a
liquidation, dissolution or winding up of the Company, each share
of Series I Preferred Stock will be entitled to a per share
preferential payment equal to the par value, or $0.01 per share.
All shares of the Company’s capital stock will be junior in
rank to the Series I Preferred Stock at the time of creation, with
respect to the preferences as to dividends, distributions and
payments upon the liquidation, dissolution and winding-up of the
Company, except for the Company’s Series D Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock, Series G
Preferred Stock, and Series H Preferred Stock.
Also in connection
with the May 2017 Public Offering, for these August 2016 Investors
to receive the Inducement Shares, each of them must also agree to
the cancellation of the warrants issued to them in the August 2016
Public Offering. Investors in the Company’s 2015 private
offering that invest at least 25% of their original investment from
such private financing in the May 2017 Public Offering and still
hold 100% of their common stock or Series E preferred stock from
the private 2015 financing also must agree to amend the terms of
their outstanding warrants that currently have an exercise price of
$11.10 per share, such that the amended warrants shall have an
exercise price of $2.00 per share and no cashless exercise feature
(as amended, the “Inducement Amended Warrants”). The
Company agreed with the Lead Investor to register for resale on a
registration statement all the Inducement Shares and shares of
common stock underlying the Inducement Amended Warrants, and to
issue the Inducement Shares to each investor meeting the investment
and ownership terms described above.
Based
on the closing of the May 2017 Public Offering, and election of
certain prior investors who made the Minimum Required Investment
and elected to take Series I Preferred Stock upon its creation,
931,336 Inducement Shares of common stock were issued and 1,968,664
Inducement Shares were issued in the form of Series I Preferred
Stock that was created following the closing of the May 2017 Public
Offering and issued following verification with each investors that
the terms of the Inducement Shares have been met. The Company
recorded a deemed dividend of $5,220,000 in June 2017 in connection
with issuing the Inducement Shares.
Additionally,
in connection with participation by the April 2015 investors in the
May 2017 Public Offering, the Company revised the exercise price
for 90,099 warrants from $11.10 to $2.00 per warrant share and
recorded a deemed dividend of $19,413 also in June 2017. In August
2017, the Company revised the exercise price for an additional
225,225 warrants from $11.10 to $2.00 per warrant share for the
July 2017 Private Placement. The impact of the repricing of the
additional warrants was immaterial as the stock price on the date
of repricing was $0.70, with a volatility index in the neighborhood
of 85%, and were expiring in 69 days. The warrants expired on
October 10, 2017, unexercised.
May 2017 Letter Agreement
As
a condition to the Lead Investor leading an investment in the May
2017 Public Offering, including the requirement that we offer
incentive shares to August 2016 Investors who participate in making
the Minimum Required Investment in the May 2017 Public Offering, we
agreed to the following:
Board Nomination
|
|
The Company shall
nominate one candidate to the Board of Directors of the Company
acceptable to the holder of a majority of the Series G Preferred
Stock by December 31, 2017, and two current Board members will
resign.
|
|
|
|
Executive Hire
|
|
The
Company shall hire a new C-level executive in a leadership role by
July 15, 2017.
|
|
|
|
Board Compensation
|
|
The Company is obligated to issue an aggregate of
1,050,000 options to certain employees and members of the Board, at
a price not less than $2.00 per share, and 50,000 options to each
other Board member at the current market price in connection with
this offering. The options shall be issued pursuant to the
Company’s option plan and are subject to the requisite
approvals and subject to availability under the plan. To the extent
we need to increase the number of shares available under such plan,
we will need the approval of our Board and Stockholders. All
Board fees will be waived for 2017.
|
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Funds Held in Escrow
|
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$500,000
of the funds from this offering will be held in escrow and released
to one or more investor relations services acceptable to the
Company following the closing of this offering.
|
Additionally we
granted the Lead Investor in
the May 2017 Public Offering certain rights to approve future (i)
issuances of our securities, (ii) equity or debt financings and
(iii) sales of any development product assets currently held by us,
subject to certain exceptions, if such securities are sold at price
below $2.50 per share and for as long as the Lead Investor in the offering holds 50% or
more of the shares of Series G Preferred Stock purchased by the
Lead Investor in this offering
(the “May 2017 Consent Right”). All other prior consent
rights of the Lead Investor
have been superseded by the May 2017 Consent Right.
For the period from
the May 2017 Public Offering to September 30, 2017, the Company
incurred approximately $223,000 in expenses related to outside
investor relations services, and the Company has engaged additional
services for the remainder of 2017 that will complete our
obligation for spending on investor relations. The Lead Investor
elected not to hold the funds in escrow. Further, two Board members
have resigned, which achieves one of the conditions of the Lead
Investor.
July 2017 Private Placement
On July 27, 2017,
we entered into a subscription agreement with an accredited
investor pursuant to which we agreed to sell 152,143 restricted
shares of common stock for $125,000 (the “July 2017 Private
Placement”). As part of the transaction, the Company agreed
to reprice the investor’s warrant to purchase 225,225 shares
of common stock from $11.10 to $2.00 per warrant share and remove
the cashless exercise feature. The transaction closed on August 2,
2017. The impact of repricing the warrants to $2.00 a share,
which took effect on August 2, 2017, was immaterial, as the stock
price on the date of the closing of the transaction was $0.70 and
the warrants at $2.00 a share expired on October 10, 2017,
unexercised.
August 2017 Registered Direct Offering
On August 11, 2017, we entered into securities
purchase agreements to sell 2,386.36 shares of Series J Preferred
Stock with a stated value of $550 per share (the “August 2017
Offering”). The Series J Preferred Stock is convertible
into common stock at $0.55 per share, subject to adjustment for
stock splits, stock dividends, recapitalizations, combinations,
subdivisions or other similar events and was purchased by certain
existing investors of the Company (the “Prior
Investors”). The total amount of the securities purchase
agreements amounted to approximately $1,312,500, before estimated
expenses of $123,083. The
Certificate of Designation for the Series J Preferred Stock
includes a 4.99% beneficial ownership conversion blocker, a 19.99%
blocker provision to comply with the NASDAQ Capital Market rules
until stockholders have approved any or all shares of common stock
issuable upon conversion of the Series J Preferred Stock, which was
approved in a special meeting of stockholders on October 2, 2017
(the “October 2017 Special Meeting”), and a 125%
liquidation preference. All shares of the Company’s capital
stock will be junior in rank to the Series J Preferred Stock at the
time of creation, with respect to the preferences as to dividends,
distributions and payments upon the liquidation, dissolution and
winding-up of the Company, except for the Company’s Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock, Series H Preferred Stock, and
Series I Preferred Stock.
In
connection with the August 2017 Offering, we agreed with the Lead
Investor pursuant to a Letter Agreement, dated August 9, 2017 (the
“August 2017 Letter Agreement”), to issue incentive
shares (the “Incentive Shares”) to Prior Investors as
an incentive to invest in the August 2017 Offering. Such Prior
Investors received a portion of 65,000 shares in the form of a new
Series K Preferred Stock, allocated by the Lead Investor, and
convertible into 6,500,000 shares of common stock, subject to
stockholder approval, which was also approved in the October 2017
Special Meeting. The stated value of each share of Series K
Preferred Stock is $0.01 and the conversion rate is the stated
value of $0.01 divided by .0001, or one hundred (100) shares of
common stock upon conversion of one (1) share of Series K Preferred
Stock, each subject to adjustment for stock splits, stock
dividends, recapitalizations, combinations, subdivisions or other
similar event, and have a 4.99% beneficial ownership conversion
blocker. In the event of a liquidation, dissolution or winding up
of the Company, each share of Series K Preferred Stock will be
entitled to a per share preferential payment equal to the par
value, or $0.01 per share. All shares of the Company’s
capital stock will be junior in rank to the Series K Preferred
Stock at the time of creation, with respect to the preferences as
to dividends, distributions and payments upon the liquidation,
dissolution and winding-up of the Company, except for the
Company’s Series D Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock, Series I Preferred Stock and Series J Preferred
Stock. The Company recorded a deemed dividend of $3,120,000 in
August 2017 in connection with issuing the Incentive
Shares.
The August 2017 Letter Agreement also specified the
following:
●
That the Company files a proxy
statement for a special meeting of stockholders within 10 days of
closing the August 2017 Offering. Proposals shall include
(i) an amendment to the Company’s Certificate of
Incorporation to effect a reverse stock split of its issued and
outstanding common stock by a ratio of not less than one-for-two
and not more than one-for-twenty at any time prior to one year from
the date of the special meeting, with the exact ratio to be set at
a whole number within this range as determined by the Board of
Directors, (ii) the issuance of securities in one or more
non-public offerings where the maximum discount at which securities
will be offered will be equivalent to a discount of 30% below the
market price of the common stock, as required by and in accordance
with NASDAQ
Marketplace Rule 5635(d), (iii) the issuance of securities in one
or more non-public offerings where the maximum discount at which
securities will be offered will be equivalent to a discount of 20%
below the market price of the Common Stock, as required by and in
accordance with NASDAQ
Marketplace Rule 5635(d), (iv) the issuance of the Series J
Conversion Shares and (v) the issuance of the Inducement
Shares.
●
Lead
Investor will commit to investing an additional $1,000,000 in a new
private or public offering of up to $8,000,000 (the
“$8,000,000 Financing”). The $8,000,000 Financing shall
sign and close following shareholder approval of each of the
proposals identified in the August 2017 Letter
Agreement.
●
That
the employment terms of all
management be reduced to two years from three years and that
management defer portions of their salary for the remainder of the
year, which shall be paid upon the earlier of completion of the
$8,000,000 Financing or a business transaction that represents, or
transactions in the aggregate that represent, in excess of
$10,000,000.
Effective with the Company’s pay period
ending August 10, 2017, and without changing their employment
agreements dated July 1, 2017, several members of management
volunteered to defer receiving portions of their salaries for the
remainder of 2017. The voluntary deferral of cash payments is
intended to help with the Company’s cash flow for the
remainder of the year, with voluntary reductions by the management
team committed to remain in effect until the earlier of completing
a successful financing of at least $8.0 million, a business
transaction that represents, or business transactions in the
aggregate that represent, an amount of $10.0 million or greater, or
the end of the year, whichever occurs first. The employment
agreements with the Company remain unchanged, except that the
executives have volunteered to reduce the terms of their employment
agreements to two years from three in connection with
the August 11, 2017 registered direct
offering and Letter Agreement with the Lead
Investor.
On
August 14, 2017, the Chairman of the Compensation Committee, acting
on behalf of the Board of Directors sent a letter to each executive
of the Company stating that the Board deems it in the best
interests of the Company to request that the executive voluntarily
defer a portion of his regular salary to help with cash flow of the
Company. On August 16 and August 21, 2017, Paul Resnick, M.D. and
Paul Maffuid, Ph.D., respectively gave notice of good reason (as
that term is defined in their employment agreements, or “Good
Reason”) for termination of their employment. The Company had
30 days from the notification date under each of their employment
agreements to cure their concerns. In oral discussions with each
executive the President and Chief Executive Officer communicated on
behalf of the Compensation Committee the Company’s intention
to provide additional equity compensation in return for salary
deferrals. Given the perceived uncertainty about the
Company’s plans at the time for addressing the concerns of
Dr. Resnick and Dr. Maffuid, and that nothing in writing had been
provided as possible equity compensation, they each submitted their
notices to the Company of good reason for termination. Further,
they each expressed in oral conversations that they wanted to
remain employed by the Company. The Company cured each
executive’s concerns within the 30-day cure period, by
reinstating the deferred salary for Dr. Resnick in one instance,
and in granting restricted stock to all executives with vesting
over time, as disclosed in the filings of Form 4s following the
approvals. Both executives rescinded their notices of good reason
for termination on September 7, 2017, and all executives’
employment agreements remain unchanged as the salary deferrals
remain to be voluntary.
In
order to meet the
NASDAQ Capital Market rules in the August 2017 Offering, we
were not obligated to issue any shares of common stock upon
conversion of the Series J Preferred Stock which would cause the
Company to breach our obligations under the rules and regulations
of the
NASDAQ Capital Market, which limit the aggregate number of
shares issued at a discount to market at 19.99% of the number of
shares outstanding on the closing date of the August 2017 Offering,
except that such limitation shall not apply in the event that we
obtain the approval of our stockholders as required by the
applicable rules of the
NASDAQ Capital Market for issuances of common stock in
excess of such amount. Similarly, none of the Series K Preferred
Stock may be converted into common stock until we obtain the
approval of our stockholders. On October 2, 2017, in a special
meeting of stockholders, we obtained approval to issue shares
underlying all of the Series J Preferred Stock and the Series K
Preferred Stock.
September 2017 Registered Direct Offerings
On September 11,
2017, we entered into
an agreement to sell 4.0 million shares of common stock at $0.50 a
share for gross proceeds of approximately $2.0 million, before
estimated expenses of $147,639. The shares were offered and sold to
certain accredited investors in a registered direct offering.
Laidlaw acted as placement agent for the offering.
On September 22,
2017, we entered into a subscription agreement with select
accredited investors relating to the Company’s registered
direct offering, issuance and sale of 2,016,129 shares of the
Company’s common stock, $0.01 par value per share. The
purchase price per share was $0.62. The total amount of the
subscription agreements amounted to $1,250,000, before estimated
expenses of $35,000.
Consultant
Grants
On
January 13, 2016, the Board of Directors approved the issuance of
13,514 shares of restricted stock with immediate vesting valued at
$64,000 to a consultant for advisory services to the
Company.
On
February 10, 2017, we entered into a consulting agreement with MDM
Worldwide, pursuant to which MDM Worldwide began providing investor
relations services to the Company in consideration for an immediate
grant of 20,000 shares of the Company’s common stock and a
monthly cash retainer of $10,000 a month for ongoing services for a
period of one year. As the shares granted were fully vested upon
grant and the Company has no legal recourse to recover the shares
in the event of nonperformance, the Company recognized the grant
date fair value of the 20,000 shares, or $56,600, as investor
relations expense upon grant during the first quarter of
2017.
On
March 7, 2017, we entered into a consulting agreement with Jenene
Thomas Communications, pursuant to which Jenene Thomas
Communications began providing investor relations services to the
Company on April 1, 2017. In consideration for the services, we
began paying a monthly cash retainer of $12,500. Additionally, we
issued 20,000 restricted shares of common stock on April 1, 2017,
to be vested at 5,000 per quarter over the four quarters of
services under the agreement beginning April 1, 2017. The shares
granted vest over a one-year period over which the services are
performed and, as such, will be amortized over the same period
beginning in April 1, 2017. During the three and nine months ended
September 30, 2017, we have recognized $3,250 and $10,200,
respectively, in general and administrative expenses related to
this arrangement in common stock for services.
On
September 14, 2017, we issued 100,000 restricted shares of common
stock for legal services and 100,000 restricted shares of common
stock for due diligence services in connection with the September
11, 2017 registered direct offering.
6. Notes Payable
On
January 15, 2016, we entered into the Loan Agreement with Oxford
Finance, LLC pursuant to which we had the option to borrow
$10,000,000 in two equal tranches of $5,000,000
each. The first tranche of $5,000,000 was funded at
close on January 15, 2016 (the “Term A Loan”). The
option to fund the second tranche of $5,000,000 (the “Term B
Loan”) was upon the Company achieving positive interim data
on the Phase 1 HuMab-5B1 antibody trial in pancreatic cancer and
successfully uplisting to either the NASDAQ Capital Market or NYSE
MKT on or before September 30, 2016. The option for the
Term B Loan expired on September 30, 2016. The Company is not
pursuing completion of any additional debt financing with Oxford
Finance, LLC at the present time. The interest rate for the Term A
Loan is set on a monthly basis at the index rate plus 11.29%, where
the index rate is the greater of the 30-day LIBOR rate or
0.21%. Interest is due on the first day of each month,
in arrears, calculated based on a 360-day year. The loan
is interest only for first year after funding, and the principal
amount of the loan is amortized in equal principal payments, plus
period interest, over the next 36 months. A facility fee
of 1.0% or $100,000 was due at closing of the transaction, and was
earned and paid by the Company on January 15, 2016. The
Company is obligated to pay a $150,000 final payment upon
completion of the term of the loan, and this amount is being
accreted using the effective interest rate method over the term of
the loan. Each of the term loans can be prepaid subject to a
graduated prepayment fee, depending on the timing of the
prepayment.
Concurrent
with the closing of the transaction, the Company issued 225,226
common stock purchase warrants to Oxford Finance, LLC with an
exercise price of $5.55 per share. The warrants are
exercisable for five years and may be exercised on a cashless
basis, and expire on January 15, 2021. The Company recorded
$607,338 for the fair value of the warrants as a debt discount
within notes payable and an increase to additional paid-in capital
on the Company’s balance sheet. We used the
Black-Scholes-Merton valuation method to calculate the value of the
warrants. The debt discount is being amortized as interest expense
over the term of the loan using the effective interest
method.
We
granted Oxford Finance, LLC a perfected first priority lien on all
of the Company’s assets with a negative pledge on
intellectual property. The Company paid Oxford Finance, LLC a good
faith deposit of $50,000, which was applied towards the facility
fee at closing. The Company agreed to pay all costs,
fees and expenses incurred by Oxford Finance, LLC in the initiation
and administration of the facilities including the cost of loan
documentation.
At
the initial funding, the Company received net proceeds of
approximately $4,610,000 after fees and expenses. These fees and
expenses are being accounted for as a debt discount and classified
within notes payable on the Company’s condensed consolidated
balance sheet. The Company's transaction costs of approximately
$390,000 are presented in the condensed consolidated balance sheet
as a direct deduction from the carrying amount of the notes
payable, consistent with debt discounts. Debt discounts, issuance
costs and the final payment are being amortized or accreted as
interest expense over the term of the loan using the effective
interest method.
The
Loan Agreement also contains customary indemnification obligations
and customary events of default, including, among other things, our
failure to fulfill certain of the Company's obligations under the
Loan Agreement, the occurrence of a material adverse change, which
is defined as a material adverse change in the Company's business,
operations, or condition (financial or otherwise), a material
impairment of the prospect of repayment of any portion of the loan,
or a material impairment in the perfection or priority of the
Lenders’ lien in the collateral or in the value of such
collateral. In the event of default by the Company under the
Loan Agreement, the Lenders would be entitled to exercise their
remedies thereunder, including the right to accelerate payment of
the debt, upon which we may be required to repay all amounts then
outstanding under the Loan Agreement, which could harm the
Company's financial condition.
On
March 31, 2017, we and Oxford Finance, LLC signed the Amendment,
providing that the payment of principal on the January 2016 Term
Loan that otherwise would have been due on the Amortization Date
will be due and payable on May 1, 2017 along with any other payment
of principal due on May 1, 2017. We were obligated to pay a fully
earned and non-refundable amendment fee of $15,000 to the
Collateral Agent. On May 1, 2017, we paid the principal due on May
1, 2017, along with the $15,000 amendment fee.
The
Company was in compliance with all applicable covenants set forth
in the Loan Agreement as of September 30, 2017.
For
the three and nine months ended September 30, 2017, the Company
recorded interest expense related to the term loan of $138,642 and
$445,934, respectively. For the three and nine months ended
September 30, 2016, the Company recorded $266,057 and $729,350 in
interest expense related to the term loan, respectively. The annual
effective interest rate on the note payable, including the
amortization of the debt discounts and accretion of the final
payment, but excluding the warrant amortization, was approximately
12.3% and approximately 13.8% as of September 30, 2017 and 2016,
respectively.
In
July 2016, we entered into a premium insurance agreement with First
Insurance of California for the financing of our 2016-17 insurance
policy premiums in the amount of $183,584, payable in monthly
installments of $20,783 with an effective interest rate of 3.9%
which was completed in April 2017. In
July 2017, we entered into another premium finance agreement with
First Insurance of California for the financing of our 2017-18
insurance policy premiums in the amount of $33,756, payable in nine
monthly installments of $3,855. The effective interest rate is
6.7%.
Future
principal payments under the Loan Agreement and the insurance notes
as of September 30, 2017, are as follows:
Years ending December 31:
|
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2017 (remaining)
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$581,952
|
2018
|
1,666,667
|
2019
|
1,666,667
|
2020
|
138,889
|
Notes
payable, balance as of September 30, 2017
|
4,054,175
|
Unamortized
discount on notes payable
|
(403,453)
|
Notes
payable, balance as of September 30, 2017
|
3,650,722
|
Current
portion of notes payable
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(1,693,065)
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Non-current
portion of notes payable
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$1,957,657
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7. Related Party Transactions
On
April 1, 2016, the Company entered into a two-year consulting
agreement with Jeffrey Ravetch, M.D., Ph.D., a Board member until
August 3, 2017, for work beginning January 1, 2016 through December
31, 2017, at a rate of $100,000 a year, in support of scientific
and technical advice on the discovery and development of technology
and products for the Company primarily related to monoclonal
antibodies, corporate development, and corporate partnering
efforts. In April 2016, the Company paid Dr. Ravetch
$100,000 for services to be performed in 2016, and will pay
quarterly thereafter beginning January 1, 2017. During the three
and nine months ended September 30, 2017, the Company recorded
$25,000 and $75,000, respectively, in consulting expenses, as part
of general and administration expenses, related to this agreement,
of which $25,000 is outstanding and included in other accrued
expenses on the balance sheet as of September 30,
2017.
On
November 3, 2016, the Company granted 17,500 stock options to
Jeffrey Ravetch, M.D., Ph.D., for his ongoing consulting services
to the Company. The option award vests over a three-year period.
During the three and nine months ended September 30, 2017, the
Company recognized $3,900 and $11,572 of stock-based compensation
expense, respectively, as part of general and administration
expenses, related to this option grant.
On May 19, 2017, the Company granted each
director, other than J. David Hansen, Jeffrey Ravetch, a Board
member at the time, and Philip Livingston, 50,000 options at market
price, $1.80 on May 19, 2017, with immediate vesting for their
continuing service to the Company, in exchange for giving up their
Board fees for the remainder of the year. J. David Hansen and Jeffrey Ravetch were
each granted 500,000 options and Philip Livingston was granted
50,000 options each at $2.00 exercise price per share with
immediate vesting and no performance obligations. Options granted
to J. David Hansen, CEO and Philip Livingston were granted as a
condition of the May 2017 financing transaction. The 450,000
options granted to Dr. Ravetch in addition to the 50,000 options
granted to other non-employee members of the Company’s Board
of Directors were in recognition of the additional value provided
by Dr. Ravetch as a scientific expert. During the three and nine
months ended September 30, 2017, the Company recorded $0 and
$1,480,089 in stock-based compensation expense, respectively, in
general and administration expenses, related to these
grants.
8. Stock-based Activity
Amendment of Equity Incentive Plan
On
March 31, 2015, the Company approved a Second Amended and Restated
2014 Employee, Director and Consultant Equity Incentive Plan (the
“Plan”) to increase the number of shares reserved for
issuance under the Plan from 21,362 to 1,129,837 shares of common
stock. Additional changes to the Plan include:
●
An
“evergreen” provision to reserve additional shares for
issuance under the Plan on an annual basis commencing on the first
day of fiscal 2016 and ending on the second day of fiscal 2024,
such that the number of shares that may be issued under the Plan
shall be increased by an amount equal to the lesser of: (i)
1,081,081 or the equivalent of such number of shares after the
administrator, in its sole discretion, has interpreted the effect
of any stock split, stock dividend, combination, recapitalization
or similar transaction in accordance with the Plan; (ii) the number
of shares necessary such that the total shares reserved under the
Plan equals (x) 15% of the number of outstanding shares of common
stock on such date (assuming the conversion of all outstanding
shares of Preferred Stock (as defined in the Plan) and other
outstanding convertible securities and exercise of all outstanding
warrants to purchase common stock) plus (y) 30,946; and (iii) an
amount determined by the Board.
●
Provisions
that no more than 405,406 shares may be granted to any participant
in any fiscal year.
●
Provisions
to allow for performance based equity awards to be issued by the
Company in accordance with Section 162(m) of the Internal Revenue
Code.
On September 22,
2016, the Board of Directors ratified an automatic increase in the
number of shares reserved for issuance under the Plan, increasing
the total shares reserved from 1,129,837 to 1,208,307 shares of
common stock, under the annual evergreen provision for the Plan,
plus a fixed amount of 30,946.
On January 1, 2017, the Board of Directors ratified
an automatic increase in the number of shares reserved for issuance
under the Plan, effective January 1, 2017, increasing the total
shares reserved from 1,208,307 to 2,159,352 shares of common stock,
under the annual evergreen provision for the Plan , plus a
fixed amount of 30,946.
On
June 12, 2017, the Company’s stockholders at its annual
meeting approved a proposal to increase in the number of shares
reserved for issuance under the Plan, increasing the total shares
reserved under the Plan from 2,128,406 (including the fixed amount
of 30,946) to 4,128,406, and increasing the number of shares that
may be granted to any participant in any fiscal year to 900,000,
from 405,406.
On
October 2, 2017, in a special meeting of stockholders, the Company
received approval of the Fifth Amended and Restated MabVax
Therapeutics Holdings, Inc. 2014 Employee, Director and Consultant
Equity Incentive Plan (the “Plan”), including an
increase in the shares of common stock reserved for issuance under
the Plan from 4,128,406 to 6,128,406 shares.
Stock-based
Compensation
We
measure stock-based compensation expense for equity-classified
awards, principally related to stock options and restricted stock
units, or RSUs, based on the estimated fair value of the award on
the date of grant. We recognize the value of the portion of the
award that we ultimately expect to vest as stock-based compensation
expense over the requisite service period in our condensed
consolidated statements of operations. Due to limited activity in
2017, 2016 and 2015, we assumed a forfeiture rate of
zero.
We
use the Black-Scholes model to estimate the fair value of stock
options granted. The expected term of stock options granted
represents the period of time that we expect them to be
outstanding. For the three and nine months ended September 30, 2017
and 2016, the following valuation assumptions were used (there were
no options granted for the three months ended September 30,
2017):
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
||
|
2017
|
2016
|
2017
|
2016
|
Risk-free interest
rate
|
-
|
0.87%
|
1.5 to 2.0%
|
1.43%
|
Dividend
yield
|
-
|
0%
|
0%
|
0%
|
Expected
volatility
|
-
|
70.98%
|
73 to 85%
|
85.91%
|
Expected
life of options, in years
|
-
|
2.9
yrs.
|
1.4 to 6.0 years
|
6.0
yrs.
|
Weighted-average
grant date fair value
|
-
|
$3.43
|
$1.53
|
$3.23
|
Total estimated
stock-based compensation expense, related to all of the
Company’s stock-based payment awards recognized under ASC
718, “Compensation—Stock
Compensation” and ASC 505,
“Equity” was comprised of the
following:
|
Three
Months Ended
|
Three
Months Ended
|
Nine
Months Ended
|
Nine
Months Ended
|
|
September
30,
|
September
30,
|
September
30,
|
September
30,
|
|
2017
|
2016
|
2017
|
2016
|
Research and
development
|
$292,523
|
$301,985
|
$989,884
|
$889,666
|
General and
administrative
|
721,213
|
666,556
|
3,526,488
|
2,570,326
|
Total stock-based
compensation expense
|
$1,013,736
|
$968,541
|
$4,516,372
|
$3,459,992
|
Stock-based Award Activity
The
following table summarizes the Company’s stock option
activity during the nine months ended September 30,
2017:
|
Options Outstanding
|
Weighted-Average Exercise Price
|
Outstanding
at December 31, 2016
|
851,375
|
$10.94
|
Granted
|
2,046,690
|
2.37
|
Exercised
|
—
|
—
|
Forfeited/cancelled/expired
|
(82,825)
|
5.67
|
Outstanding
and expected to vest at September 30, 2017
|
2,815,240
|
$4.87
|
Vested
and exercisable at September 30, 2017
|
1,742,632
|
$4.79
|
The
total unrecognized compensation cost related to unvested stock
option grants as of September 30, 2017, was $2,519,222 and the
weighted average period over which these grants are expected to
vest is 1.71 years. The weighted average remaining contractual life
of stock options outstanding at September 30, 2017 and 2016 is 9.1
and 9.0 years, respectively.
During
the first nine months of 2017, the Company granted 2,046,690
options to officers and employees with a weighted average exercise
price of $2.37 which consisted of 1,300,000 shares vesting
immediately at grant and the remainder vesting over a three-year
period starting at the one-year anniversary of the grant
date. During the first nine months of 2016, the Company
granted 413,578 options to officers and employees with a weighted
average exercise price of $5.21. Stock options granted to employees
generally vest over a three-year period with one third of the
grants vesting at each one-year anniversary of the grant
date.
Because
the Company had a net operating loss carryforward as of September
30, 2017, no tax benefits for the tax deductions related to
stock-based compensation expense were recognized in the
Company’s condensed consolidated statements of operations.
Additionally, no stock options were exercised in the three and nine
months ended September 30, 2017 and 2016.
A
summary of activity related to restricted stock grants under the
Plan for the nine months ended September 30, 2017 is presented
below:
|
Shares
|
Weighted Average Grant-Date Fair Value
|
Non-vested
at December 31, 2016
|
205,478
|
$16.84
|
Granted
|
850,965
|
.55
|
Vested
|
(102,737)
|
16.22
|
Forfeited
|
—
|
—
|
Non-vested
at September 30, 2017
|
953,706
|
$2.30
|
As
of September 30, 2017, there were 953,706 non-vested
restricted stock units remaining outstanding.
As
of September 30, 2017 and 2016, unamortized compensation expense
related to restricted stock grants amounted to $1,169,284 and
$2,553,920, respectively, which is expected to be recognized over a
weighted average period of 0.24 and 1.5 years,
respectively.
Management Bonus Plan and Compensation for Non-Employee
Directors
On
February 16, 2016, our Compensation Committee approved a 2016
Management Bonus Plan (the “2016 Management Plan”)
outlining maximum target bonuses of the base salaries of certain of
our executive officers. Under the terms of the 2016 Management
Plan, the Company's Chief Executive Officer shall receive a maximum
target bonus of up to 50% of his annual base salary, and the Chief
Financial Officer and each of the Company's Vice Presidents shall
receive a maximum target bonus of up to 30% of their annual base
salary.
Also,
on February 16, 2016, the Compensation Committee of the Board of
Directors of the Company approved the following
amendments to Company's policy for compensating non-employee
members of the Board:
●
The
initial equity grant upon first appointment (or election) of future
non-employee directors to the Board shall be a 10-year option to
purchase 6,757 shares of the Company's common stock, under the
Company's Second Amended and Restated 2014 Equity Incentive Plan
with 3-year annual vesting and a strike price equal the closing
price of the Company's common stock on the effective date of the
appointment (or election);
●
The
annual cash retainer for each non-employee director, paid
quarterly, is increased by $1,000 per calendar quarter to a total
of $7,000 per quarter, effective April 1, 2016; and
●
The
additional annual cash retainer for the chairperson of each of the
Audit, Compensation, and Nominating and Governance Committees, paid
quarterly, is increased by $1,000 per calendar year, such that each
chairperson retainer shall be as follows, effective April 1, 2016:
Audit Committee: $13,000; Compensation Committee: $9,000;
Nominating and Governance Committee: $6,000.
On August 25, 2016,
the Compensation Committee of the Board of Directors of the Company
approved the following amendments to Company's policy for
compensating non-employee members of the Board:
●
The
initial equity grant upon first appointment (or election) of future
non-employee directors to the Board shall be a 10-year option to
purchase 25,000 shares of the Company's common stock, under the
Plan with 3-year annual vesting and a strike price equal to the
closing price of the Company's common stock on the effective date
of the appointment (or election); and
●
the
additional automatic annual option grant to each non-employee
director on the date of the Company's annual meeting shall be a
10-year option to purchase 17,500 shares of the Company's common
stock, under the Plan with 1-year vesting and a strike price equal
to the closing price of the Company's common stock on the date of
the annual meeting.
On February 6,
2017, the Compensation Committee of the Board of Directors of the
Company approved the following amendments to Company's policy for
compensating non-employee members of the Board:
●
the
initial equity grant upon first appointment (or election) of future
non-employee directors to the Board shall be a 10-year option to
purchase 30,000 shares of the Company's common stock, under the
Plan with 3-year annual vesting and a strike price equal to the
closing price of the Company's common stock on the effective date
of the appointment (or election); and
●
the
additional automatic annual option grant to each non-employee
director on the date of the Company's annual meeting shall be a
10-year option to purchase 20,000 shares of the Company's Common
Stock, under the Plan with 1-year vesting and a strike price equal
the closing price of the Company's common stock on the date of the
annual meeting.
On
May 19, 2017, in connection with the May 2017 Public Offering, the
Company entered into the May 2017 Letter Agreement with the Lead
Investor, whereby the Company was obligated to issue an aggregate
of 1,050,000 options to certain employees and members of the Board,
at a price not less than $2.00 per share, and 50,000 options to
each other Board member at the current market price. Further, all
Board fees were waived for 2017 in connection with the May 2017
Letter Agreement.
On
August 14, 2017, the Chairman of the Compensation Committee, acting
on behalf of the Board of Directors sent a letter to each executive
of the Company stating that the Board deems it in the best
interests of the Company to request that the executive voluntarily
defer a portion of his regular salary to help with cash flow of the
Company. On August 16 and August 21, 2017, Paul Resnick, M.D. and
Paul Maffuid, Ph.D., respectively gave notice of good reason (as
that term is defined in their employment agreements, or “Good
Reason”) for termination of their employment. The Company had
30 days from the notification date under each of their employment
agreements to cure their concerns. In oral discussions with each
executive the President and Chief Executive Officer communicated on
behalf of the Compensation Committee the Company’s intention
to provide additional equity compensation in return for salary
deferrals. Given the perceived uncertainty about the
Company’s plans at the time for addressing the concerns of
Dr. Resnick and Dr. Maffuid, and that nothing in writing had been
provided as possible equity compensation, they each submitted their
notices to the Company of good reason for termination. Further,
they each expressed in oral conversations that they wanted to
remain employed by the Company. The Company cured each
executive’s concerns within the 30-day cure period, by
reinstating the deferred salary for Dr. Resnick in one instance,
and in granting restricted stock to all executives with vesting
over time, as disclosed in the filings of Form 4s following the
approvals. Both executives rescinded their notices of good reason
for termination on September 7, 2017, and all executives’
employment agreements remain unchanged as the salary deferrals
remain to be voluntary.
Common stock reserved for future issuance
Common
stock reserved for future issuance consists of the following at
September 30, 2017:
Common
stock reserved for issuance upon conversion of preferred
stock
|
11,633,387
|
Common
stock reserved for issuance upon exercise of warrants
|
2,073,416
|
Common
stock options outstanding
|
2,815,240
|
Authorized
for future grant or issuance under the Stock Plan
|
181,839
|
Unvested
restricted stock
|
953,706
|
Total
|
17,657,588
|
9.
Net Loss per Share
The Company
calculates basic and diluted net loss per share using the
weighted-average number of shares of common stock outstanding
during the period.
When the Company is
in a net loss position, it excludes from the calculation of diluted
net loss per share all potentially dilutive stock options,
preferred stock and warrants, and the diluted net loss per share is
the same as the basic net loss per share for such periods. If the
Company was to be in a net income position, the weighted average
number of shares used to calculate the diluted net income per share
would include the potential dilutive effect of in-the-money
securities, as determined using the treasury stock
method.
The table below
presents, the potentially dilutive securities that would have been
included in the calculation of diluted net loss per share if they
were not antidilutive for the periods presented.
|
As
of September 30,
|
|
|
2017
|
2016
|
Stock
options
|
2,815,240
|
815,412
|
Restricted stock
awards
|
953,706
|
205,478
|
Preferred
stock
|
11,633,387
|
2,975,424
|
Common stock
warrants
|
2,073,416
|
5,124,144
|
Total
|
17,475,749
|
9,120,458
|
10.
Contracts and Agreements
Memorial Sloan Kettering Cancer Center, or MSK
Since 2008 the Company has engaged in various
research agreements and collaborations with MSK including licensed
rights to cancer vaccines and the blood samples from patients who
have been vaccinated with MSK’s cancer vaccines. Total
sponsored research contracts outstanding in 2016 amounting to
approximately $800,000 in 2016 were 100% complete as of the year
ended December 31, 2016. Such sponsored research agreements provide
support for preclinical work on the Company’s product
development programs. The work includes preparing
radioimmunoconjugates of the Company’s antibodies and
performing in vitro and in vivo pharmacology studies for our therapeutic antibody
product, imaging agent product and radioimmunotherapy product
programs. For the three and nine months ended September 30, 2017
the Company incurred $0 and $184,000 in expenses related to these
contracts, respectively, and for the three and nine months ended
September 30, 2016, the Company incurred $0 and $212,574,
respectively.
Life Technologies Licensing Agreement
On
September 24, 2015, the Company entered into a licensing agreement
with Life Technologies Corporation, a subsidiary of ThermoFisher
Scientific. Under the agreement MabVax agreed to license
certain cell lines from Life Technologies Corporation to be used in
the production of recombinant proteins for the Company’s
clinical trials. The amount of the contract is for
$450,000 and was fully expensed during 2015. This agreement was
fully paid as of December 31, 2016. For the three and nine months
ended September 30, 2017 and 2016, the Company recorded no expenses
associated with the agreement.
Rockefeller
University Collaboration
In
July 2015, the Company entered into a research collaboration
agreement with Rockefeller University's Laboratory of Molecular
Genetics and Immunology. The Company provided antibody material to
Rockefeller University, which is exploring the mechanism of action
of constant region (Fc) variants of the HuMab 5B1 in the role of
tumor clearance. The Company may supply additional research
materials if requested by the Rockefeller University, which is
evaluating ways to optimize the function. For the three and nine
months ended September 30, 2017, and 2016, the Company recorded no
expenses associated with the agreement.
Patheon
Biologics LLC Agreement
On April 14, 2014, the Company entered into a
development and manufacturing services agreement with Patheon
(f.k.a. Gallus Biopharmaceuticals) to provide a full range of
manufacturing and bioprocessing services, including cell line
development, process development, protein production, cell culture,
protein purification, bio-analytical chemistry and QC
testing. Total amount of the contract is estimated at
approximately $3.0 million. For the three and nine
months ended September 30, 2017 and 2016, the Company recorded no
expenses associated with the agreement.
NCI PET Imaging Agent Grant
In
September 2013, the NCI awarded the Company a SBIR Program Contract
to support the Company’s program to develop a Positron
Emission Tomography (“PET”) imaging agent for
pancreatic cancer using a fragment of the Company’s 5B1
antibody (the “NCI PET Imaging Agent Grant”). The
project period for Phase I of the grant award of approximately
$250,000 covered a nine-month period, which commenced in September
2013 and ended in June 2014.
On
August 25, 2014, the Company was awarded a $1.5 million contract
for the Phase II portion of the NCI PET Imaging Agent Grant. The
contract is intended to support a major portion of the preclinical
work being conducted by the Company, together with its
collaboration partner, MSK, to develop a novel PET imaging agent
for detection and assessment of pancreatic cancer. The total
contract amount for Phase I and Phase II was approximately
$1,749,000. The Company recorded revenue associated with the NCI
PET Imaging Agent Grant as the related costs and expenses were
incurred. For the three and nine month periods ended September 30,
2017 the Company recorded no revenues associated with the NCI PET
Imaging Agent Grant, and during the same periods in 2016, the
Company recorded $0 and $148,054 of revenue associated with the NCI
PET Imaging Agent Grant, respectively.
11.
Commitments and contingencies
Capital Leases
On
March 21, 2016, the Company entered into a lease agreement with
ThermoFisher Scientific (“Lessor”). Under
the terms of the agreement, the Company agreed to lease two pieces
of equipment from the Lessor, a liquid chromatography system and an
incubator, totaling in cost of $95,656. The term of the
lease is five years (60 months), and the monthly lease payment is
$1,867. In addition, there is a $1.00 buyout option at the end of
the lease term.
Minimum
future annual capital lease obligations are as follows as of
September 30, 2017:
2017
(remaining)
|
$5,601
|
2018
|
22,402
|
2019
|
22,402
|
2020
|
22,402
|
2021
|
7,467
|
Less
interest
|
(12,379)
|
Principal
|
67,895
|
Less
current portion
|
(17,447)
|
Noncurrent
portion
|
$50,448
|
Operating Leases
In
connection with the Merger, the Company recorded a $590,504
contingent lease termination fee, in connection with the
termination by MabVax (f.k.a. Telik, Inc.) of the master lease and
sublease of 3165 Porter Drive in Palo Alto, California, which is
payable to ARE-San Francisco No. 24, if the Company receives $15
million or more in additional financing in the aggregate. The
additional financing was achieved in 2015 and the termination fee
is reflected on the condensed consolidated balance sheet as an
accrued lease contingency fee.
On September 2, 2015, the Company
entered into a lease (the
“Lease”) with AGP Sorrento Business Complex, L.P., for
certain premises of office and laboratory space in buildings
located at 11535 Sorrento Valley Rd., San Diego, California, to
serve as the Company’s corporate offices and laboratories
(the “New Premises”). Because certain tenant
improvements needed to be made to the New Premises before the
Company could take occupancy, the term of the Lease did not
commence until the New Premises were ready for occupancy, which was
on February 4, 2016. The Lease terminates six years
after such term commencement date, unless earlier terminated in
accordance with the Lease. Pursuant to the terms of the Lease, the
monthly base rent is $35,631, subject to annual increases as set
forth in the Lease. Effective March 1, 2017, the monthly base rent
increased to $36,700.
The
Company has an option to extend the Lease term for a single,
five-year period. If the Lease term is extended for the
optional five-year period, the monthly base rent will be adjusted
based on fair market rental value. In addition to rent,
the Company agreed to pay a portion of the taxes and utility,
maintenance and other operating costs paid or accrued in connection
with the ownership and operation of the property.
During the three
and nine months ended September 30, 2017, the Company recorded rent
expense of $115,238 and $345,714, respectively, and during the
three and nine months ended September 30, 2016, the Company
recorded rent expense of $115,238 and $318,159,
respectively.
Minimum
future annual operating lease obligations are as follows as of
September 30, 2017:
2017
(remaining)
|
$110,100
|
2018
|
451,409
|
2019
|
464,951
|
2020
|
478,900
|
2021
|
493,267
|
Thereafter
|
82,612
|
Total
|
$2,081,239
|
12.
Subsequent Events
October 10, 2017 Registered Direct
Offering – On October 10, 2017, we entered into a
subscription agreement with select accredited investors relating to
the Company’s registered direct offering, issuance and sale
of 769,231 shares of the Company’s common stock, $0.01 par
value per share. The purchase price per share was $0.65. The total
amount of the subscription agreements amounted to $500,000, before
estimated expenses of $15,000.
October 16, 2017 Series L
Preferred Stock - On October
16, 2017, we filed a Certificate of Designations, Preferences and
Rights of the 0% Series L Convertible Preferred Stock (the
"Series L Certificate of Designation") with the Delaware
Secretary of State, designating 58,000 shares of preferred stock as
Series L convertible preferred stock (the “Series L Preferred
Stock”). On October 18, 2017, we filed a Certificate of
Correction to the Series L Certificate of Designation to include a
sentence that was inadvertently omitted.
The
shares of Series L Preferred Stock are convertible into shares of
common stock based on a conversion calculation equal to the stated
value of the Series L Preferred Stock, plus all accrued and unpaid
dividends, if any, on such Series L Preferred Stock, as of such
date of determination, divided by the conversion price. The stated
value of each share of Series L Preferred Stock is $100 and the
initial conversion price is $0.60 per share, each subject to
adjustment for stock splits, stock dividends, recapitalizations,
combinations, subdivisions or other similar events.
The
holders of Series L Preferred Stock will be entitled to receive
dividends if and when declared by our board of directors. The
Series L Preferred Stock shall participate on an “as
converted” basis, with all dividends declared on our common
stock. In addition, if the Company grants, issues or
sells any rights to purchase its securities pro rata to all record
holders of common stock, each holder will be entitled to acquire
such securities applicable to the granted purchase rights as if the
holder had held the number of shares of common stock acquirable
upon complete conversion of all Series L Preferred Stock then
held.
We
are prohibited from effecting a conversion of the Series L
Preferred Stock if the Company has not obtained stockholder
approval for the full conversion of the Series L Preferred Stock in
accordance with the rules of the NASDAQ Capital Market or to
the extent that, as a result of such conversion, the holder would
beneficially own more than 4.99% of the number of shares of common
stock outstanding immediately after giving effect to the issuance
of shares of common stock upon conversion of the Series L Preferred
Stock, which beneficial ownership limitation may be increased by
the holder up to, but not exceeding, 9.99%. Each holder is entitled
to vote on all matters submitted to stockholders of the Company,
and shall have the number of votes equal to the number of shares of
common stock issuable upon conversion of such holder’s Series
L Preferred Stock, substituting the consolidated closing bid
price of the common stock on October 13, 2017, for the
then-applicable conversion price, and not in excess of the
beneficial ownership limitations or limitations required by the
rules and regulations of the NASDAQ Capital Market.
Holders
of Series L Preferred Stock will be entitled to a preferential
payment of cash per share equal to the greater of 100% of the base
amount on the date of payment or the amount per share had the
holders converted such preferred shares immediately prior to the
date of payment upon the liquidation, dissolution or winding up of
the affairs of the Company, or a consolidation or merger of the
Company with or into any other corporation or corporations, or a
sale of all or substantially all of the assets of the Company, or
the effectuation by the Company of a transaction or series of
transactions in which more than 50% of the voting shares of the
Company is disposed of or conveyed.
October 18, 2017 Preferred Stock Exchange Agreement
– On October 18, 2017, we entered into exchange agreements
(each, an “Exchange Agreement” and collectively, the
“Exchange Agreements”) with the holders of all of the
Company’s outstanding shares of Series F Preferred Stock,
Series G Preferred Stock and Series H Preferred Stock, pursuant to
which 665,281 shares of Series F Preferred Stock, 1,000,000 shares
of Series G Preferred Stock and 850 shares of Series H Preferred
Stock were exchanged for 58,000 newly authorized shares of Series L
Preferred Stock. The Company agreed to hold a special meeting of
shareholders to approve the issuance of the Series L Preferred
Stock and shares of common stock issuable upon conversion of the
Series L Preferred Stock (the “Conversion Shares”). The
special meeting has been scheduled for November 22,
2017.
The terms of the
Exchange Agreements and Series L Preferred Stock were determined by
negotiation between the parties. No commission or other payment was
received by the Company in connection with the Exchange Agreements.
Such exchange was conducted pursuant to the exemption provided by
Section 3(a)(9) of the Securities Act, and Series L Preferred
Stock issuable pursuant to the Exchange Agreements and the
Conversion Shares will be issued in reliance on the exemption from
registration contained in Section 3(a)(9) of the Securities
Act.
Pursuant to a
registration rights agreement entered into between the Company and
the Holders on October 18, 2017, the Company agreed to use its
reasonable best efforts to file a registration statement
registering the Conversion Shares for resale within 10 days of
closing and cause the registration statement to be declared
effective within 30 days of filing. On October 25, 2017, we filed a
registration statement with the SEC, which was within 10 days of
closing. The registration statement is currently under review by
the SEC.
Restricted Stock Grants
– During the month of October
2017, we issued an aggregate of 415,000 shares of restricted common
stock valued at $306,650 based on the closing market prices ranging
from $0.63 to $0.78, depending on the date of issuance, to
different investor relations services firms or individuals in
connection with providing investor relations services to the
Company. All of the shares were fully vested on the date of
issuance.
To the Board of Directors and Stockholders
MabVax Therapeutics Holdings, Inc.
We have audited the accompanying consolidated balance sheets of
MabVax Therapeutics Holdings, Inc. (the “Company”) as
of December 31, 2016 and 2015, and the related consolidated
statements of operations, redeemable convertible preferred stock,
convertible preferred stock and stockholders’ equity, and
cash flows for the years then ended. MabVax Therapeutics Holdings,
Inc.’s management is responsible for these consolidated
financial statements. Our responsibility is to express an opinion
on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of MabVax Therapeutics Holdings, Inc. as of
December 31, 2016 and 2015, and the results of its operations
and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of
America.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the consolidated financial
statements, the Company has incurred recurring operating losses and
is dependent on additional financing to fund operations. These
conditions raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans in
regard to these matters are described in Note 1 to the consolidated
financial statements. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/ CohnReznick LLP
San Diego, California
March 1, 2017
MABVAX THERAPEUTICS
HOLDINGS, INC.
Consolidated Balance
Sheets
|
December 31,
|
|
|
2016
|
2015
|
Assets
|
|
|
Current
assets:
|
|
|
Cash
and cash equivalents
|
$3,979,290
|
$4,084,085
|
Grants
receivable
|
—
|
757,562
|
Prepaid
expenses
|
281,858
|
419,751
|
Other
current assets
|
32,830
|
47,586
|
Total
current assets
|
4,293,978
|
5,308,984
|
Property
and equipment, net
|
731,712
|
135,486
|
Goodwill
|
6,826,003
|
6,826,003
|
Other
long-term assets
|
168,597
|
126,654
|
Total
assets
|
$12,020,290
|
$12,397,127
|
Liabilities and Stockholders’ Equity
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$1,137,903
|
$3,002,497
|
Accrued
compensation
|
770,592
|
562,755
|
Accrued
clinical operations and site costs
|
1,218,641
|
391,041
|
Accrued
lease contingency fee
|
590,504
|
590,504
|
Other
accrued expenses
|
315,034
|
411,566
|
Interest
payable
|
51,295
|
—
|
Current
portion of notes payable
|
1,589,661
|
—
|
Current
portion of capital lease payable
|
17,004
|
—
|
Total
current liabilities
|
5,690,634
|
4,958,363
|
|
|
|
Long-term
liabilities:
|
|
|
Long-term
portion of notes payable, net
|
2,774,627
|
—
|
Long-term
portion of capital lease payable
|
68,113
|
—
|
Other
long-term liabilities
|
144,394
|
—
|
Total
long-term liabilities
|
2,987,134
|
—
|
Total
liabilities
|
8,677,768
|
4,958,363
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
Series
D convertible preferred stock, $0.01 par value, 1,000,000 shares
authorized, 132,489 and 191,490 shares issued and outstanding as of
December 31, 2016 and 2015, respectively, with liquidation
preference of $1,325 and $1,915 as of December 31, 2016 and 2015,
respectively
|
1,325
|
1,915
|
Series
E convertible preferred stock, $0.01 par value, 100,000 shares
authorized, 33,333 shares issued and outstanding as of
December 31, 2016 and 2015, with a liquidation preference of
$333 as of December 31, 2016 and 2015
|
333
|
333
|
Series
F convertible preferred stock, $0.01 par value, 1,559,252 shares
authorized, 665,281 shares and none issued and outstanding,
with a liquidation preference of $6,653 and none as of December 31,
2016 and 2015, respectively
|
6,653
|
—
|
Common
stock, $0.01 par value; 150,000,000 shares authorized, 6,296,110
and 3,836,631 shares issued and outstanding as of December 31,
2016 and 2015, respectively
|
62,961
|
38,366
|
Additional
paid-in capital
|
81,533,511
|
67,999,928
|
Accumulated
deficit
|
(78,262,261)
|
(60,601,778)
|
Total
stockholders’ equity
|
3,342,522
|
7,438,764
|
Total
liabilities and stockholders’ equity
|
$12,020,290
|
$12,397,127
|
See Accompanying Notes to Consolidated Financial
Statements.
MABVAX THERAPEUTICS HOLDINGS,
INC.
Consolidated Statements of Operations
|
For the Years Ended December 31,
|
|
|
2016
|
2015
|
Revenues:
|
|
|
Grants
|
$148,054
|
$1,267,036
|
Total
revenues
|
148,054
|
1,267,036
|
|
|
|
Operating
costs and expenses:
|
|
|
Research
and development
|
7,800,723
|
9,596,768
|
General
and administrative
|
9,010,450
|
9,795,163
|
Total
operating costs and expenses
|
16,811,173
|
19,391,931
|
Loss
from operations
|
(16,663,119)
|
(18,124,895)
|
Interest
and other expenses, net of income
|
(997,364)
|
(227)
|
Change
in fair value of warrant liability
|
—
|
19,807
|
Net
loss
|
(17,660,483)
|
(18,105,315)
|
Deemed
dividend on Series A-1 preferred stock
|
—
|
(9,017,512)
|
Deemed
dividend on Series A-1 warrant
|
—
|
(179,411)
|
Deemed
dividend on Series B preferred stock
|
—
|
(8,655,998)
|
Accretion
of preferred stock dividends
|
—
|
(93,234)
|
Net
loss allocable to common stockholders
|
$(17,660,483)
|
$(36,051,470)
|
Basic
and diluted net loss per share
|
$(3.64)
|
$(13.44)
|
Shares
used to calculate basic and diluted net loss per share
|
4,857,753
|
2,681,740
|
See Accompanying Notes to Consolidated Financial
Statements.
MABVAX THERAPEUTICS HOLDINGS,
INC.
Consolidated Statements of Redeemable Convertible Preferred Stock,
Convertible Preferred Stock and Stockholders’ Equity
|
Redeemable Convertible Preferred Stock
|
Convertible Preferred Stock
|
|||||
|
MabVax Series B
|
|
MabVax Series A-1
|
MabVax Series C
|
|||
|
Shares
|
Amount
|
Total
|
Shares
|
Amount
|
Shares
|
Amount
|
Balance at December 31, 2014
|
$1,250,000
|
$1,838,025
|
1,838,025
|
1,593,389
|
$4,029,576
|
96,571
|
$966
|
Conversion
of Series A-1 into common stock on January 10 and February 25,
2015
|
—
|
—
|
—
|
(64,019)
|
(162,968)
|
—
|
—
|
Conversion
of Series C into common stock on January 10, 2015
|
—
|
—
|
—
|
—
|
—
|
(96,571)
|
(966)
|
Conversion
of Series B into common stock between March 3 and March 20,
2015
|
(106,437)
|
(160,380)
|
(160,380)
|
—
|
—
|
—
|
—
|
Accretion
of redemption value for Series A-1 from January 1 to March 25,
2015
|
—
|
—
|
—
|
—
|
47,749
|
—
|
—
|
Accretion
of redemption value for Series B from January 1 to March 25,
2015
|
—
|
45,485
|
45,485
|
—
|
—
|
—
|
—
|
Deemed
dividend related to exchange of common stock for Series A-1, Series
A-1 Warrants, and Series B on March 25, 2015
|
—
|
8,655,998
|
8,655,998
|
—
|
9,196,923
|
—
|
—
|
Exchange
of Series A-1 and Series A-1 Warrants into common and Series D
on March 25, 2015
|
—
|
—
|
—
|
(1,529,370)
|
(13,111,280)
|
—
|
—
|
Exchange
of Series B into Common and Series D on March 25, 2015
|
(1,143,563)
|
(10,379,128)
|
(10,379,128)
|
—
|
—
|
—
|
—
|
Private
Placement Issuance of 900,136 shares at $5.55 per share, net of
issuance costs of $281,023 on March 31, 2015
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Issuance
of additional common stock in March 2015 under common stock
Purchase Agreement in relation to financing on July 7,
2014
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Private
Placement Issuance of 760,135 shares at $5.55 per share, net of
issuance costs of $387,127 on April 10, 2015
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Private
Placement Issuance of 33,333 shares at $75 per share of Series E
Preferred Stock on April 10, 2015
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Issuance
of restricted common stock in April 2015 for services
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Issuance
of restricted common stock to former board member on April 3, 2015
upon termination
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Conversion
of Series D Preferred Stock to common stock
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Stock
option exercise
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Shares
issued in connection with exercise of warrants on a cashless
basis
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Elimination
of warrant liability in exchange transaction
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Stock-based
compensation
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
See Accompanying Notes to Consolidated Financial
Statements.
MABVAX THERAPEUTICS HOLDINGS,
INC.
Consolidated Statements of Redeemable Convertible Preferred Stock,
Convertible Preferred Stock and Stockholders’
Equity
|
Redeemable Convertible Preferred Stock
|
Convertible Preferred Stock
|
|||||
|
MabVax Series B
|
|
MabVax Series A-1
|
MabVax Series C
|
|||
|
Shares
|
Amount
|
Total
|
Shares
|
Amount
|
Shares
|
Amount
|
Balance at December 31, 2015
|
—
|
$—
|
$—
|
—
|
$—
|
—
|
$—
|
Issuance
of warrants in connection with note payable transaction on January
15, 2016
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Issuance
of whole in lieu of fractional shares resulting from reverse split
in August 2016
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Issuance
of Series F convertible preferred stock, warrants and common stock
in August public offering, net of $871,305 in issuance
costs
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Issuance
of additional common stock related to April 2015
financing
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Stock
issued for services
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Conversion of
Series D Preferred Stock to common stock
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Stock
issued upon vesting of restricted stock units in April, July and
August of 2016, net of payroll taxes
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Stock-based
compensation
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Balance at December 31, 2016
|
—
|
$—
|
—
|
$—
|
—
|
|
$—
|
See Accompanying Notes to Consolidated Financial
Statements.
MABVAX THERAPEUTICS HOLDINGS,
INC.
Consolidated Statements of Redeemable Convertible Preferred Stock,
Convertible Preferred Stock and Stockholders’
Equity
Total
Stockholders’
Equity
|
Series D, E & F
Convertible
Preferred
Stock
|
Common
Stock
|
Additional
Paid-in
|
Accumulated
|
Total Stockholders'
|
||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
Balance at December 31, 2014
|
—
|
—
|
378,766
|
3,787
|
24,516,692
|
(24,550,308)
|
4,000,713
|
Conversion
of Series A-1 into common stock on January 10 and February 25,
2015
|
—
|
—
|
5,197
|
52
|
162,916
|
—
|
—
|
Conversion
of Series C into common stock on January 10, 2015
|
—
|
—
|
16,313
|
163
|
803
|
—
|
—
|
Conversion
of Series B into common stock between March 3 and March 20,
2015
|
—
|
—
|
37,416
|
374
|
160,006
|
—
|
160,380
|
Accretion
of redemption value for Series A-1 from January 1 to March 25,
2015
|
—
|
—
|
—
|
—
|
—
|
(47,749)
|
—
|
Accretion
of redemption value for Series B from January 1 to March 25,
2015
|
—
|
—
|
—
|
—
|
—
|
(45,485)
|
(45,485)
|
Deemed
dividend related to exchange of common stock for Series A-1, Series
A-1 Warrants, and Series B on March 25, 2015
|
—
|
—
|
—
|
—
|
—
|
(17,852,921)
|
(8,655,998)
|
Exchange
of Series A-1 and Series A-1 Warrants into common and Series D
on March 25, 2015
|
117,582
|
1,176
|
299,108
|
2,991
|
13,107,113
|
—
|
—
|
Exchange
of Series B into common and Series D on March 25, 2015
|
120,573
|
1,206
|
43,797
|
438
|
10,377,484
|
—
|
10,379,128
|
Private
Placement Issuance of 900,135 shares at $5.55 per share, net of
issuance costs of $281,023 on March 31, 2015
|
—
|
—
|
900,135
|
9,001
|
4,705,525
|
—
|
4,714,726
|
Issuance
of additional common stock in March 2015 under common stock
Purchase Agreement in relation to financing on July 7,
2014
|
—
|
—
|
11,904
|
119
|
(119)
|
—
|
—
|
Private
Placement Issuance of 760,135 shares at $5.55 per share, net of
issuance costs of $387,127 on April 10, 2015
|
—
|
—
|
760,135
|
7,601
|
3,824,021
|
—
|
3,831,622
|
Private
Placement Issuance of 33,333 shares at $75 per share of Series E
Preferred Stock on April 10, 2015
|
33,333
|
333
|
—
|
—
|
2,499,667
|
—
|
2,500,000
|
Issuance
of restricted common stock in April 2015 for services
|
—
|
—
|
247,500
|
2,476
|
1,909,974
|
—
|
1,912,450
|
Issuance
of restricted common stock to former board member on April 3, 2015
upon termination
|
—
|
—
|
2,703
|
27
|
45,973
|
—
|
46,000
|
Conversion
of Series D Preferred Stock to common stock
|
(46,665)
|
(467)
|
630,608
|
6,306
|
(5,839)
|
—
|
—
|
Stock
option exercise
|
—
|
—
|
376
|
4
|
796
|
—
|
800
|
Shares
issued in connection with exercise of warrants on a cashless
basis
|
—
|
—
|
164,835
|
1,648
|
(1,648)
|
—
|
—
|
Elimination
of warrant liability in exchange transaction
|
—
|
—
|
—
|
—
|
72,656
|
—
|
72,656
|
Issuance
of shares in registered offering in October 2015, net of issuance
costs
|
—
|
—
|
337,838
|
3,379
|
2,160,013
|
—
|
2,163,392
|
Stock-based
compensation
|
—
|
—
|
—
|
—
|
4,463,695
|
—
|
4,463,695
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(18,105,315)
|
(18,105,315)
|
See Accompanying Notes to Consolidated Financial
Statements.
MABVAX THERAPEUTICS HOLDINGS, INC.
Consolidated Statements of Redeemable Convertible Preferred Stock,
Convertible Preferred Stock and Stockholders’
Equity
|
Series D, E & F
Convertible
Preferred
Stock
|
Common Stock
|
Additional
Paid-in
|
Accumulated
|
Total
Stockholders’
|
||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
Balance at December 31, 2015
|
224,823
|
2,248
|
3,836,631
|
38,366
|
67,999,928
|
(60,601,778)
|
7,438,764
|
Issuance
of warrants in connection with note payable transaction on January
15, 2016
|
—
|
—
|
—
|
—
|
607,338
|
—
|
607,338
|
Issuance
of whole in lieu of fractional shares resulting from reverse split
in August 2016
|
—
|
—
|
2,426
|
24
|
(24)
|
—
|
—
|
Issuance
of Series F convertible preferred stock, warrants and common stock
in August public offering, net of $871,305 in issuance
costs
|
665,281
|
6,653
|
1,297,038
|
12,970
|
8,547,825
|
—
|
8,567,448
|
Issuance
of additional common stock related to April 2015
financing
|
—
|
—
|
255,459
|
2,555
|
(2,555)
|
—
|
—
|
Stock
issued for services
|
—
|
—
|
35,644
|
356
|
163,644
|
—
|
164,000
|
Conversion of
Series D Preferred Stock to common stock
|
(59,001)
|
(590)
|
797,312
|
7,974
|
(7,384)
|
—
|
—
|
Stock
issued upon vesting of restricted stock units in April, July and
August of 2016, net of payroll taxes
|
—
|
—
|
71,600
|
716
|
(178,539)
|
—
|
(177,823)
|
Stock-based
compensation
|
—
|
—
|
—
|
—
|
4,403,278
|
—
|
4,403,278
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(17,660,483)
|
(17,660,483)
|
Balance at December 31, 2016
|
831,103
|
$8,311
|
6,296,110
|
$62,961
|
$81,533,511
|
$(78,262,261)
|
$3,342,522
|
See Accompanying Notes to Consolidated Financial
Statements.
MABVAX THERAPEUTICS HOLDINGS, INC.
Consolidated Statements of Cash Flows
|
|
For the Years Ended December 31,
|
|
|||||
|
|
2016
|
|
|
2015
|
|
||
Operating activities
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(17,660,483
|
)
|
|
$
|
(18,105,315
|
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
96,553
|
|
|
|
21,360
|
|
Stock-based
compensation
|
|
|
4,403,278
|
|
|
|
4,463,695
|
|
Change
in fair value of warrants
|
|
|
—
|
|
|
|
(19,807
|
)
|
Issuance
of restricted common stock for services
|
|
|
164,000
|
|
|
|
1,958,450
|
|
Amortization
and accretion related to notes payable
|
|
|
413,676
|
|
|
|
—
|
|
Increase
(decrease) in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Grants
receivable
|
|
|
757,562
|
|
|
|
(673,218
|
)
|
Other
receivables
|
|
|
—
|
|
|
|
2,275
|
|
Prepaid
expenses and other
|
|
|
340,187
|
|
|
|
(199,377
|
)
|
Accounts
payable
|
|
|
(1,898,520
|
)
|
|
|
1,631,305
|
|
Accrued
clinical operations and site costs
|
|
|
827,600
|
|
|
|
(103,069
|
)
|
Accrued
compensation
|
|
|
207,837
|
|
|
|
332,374
|
|
Other
accrued expenses
|
|
|
(15,101
|
)
|
|
|
166,145
|
|
Net
cash used in operating activities
|
|
|
(12,363,411
|
)
|
|
|
(10,525,182
|
)
|
Investing activities
|
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
(563,196
|
)
|
|
|
(78,416
|
)
|
Net
cash used in investing activities
|
|
|
(563,196
|
)
|
|
|
(78,416
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
Issuances
of preferred stock, net of issuance costs
|
|
|
—
|
|
|
|
2,500,000
|
|
Proceeds
from exercise of stock options
|
|
|
—
|
|
|
|
800
|
|
Principal
payments on financed insurance policies
|
|
|
(167,597
|
)
|
|
|
—
|
|
Principal
payments on capital lease
|
|
|
(10,540
|
)
|
|
|
—
|
|
Purchase
of vested employee stock in connection with tax withholding
obligation
|
|
|
(177,823
|
)
|
|
|
—
|
|
Cash
receipts from bank loan, net of financing costs
|
|
|
4,610,324
|
|
|
|
—
|
|
Proceeds
from issuance of preferred stock, common stock and warrants, net of
issuance costs
|
|
|
8,567,448
|
|
|
|
10,709,740
|
|
Net
cash provided by financing activities
|
|
|
12,821,812
|
|
|
|
13,210,540
|
|
Net
change in cash and cash equivalents
|
|
|
(104,795
|
)
|
|
|
2,606,942
|
|
Cash
and cash equivalents at beginning of year
|
|
|
4,084,085
|
|
|
|
1,477,143
|
|
Cash
and cash equivalents at end of year
|
|
$
|
3,979,290
|
|
|
$
|
4,084,085
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash
paid during the year for income taxes
|
|
$
|
24,626
|
|
|
$
|
1,600
|
|
Supplemental disclosures of non-cash investing and financing
information:
|
|
|
|
|
|
|
|
|
Deemed
dividend on beneficial conversion feature for preferred
stock
|
|
$
|
—
|
|
|
$
|
17,852,921
|
|
Capital
lease in connection with purchase of equipment
|
|
$
|
95,657
|
|
|
$
|
—
|
|
Fair
value of warrants issued
|
|
$
|
607,338
|
|
|
$
|
—
|
|
Accretion
of redemption value for Series A-1 and B preferred
stock
|
|
$
|
—
|
|
|
$
|
93,234
|
|
Conversion
of Series B redeemable preferred stock into common
stock
|
|
$
|
—
|
|
|
$
|
160,380
|
|
Conversion
of Series D preferred stock into common stock
|
|
$
|
7,974
|
|
|
$
|
6,306
|
|
Conversion
of Series A-1 preferred stock into common stock
|
|
$
|
—
|
|
|
$
|
162,968
|
|
Exchange
of Series A-1 preferred stock and warrants to common stock and
Series D convertible preferred stock
|
|
$
|
—
|
|
|
$
|
13,111,280
|
|
Exchange
of Series B preferred stock and warrants to common stock and Series
D convertible preferred stock
|
|
$
|
—
|
|
|
$
|
10,451,784
|
|
Warrants
exercised to purchase common stock on a cashless basis
|
|
$
|
—
|
|
|
$
|
12,198
|
|
Elimination
of warrant liability in exchange transaction
|
|
$
|
—
|
|
|
$
|
72,656
|
|
Financing
transaction not yet paid
|
|
$
|
—
|
|
|
$
|
36,570
|
|
Conversion
of Series C preferred stock to common stock
|
|
$
|
—
|
|
|
$
|
966
|
|
Property and equipment
accrued in accounts payable
|
|
$
|
33,934
|
|
|
$
|
21,376
|
|
See Accompanying Notes to Consolidated Financial
Statements.
MABVAX THERAPEUTICS HOLDINGS, INC.
Notes to Consolidated Financial
Statements
1. Nature of Operations and Basis of Presentation
MabVax Therapeutics Holdings, Inc. (f.k.a. Telik, Inc. and referred
to herein as “MabVax Therapeutics Holdings” or the
“Company”) (NASDAQ: MBVX) was incorporated in the state
of Delaware on October 20, 1988. On July 8, 2014, Tacoma
Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of MabVax Therapeutics Holdings (“Tacoma
Corp.”) merged with MabVax Therapeutics, Inc., a Delaware
corporation (“MabVax Therapeutics”) pursuant to an
Agreement and Plan of Merger, dated May 12, 2014, by and among
MabVax Therapeutics Holdings, Tacoma Corp. and MabVax Therapeutics,
as amended by that certain Amendment No. 1 to the Merger
Agreement, dated June 30, 2014, by and among the parties
thereto and by that certain Amendment No. 2 to the Merger
Agreement, dated July 7, 2014, by and among the parties
thereto (such agreement as amended, the “Merger
Agreement”; such Merger, the “Merger”). Unless
the context otherwise requires, references to “we,”
“our,” “us,” or the “Company”
in this Annual Report mean MabVax Therapeutics Holdings, Inc. on a
consolidated financial statement basis with our wholly owned
subsidiary following the Merger, MabVax Therapeutics, as
applicable. On October 9, 2014, the Financial Industry
Regulatory Authority (FINRA) approved
the Company’s stock symbol change request and the Company
began trading on the OTCQB under the symbol MBVX on October 10,
2014. On August 17, 2016, our common stock began trading on the
NASDAQ Capital Market under the symbol
“MBVX.”
On
August 16, 2016, we filed a certificate of amendment to our Amended
and Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware in order to effectuate a reverse
stock split of our issued and outstanding common stock on a 1 for
7.4 basis, effective on August 16, 2016 (the “Reverse Stock
Split”). The Reverse Stock Split was effective with FINRA and
the Company’s common stock began trading on the NASDAQ
Capital Market at the open of business on August 17, 2016.
All share and per share amounts, and
number of shares of common stock into which each share of preferred
stock will convert, in the financial statements and notes hereto
have been retroactively adjusted for all periods presented to give
effect to the Reverse Stock Split, including reclassifying an
amount equal to the reduction in par value of common stock to
additional paid-in capital.
The Company is a clinical stage biopharmaceutical company engaged
in the discovery, development and commercialization of proprietary
human monoclonal antibody products and vaccines for the treatment
of a variety of cancers. The Company has discovered a pipeline of
human monoclonal antibody products based on the protective immune
responses generated by patients who have been immunized against
targeted cancers. Therapeutic vaccines under development were
discovered at Memorial Sloan Kettering Cancer Center
(“MSK”) and are exclusively licensed to MabVax
Therapeutics. The Company operates in only one business
segment.
The Company has incurred net losses since inception and expects to
incur substantial losses for the foreseeable future as it continues
its research and development activities. To date, the Company has
funded operations primarily through government grants, the sale of
preferred stock and equity securities, debt financing, non-equity
payments from collaborators and interest income. The process of
developing products will require significant additional research
and development, preclinical testing and clinical trials, as well
as regulatory approvals. The Company expects these activities,
together with general and administrative expenses, to result in
substantial operating losses for the foreseeable future. The
Company will not receive substantial revenue unless the Company or
its collaborative partners complete clinical trials, obtain
regulatory approvals and successfully commercialize one or more
products; or the Company licenses its technology after achieving
one or more milestones of interest to a potential
partner.
The
preparation of consolidated financial statements in conformity with
GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of
expenses during the reporting period. Management believes that
these estimates are reasonable; however, actual results may differ
from these estimates.
Liquidity and Going Concern
The accompanying consolidated financial statements have been
prepared on the going concern basis, which assumes that the Company
will continue to operate as a going concern and which contemplates
the realization of assets and the satisfaction of liabilities and
commitments in the normal course of business. As reflected in the
accompanying consolidated financial statements, the Company had a
net loss of $17,660,483, net cash used in operating activities of
$12,363,411 and net cash used in investing activities of $563,196
for the year ended December 31, 2016. As of December 31,
2016, the Company had $3,979,290 in cash and cash equivalents and
an accumulated deficit of $78,262,261.
On
January 15, 2016, the Company and Oxford Finance LLC, as collateral
agent and lender, entered into a loan and security agreement (the
“Loan Agreement”) providing for senior secured term
loans to the Company in an aggregate principal amount of up to
$10,000,000, subject to the terms and conditions set forth in the
Loan Agreement (the “January 2016 Term
Loan”). On January 15, 2016, the Company received
an initial loan of $5,000,000 under the Loan Agreement, before fees
and issuance costs of approximately $390,000.
On
August 22, 2016, we closed a public offering of 1,297,038 shares of
common stock and 665,281 shares of Series F Preferred Stock, and
warrants to purchase 1,962,319 shares of common stock at $5.55 per
share and warrants to purchase 1,962,319 shares of common stock at
$6.29 per share, at an offering price of $4.81 per share (the
“August 2016 Public Offering”). For every one
share of common stock or Series F Preferred Stock sold, we issued
one warrant to purchase one share of common stock at $5.55 per
share and one warrant to purchase one share of common stock at
$6.29 per share. We received $9,438,753 in gross proceeds,
before underwriting discounts and commissions and offering expenses
totaling $871,305. The gross proceeds include the
underwriters’ over-allotment option, which they exercised on
the closing date.
We
anticipate that the Company will continue to incur net losses into
the foreseeable future as we: (i) continue our Phase I clinical
trial for our standalone therapeutic HuMab 5b-1, designated as
MVT-5873 that was initiated in the first quarter of 2016; (ii)
continue our Positron Emission Tomography (“PET”)
imaging agent 89Zr-HuMab-5B1, designated as MVT-2163 that was
initiated in July 2016; (iii) initiate our clinical trial for the
development of our HuMab-based radioimmunotherapy product,
designated as MVT-1075; (iv) continue preclinical work on several
other programs; and (iv) continue operations as a public
company. Management believes that the Company has sufficient funds
to meet its obligations through April 2017. These conditions give
rise to substantial doubt as to the Company’s ability to
continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
We
plan to continue to fund the Company’s losses from operations
and capital funding needs through equity or debt financings,
strategic collaborations, licensing arrangements, government grants
or other arrangements. However, we cannot be sure that such
additional funds will be available on reasonable terms, or at all.
If we are unable to secure adequate additional funding, we may be
forced to make reductions in spending, extend payment terms with
suppliers, liquidate assets where possible, and/or suspend or
curtail planned programs. In addition, if the Company does not meet
its payment obligations to third parties as they come due, it may
be subject to litigation claims. Even if we are successful in
defending against these claims, litigation could result in
substantial costs and be a distraction to management. Any of these
actions could materially harm the Company’s business, results
of operations, and future prospects.
If
the Company raises additional funds by issuing equity securities,
substantial dilution to existing stockholders would result. If the
Company raises additional funds by incurring debt financing, the
terms of the debt may involve significant cash payment obligations
as well as covenants and specific financial ratios that may
restrict the Company’s ability to operate its
business.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements reflect all of
our activities, including those of our wholly owned subsidiaries.
All material intercompany accounts and transactions have been
eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America (“GAAP”) requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
expenses during the reporting period. Management believes that
these estimates are reasonable; however, actual results may differ
from these estimates.
Cash and Cash Equivalents
We consider all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. The
Company minimizes its credit risk associated with cash and cash
equivalents by periodically evaluating the credit quality of its
primary financial institution. The balance at times may exceed
federally insured limits. As of December 31, 2016, cash and cash
equivalents exceeded federally insured limits by approximately $3.7
million. The Company has not experienced any losses on such
accounts.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash
equivalents, grants receivable, other receivable, accounts payable,
all of which are generally considered to be representative of their
respective fair values because of the short-term nature of those
instruments.
Grants Receivable
Grants receivable at December 31, 2015 represented amounts due
under the NIH Imaging Contract Phase II with the National Cancer
Institute (the “NCI”), a division of the National
Institutes of Health, or NIH (collectively, the “NIH
Grants”). The Company considers the grants receivable to be
fully collectible; accordingly, no allowance for doubtful accounts
has been established. Grants receivable balances may include
unbilled amounts for which work was completed by the Company as of
the balance sheet date. If amounts become uncollectible, they are
charged to operations. There were no grant receivable amounts
outstanding as of December 31, 2016,
Property and Equipment
Property and equipment are carried at cost less accumulated
depreciation. Depreciation of property and equipment is computed
using the straight-line method over the estimated useful lives of
the assets, which are generally three to seven years. Leasehold
improvements are amortized over the lesser of the life of the lease
or the life of the asset.
Impairment of Long-lived Assets
We evaluate the Company’s long-lived assets with definite
lives, such as property and equipment, for impairment. We record
impairment losses on long-lived assets used for operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
carrying value of the assets. There have not been any impairment
losses of long-lived assets for the years ended December 31,
2016 and 2015.
Impairment of Goodwill
The
Company applies the GAAP principles related to Intangibles –
Goodwill and Other related to performing a test for
goodwill impairment annually. For the years ended December 31, 2016
and 2015, the Company performed a step 1 analysis and assessed the
market value of the Company to determine whether an impairment had
taken place. Based upon the analysis performed no impairment was
noted, therefore performing step 2 was not required. The Company
has concluded that no impairment of Goodwill has taken place for
the years ended December 31, 2016 and 2015. Further, in performing
a qualitative assessment, the Company concluded no events and
circumstances have taken place that would have indicated that an
impairment had taken place.
Revenue Recognition
Revenue from grants is based upon internal and subcontractor costs
incurred that are specifically covered by the grant, including a
facilities and administrative rate that provides funding for
overhead expenses. NIH Grants are recognized when the Company
incurs internal expenses that are specifically related to each
grant, in clinical trials at the clinical trial sites, by
subcontractors who manage the clinical trials, and provided the
grant has been approved for payment. The Company records revenue
associated with the NIH Grants as the related costs and expenses
are incurred. Any amounts received by the Company pursuant to the
NIH Grants prior to satisfying the Company’s revenue
recognition criteria are recorded as deferred revenue.
Research and Development Costs
Research and development expenses, which consist primarily of
salaries and other personnel costs, clinical trial costs and
preclinical study fees, manufacturing costs for non-commercial
products, and the development of earlier-stage programs and
technologies, are expensed as incurred when these expenditures have
no alternative future uses. A significant portion of the
development activities are outsourced to third parties, including
contract research organizations. In such cases, the Company may be
required to estimate related service fees incurred.
Stock-based Compensation
The Company’s stock-based compensation programs include
grants of common stock and stock options to employees, non-employee
directors and non-employee consultants. Stock-based compensation
cost is measured at the grant date, based on the calculated fair
value of the award, and is recognized as an expense, under the
straight-line method, over the employee’s requisite service
period (generally the vesting period of the equity
grant).
The Company accounts for equity instruments, including common stock
and stock options, issued to non-employees in accordance with
authoritative guidance for equity based payments to non-employees.
Stock options issued to non-employees are accounted for at their
estimated fair value determined using the Black-Scholes-Merton
option-pricing model. The fair value of options granted to
non-employees is re-measured as they vest, and the resulting
increase in value, if any, is recognized as expense during the
period the related services are rendered.
Income Taxes
The Company uses the asset and liability method of accounting for
income taxes. Deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to basis
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.
As of December 31, 2016 and 2015, all deferred tax assets were
fully offset by a valuation allowance.
The Company accrues interest and penalties, if any, on underpayment
of income taxes related to unrecognized tax benefits as a component
of income tax expense in its consolidated statements of
operations.
Fair Value Measurements
Level 1 fair value inputs are quoted prices for identical items in
active, liquid and visible markets such as stock exchanges.
Level 2 fair value inputs are observable information for
similar items in active or inactive markets, and appropriately
consider counterparty creditworthiness in the valuations. Level 3
fair value inputs reflect our best estimate of inputs and
assumptions market participants would use in pricing an asset or
liability at the measurement date. The inputs are unobservable in
the market and significant to the valuation estimate.
3. Recent Accounting Pronouncements
In November 2015, the FASB issued Accounting Standards Update No.
2015-17, Income Taxes. Current GAAP requires an entity to separate
deferred income tax liabilities and assets into current and
noncurrent amounts in a classified balance sheet. The new standard
simplifies the presentation of deferred tax assets and liabilities
and requires that deferred tax assets and liabilities be classified
as noncurrent in a classified balance sheet. This ASU is effective
for financial statements issued for fiscal years beginning after
December 15, 2015, with early adoption permitted. This ASU affected
our disclosures relating to deferred tax assets and liabilities.
The Company has applied this guidance prospectively and it did not
have a material impact on the consolidated balance
sheets.
In February 2016, the FASB issued ASU 2016-2,"Leases (Topic
842)." This update will increase transparency and
comparability by recognizing lease assets and lease liabilities on
the balance sheet and disclosing key information about leasing
arrangements. Under the new guidance, lessees will be
required to recognize the following for all leases (with the
exception of short-term leases) at the commencement date (i) a
lease liability, which is a lessee’s obligation to make lease
payments arising from a lease, measured on a discounted basis; and
(ii) a right-of-use asset, which is an asset that represents the
lessee’s right to use, or control the use of, a specified
asset for the lease term. Under the new guidance, lessor accounting
is largely unchanged, and it simplified the accounting for sale and
leaseback transactions. Lessees will no longer be provided with a
source of off-balance sheet financing. Lessees (for capital and
operating leases) and lessors (for sales-type, direct financing,
and operating leases) must apply a modified retrospective
transition approach for leases existing at, or entered into after,
the beginning of the earliest comparative period presented in the
financial statements. The modified retrospective approach would not
require any transition accounting for leases that expired before
the earliest comparative period presented. Lessees and lessors may
not apply a full retrospective transition approach. The standard is
effective for fiscal years beginning after December 15, 2018,
including interim periods within those fiscal years. We are
currently in the process of assessing what impact this new standard
may have on our consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09,
“Compensation—Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting.”
This update includes multiple provisions intended to simplify
various aspects of the accounting for share-based payment
transactions including accounting for excess tax benefits and tax
deficiencies, classification of excess tax benefits in the
statement of cash flows and accounting for award forfeitures. This
update is effective for annual and interim reporting periods of
public entities beginning after December 15, 2016, with early
adoption permitted. We do not expect the adoption of this
new standard to have a material impact on our consolidated
financial statements.
In
August 2016, the FASB issued ASU No. 2016-15 (“ASU
2016-15”), “Statement of Cash Flows (Topic 230):
Classification of Certain Cash Receipts and Cash Payments.”
The standard provides guidance on eight (8) cash flow issues: (1)
debt prepayment or debt extinguishment costs; (2) settlement of
zero-coupon bonds; (3) contingent consideration payments after a
business combination; (4) proceeds from the settlement of insurance
claims; (5) proceeds from the settlement of corporate-owned life
insurance policies; (6) distributions received from equity method
investees; (7) beneficial interests in securitization transactions;
and (8) separately identifiable cash flows and application of the
predominance principle. ASU 2016-15 addresses how certain cash
receipts and cash payments are presented and classified in the
statement of cash flows. ASU 2016-15 is effective for fiscal years,
and interim periods within those years, beginning after December
15, 2017 with early adoption permitted. We do not expect the
adoption of this new standard to have a material impact on our
consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-15 ("ASU
2014-15"), “Disclosure of Uncertainties about an
Entity’s Ability to Continue as a Going Concern.”
This standard provides guidance on management’s
responsibility in evaluating whether there is substantial doubt
about a company’s ability to continue as a going
concern and to provide related footnote disclosures. ASU No.
2014-15 is effective for fiscal years ending after December 15,
2016 and for interim and annual periods therein with early adoption
permitted. The adoption of this new standard did not have a
material impact on our consolidated financial
statements.
Management does not believe that any other recently issued, but not
yet effective, accounting standards if currently adopted would have
a material effect on the accompanying consolidated financial
statements.
4. Property and Equipment, Net
Property and equipment consisted of the following as of
December 31, 2016 and 2015:
|
December 31,
|
|
|
2016
|
2015
|
Furniture
and fixtures
|
$51,909
|
$8,979
|
Office
equipment
|
52,547
|
52,547
|
Lab
equipment
|
894,942
|
400,301
|
Capital
lease equipment
|
95,657
|
—
|
Leasehold
improvement
|
59,555
|
—
|
|
1,154,610
|
461,827
|
Less
accumulated depreciation and amortization
|
(422,898)
|
(326,341)
|
Totals
|
$731,712
|
$135,486
|
Depreciation expense for the years ended December 31, 2016 and
2015 was $96,553 and $21,360, respectively.
5. Reverse Stock Split
On
August 16, 2016, we filed a certificate of amendment to our Amended
and Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware in order to effectuate a reverse
stock split of our issued and outstanding common stock on a 1 for
7.4 basis, effective on August 16, 2016 (the “Reverse Stock
Split”). The Reverse Stock Split was effective with FINRA and
the Company’s common stock began trading on the NASDAQ
Capital Market at the open of business on August 17, 2016.
All share and per share amounts, and
number of shares of common stock into which each share of preferred
stock will convert, in the financial statements and notes hereto
have been retroactively adjusted for all periods presented to give
effect to the Reverse Stock Split, including reclassifying an
amount equal to the reduction in par value of common stock to
additional paid-in capital.
6. Notes Payable, Net
On
January 15, 2016, we entered into a loan and security agreement
with Oxford Finance LLC pursuant to which we had the option to
borrow $10,000,000 in two equal tranches of $5,000,000 each (the
“Loan Agreement”). The first tranche of
$5,000,000 was funded at close on January 15, 2016 (the “Term
A Loan”). The option to fund the second tranche of $5,000,000
(the “Term B Loan”) was upon the Company achieving
positive interim data on the Phase 1 HuMab-5B1 antibody trial in
pancreatic cancer and successfully uplisting to either the NASDAQ
Capital Market or NYSE MKT on or before September 30,
2016. The option for the Term B Loan expired on
September 30, 2016. The Company is not pursuing completion of any
additional debt financing with Oxford Finance LLC at the present
time. The interest rate for the Term A Loan is set on a monthly
basis at a rate equal to the greater of: the index rate plus
11.29%, where the index rate is the 30-day LIBOR rate; or 11.5%.
Interest is due on the first day of each month, in arrears,
calculated based on a 360-day year. The loan is interest
only for the first year after funding, and the principal amount of
the loan is amortized in equal principal payments, plus period
interest, over the next 36 months. A facility fee of
1.0% or $100,000 was due at closing of the transaction, and was
incurred and paid by the Company on January 15,
2016. The Company is obligated to pay a $150,000 final
payment upon completion of the term of the loan, and this amount is
being accreted using the effective interest rate method over the
term of the loan. The amount being accreted is included in the
long-term portion of notes payable, net, on the balance sheet Each
of the term loans can be prepaid subject to a graduated prepayment
fee, depending on the timing of the prepayment.
Concurrent
with the closing of the transaction, the Company issued 225,226
common stock purchase warrants to Oxford Finance LLC with an
exercise price of $5.55 per share. The warrants are
exercisable for five years and may be exercised on a cashless
basis, and expire on January 15, 2021. The Company recorded
$607,338 for the fair value of the warrants as a debt discount
within notes payable and an increase to additional paid-in capital
on the Company’s balance sheet. We used the
Black-Scholes-Merton valuation method to calculate the value of the
warrants. The debt discount is being amortized as interest expense
over the term of the loan using the effective interest
method.
We
granted Oxford Finance LLC a perfected first priority lien on all
of the Company’s assets with a negative pledge on
intellectual property. The Company paid Oxford Finance LLC a good
faith deposit of $50,000, which was applied towards the facility
fee at closing. The Company agreed to pay all costs,
fees and expenses incurred by Oxford Finance LLC in the initiation
and administration of the facilities including the cost of loan
documentation.
At
the initial funding, the Company received net proceeds of
approximately $4,610,000 after fees and expenses. These fees and
expenses are being accounted for as a debt discount and classified
within notes payable on the Company’s consolidated balance
sheet as a direct deduction from the carrying amount of the notes
payable, consistent with debt discounts. Debt discounts, issuance
costs and the final payment are being amortized or accreted as
interest expense over the term of the loan using the effective
interest method.
The
Loan Agreement also contains customary indemnification obligations
and customary events of default, including, among other things, our
failure to fulfill certain of the Company's obligations under the
Loan Agreement, the occurrence of a material adverse change, which
is defined as a material adverse change in the Company's business,
operations, or condition (financial or otherwise), a material
impairment of the prospect of repayment of any portion of the loan,
or a material impairment in the perfection or priority of the
Lenders’ lien in the collateral or in the value of such
collateral. In the event of default by the Company under the
Loan Agreement, the Lenders would be entitled to exercise their
remedies thereunder, including the right to accelerate payment of
the debt, upon which we may be required to repay all amounts then
outstanding under the Loan Agreement, which could harm the
Company's financial condition.
The
Company was in compliance with all applicable covenants set forth
in the Loan Agreement as of December 31, 2016.
The
Company recorded interest expense related to the term loan of
$997,389 for the year ended December 31, 2016. The annual effective
interest rate on the note payable, including the amortization of
the debt discounts and accretion of the final payment, but
excluding the warrant amortization, is approximately
12.4%.
As
of December 31, 2016, the Company has one insurance premium
note outstanding with a balance totaling $61,883, which
matures in April 2017. This note bears interest at a
rate of 4.5% per annum, and the monthly payments are
$20,783.
Future
principal payments under the Loan Agreement and insurance premium
note as of December 31, 2016 are as follows:
Years
ending December 31:
|
|
2017
|
$1,589,661
|
2018
|
1,666,667
|
2019
|
1,666,667
|
2020
|
138,889
|
Notes
payable, balance as of December 31, 2016
|
5,061,884
|
Unamortized
discount on notes payable
|
(697,596)
|
Notes
payable, net, balance as of December 31, 2016
|
4,364,288
|
Current
portion of notes payable, net
|
(1,589,661)
|
Long-term
portion of notes payable, net
|
$2,774,627
|
7. Redeemable Convertible Preferred Stock, Convertible Preferred
Stock, Common Stock and Warrants
MabVax Therapeutics Holdings Series B Redeemable Convertible
Preferred Stock and Warrants (Pre-Merger MabVax Therapeutics
Issuances)
On May 12, 2014, MabVax Therapeutics Holdings entered into a
securities purchase agreement with certain purchasers pursuant to
which MabVax Therapeutics Holdings agreed to issue and sell,
subject to customary closing conditions, an aggregate of 1,250,000
shares of MabVax Therapeutics Series B Preferred Stock and warrants
(the “Series B Common Warrants”) to purchase up to an
additional 10,557 shares of MabVax Therapeutics Holdings common
stock, with an aggregate purchase price of $2,500,000, or $2.00 for
each share of our Series B Preferred Stock and related Series B
Common Warrants.
As a result of the Series B Common Warrants’ anti-dilution
provision, the Series B Common Warrants were recorded as a current
liability in the amount of $92,463 on our consolidated balance
sheet as of December 31, 2014. On March 25, 2015, the Series B
Common Warrants were re-valued at $72,656 prior to being exchanged
into shares of common stock and Series D Preferred Stock and the
warrant liability was eliminated and the Company recorded a gain of
$19,807 for the year ended December 31, 2015.
The changes in the value of the warrant liability during the year
ended December 31, 2015 were as follows:
Fair
value – beginning of year
|
$92,463
|
Change
in fair value
|
(19,807)
|
Cancellation
of warrants
|
(72,656)
|
Fair
value – end of year
|
$—
|
At December 31, 2016 and 2015, there were no financial instruments
requiring fair value measurement.
Dividends on Preferred Stock
The Company immediately recognizes the changes in the redemption
value on preferred stock as they occur and the carrying value of
the security is adjusted to equal what the redemption amount would
be as if redemption were to occur at the end of the reporting
period based on the conditions that exist as of that date. The
value adjustment made to the redemption value and preferred stock
dividends on the Series A-1 Preferred Stock and Series B Preferred
Stock for the year ended December 31, 2016 and 2015, was an
increase of none and $93,234, respectively.
Since
the Company’s inception, no dividends were ever declared or
paid by the Company’s Board of Directors on either of the
Company’s Series A Preferred Stock or Series B Preferred
Stock.
Conversion of Preferred Stock into Common Stock
During
quarter ended March 31, 2015, holders of Series A-1 Preferred
Stock, Series B Preferred Stock, and Series C Preferred Stock
converted 64,019, 106,437, and 96,571 shares into 5,197, 37,417,
and 16,313 shares of common stock, respectively; such conversions
eliminated all outstanding Series A-1 Preferred Stock, Series B
Preferred Stock, and Series C Preferred Stock
outstanding.
Exchange of Series A-1 Preferred
Stock and Series B Preferred Stock and Warrants into Common Stock
and Series D Preferred Stock
On
March 25, 2015, the Company entered into separate exchange
agreements with certain holders of the Company’s Series A-1
Preferred Stock and Merger warrants (the “Series A-1 Exchange
Securities”) and holders of the Company’s Series B
Preferred Stock and Series B warrants (the “Series B Exchange
Securities” and, collectively with the Series A-1 Exchange
Securities, the “Exchange Securities”), all previously
issued by the Company. Pursuant to the exchange agreements, the
holders exchanged the Exchange Securities and relinquished any and
all other rights they may have had pursuant to the Exchange
Securities, their respective governing agreements and certificates
of designation, including any related registration rights, in
exchange for an aggregate of 342,906 shares of the Company’s
common stock and an aggregate of 238,156 shares of the
Company’s newly designated Series D Preferred Stock ,
convertible into 3,218,325 shares of common stock. No
cash was exchanged in the transaction. The Company
recorded deemed dividends of $9,017,512, $8,655,998 and $179,411
representing the excess fair value of the common stock issued over
the original conversion terms of the Series A-1 Preferred Stock and
B Preferred Stock as part of the consideration for elimination of
the Series A-1 Preferred Stock, Series B Preferred Stock and Series
A-1 warrant, respectively.
As
of March 25, 2015, pursuant to the terms of the exchange
agreements, the Series A-1 Purchase Agreement, dated February 12,
2014; the Series A-1 Registration Rights Agreement, dated February
12, 2014; the Series B Purchase Agreement, dated May 12, 2014; and
the Series B Registration Rights Agreement, dated May 12, 2014; all
of which have been described as part of the Company’s annual
report on Form 10-K, were terminated, and all rights covenants,
agreements and obligations contained therein, are of no further
force or effect.
No commission or other payment was received by the Company in
connection with the exchange agreements.
Series D Preferred Stock
As
of December 31, 2016, there were 132,489 shares of Series D
Preferred Stock issued and outstanding that are convertible into an
aggregate of 1,790,392 shares of common stock, as compared to
191,490 that were convertible into 2,587,703 shares of common stock
as of December 31, 2015.
As contemplated by the exchange agreements and as approved by the
Company’s Board of Directors, the Company filed with the
Secretary of State of the State of Delaware a Certificate of
Designation of Preferences, Rights and Limitations of Series D
Convertible Preferred Stock (the “Series D Certificate of
Designations”), on March 25, 2015. Pursuant to the
Series D Certificate of Designations, the Company designated
1,000,000 shares of its blank check preferred stock as Series D
Preferred Stock. Each share of Series D Preferred Stock has a
stated value of $0.01 per share. In the event of a
liquidation, dissolution or winding up of the Company, each share
of Series D Preferred Stock will be entitled to a per share
preferential payment equal to the par value. Each share of Series D
Preferred Stock is convertible into 13.5135 shares of common
stock. The conversion ratio is subject to adjustment in the
event of stock splits, stock dividends, combination of shares and
similar recapitalization transactions. The Company is
prohibited from effecting the conversion of the Series D Preferred
Stock to the extent that, as a result of such conversion, the
holder beneficially would own more than 4.99% (provided that
certain investors elected to block their beneficial ownership
initially at 2.49% in the exchange agreements), in the aggregate,
of the issued and outstanding shares of the Company’s common
stock calculated immediately after giving effect to the issuance of
shares of common stock upon the conversion of the Series D
Preferred Stock. Each share of Series D Preferred Stock
entitles the holder to vote on all matters voted on by holders of
common stock. With respect to any such vote, each share of Series D
Preferred Stock entitles the holder to cast such number of votes
equal to the number of shares of common stock such shares of Series
D Preferred Stock are convertible into at such time, but not in
excess of the beneficial ownership limitations.
Series E Preferred Stock
As
of December 31, 2016 and December 31, 2015, there were 33,333
shares of Series E Preferred Stock issued and outstanding,
convertible into 519,751 and 450,446 shares of common stock,
respectively.
On
March 30, 2015, the Company filed with the Secretary of State of
the State of Delaware a Certificate of Designation of Preferences,
Rights and Limitations of Series E Convertible Preferred Stock (the
“Series E Certificate of Designations”) to designate
100,000 shares of its blank check preferred stock as Series E
Preferred Stock.
The
shares of Series E Preferred Stock are convertible into shares of
common stock based on a conversion calculation equal to the stated
value of such preferred share, plus all accrued and unpaid
dividends, if any, on such share of Series E Preferred Stock, as of
such date of determination, divided by the conversion price. The
stated value of each share of Series E Preferred Stock is $75 and
the initial conversion price is $5.55 per share, each subject to
adjustment for stock splits, stock dividends, recapitalizations,
combinations, subdivisions or other similar events. In addition,
during the period proscribed for in the Series E Certificate of
Designations, in the event the Company issues or sells, or is
deemed to issue or sell, shares of common stock at a per share
price that is less than the conversion price then in effect, the
conversion price shall be reduced to such lower price, subject to
certain exceptions. The Company is prohibited from effecting a
conversion of the share of Series E Preferred Stock to the extent
that, as a result of such conversion, such holder would
beneficially own more than 4.99% of the number of shares of common
stock outstanding immediately after giving effect to the issuance
of shares of common stock upon conversion of the Series E Preferred
Stock, which beneficial ownership limitation may be increased by
the holder up to, but not exceeding, 9.99%. Each holder is entitled
to vote on all matters submitted to stockholders of the Company,
and shall have the number of votes equal to the number of shares of
common stock issuable upon conversion of such holder’s share
of Series E Preferred Stock, but not in excess of beneficial
ownership limitations. The shares of Series E Preferred Stock bear
no interest.
On August 22, 2016, when the Company closed on the August 2016
Public Offering, the current Series E Preferred Stock conversion
price of $5.55 per share was reduced to $4.81 per share under the
terms of the Series E Certificate of Designations, resulting in an
increase in the number of shares of common stock to 519,751 that
the Series E Preferred Stock may be converted into. In the event of
a liquidation, dissolution or winding up of the Company, each share
of Series E preferred stock will be entitled to a per share
preferential payment equal to the stated value. There is no further
adjustment required by the Series E Certificate of Designations in
the event of an offering of shares below $4.81 per share by the
Company.
Series F Preferred Stock
As
of December 31, 2016 and December 31, 2015, there were 665,281 and
0 shares of Series F Preferred Stock issued and outstanding,
convertible into 665,281 and 0 shares of common stock,
respectively. In the event of a liquidation, dissolution or winding
up of the Company, each share of Series F Preferred Stock will be
entitled to a per share preferential payment equal to the par
value.
On
August 16, 2016, we filed a Certificate of Designations,
Preferences and Rights of the 0% Series F Convertible Preferred
Stock with the Delaware Secretary of State, designating 1,559,252
shares of preferred stock as 0% Series F Preferred Stock.
The
shares of Series F Preferred
Stock are convertible into shares of common stock based on a
conversion calculation equal to the stated value of such Series F
Preferred Stock, plus all
accrued and unpaid dividends, if any, on such Series F Preferred Stock, as of such date of
determination, divided by the conversion price. The stated value of
each share of Series F Preferred
Stock is $4.81 and the initial conversion price is $4.81 per
share, each subject to adjustment for stock splits, stock
dividends, recapitalizations, combinations, subdivisions or other
similar events. In the event of a liquidation, dissolution or
winding up of the Company, each share of Series F Preferred Stock will be entitled to a per
share preferential payment equal to the par value. All shares of
the Company’s capital stock will be junior in rank to Series
F Preferred Stock with respect
to the preferences as to dividends, distributions and payments upon
the liquidation, dissolution and winding-up of the Company, except
for the Company’s Series D Preferred Stock and Series E Preferred Stock.
The
holders of Series F Preferred
Stock will be entitled to receive dividends if and when
declared by our board of directors. The Series F Preferred Stock shall participate on an
“as converted” basis, with all dividends declared on
the Company’s common stock. In addition, if we grant, issue
or sell any rights to purchase our securities pro rata to all our
record holders of our common stock, each holder will be entitled to
acquire such securities applicable to the granted purchase rights
as if the holder had held the number of shares of common stock
acquirable upon complete conversion of all Series F Preferred Stock then held.
We are
prohibited from effecting a conversion of the Series F Preferred Stock to the extent that, as a
result of such conversion, the holder would beneficially own more
than 4.99% of the number of shares of common stock outstanding
immediately after giving effect to the issuance of shares of common
stock upon conversion of the Series F Preferred Stock, which beneficial ownership
limitation may be increased by the holder up to, but not exceeding,
9.99%. Each holder is entitled to vote on all matters submitted to
stockholders of the Company, and shall have the number of votes
equal to the number of shares of common stock issuable upon
conversion of such holder’s Series F Preferred Stock, but not in excess of the
beneficial ownership limitations.
April 2015 Private Placement
On
March 31, 2015, the Company consummated the first closing of a
private offering (the “April 2015 Private Placement”)
and sold $4,714,726 worth of units (the “Unit(s)”), net
of $281,023 in issuance costs. The Units consisted of 900,136
shares of common stock and warrants to purchase 450,068 shares of
common stock with an exercise price of $11.10 per
share. The Units were sold at a price of $5.55 per
Unit.
On
April 10, 2015, the Company consummated the second and final
closing of the April 2015 Private Placement and sold $3,831,622
worth of Units, net of $387,127 in issuance costs, of which
$2,500,000 of the Units consisted of Series E Preferred Stock and
the balance of it consisting of 760,135 shares of common stock,
together with warrants to all investors to purchase 605,293 shares
of common stock at $11.10 per share. Each Unit was sold
at a purchase price of $5.55 per Unit.
The
Company paid commissions to broker-dealers in the aggregate amount
of approximately $574,000 in the April 2015 Private
Placement.
OPKO
Health, Inc., or OPKO, was the lead investor in the April 2015
Private Placement, purchasing $2,500,000 worth of Units consisting
of Series E Preferred Stock.
As
a condition to OPKO’s and Frost Gama Investment
Trust’s, or FGIT’s, participation in the April 2015
Private Placement, each of the other investors in the April 2015
Private Placement agreed to execute lockup agreements restricting
the sale of 50% of the securities underlying the Units purchased by
them for a period of six months and the remaining 50% prior to the
expiration of one year following the final closing date of the
April 2015 Private Placement.
On
April 10, 2015, the Company agreed that $3.5 million of the net
proceeds of such closing would be paid into and held under the
terms of an escrow agreement with Signature Bank, N.A. pending the
approval of a representative of OPKO or 10 weeks thereafter, unless
released sooner or extended by the Company and OPKO. On
June 22, 2015, the Company and OPKO extended the termination date
of the escrow to 16 weeks from the final closing of the April 2015
Private Placement. In connection with the OPKO investment, Steven
Rubin, Esq. was appointed advisor to the Company. The escrowed
funds were to be returned to the applicable investors and the
Company shall have no further obligation to issue Units to such
investors in the event certain release conditions are not met. On
June 30, 2015, the Company and OPKO entered into a letter agreement
pursuant to which the Company granted the representative the right,
but not the obligation, until June 30, 2016, to nominate and
appoint up to two additional members of the Company’s Board
of Directors, or to approve the person(s) nominated by the Company
pursuant to the agreement in consideration for the release of the
escrowed funds. The nominees will be subject to the satisfaction of
standard corporate governance practices and any applicable national
securities exchange requirements. Upon signing the
agreement, the escrowed funds were released to the
Company.
The
warrants are exercisable upon issuance and expire October 10, 2017,
and may be exercised for cash or on a cashless basis. The warrants
have a per share exercise price of $11.10, subject to certain
adjustments including stock splits, dividends and reverse-splits.
The Company is prohibited from effecting the exercise of the
warrants to the extent that, as a result of such exercise, the
holder beneficially would own more than 4.99% in the aggregate, of
the issued and outstanding shares of the Company’s common
stock calculated immediately after giving effect to the issuance of
shares of common stock upon the exercise of the
warrants.
In
connection with the April 2015 Private Placement, the Company also
entered into registration rights agreements (the
“Registration Rights Agreements”) with the investors in
the April 2015 Private Placement pursuant to which the Company
agreed to file a registration statement with the SEC covering the
resale of 25% of common stock issued pursuant to the subscription
agreements including 25% of the common stock issuable upon
conversion of the Series E Preferred Stock, in the event the
investors elect to receive Series E Preferred Stock instead of
common stock (together, the “Registrable Securities”),
no later than 60 days following the final closing date of the April
2015 Private Placement, and to use its commercially reasonable best
efforts to have such registration statement declared effective
within 120 days after filing. Investors in the April 2015
Private Placement also may be required under certain circumstances
to agree to refrain from selling securities underlying the
purchased Units. The liquidated damages for failure to achieve
effectiveness of the Registerable Securities is 1% per month
beginning 120 days after filing, and provided management has not
used commercially reasonable best efforts to have the registration
statement declared effective within that time
frame.
On
June 9, 2015, the Company and investors holding over 60% of the
outstanding Registrable Securities entered into an amendment
agreement to the Registration Rights Agreements in order to extend
the filing date of the registration statement to waive any payments
that may be due to the investors as a result of the Company not
filing a registration statement on or before the original filing
date. On August 4, 2015, the Company and investors
holding over 70% of the outstanding Registrable Securities entered
into a second amendment agreement to further extend the filing date
to October 9, 2015.
On
October 12, 2015, the Company and investors holding over 60% of the
outstanding Registerable Securities entered into a third amendment
agreement to the Registration Rights Agreements to suspend the
Company’s registration obligations under the Registration
Rights Agreements and related subscription agreements during any
period when the “standstill” provision set forth in the
subscription agreements is in effect.
On
January 28, 2016, the Company filed a Registration Statement on
Form S-1, registering 527,680 shares of common stock for resale,
including 112,613 shares of common stock, which are issuable upon
conversion of the Company’s Series E Preferred Stock issued
in the April 2015 Private Placement.
Except
for certain issuances, for a period beginning on the closing date
of the April 2015 Private Placement and ending on the date that is
the earlier of (i) 24 months from the final closing date of the
April 2015 Private Placement, (ii) the date the Company consummates
a financing (excluding proceeds from the April 2015 Private
Placement) in which the Company receives gross proceeds of at least
$10,000,000 and (iii) the date the common stock is listed for
trading on a national securities exchange (such period until the
earlier date, the “Price Protection Period”), in the
event that the Company issues any shares of common stock or
securities convertible into common stock at a price per share or
conversion price or exercise price per share that is less than
$5.55, the Company shall issue to the investors in the April 2015
Private Placement such additional number of shares of common stock
such that the investor shall own an aggregate total number of
shares of common stock as if they had purchased the Units at the
price of the lower price issuance. No adjustment in the warrants is
required in connection with a lower price issuance.
Effective
with the Company’s entry into an agreement with the
underwriter for the Company’s August 2016 Public Offering,
which closed on August 22, 2016, the Company issued 255,459 shares
of common stock to the holders of record of the shares purchased in
the Company’s April 2015 Private Placement under the Price
Protection Period, representing the shares the investors would have
received had they purchased their shares at $4.81 per share,
instead of $5.55 per share. Effective August 17, 2016, the date of
listing of the Company’s stock on the
NASDAQ Capital Market, the Price Protection Period came to
an end.
The
Company has also granted each investor a right of participation in
the Company’s financings for a period of 24
months.
Between
April 13, 2015, and April 14, 2015, certain holders of warrants
issued in the April 2015 Private Placement to purchase an aggregate
of 250,000 shares of common stock exercised such warrants on a
cashless basis for an aggregate issuance of 164,835 shares of
common stock. As of December 31, 2016, there were 805,361 warrants
outstanding from the April 2015 Private Placement to purchase
common stock at $11.10 per share.
October 2015 Public Offering
On
October 5, 2015, the Company closed a public offering of 337,838
shares of common stock and warrants to purchase 168,919 shares of
common stock, at an offering price of $8.14 per share. For
every two shares of common stock sold, the Company issued one
warrant to purchase one share of common stock. The Company
received $2,750,000 in gross proceeds, before underwriting
discounts and commissions and offering expenses totaling
approximately $586,608, and without giving effect to any exercise
of the underwriters’ over-allotment option. The Company
used the net proceeds from this offering to fund the HuMab-5B1
human antibody program preclinical development and for
working capital and general corporate purposes.
The
shares and warrants were separately issued and sold in equal
proportions. The warrants are immediately exercisable, expire
September 30, 2018, and have an exercise price of $9.77 per
share. The warrants are not listed on any securities
exchange or other trading market. As of December 31,
2016, there were warrants to purchase 168,919 shares of common
stock outstanding. The Company granted the underwriters a 30-day
option to purchase up to an additional 50,676 shares of common
stock and up to an additional 25,338 warrants at the same price to
cover over-allotments, if any.
Under
the terms of the underwriting agreement entered into between the
Company and the underwriter in the public offering, the Company,
without the prior written consent of the underwriter, was
prohibited, for a period of 90 days after execution of the
underwriting agreement, from issuing any equity securities, subject
to certain exceptions.
August 2016 Public Offering
On
August 22, 2016, we closed a public offering of 1,297,038 shares of
common stock and 665,281 shares of Series F Preferred Stock
convertible into 665,281 shares of common stock, and warrants to
purchase 1,962,319 shares of common stock at $5.55 per share and
warrants to purchase 1,962,319 shares of common stock at $6.29 per
share, at an offering price of $4.81 per share. For every one
share of common stock or Series F Preferred Stock sold, we issued
one warrant to purchase one share of common stock at $5.55 per
share and one warrant to purchase one share of common stock at
$6.29 per share. We received $9,438,753 in gross proceeds,
before underwriting discounts and commissions and offering expenses
totaling $871,305. The gross proceeds include the
underwriter’s over-allotment option, which they exercised on
the closing date.
Issuance of Common Stock under a 2014 Common Stock Purchase
Agreement
In
connection with a financing by the Company in July 2014 (the
“July 2014 Financing Transaction”), the Company assumed
certain obligations as per the original agreement to issue
additional shares to investors in the July 2014 Financing
Transaction if a subsequent financing or issuance of shares was at
a price per share lower than the price per share in the July 2014
Financing Transaction. The Company issued on March 31, 2015, an
aggregate of 11,904 shares of common stock that were required to be
issued in connection with the July 2014 Financing Transaction as a
result of the issuance of shares at a lower share price than in the
July 2014 Financing Transaction.
Grant of Restricted Shares
Rubin Grant
On April 3, 2015, the Company entered into a consulting agreement
with Steve Rubin pursuant to which he agreed to provide advisory
services in connection with corporate strategy, licensing and
business development estimated to be for a period of 12
months. In exchange for his services, the Company
provided him with a one-time grant of 27,027 shares of the
Company’s restricted common stock, valued at $17.02 per
share. As the shares granted were fully vested upon
grant and the Company has no legal recourse to recover the shares
in the event of nonperformance, the Company recognized the grant
date fair value of the shares as consulting expense upon grant
during the second quarter of 2015.
Ravetch Grant
On
April 4, 2015, the Board of Directors approved the issuance of an
additional restricted stock award of 17,770 shares to Jeffrey
Ravetch, M.D., Ph. D, who is one of the Company’s board
members. This award is for future services covering at
least a one-year period. The award was granted in addition to the
prior award to Dr. Ravetch on April 2, 2015 of (i) 4,628 restricted
shares and (ii) options to purchase 4,628 shares of common stock
with an exercise price of $17.02 per share, for a total grant of
27,028 restricted shares and options. As the 17,770 shares granted
were fully vested upon grant and the Company has no legal recourse
to recover the shares in the event of nonperformance, the Company
recognized the grant date fair value of the shares as consulting
expense upon grant during the second quarter of 2015.
Livingston Grant
On
April 4, 2015, the Board of Directors approved the issuance of a
restricted stock award by the Company of 135,135 shares of common
stock, valued at $17.02 per share, to Philip Livingston, Ph.D. for
his continuing service to the Company. On May 13, 2015,
the Compensation Committee of the Board of Directors clarified that
the award was being granted in consideration for at least one year
of Dr. Livingston’s services. The committee
further clarified that the vesting of the common stock shall be on
the one-year anniversary of the Board of Directors’ approval
of the award, or April 4, 2016. The Company expensed the
grant date fair value of the award over the vesting period of one
year.
Consultant Grants
On
April 5, 2015, the Company entered into consulting agreements with
two investor relations consultants to provide relations services to
the Company in consideration for an immediate grant of 40,541
shares of the Company’s restricted common stock and a monthly
cash retainer of $12,000 a month for ongoing services for a period
of one year. The consultants also received an additional 27,027
shares of the Company’s restricted common stock upon the
Company’s achieving a milestone based on its fully-diluted
market capitalization. As the shares granted were fully vested upon
grant and the Company has no legal recourse to recover the shares
in the event of nonperformance, the Company recognized the grant
date fair value of the 40,541 shares or $690,000, as investor
relations expense upon grant during the second quarter of 2015. The
performance condition for the 27,027 shares became probable and the
market capitalization metric was met during the second quarter;
therefore, the Company recognized an additional $460,000 of expense
during the second quarter of 2015.
Also
during 2015, the Board of Directors approved the issuance of
restricted stock awards to two other consultants totaling 16,217
shares with vesting terms ranging from one to three years, valued
from $13.10 to $15.76 per share. The Company is
expensing each of the grant date fair value of the awards over the
performance period for the award, which will be re-measured at the
end of each quarter until the performance is complete. As of
December 31, 2016, the Company expensed $32,569 related to these
grants. As of December 31, 2016, the expected future compensation
expense related to these grants is $24,571 based upon the
Company’s stock price on December 31, 2016.
On
January 13, 2016, the Board of Directors approved the issuance of
13,514 shares of restricted stock valued at $64,000 to a consultant
for advisory services to the Company that was fully recognized upon
issuance.
On
September 1, 2016, the Board of Directors approved the issuance of
22,130 shares of common stock with a date of issuance fair value of
$100,000 to an investor relations consulting firm. In exchange for
the shares granted and a monthly retainer, the consulting firm will
perform investor relations services on behalf of the Company. As
the shares granted were fully vested upon grant and the Company has
no legal recourse to recover the shares in the event of
nonperformance, the Company recognized the grant date fair value of
the 22,130 shares of $100,000 as investor relations expense upon
grant during the third quarter of 2016.
8. Related Party Transactions
On November 3, 2016, the Company granted 17,500 stock options to
Jeffrey Ravetch, M.D., Ph.D., a Board member, for his ongoing
consulting services to the Company. The option award vests over a
three-year period.
On April 1, 2016, the Company entered into a two-year consulting
agreement with Jeffrey Ravetch, M.D., Ph.D., a Board member, for
work beginning January 1, 2016 through December 31, 2017, at a rate
of $100,000 a year, in support of scientific and technical advice
on the discovery and development of technology and products for the
Company primarily related to monoclonal antibodies, corporate
development, and corporate partnering efforts. In April
2016, the Company paid Dr. Ravetch $100,000 for services to be
performed in 2016, and will pay quarterly thereafter beginning
January 1, 2017.
In April 2015, the Company granted a restricted stock award of
135,135 shares to Phil Livingston, Ph.D., an employee and Board
member, for his continuing services to the Company. In
addition, in April 2015, the Company has granted a restricted stock
award of 17,770 shares for Jeffrey Ravetch, M.D., Ph.D., a Board
member, for consulting services.
9. Stock-based Compensation
Stock Incentive Plan
In
September 2008, the Company’s stockholders approved the 2008
Stock Incentive Plan (the “2008 Plan”) which became
effective in September 2008 and under which 8,853 shares of the
Company’s common stock were initially reserved for issuance
to employees, non-employee directors and consultants of the
Company. In November 2012, the Company increased the authorized
shares under the plan to 21,067. On February 14, 2013, the
2008 Plan terminated and no further grants of equity may be made
thereunder.
In
June 2014, MabVax Therapeutics Inc.’s stockholders approved
the amended 2014 Stock Incentive Plan (the “2014 Plan”)
which became effective and was adopted by the Company in the Merger
in July 2014. The 2014 Plan authorized the issuance of up to 47,493
shares, 20,543 of which are contingent upon the forfeiture,
expiration or cancellation of the 2008 Reserved
Shares.
The
2014 Plan provided for the grant of incentive stock options,
non-incentive stock options, stock appreciation rights, restricted
stock awards, and restricted stock unit awards to eligible
recipients. The maximum term of options granted under the Stock
Plan is ten years.
Employee option grants generally vest 25% on the first anniversary
of the original vesting date, and the balance vests monthly over
the following three years. The vesting schedules for grants to
non-employee directors and consultants is determined by the
Company’s Compensation Committee. Stock options are generally
not exercisable prior to the applicable vesting date, unless
otherwise accelerated under the terms of the applicable stock plan
agreement.
Amendment of Equity Incentive Plan
On March 31, 2015, the Company approved a Second Amended and
Restated 2014 Employee, Director and Consultant Equity Incentive
Plan (the “Plan”), effective as of and contingent upon
the consummation of the initial closing of the April Private
Placement, to increase the number of shares reserved for issuance
under the Plan from 21,361 to 1,129,837 shares of common stock.
Additional changes to the Plan include:
●
An “evergreen” provision to reserve additional shares
for issuance under the Plan on an annual basis commencing on the
first day of fiscal 2016 and ending on the second day of fiscal
2024, such that the number of shares that may be issued under the
Plan shall be increased by an amount equal to the lesser of: (i)
1,081,082 or the equivalent of such number of shares after the
administrator, in its sole discretion, has interpreted the effect
of any stock split, stock dividend, combination, recapitalization
or similar transaction in accordance with the Plan; (ii) the number
of shares necessary such that the total shares reserved under the
Plan equals (x) 15% of the number of outstanding shares of
common stock on such date (assuming the conversion of all
outstanding shares of Preferred Stock (as defined in the Plan) and
other outstanding convertible securities and exercise of all
outstanding warrants to purchase common stock) plus
(y) 30,946; and (iii) an amount determined by the
Board.
●
Provision that no more than 405,406 shares may be granted to any
participant in any fiscal year.
●
Provisions to allow for performance based equity awards to be
issued by the Company in accordance with Section 162(m) of the
Internal Revenue Code.
●
On September 22,
2016, the Board of Directors ratified an automatic increase in the
number of shares reserved for issuance under the Plan, increasing
the total shares reserved from 1,129,837 to 1,208,307 shares of
common stock, under the annual evergreen provision for the
Plan.
Stock-based Compensation
Total estimated stock-based compensation expense, related to all of
the Company’s stock-based payment awards recognized under ASC
718, “Compensation—Stock Compensation” and
ASC 505, “Equity” was comprised of the
following:
|
Years Ended December 31,
|
|
|
2016
|
2015
|
Research
and development
|
$1,192,126
|
$929,633
|
General
and administrative
|
3,211,152
|
3,534,062
|
Total
stock-based compensation expense
|
$4,403,278
|
$4,463,695
|
Stock-based Award Activity
The following table summarizes the Company’s stock option
activity for the years ended December 31, 2016 and
2015:
|
Options
Outstanding
|
Weighted
Average
Exercise Price
|
Outstanding
at December 31, 2014
|
32,823
|
$29.00
|
Granted
|
407,547
|
16.50
|
Exercised
|
(376)
|
2.15
|
Forfeited/cancelled/expired
|
(1,746)
|
54.91
|
Outstanding
and expected to vest at December 31, 2015
|
438,248
|
$17.46
|
Granted
|
449,542
|
5.13
|
Exercised
|
—
|
—
|
Forfeited/cancelled/expired
|
(36,415)
|
15.28
|
Outstanding
and expected to vest at December 31, 2016
|
851,375
|
$10.94
|
Vested
and exercisable at December 31, 2016
|
167,291
|
$17.29
|
The total unrecognized compensation cost related to unvested stock
option grants as of December 31, 2016 was $3,007,785 and the
weighted average period over which these grants are expected to
vest is 1.96 years. Due to limited activity in 2016, the Company
has assumed a forfeiture rate of zero. The weighted average
remaining contractual life of stock options outstanding at
December 31, 2016 and 2015 is 8.82 years and 9.13 years,
respectively.
Stock options granted to employees generally vest over a three-year
period with one third of the grants vesting at each one-year
anniversary of the grant date.
During 2016, the Company granted 449,542 options to its directors,
officers, employees with a weighted average exercise price of $5.13
and vesting over a three-year period with vesting starting at the
one-year anniversary of the grant date. During 2015,
there were 407,547 options and 310,926 shares of restricted stock
granted to directors, officers, employees and consultants from the
2014 Plan. During the year ended December 31, 2016,
105,448 shares of restricted stock units have vested and the
balance will vest in two equal installments on the anniversary of
the grant date over the next two years. During the year ended
December 31, 2016, the Company has recognized $1,628,405 in stock
based compensation expense related to restricted stock units. In
addition, the Company granted 250,203 shares of restricted stock
outside of the plan for consulting and investor relation services
during the second quarter of 2015.
A summary of activity related to restricted stock grants under the
Plan for the years December 31, 2016 and 2015 is presented
below:
|
Shares
|
Weighted Average Grant-Date Fair Value
|
Non-vested
at December 31, 2014
|
—
|
$—
|
Granted
|
310,926
|
16.84
|
Vested
|
—
|
—
|
Forfeited
|
—
|
—
|
Non-vested
at December 31, 2015
|
310,926
|
16.84
|
Granted
|
—
|
—
|
Vested
|
(105,448)
|
$16.84
|
Forfeited
|
—
|
—
|
Non-vested
at December 31, 2016
|
205,478
|
|
On
April 2 and April 3, 2016, 98,237 shares of restricted stock units
vested upon the one-year anniversary of restricted stock units
granted. Accordingly, 64,392 shares were issued to the
Company’s directors and officers, and the Company withheld
33,848 shares for the employee portion of taxes and remitted
$177,823 to the tax authorities in order to satisfy tax liabilities
related to this issuance on behalf of the officers. In
addition, in July and August of 2016, 7,208 shares were issued to
outside consultants upon vesting of previously issued restricted
stock units. As of December 31, 2016, there were
205,478 nonvested restricted stock units remaining
outstanding.
As of December 31, 2016 and 2015, unamortized compensation expense
related to restricted stock grants amounted to $2,214,859 and
$3,843,264, which is expected to be recognized over a weighted
average period of 1.27 and 2.27 years, respectively.
Valuation Assumptions
The Company used the Black-Scholes-Merton option valuation model,
or the Black-Scholes model, to determine the stock-based
compensation expense for stock options recognized under ASC 718 and
ASC 505. The Company’s expected stock-price volatility
assumption was based solely on the weighted average of the
historical and implied volatility of comparable companies whose
share prices are publicly available. 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 the
Company’s 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.
|
Years Ended December 31,
|
|
|
2016
|
2015
|
Risk-free
interest rate
|
0.9 to 1.4 %
|
0.9 to 1.8 %
|
Dividend
yield
|
0%
|
0%
|
Expected
volatility
|
71 to 86%
|
81 to 87%
|
Expected
life of options, in years
|
1.61 to 6.0
|
5.5 and
6.0
|
Weighted
average grant date fair value
|
$3.16
|
$1.56
|
Because the Company had a net operating loss carryforward as of
December 31, 2015 and 2016, no tax benefits for the tax
deductions related to stock-based compensation expense were
recognized in the Company’s consolidated statements of
operations. Additionally, there were 376 stock options exercised
during the year ended December 31, 2015, and there were no stock
option exercises in the corresponding period of 2016.
Management Bonus Plan
On April 2, 2015, the Compensation Committee of the Board of
Directors approved the 2015 Management Bonus Plan (the
“Management Plan”) outlining maximum target bonuses of
the base salaries of certain of the Company’s executive
officers. Under the terms of the Management Plan, the
Company’s Chief Executive Officer shall receive a maximum
target bonus of up to 50% of his annual base salary, the Chief
Financial Officer shall receive a maximum target bonus of up to 35%
of his annual base salary and the Company’s Vice President
shall receive a maximum target bonus of up to 25% of his annual
base salary. During the year ended December 31, 2016 and 2015, the
Company accrued and expensed $458,586 and $323,363, respectively
related to the Management Plan.
On April 4, 2015, the Board approved the following Non-Employee
Director Policy (the “Incumbent Director Policy”) with
respect to incumbent non-employee members of the Board in the event
that they are replaced before their term expires:
●
A one-time issuance of 2,703 restricted shares of common
stock;
●
The vesting of all options and restricted stock grants held on such
date; and
●
The payment of all earned but unpaid cash compensation for their
services on the Board and its committees, as of such
date.
On April 4, 2015, in connection with his resignation from the
Board, Michael Wick received a one-time restricted stock grant of
2,703 shares under the Incumbent Director Policy.
On
February 16, 2016, our Compensation Committee approved a 2016
Management Bonus Plan (the “2016 Management Plan”)
outlining maximum target bonuses of the base salaries of certain of
our executive officers. Under the terms of the 2016 Management
Plan, the Company's Chief Executive Officer shall receive a maximum
target bonus of up to 50% of his annual base salary, and the Chief
Financial Officer and each of the Company's Vice Presidents shall
receive a maximum target bonus of up to 30% of their annual base
salary.
On February 16, 2016, the Compensation Committee of the Board of
Directors of the Company approved the following
amendments to Company's policy for compensating non-employee
members of the Board:
●
The initial equity grant upon first appointment (or election) of
future non-employee directors to the Board shall be a 10-year
option to purchase 6,757 shares of the Company's common stock,
under the Company's Second Amended and Restated 2014 Equity
Incentive Plan with 3-year annual vesting and a strike price equal
the closing price of the Company's common stock on the effective
date of the appointment (or election);
●
The annual cash retainer for each non-employee director, paid
quarterly, is increased by $1,000 per calendar quarter to a total
of $7,000 per quarter, effective April 1, 2016; and
●
The additional annual cash retainer for the chairperson of each of
the Audit, Compensation, and Nominating and Governance Committees,
paid quarterly, is increased by $1,000 per calendar year, such that
each chairperson retainer shall be as follows, effective April 1,
2016: Audit Committee: $13,000; Compensation Committee: $9,000;
Nominating and Governance Committee: $6,000.
On
August 25, 2016, the Compensation Committee of the Board of
Directors of the Company approved the following amendments to
Company's policy for compensating non-employee members of the
Board:
●
The initial equity
grant upon first appointment (or election) of future non-employee
directors to the Board shall be a 10-year option to purchase 25,000
shares of the Company's common stock, under the Company's Second
Amended and Restated 2014 Equity Incentive Plan with 3-year annual
vesting and a strike price equal to the closing price of the
Company's common stock on the effective date of the appointment (or
election); and
●
The additional
automatic annual option grant to each non-employee director on the
date of the Company's annual meeting shall be a 10-year option to
purchase 17,500 shares of the Company's common stock, under the
Company's Second Amended and Restated 2014 Equity Incentive Plan
with 1-year vesting and a strike price equal to the closing price
of the Company's common stock on the date of the annual
meeting.
Common Stock Reserved for Future Issuance
Common stock reserved for future issuance consists of the following
at December 31, 2016:
Common
stock reserved for conversion of preferred stock and
warrants
|
8,099,568
|
Common
stock options outstanding
|
851,375
|
Authorized
for future grant or issuance under the Stock Plan
|
66,693
|
Unvested
restricted stock
|
205,478
|
Total
|
9,223,114
|
10. Net Loss per Share
The Company calculates basic and diluted net loss per share using
the weighted average number of shares of common stock outstanding
during the period.
When the Company is in a net loss position, it excludes from the
calculation of diluted net loss per share all potentially dilutive
stock options, preferred stock and warrants, and the diluted net
loss per share is the same as the basic net loss per share for such
periods. If the Company was to be in a net income position, the
weighted average number of shares used to calculate the diluted net
income per share would include the potential dilutive effect of
in-the-money securities, as determined using the treasury stock
method.
The table below presents the potentially dilutive securities that
would have been included in the calculation of diluted net loss per
share if they were not antidilutive for the periods
presented.
|
Years Ended December 31,
|
|
|
2016
|
2015
|
Stock
options
|
851,375
|
438,248
|
Preferred
stock
|
2,975,424
|
3,038,163
|
Unvested
restricted stock
|
205,478
|
310,926
|
Warrants
to purchase common stock
|
5,124,144
|
974,280
|
Total
|
9,156,421
|
4,761,617
|
11. Contracts and Agreements
Memorial Sloan Kettering Cancer Center, or MSK
Since 2008 the Company has engaged in various
research agreements and collaborations with MSK including licensed
rights to cancer vaccines and the blood samples from patients who
have been vaccinated with MSK’s cancer vaccines. Total
sponsored research contracts outstanding in 2016 amounting to
approximately $800,000 in 2016 were approximately 100% complete as
of the year ended December 31, 2016. Such sponsored research
agreements provide support for preclinical work on the
Company’s product development programs. The work includes
preparing radioimmunoconjugates of the Company’s antibodies
and performing in vitro and in vivo pharmacology studies for our therapeutic antibody
product, imaging agent product and radioimmunotherapy product
programs.
Life Technologies Licensing Agreement
On September 24, 2015, the Company entered into a licensing
agreement with Life Technologies Corporation (“Life
Technologies”), a subsidiary of ThermoFisher
Scientific. Under the agreement, MabVax agreed to
license certain cell lines from Life Technologies to be used in the
production of recombinant proteins for the Company’s clinical
trials. The amount of the contract is for $450,000 and
was fully expensed during the year ended December 31, 2015. In each
of the years ended December 31, 2015 and 2016, the Company paid
$225,000 and $225,000, respectively, related to this
contract.
Rockefeller University Collaboration
In July 2015, the Company entered into a research collaboration
agreement with Rockefeller University's Laboratory of Molecular
Genetics and Immunology. The Company provided antibody material to
Rockefeller University, which is exploring the mechanism of action
of constant region (Fc) variants of the HuMab-5B1 in the role of
tumor clearance. The Company will supply additional research
materials as requested by the university, which is evaluating ways
to optimize the function.
Patheon Biologics LLC Agreement
On
April 14, 2014, the Company entered into a development and
manufacturing services agreement (the “Services
Agreement”) with Patheon (f.k.a. Gallus Biopharmaceuticals)
to provide a full range of manufacturing and bioprocessing
services, including cell line development, process development,
protein production, cell culture, protein purification,
bio-analytical chemistry and quality control, or QC,
testing. Total amount of the contract is estimated at
approximately $3.0 million. For the years ended December
31, 2016 and 2015, the Company recorded $0 and $2,556,278 of
expense, respectively, associated with the Services Agreement.
During the third quarter of 2016, the Company negotiated a
reduction in the amount previously recorded and owed to Patheon
related to manufacturing batches that have failed, resulting in the
reduction in R&D expenses of approximately $363,000 during the
quarter.
NCI PET Imaging Agent Grant
In September 2013, the NCI awarded the Company a SBIR Program
Contract to support the Company’s program to develop a PET
imaging agent for pancreatic cancer using a fragment of the
Company’s HuMab-5B1 antibody (the “NCI PET Imaging
Agent Grant”). The project period for Phase I of the grant
award of approximately $250,000 covered a nine-month period which
commenced in September 2013 and ended in June 2014.
On August 25, 2014, the Company was awarded a $1.5 million
contract for the Phase II portion of the NCI PET Imaging Agent
Grant. The contract is intended to support a major portion of
the preclinical work being conducted by the Company, together with
its collaboration partner, MSK, to develop a novel Positron
Emission Tomography (“PET”) imaging agent for detection
and assessment of pancreatic cancer. The total contract amount for
Phase I and Phase II was approximately $1,749,000. The Company
recorded revenue associated with the NCI PET Imaging Agent Grant as
the related costs and expenses were incurred. For the years ended
December 31, 2016 and 2015, the Company recorded $148,054 and
$1,141,451 of revenue associated with the NCI PET Imaging Agent
Grant, respectively. No additional activities are required or
planned under the contract and all monies available under the
contract have been requested and received.
Juno Therapeutics Option Agreement
On
August 29, 2014, the Company entered into an option agreement (the
“Option Agreement”) with Juno Therapeutics, Inc.
(“Juno”) in exchange for a one-time up-front option fee
in the low five figures. Pursuant to the Option Agreement, the
Company granted Juno the option to obtain an exclusive, world-wide,
royalty-bearing license authorizing Juno to develop, make, have
made, use, import, have imported, sell, have sold, offer for sale
and otherwise exploit certain patents the Company developed with
respect to fully human antibodies with binding specificity against
human GD2 or sialyl-Lewis A antigens and certain Company controlled
biologic materials. As of June 30, 2016, the Option Agreement
expired and Juno no longer has a contractual right for use of
Company binding domains for use in the construction of CAR
T-cells.
During the years ended December 31, 2016 and 2015, no revenues had
been earned under the Option Agreement.
12. Commitments and contingencies
Litigation
On
September 18, 2015, an Order and Final Judgment was entered by the
Superior Court of the State of California, approving a settlement
of a class action lawsuit commenced on May 30, 2014, in Santa Clara
County Superior Court, State of California, on behalf of Cadillac
Partners and others similarly situated, naming as defendants,
MabVax Therapeutics, the Company and the Company’s directors,
Hudson Bay Capital Management LP, Bio IP Ventures LLC, Hudson Bay
Master Fund Ltd., and Hudson Bay IP Opportunities Master Fund LP,
together the “Parties,” alleging the defendants
breached certain fiduciary duties, or aided and abetted a breach of
fiduciary duties, in connection with the Company’s Merger
with MabVax Therapeutics. The plaintiff sought to enjoin the Merger
and obtain damages as well as attorneys’ and expert fees and
costs. We expect to incur no expenses in 2016 or
thereafter in connection with this lawsuit or
settlement.
Capital Leases
On
March 21, 2016, the Company entered into a lease agreement with
ThermoFisher Scientific (“Lessor”). Under the terms of
the agreement, the Company agreed to lease two pieces of equipment
from the Lessor, a liquid chromatography system and an incubator,
totaling in cost $95,656. The term of the lease is five years (60
months), and the monthly lease payment is $1,942. In addition,
there is a $1.00 buyout option at the end of the lease
term.
Minimum future annual capital lease obligations are as follows as
of December 31, 2016:
2017
|
$23,306
|
2018
|
23,306
|
2019
|
23,306
|
2020
|
23,306
|
2021
|
7,769
|
Less
interest
|
(15,876)
|
Principal
|
85,117
|
Less
current portion
|
(17,004)
|
Noncurrent
portion
|
$68,113
|
Operating Leases
In connection with the Merger, the Company recorded a $590,504
contingent lease termination fee, related to the termination of the
master lease and sublease of the Porter Drive Facility by MabVax
Therapeutics Holdings (f.k.a. Telik, Inc.), which is payable to
ARE-San Francisco No. 24 (“ARE”) if the Company
receives $15 million or more in additional financing in the
aggregate. The additional financing was achieved in 2015 and the
termination fee is reflected on the balance sheet as an accrued
lease contingency fee.
On September 2, 2015, the Company
entered into a lease (the
“Lease”) with AGP Sorrento Business Complex, L.P., for
certain premises of office and laboratory space in buildings
located at 11535 Sorrento Valley Rd., San Diego, California, to
serve as the Company’s corporate offices and laboratories
(the “New Premises”). Due to the fact that
certain tenant improvements needed to be made to the New Premises
before the Company could take occupancy, the term of the Lease did
not commence until the New Premises were ready for occupancy, on
February 4, 2016. The Lease terminates six years after
such term commencement date, unless earlier terminated in
accordance with the Lease. Pursuant to the terms of the Lease, the
monthly base rent will be $35,631, subject to annual increases as
set forth in the Lease.
The Company has an option to extend the Lease term for a single,
five-year period. If the Lease term is extended for the
optional five-year period, the monthly base rent will be adjusted
based on fair market rental value. In addition to rent,
the Company agreed to pay a portion of the taxes and utility,
maintenance and other operating costs paid or accrued in connection
with the ownership and operation of the property.
The Company previously leased its corporate office and laboratory
space under an operating lease that, as amended on August 1,
2010, expired on July 31, 2015.
We recognize rent expense on a straight-line basis over the term
the lease. Rent expense of $433,397 and $122,236 was recognized in
the years ended December 31, 2016 and 2015,
respectively.
Minimum future annual operating lease obligations are as follows as
of December 31, 2016:
2017
|
|
$
|
439,330
|
|
2018
|
|
|
452,510
|
|
2019
|
|
|
466,085
|
|
2020
|
|
|
480,068
|
|
2021
|
|
|
494,469
|
|
Thereafter
|
|
|
41,306
|
|
Total
|
|
$
|
2,373,768
|
|
|
|
|
|
|
13. Income Taxes
During the years ended December 31, 2016 and 2015, the Company did
not record a provision or benefit for current or deferred income
taxes in the consolidated statement of operations due to its
cumulative net losses.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company’s net
deferred tax assets are as follows as of December 31, 2016 and
2015:
|
2016
|
2015
|
Deferred
tax assets:
|
|
|
Net
operating loss carryforwards
|
$20,169,000
|
$14,502,000
|
Tax
credits
|
5,065,000
|
4,803,000
|
Accrued
expenses and other
|
2,667,900
|
1,861,300
|
Total
deferred tax assets
|
27,901,900
|
21,166,300
|
Less
valuation allowance
|
(27,901,900)
|
(21,166,300)
|
Net
deferred tax assets
|
$—
|
$—
|
The Company has evaluated the available evidence supporting the
realization of its gross deferred tax assets, including the amount
and timing of future taxable income, and has determined that it is
more likely than not that the deferred tax assets will not be
realized. Due to such uncertainties surrounding the realization of
the Company’s deferred tax assets, the Company maintains a
valuation allowance of $27,901,900 against its deferred tax assets
as of December 31, 2016. Realization of the deferred tax assets
will be primarily dependent upon the Company’s ability to
generate sufficient taxable income prior to the expiration of its
net operating losses.
During the year ended December 31, 2014, MabVax Therapeutics, Inc.
merged with Telik, Inc. in a tax-free reorganization. As a result
of the merger, all components of Telik’s deferred tax assets
are now included as deferred tax assets of MabVax Therapeutics,
Inc. These pre-merger deferred tax assets are net operating loss
carryforwards of $1,588,000, research and development credit
carryforwards of $4,457,000, in total equaling $6,045,000. The
current year change in these assets has been reflected in the
provision for income taxes.
As of December 31, 2016, the Company had net operating loss
carryforwards of approximately $50,576,000 and $50,994,000 for
federal and state income tax purposes, respectively. These may be
used to offset future taxable income and will begin to expire in
varying amounts in 2028 to 2035. The Company also has research and
development credits of approximately $525,500 and $6,878,000 for
federal and state income tax purposes, respectively. The federal
credits may be used to offset future taxable income and will begin
to expire at various dates beginning in 2030 through 2035. The
state credits may be used to offset future taxable income, and such
credits carry forward indefinitely.
The Company is subject to taxation in the U.S. and California
jurisdictions. Currently, no historical years are under
examination. The Company’s tax years ending December 31, 2016
and 2015 are subject to examination by the U.S. and state taxing
authorities due to the carryforward of unutilized net operating
losses and research and development credits.
Utilization of the Company’s net operating loss carryforwards
and research and development credit carryforwards may be subject to
a substantial annual limitation due to an “ownership
change” that may have occurred, or that could occur in the
future, as defined and required by Section 382 of the Internal
Revenue Code of 1986, as amended, as well as similar state
provisions. These ownership changes may limit the amount of net
operating loss carryforwards and research and development credit
carryforwards, and other tax attributes that can be utilized
annually to offset future taxable income and tax, respectively. Any
limitation may result in the expiration of a portion of the net
operating loss carryforwards or research and development credit
carryforwards before utilization. The net operating loss
carryforwards and research and development credit carryforwards
inherited as a result of the merger with Telik, Inc. have been
severely limited under these rules and will likely not be
realized.
In general, an “ownership change” results from a
transaction or series of transactions over a three-year period
resulting in an ownership change of more than 50% of the
outstanding stock of a company by certain stockholders or public
groups. The Company intends to complete a study in the future to
assess whether an ownership change has occurred or whether there
have been multiple ownership changes since the Company’s
formation, and will complete such study before the use of any of
the aforementioned attributes.
The provision for income taxes differs from the amount computed by
applying the U.S. federal statutory tax rate (34% in 2016 and 2015)
to income taxes as follows:
|
2016
|
2015
|
Tax
benefit computed at 34%
|
$(6,004,000)
|
$(6,155,300)
|
State
tax provision, net of federal tax benefit
|
(989,344)
|
(1,551,444)
|
Change
in valuation allowance
|
6,735,600
|
7,335,300
|
Other
|
257,744
|
371,444
|
Tax
provision (benefit)
|
$—
|
$—
|
The Company has adopted ASC 740-10-25. This interpretation
clarifies the criteria for recognizing income tax benefits under
ASC 740, “Accounting for Income
Taxes,” and requires
additional disclosures about uncertain tax positions. Under ASC
740-10-25 the financial statement recognition of the benefit for a
tax position is dependent upon the benefit being more likely than
not to be sustainable upon audit by the applicable taxing
authority. If this threshold is met, the tax benefit is then
measured and recognized at the largest amount that is greater than
50 percent likely of being realized upon ultimate
settlement.
PROSPECTUS
, 2018
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and
Distribution
The
following table sets forth all expenses to be paid by the
Registrant in connection with our public offering. All amounts
shown are estimates except for the SEC registration
fee:
SEC
registration fee
|
$311.25
|
FINRA
filing fee
|
3,750.00
|
Legal
fees and expenses
|
40,000.00
|
Accounting
fees and expenses
|
7,000.00
|
Transfer
agent and registrar fees
|
2,000.00
|
Printing
and engraving expenses
|
5,000.00
|
Miscellaneous
fees and expenses
|
106,938.75
|
Total
|
$165,000.00
|
Item 14. Indemnification of
Directors and Officers
Subsection
(a) of Section 145 of the General Corporation Law of
Delaware, or the DGCL, empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason of
the fact that he is or was a director, employee or agent of the
corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys’ fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
Subsection
(b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit
by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that such person acted in any of the
capacities set forth above, against expenses (including
attorneys’ fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation and
except that no indemnification may be made with respect to any
claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action
or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
Section 145
of the DGCL further provides that to the extent a director,
officer, employee or agent of a corporation has been successful on
the merits or otherwise in the defense of any action, suit or
proceeding referred to in subsections (a) and (b) or in
the defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys’ fees)
actually and reasonably incurred by him in connection therewith;
that indemnification or advancement of expenses provided for by
Section 145 shall not be deemed exclusive of any other rights
to which the indemnified party may be entitled; and empowers the
corporation to purchase and maintain insurance on behalf of a
director, officer, employee or agent of the corporation against any
liability asserted against him or incurred by him in any such
capacity or arising out of his status as such whether or not the
corporation would have the power to indemnify him against such
liabilities under Section 145.
Reference
is also made to Section 102(b)(7) of the DGCL, which enables a
corporation in its certificate of incorporation to eliminate or
limit the personal liability of a director for monetary damages for
violations of a director’s fiduciary duty, except for
liability (i) for any breach of the director’s duty of
loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL (providing for liability of directors
for unlawful payment of dividends or unlawful stock purchases or
redemptions) or (iv) for any transaction from which the
director derived an improper personal benefit. Our amended and
restated certificate of incorporation provides that we must
indemnify our directors to the fullest extent under applicable law.
Pursuant to Delaware law, this includes elimination of liability
for monetary damages for breach of the directors’ fiduciary
duty of care to MabVax Holdings and its stockholders. However, our
directors may be personally liable for liability:
●
for
any breach of duty of loyalty to us or to our
stockholders;
●
for
acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
●
for
unlawful payment of dividends or unlawful stock repurchases or
redemptions; or
●
for
any transaction from which the director derived an improper
personal benefit.
In
addition, our amended and restated bylaws provide
that:
●
we
are required to indemnify our directors and executive officers to
the fullest extent not prohibited by Delaware law or any other
applicable law, subject to limited exceptions;
●
we
may indemnify our other officers, employees and other agents as set
forth in Delaware law or any other applicable law;
●
we
are required to advance expenses to our directors and executive
officers as incurred in connection with legal proceedings against
them for which they may be indemnified; and
●
the
rights conferred in the amended and restated bylaws are not
exclusive.
Item 15. Recent Sales of
Unregistered Securities
October 2017 Restricted Stock Grants
During
the month of October 2017, we issued an aggregate of 415,000 shares
of restricted common stock valued at $306,650 based on the closing
market prices ranging from $0.63 to $0.78, depending on the date of
issuance, to different investor relations services firms or
individuals in connection with providing investor relations
services to the Company. All of the shares were fully vested on the
date of issuance.
The
securities referenced above were issued in reliance on the
exemption from registration afforded by Section 4(a)(2) of the
Securities Act, as a
transaction by an issuer not involving a public
offering.
October 18, 2017 Preferred Stock Exchange
Agreement
On
October 18, 2017, we entered into the Exchange Agreements with the
holders of all of the Company’s outstanding shares of Series
F Preferred Stock, Series G Preferred Stock and Series H Preferred
Stock, pursuant to which an aggregate of 665,281 shares of Series F
Preferred Stock, 1,000,000 shares of Series G Preferred Stock and
850 shares of Series H Preferred Stock were exchanged for an
aggregate of 58,000 newly authorized shares of Series L Preferred
Stock convertible into 9,666,669 shares of common stock, subject to
a conversion restriction until stockholder approval is obtained. On
December 1, 2017, the necessary shareholder approval was
obtained.
The
terms of the Exchange Agreements and Series L Preferred Stock were
determined by arms-length negotiation between the parties. No
commission or other payment was received by the Company in
connection with the Exchange Agreements. Such exchange was
conducted and the Series L Preferred Stock issuable pursuant to the
Exchange Agreements, including the Conversion Shares, were issued
pursuant to the exemption provided by Section 3(a)(9) of the
Securities Act.
Pursuant to a
registration rights agreement entered into between the Company and
the holders on October 18, 2017, we agreed to use reasonable best
efforts to file a registration statement registering the Conversion
Shares for resale within ten days of closing and cause the
registration statement to be declared effective within 30 days of
filing.
July 2017 Private Placement
On July
27, 2017, we entered into a subscription agreement with an
accredited investor pursuant to which we agreed to sell an
aggregate of $125,000 in common stock under terms similar to our
May 2017 Public Offering, in which investors purchased common stock
at $1.75 per share. According to the subscription agreement,
investors, if meeting the minimum required investment of 25% of
their original investment in a private placement in April 2015, and
still hold their shares of common stock or Series E Preferred Stock
purchased in April 2015, would be entitled to receive inducement
shares of common stock, or Series I Preferred Stock, at the
election of the investor who would hold in excess of 4.99% of the
outstanding shares of common stock, at the rate of 1.13 shares of
common stock or Series I Preferred Stock for every share of common
stock or Series G Preferred Stock purchased in the May 2017 Public
Offering, as well as agree to amend the terms of their outstanding
warrants that currently have an exercise price of $11.10 per share,
such that the amended warrants shall have an exercise price of
$2.00 per share and no cashless exercise feature. The transaction
closed on August 2, 2017. As a result of the investor meeting the
minimum required investment, the investor received an aggregate of
152,143 shares of common stock for its investment, including 80,714
inducement shares, and had warrants to purchase 225,225 shares of
common stock repriced from $11.10 to $2.00 per warrant
share.
The
securities referenced above were issued in reliance on the
exemption from registration afforded by Rule 506 of Regulation D
and/or Section 4(a)(2) of the Securities Act, as a transaction by an issuer not
involving a public offering.
May 2017 Private Placement
On May 3, 2017, we entered into separate
subscription agreements with accredited investors pursuant to which
we agreed to sell an aggregate of $850,000
of Series H Preferred
Stock. The shares of
Series H Preferred Stock are convertible into shares of common
stock based on a conversion calculation equal to the stated value
of the Series H Preferred Stock, plus all accrued and unpaid
dividends, if any, on such Series H Preferred Stock, as of such
date of determination, divided by the conversion price. The stated
value of each share of Series H Preferred Stock is $1,000 and the
initial conversion price is $1.75 per share, each subject to
adjustment for stock splits, stock dividends, recapitalizations,
combinations, subdivisions or other similar
events.
On
the closing date, we entered into separate registration rights
agreements with each of the investors, pursuant to which we agreed
to undertake to file a registration statement to register the
resale of the shares within thirty (30) days following the closing
date, to cause such registration statement to be declared effective
by the Securities and Exchange Commission within sixty (60) days of
the closing date and to maintain the effectiveness of the
registration statement until all of such shares of Common Stock
have been sold or are otherwise able to be sold pursuant to Rule
144 under the Securities Act, without any
restrictions.
The
securities referenced above were issued in reliance on the
exemption from registration afforded by Rule 506 of Regulation D
and/or Section 4(a)(2) of the Securities Act as a transaction by an
issuer not involving a public offering.
Consulting Shares
On
January 13, 2016, we issued 13,514 shares of common stock as
payment for consulting services received.
On
September 1, 2016, we issued 22,130 shares of common stock as
partial payment for consulting services performed in
2016.
The
securities referenced above were issued in reliance on the
exemption from registration afforded by Section 4(a)(2) of the
Securities Act as a transaction by an issuer not involving a public
offering.
Oxford Loan
On
January 15, 2016, the Company entered into a loan and security
agreement with Oxford Finance providing for senior secured term
loans to the Company in the aggregate principal amount of up to
$10,000,000. In connection with the foregoing loan
agreement, the Company issued Oxford Finance five year warrants to
purchase an aggregate of 225,226 shares of the Company’s
common stock at $5.55 per share.
In
connection with the execution of the loan agreement, the Company
entered into an amendment of Sections 8(a) and 8(b) of certain
exchange agreements with the Company dated March 25, 2015 held by a
certain holder of the Company’s Series D Preferred
Stock. The amendment requires the Company to obtain
consent of the holder for certain future equity or debt issuances,
and modifies the termination date for this requirement to be the
earlier to occur of: (a) April 1, 2017; (b) the date on which the
Company has raised $10 million in equity financing; (c) the date on
which the Company has closed one or more licensing agreements with
corporate partners pursuant to which the Company is entitled to
receive in total a minimum of $10,000,000 in initial licensing or
equity investments under such agreements; and (d) the date on which
shares of the Company's common stock are listed on a national
securities exchange. The Company issued 13,514 shares of common
stock in connection with the foregoing.
The
securities referenced above were issued in reliance on the
exemption from registration afforded by Rule 506 of Regulation D
and/or Section 4(a)(2) of the Securities Act as a transaction by an
issuer not involving a public offering.
Issuance of common stock under common stock Purchase
Agreement
We
issued, on March 31, 2015, an aggregate of 11,904 shares of
common stock that were required to be issued in connection with our
July 2014 financing transaction, as a result of the lower share
price in an offering.
The
securities referenced above were issued in reliance on the
exemption from registration afforded by Rule 506 of Regulation D
and/or Section 4(a)(2) of the Securities Act as a transaction by an
issuer not involving a public offering.
March 2015 Private Placement
On March 31, 2015, the Company sold an aggregate of $4,995,750
of units at a purchase price of $5.55 per unit, with each unit
consisting of one share of our common stock (or, at the election of
any investor who, as a result of receiving common stock would hold
in excess of 4.99% of our issued and outstanding common stock,
shares of our newly designated Series E Preferred Stock) and a
thirty month warrant to purchase one half of one share of common
stock at an initial exercise price of $11.10 per share. A second
closing was held on April 3, 2015 in which we entered into
separate subscription agreements for an additional $6,718,751 of
units. Of the subscription agreements accepted, investors elected,
and we issued, $2,500,000 of units consisting of Series E Preferred
Stock on April 3, 2015.
The
securities referenced above were issued in reliance on the
exemption from registration afforded by Rule 506 of Regulation D
and/or Section 4(a)(2) of the Securities Act as a transaction by an
issuer not involving a public offering.
Rubin Grant
On
April 3, 2015, we entered into a consulting agreement with Steve
Rubin pursuant to which he agreed to provide advisory services in
connection with corporate strategy, licensing and business
development estimated to be for a period of 12
months. In exchange for his services, we provided
him with a one-time grant of 27,027 shares of our restricted
common stock.
The
securities were issued in reliance on the exemption from
registration afforded by Section 4(a)(2) of the Securities Act as a
transaction by an issuer not involving a public
offering.
Ravetch
Grant
On April
4, 2015, the Board approved the issuance of an additional
restricted stock award of 17,770 shares of common stock to
Jeffrey Ravetch. This award is for future services covering
at least one-year period. The award was granted in
addition to the prior award to Dr. Ravetch on April 2, 2015 of: (i)
4,628 restricted shares of common stock and (ii) options to
purchase 4,628 shares of common stock with an exercise price of
$17.02 per share, for a total grant of 27,028 restricted
shares and options.
The
securities were issued in reliance on the exemption from
registration afforded by Section 4(a)(2) of the Securities Act as a
transaction by an issuer not involving a public
offering.
Livingston Grant
On
April 4, 2015, the Board of Directors approved a restricted stock
award by the Company of 135,135 shares of common stock to be issued
to Phil Livingston, Ph.D. for his continuing service to the
Company. On May 13, 2015, the Compensation Committee of
the Board clarified that the award is being granted in
consideration for at least one year of Dr. Livingston’s
services. The committee further clarified that the
vesting of the common stock shall be on the one-year anniversary of
the Board of Directors’ approval of the award, or April 4,
2016.
The
securities were issued in reliance on the exemption from
registration afforded by Section 4(a)(2) of the Securities Act as a
transaction by an issuer not involving a public
offering.
Consulting Agreement
On
April 5, 2015, we entered into a consulting agreement with The Del
Mar Consulting Group, Inc. and Alex Partners, LLC in consideration
for 40,541 shares of our restricted common stock. The consultants
also received an additional 27,027 shares of our restricted
common stock upon the Company’s achieving a milestone based
on its fully-diluted market capitalization.
The
securities were issued in reliance on the exemption from
registration afforded by Section 4(a)(2) of the Securities Act as a
transaction by an issuer not involving a public
offering.
Preferred and Warrant Exchanges
On
March 25, 2015, we exchanged certain of our issued and outstanding
Series A-1 Preferred Stock, A-1 Warrants, Series B Preferred Stock,
and Series B warrant in exchange for an aggregate of
342,906 shares of our common stock, and an aggregate of
238,156 shares of our newly designated Series D Preferred
Stock.
The
issuance of the securities set forth above was deemed to be exempt
from registration pursuant to Section 3(a)(9) of the
Securities Act.
Item 16. Exhibits and Financial
Statement Schedules
(a)
Exhibits.
No.
|
|
Description
|
|
Form
|
|
Filing
Date/Period
End
|
|
Exhibit
Number
|
|
|
|
|
|
|
|
|
|
|
Agreement and Plan of Merger and Reorganization, dated May 12,
2014, between the Company, Tacoma Acquisition Corp., Inc. and
MabVax Therapeutics, Inc.
|
|
8-K
|
|
5/12/2014
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
Amendment No.1, dated as of June 30, 2014, by and between the
Company and MabVax Therapeutics, Inc.
|
|
8-K
|
|
7/1/2014
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
Amendment No.2 to the Agreement and Plan of Merger, dated July 7,
2014, by and among the Company, Tacoma Acquisition Corp. and MabVax
Therapeutics, Inc.
|
|
8-K
|
|
7/9/2014
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
Amended and Restated Certificate of Incorporation
|
|
S-1
|
|
3/16/2017
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
Amended and Restated Bylaws
|
|
8-K
|
|
12/14/2007
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
Form of Certificate of Designations, Preferences and Rights of
Series D Convertible Preferred Stock
|
|
8-K
|
|
3/26/2015
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of Certificate of Designations, Preferences and Rights of
Series E Convertible Preferred Stock
|
|
8-K
|
|
4/6/2015
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
Form of Certificate of Designations, Preferences and Rights of
Series F Convertible Preferred Stock
|
|
8-K
|
|
8/17/2016
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of Series G
Convertible Preferred Stock
|
|
8-K
|
|
5/16/2017
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of Series H
Convertible Preferred Stock
|
|
8-K
|
|
5/3/2017
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of Series I
Convertible Preferred Stock
|
|
8-K
|
|
5/26/2017
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of Series J
Convertible Preferred Stock
|
|
8-K
|
|
8/14/2017
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of Series K
Convertible Preferred Stock
|
|
8-K
|
|
8/14/2017
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
Form of Certificate of Amendment to Amended and Restated
Certificate of Incorporation
|
|
8-K
|
|
8/17/2016
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of Series L
Convertible Preferred Stock
|
|
8-K
|
|
10/19/2017
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of Certificate of Correction to the Designations, Preferences
and Rights of Series L Convertible Preferred Stock
|
|
8-K
|
|
10/16/2017
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
Securities Purchase Agreement, dated as of February 12, 2014,
between MabVax Therapeutics, Inc. 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 Therapeutics, Inc. and the persons and entities identified
on the signature pages thereto
|
|
8-K
|
|
5/12/2014
|
|
10.3
|
|
|
|
|
|
|
|
|
|
|
|
Registration Rights Agreement, dated as of February 12, 2014,
between MabVax Therapeutics, Inc. and the persons and entities
identified on the signature pages thereto
|
|
8-K
|
|
5/12/2014
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
Form of Exchange Agreement
|
|
8-K
|
|
9/3/2014
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of Waiver Letter
|
|
8-K
|
|
9/3/2014
|
|
10.2
|
|
Form of Common Stock Certificate
|
|
S-1
|
|
9/29/2014
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of Waiver Extension Letter
|
|
8-K
|
|
9/30/2014
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of Subscription Agreement, dated March 31, 2015, between the
Company and the subscribers set forth on the signature pages
thereto
|
|
10-K
|
|
3/31/2015
|
|
4.11
|
|
|
|
|
|
|
|
|
|
|
|
Form of Common Stock Purchase Warrant
|
|
10-K
|
|
3/31/2015
|
|
4.12
|
|
|
|
|
|
|
|
|
|
|
|
Form of Registration Rights Agreement, dated March 31, 2015,
between the Company and the persons and entities identified on the
signature pages thereto
|
|
10-K
|
|
3/31/2015
|
|
4.13
|
|
Form of Secured Promissory Note
|
|
8-K
|
|
1/19/2016
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of Warrant
|
|
8-K
|
|
1/19/2016
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
Form of Warrant Agency Agreement between MabVax Therapeutics
Holdings, Inc. and Equity Stock Transfer LLC and the Form of
Warrant Certificate
|
|
S-1
|
|
8/25/2015
|
|
4.10
|
|
|
|
|
|
|
|
|
|
|
|
Opinion
of Sichenzia Ross Ference Kesner LLP, as to the legality of the
securities being registered
|
|
S-1
|
|
12/12/2017
|
|
5.1
|
|
Employment Agreement, dated July 1, 2014, by and between MabVax
Therapeutics, Inc. and J. David Hansen
|
|
10-Q
|
|
8/8/2014
|
|
10.9
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement, dated July 1, 2014, by and between MabVax
Therapeutics, Inc. and Gregory P. Hanson
|
|
10-Q
|
|
8/8/2014
|
|
10.10
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement, dated July 1, 2014, by and between MabVax
Therapeutics, Inc. and Wolfgang W. Scholz, Ph.D.
|
|
10-Q
|
|
8/8/2014
|
|
10.11
|
|
|
|
|
|
|
|
|
|
|
|
Second Amended and Restated MabVax Therapeutics Holdings, Inc. 2014
Employee, Director and Consultant Equity Incentive
Plan
|
|
10-K
|
|
3/31/2015
|
|
10.15
|
|
Form of Exchange Agreement (Series A-1 Preferred Stock and Series
A-1 Warrants).
|
|
8-K
|
|
3/26/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of Exchange Agreement (Series B Preferred Stock and Series B
Warrants).
|
|
8-K
|
|
3/26/2015
|
|
10.2
|
|
2008 Equity Incentive Plan
|
|
10-K
|
|
3/31/2015
|
|
10.29
|
|
|
|
|
|
|
|
|
|
|
|
Form of Option Agreement, 2008 Equity Incentive Plan
|
|
10-K
|
|
3/31/2015
|
|
10.30
|
|
|
|
|
|
|
|
|
|
|
|
Form of Lockup Agreement dated as of April 3, 2015
|
|
8-K
|
|
4/6/2015
|
|
10.3
|
|
|
|
|
|
|
|
|
|
|
|
Consulting Agreement with The Del Mar Consulting Group, Inc.
and Alex Partners, LLC dated as of April 5, 2015
|
|
8-K
|
|
4/6/2015
|
|
10.4
|
|
Form of Escrow Deposit Agreement dated as of April 14,
2015
|
|
8-K
|
|
4/15/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of Amendment Agreement to Registration Rights
Agreement
|
|
8-K
|
|
6/10/2015
|
|
10.1
|
|
Amendment
to Escrow Deposit Agreement dated June 22, 2015
|
|
8-K
|
|
6/24/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Letter Agreement dated June 30, 2015 between MabVax Therapeutics,
Inc. and OPKO Health, Inc.
|
|
8-K
|
|
7/1/205
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of Proposed Lease Agreement with AGP Sorrento Business
Complex, L.P.
|
|
S-1
|
|
8/25/2015
|
|
10.37
|
|
|
|
|
|
|
|
|
|
|
|
Form of Amendment Agreement No. 2 to Registration Right s
Agreement
|
|
8-K
|
|
8/4/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Non-Employee Director Compensation Policy
|
|
10-Q/A
|
|
8/12/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Standard Industrial Net Lease, dated as of May 23, 2008, by
and between MabVax Therapeutics, Inc. and Sorrento
Square
|
|
10-Q/A
|
|
8/12/2015
|
|
10.2
|
|
First Amendment to that Standard Industrial Net Lease, dated May 6,
2010, by and between MabVax Therapeutics, Inc. and Sorrento
Square
|
|
10-Q/A
|
|
8/12/2015
|
|
10.3
|
|
|
|
|
|
|
|
|
|
|
|
Second Amendment to that Standard Industrial Net Lease, dated
August 1, 2012, by and between the Company and Sorrento
Square
|
|
10-Q/A
|
|
8/12/2015
|
|
10.4
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement, dated July 21, 2014, by and between
MabVax Therapeutics, Inc. and Paul Maffuid, Ph.D.
|
|
10-Q/A
|
|
8/12/2015
|
|
10.5
|
|
|
|
|
|
|
|
|
|
|
|
Development and Manufacturing Services Agreement, dated April 15,
2014, by and between MabVax Therapeutics, Inc. and Gallus
BioPharmaceuticals NJ, LLC
|
|
10-Q/A
|
|
8/12/2015
|
|
10.6
|
|
|
|
|
|
|
|
|
|
|
|
Exclusive License Agreement for “Polyvalent Conjugate
Vaccines for Cancer” (SK#14491), dated as of June 30,
2008, by and between MabVax Therapeutics, Inc. and Sloan-Kettering
Institute for Cancer Research
|
|
10-Q/A
|
|
8/12/2015
|
|
10.7
|
|
|
|
|
|
|
|
|
|
|
|
Research and License Agreement, dated as of April 7, 2008, by
and between MabVax Therapeutics, Inc. and Sloan-Kettering Institute
for Cancer Research
|
|
10-Q/A
|
|
8/12/2015
|
|
10.8
|
|
|
|
|
|
|
|
|
|
|
|
Exclusive License to Unimolecular Antibodies, dated October 13,
2011, by and between MabVax Therapeutics, Inc. and Sloan-Kettering
Institute for Cancer Research
|
|
10-Q/A
|
|
8/12/2015
|
|
10.9
|
|
Option
Agreement, dated August 29, 2014, by and between MabVax
Therapeutics, Inc. and Juno Therapeutics, Inc.
|
|
10-Q/A
|
|
8/12/2015
|
|
10.10
|
|
|
|
|
|
|
|
|
|
|
|
SBIR
Contract from National Cancer Institute
|
|
10-Q/A
|
|
8/12/2015
|
|
10.11
|
|
Lease by and between AGP Sorrento Business Complex, L.P., and
MabVax Therapeutics Holdings, Inc., dated as of September 2,
2015
|
|
8-K
|
|
9/3/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of Amendment Agreement No.3 to Registration Rights
Agreement
|
|
8-K
|
|
10/13/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Loan and Security Agreement dated as of January 15,
2016
|
|
8-K
|
|
1/19/2016
|
|
10.1
|
|
Form of Amendment Agreement
|
|
10-K
|
|
3/14/2016
|
|
10.54
|
|
|
|
|
|
|
|
|
|
|
|
Consulting Agreement, dated April 1, 2016, by and between MabVax
Therapeutics Holdings, Inc. and Jeffrey Ravetch, M.D.,
Ph.D.
|
|
8-K
|
|
4/7/2016
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Employment
Agreement, dated March 16, 2016, by and between MabVax
Therapeutics Holdings, Inc. and Paul Resnick, M.D.
|
|
10-K/A
|
|
4/19/2016
|
|
10.56
|
|
|
|
|
|
|
|
|
|
|
|
Non-Employee
Director Compensation Policy, as amended through August 25,
2016
|
|
8-K
|
|
8/31/2016
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Form
of Subscription Agreement between the Company and the subscribers
set forth on the signature pages thereto
|
|
8-K
|
|
5/3/2017
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Form
of Registration Rights Agreement between the Company and the
subscribers set forth on the signature pages
thereto
|
|
8-K
|
|
5/3/2017
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Exchange Agreement
|
|
8-K
|
|
10/19/2017
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Form
of Registration Rights Agreement
|
|
8-K
|
|
10/19/2017
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Subscription Agreement
|
|
S-1
|
|
12/12/2017
|
|
5.1
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of per share earnings
|
|
S-1
|
|
9/29/2014
|
|
11.1
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiaries
of the Registrant
|
|
S-1
|
|
9/29/2014
|
|
21.1
|
|
|
|
|
|
|
|
|
|
|
*
|
Consent
of Independent Registered Public Accounting Firm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consent
of Sichenzia Ross Ference Kesner LLP (included as part of Exhibit
5.1)
|
|
S-1
|
|
12/12/2017
|
|
5.1
|
|
|
|
|
|
|
|
|
|
|
|
Power
of Attorney
|
|
S-1
|
|
12/12/2017
|
|
Signature
page
|
*
|
Filed
herewith
|
Item 17. Undertakings
(a) The undersigned
registrant hereby undertakes:
|
(1)
|
To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration
Statement:
|
|
(i)
|
To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
|
|
(ii)
|
To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth
in the “Calculation of Registration Fee” table in the
effective registration statement; and
|
|
(iii)
|
To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
|
|
(2)
|
That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
|
|
(3)
|
To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
|
|
(4)
|
That, for the purpose of determining liability under the Securities
Act of 1933 to any purchaser in the initial distribution of the
securities:
The undersigned registrant undertakes that in a primary offering of
securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used
to sell the securities to the purchaser, if the securities are
offered or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities
to such purchaser:
|
|
(i)
|
Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed pursuant
to Rule 424 (§230.424 of this chapter);
|
|
(ii)
|
Any free writing prospectus relating to the offering prepared by or
on behalf of the undersigned registrant or used or referred to by
the undersigned registrant;
|
|
(iii)
|
The portion of any other free writing prospectus relating to the
offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the
undersigned registrant; and
|
|
(iv)
|
Any other communication that is an offer in the offering made by
the undersigned registrant to the purchaser.
|
(b) Insofar as
indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of
the SEC such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned
registrant hereby undertakes that:
(1)For
purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this registration statement as of the time
it was declared effective.
(2)For the purpose of determining
any liability under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be deemed to be
a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering
thereof.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of San Diego, State of California on the
16th day of January,
2018.
|
MABVAX THERAPEUTICS HOLDINGS, INC.
|
||
|
|
||
|
By
|
/s/
J. David Hansen
|
|
|
J. David Hansen
|
||
|
President and Chief Executive Officer
(Principal executive officer)
|
||
|
/s/
Gregory P. Hanson
|
|
|
|
Gregory P. Hanson
|
||
|
Chief Financial Officer
|
||
|
(Principal financial and accounting officer)
|
Pursuant to the
requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ J. David
Hansen
J.
David Hansen
|
|
Chairman
of the Board, President and
Chief
Executive Officer
(Principal
executive officer)
|
|
January 16, 2018
|
|
|
|
|
|
/s/ Gregory P.
Hanson
Gregory
P. Hanson
|
|
Chief
Financial Officer
(Principal
financial and accounting officer)
|
|
January
16, 2018
|
|
|
|
|
|
/s/
*
Kenneth
M. Cohen
|
|
Director
|
|
January
16, 2018
|
|
|
|
|
|
/s/
*
Philip
O. Livingston, M.D.
|
|
Director
|
|
January
16, 2018
|
|
|
|
|
|
/s/*
Paul V.
Maier
|
|
Director
|
|
January
16, 2018
|
|
|
|
|
|
/s/
*
Thomas
C. Varvaro
|
|
Director
|
|
January
16, 2018
|
/s/
*
Jeffrey
F. Eisenberg
|
|
Director
|
|
January
16, 2018
|
* by
/s/ J. David
Hansen
J.
David Hansen
Attorney-in-fact
II-10