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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
November 20, 2018
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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:
Jeremy Glaser, Esq.
Melanie Levy, Esq.
Mintz Levin Cohn Ferris Glovsky and Popeo PC
3580 Carmel Mountain Road
San Diego, CA 92130
(858) 314-1500
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Approximate date of commencement of proposed sale to the
public:
From time to time after the effective date of this registration
statement.
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,” “smaller
reporting company” and an “emerging
growth 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
☐
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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 7(a)(2)(B) of the
Securities Act. ☐
CALCULATION OF REGISTRATION FEE
Title of Each Class
of Securities to be Registered
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Amount to be
Registered (1)
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Proposed Maximum
Aggregate Offering Price (2)
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Amount of
Registration Fee
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Primary
Offering
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Shares of common
stock, par value $0.01 per share
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175,000
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$47,250
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$5.73
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Shares of common
stock, par value $0.01 per share, underlying Series P Convertible
Preferred Stock
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6,000,000
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$1,620,000
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196.34
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Total
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6,175,000
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$1,667,250
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$202.07
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(1)
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Pursuant
to Rule 416 under the Securities Act, the securities being
registered hereunder include such indeterminate number of
additional shares of common stock as may be issued after the date
hereof as a result of stock splits, stock dividends or similar
transactions.
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(2)
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Estimated
solely for purposes of calculating the registration fee pursuant to
Rule 457(c) under the Securities Act of 1933, as amended,
using the average of the high and low prices as quoted on the OTC
Pink on November 19, 2018, which was $0.27 per share.
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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.
PRELIMINARY PROSPECTUS
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SUBJECT TO COMPLETION
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DATED [●], 2018
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Up to
6,175,000 Shares of Common
Stock
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This
prospectus relates to the offer and resale by the selling
stockholders identified on Page 24 of up to 6,175,000 shares of our
common stock, par value $0.01 per share. These shares represent:
(i) up to 6,000,000 shares of our common stock issuable upon
conversion of shares of our to be designated Series P Convertible
Preferred Stock, par value $0.01 per share (the “Series P
Preferred Stock”), which Triton Funds LP
(“Triton”), a fund launched by students at the
University of California San Diego (“UCSD”), has agreed
to purchase for a maximum purchase price of up to $1.0 million,
subject to the effectiveness of this registration statement and
pursuant to the terms and conditions of an Equity Purchase
Agreement we entered into with them on November 19, 2018 (the
“Equity Purchase Agreement”); and (ii) 175,000 shares
of common stock we agreed to issue to Triton Funds LLC, manager of
Triton, upon execution of the Equity Purchase Agreement to support
the cost of the student-run fund.
Per the terms of
the Equity Purchase Agreement, we have the right to
“put,” or sell, shares of Series P Preferred Stock up
to an aggregate maximum purchase price of $1.0 million (the
“Put Shares”) to Triton Funds for an Investment Amount
(as defined herein and subject to adjustment) based upon a per
share price equal to $100.00 per share. We may issue Put Shares at
any time on or after the date of effectiveness of a registration
statement registering the shares of common stock underlying the Put
Shares and subject to a maximum purchase amount of $300,000 for the
initial purchase and terms providing the Company may not direct
Triton to purchase Put Shares during the 30 day period immediately
following delivery of the initial purchase notice. The Equity
Purchase Agreement will terminate upon until the earlier of (i) the
date on which Triton Funds has purchased Put Shares with an
aggregate purchase price of $1.0 million or (ii) 90 days after the
effectiveness of a registration statement registering the shares of
common stock underlying the Put Shares (such period, the
“Commitment Period”). Per the terms of the Equity
Purchase Agreement and the Series P Certificate of Designations
(defined on page 83 below), each share of Series P Preferred Stock
will be convertible into shares of the Company’s common stock
at the rate of $100.00 divided by 75% of the 5-day volume-weighted average price of the
Company’s common stock prior to the Series P Preferred Stock
conversion notice (the “Market Price”), except
that Triton, together with its affiliates and certain related
parties, will be restricted from converting its preferred stock
into common stock to the extent the conversion would cause Triton
to own beneficially more than 4.99% of our outstanding common stock
immediately following the conversion.
Our
common stock is quoted on the OTC Pink under the symbol
“MBVX”. On November 19, 2018, the last reported sale
price of our common stock on OTC Pink was $0.27 per
share.
Investing in our common stock involves a high
degree of risk. Please read “Risk
Factors” beginning on
Page 5 of this preliminary
prospectus.
Neither
the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or
determined if this preliminary prospectus is truthful or complete.
Any representation to the contrary is a criminal
offense.
The
date of this prospectus is [●], 2018
TABLE OF
CONTENTS
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Page
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5
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22
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23
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23
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24
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25
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48
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64
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77
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81
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85
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86
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87
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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.
About Us
MabVax
Therapeutics Holdings, Inc. is a clinical-stage biotechnology
company with a fully human antibody discovery platform focused on
the rapid translation into clinical development of products to
address unmet medical needs in the treatment of cancer and
pancreatitis. We discovered a pipeline of human monoclonal antibody
product candidates based on the protective immune responses
generated by patients who have been vaccinated against targeted
cancers. Our therapeutic vaccine product candidates under
development were discovered at Memorial Sloan Kettering Cancer
Center (“MSK”) and are exclusively licensed to us as
well as exclusive rights to blood samples from patients who were
vaccinated with the same licensed vaccines.
Our
lead development product, MVT-5873, is a fully human IgG1
monoclonal antibody (mAb) that targets sialyl Lewis A (sLea), an
epitope on CA19-9. MVT-5873 is currently in Phase 1 clinical
trials as a therapeutic agent for patients with pancreatic cancer
and other CA19-9 positive tumors. CA19-9 is expressed in over 90%
of pancreatic cancers and in other diseases including pancreatitis.
CA19-9 plays an important role in tumor adhesion and metastasis and
is a marker of an aggressive cancer phenotype. CA19-9 also has an
important role in the biological pathways that can result in
pancreatitis. CA19-9 serum levels are considered a valuable adjunct
in the diagnosis, prognosis and treatment monitoring of pancreatic
cancer and now pancreatitis. With our collaborators including MSK,
Sarah Cannon Research Institute, Honor Health and Imaging
Endpoints, we have treated more than 56 patients with either our
therapeutic antibody designated as MVT-5873 or our PET imaging
diagnostic product designated as MVT-2163 in Phase 1 clinical
studies, and demonstrated early safety, specificity for the target
and a potential efficacy signal. The Company also has a
radioimmunotherapy product, designated as MVT-1075, that is also in
Phase 1 clinical development. For additional information,
please visit the Company's website, www.mabvax.com.
Studies
conducted by Cold Spring Harbor Laboratories have demonstrated that
antibodies capable of binding to CA19-9 and blocking the downstream
biological pathways of pancreatitis have a positive effect on
ameliorating the disease. Combining the preclinical science
supporting the use of the CA19-9 blocking antibodies in the
treatment of pancreatitis with the clinically validated data and
supplies of MVT-5873 already available gives MabVax the
opportunity, assuming adequate funding, to move quickly into the
clinic in a mid-stage proof of concept clinical trial in the
near-term.
The
Company completed a preclinical asset sale and license agreement
with Boehringer Ingelheim International GmbH (“Boehringer
Ingelheim”) in July 2018, and a license agreement for a
cancer vaccine to Y-mAbs Therapeutics, Inc. in June 2018. The
Company received nearly $5 million in upfront payments from these
two transactions to begin the third quarter, with an additional
$7.6 million in downstream milestones the Company expects to
receive based either on reaching an anniversary date of entering
the agreement, or upon reaching a milestone.
Plan
for Remainder of 2018
Based
on the experience with recent asset sales and license agreements,
and continuing inquiries from third parties regarding their
interest in other MabVax assets and clinical progress to date
related to MVT-5873, MVT-1075, and MVT-2163, we intend on
continuing to explore additional licensing and/or collaboration
opportunities for certain fields of use of our technology. However,
there can be no assurance that any such transaction will
occur.
If we
are able to secure additional funds, we intend to, among other
things:
●
continue
enrollment in our clinical study of MVT-5873 in combination with
gemcitabine and nab-paclitaxel in first line therapy for the
treatment of patients newly diagnosed with pancreatic cancer with
the objective of confirming early observations seen to date, to
enable discussions with potential strategic partners and
investors.
●
enroll
additional patients into the MVT-5873 monotherapy trial with the
aim of establishing a higher maximum tolerated dose. We have
submitted our Investigational New Drug Application
(“IND”), to the FDA, for a revised protocol to enable
continuation of the trial at higher doses.
●
support
the continued development of the MVT-2163 imaging agent under the
R01 grant made to MSK for the Phase 1b portion of this clinical
program.
●
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; also, to enable discussions with potential strategic
partners and investors.
●
Use a
portion of existing supplies of MVT-5873 to pursue a proof of
concept clinical trial of MVT-5873 in the treatment of
pancreatitis.
Overview
of 2018 Private Placements
Between
February 2 and February 10, 2018, the Company entered into separate
purchase agreements with investors pursuant to which the Company
sold (i) shares of its common stock, (ii) shares of its convertible
preferred stock, and
(iii) warrants to purchase shares of common (the “February
2018 Private Placements”). From April 30 to May 2, 2018, the
Company entered into separate purchase agreements with investors
pursuant to which we agreed to sell shares of its common stock and
convertible preferred stock (the “May 2018 Private
Placements”). No financial advisor was used in
connection with the February 2018 Private Placements nor the May
2018 Private Placements.
The
securities issued in connection with the February 2018 Private
Placements and the May 2018 Private Placements 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”). The Company entered into separate
registration rights agreements with each of the investors in the
February 2018 Private Placements and the May 2018 Private
Placements, pursuant to which the Company agreed to undertake to
file a registration statement to register the resale of the shares
of common stock and the shares of common stock underlying the
warrants and preferred stock. The Company also agreed to use
reasonable best efforts to cause such registration statement to be
declared effective 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.
February
2018 Private Placements
In
connection with the February 2018 Private Placements, the Company
sold (i) an aggregate of 555,557 shares of its common stock for an
aggregate purchase price of $1,250,000, or $2.25 per share, (ii)
5,000 shares of our newly designated 0% Series M Convertible Preferred Stock
(the “Series M Preferred Stock”) for an aggregate
purchase price of $1,500,000, or $300.00 per share, and
(iii) warrants to purchase up to an aggregate of 855,561 shares of
common stock each with an exercise price of $2.70 per share. The
net proceeds of the February 2018 Private Placements were
$2,700,000 after transaction costs of $50,000.
May
2018 Private Placements
In
connection with the May 2018 Private Placements, the Company agreed
to sell (i) 218,182 shares of common stock at an aggregate purchase
price of $240,000, or $1.10 per share, and (ii) 5,363.64 shares of
newly designated 0% Series
N Convertible Preferred Stock (the “Series N Preferred
Stock”) at an aggregate purchase price of $590,000, or
$110.00 per share. The following investors in the May 2018
Private Placements also
invested in the February 2018 Private Placements (the “Prior
Investors”): GRQ Consultants Inc., Roth 401K FBO
Renee Honig; GRQ Consultants Inc., Roth 401K FBO Barry Honig;
Melechdavid, Inc.; Grander Holdings Inc. 401K; Robert S. Colman
Trust UDT 3/13/85; Ben Brauser; Joshua A. Brauser; Daniel A.
Brauser; Gregory Aaron Brauser; Erick E. Richardson; and Ronald B.
Low.
Under
the terms of the May 2018 Private Placements, we were required to
offer an aggregate of 12,777.77 shares (the “May 2018
Inducement Shares”) of newly designated 0% Series O Preferred
Stock (the “Series O Preferred Stock”) to investors who
previously purchased securities in the February 2018 Private
Placements and who also purchased securities in the May 2018
Private Placements with an aggregate purchase price of at least 40%
of their investment amounts in the February 2018 Private
Placements. Based on the closing of the offering, and participation
of the Prior Investors who invested an aggregate of $830,000 (the
“May 2018 Inducement Investors”), the Company issued an
aggregate of 10,605.56 May 2018 Inducement Shares in the form of
Series O Preferred Stock convertible into an aggregate of 1,060,556
shares of common stock. The
May 2018 Private Placements closed on May 15, 2018, with the
Company receiving gross proceeds totaling
$830,000.
Going
Concern and Plans for Continuing to Fund the Company’s Losses
from Operations
We plan
to continue to fund the Company’s losses from operations and
capital funding needs through equity financings in the form of
common stock and preferred stock, licensing agreements, asset
sales, strategic collaborations, government grants, issuance of
common stock in lieu of cash for services, debt financings or other
arrangements. Further, to extend availability of existing cash
available for our programs for achieving milestones or a strategic
transaction, in mid-2017 we began reducing personnel from
twenty-five (25) full time employees to six (6) as of November 19,
2018, and reduced other operating expenses following the completion
of two (2) Phase 1a clinical trials of our lead antibody product
candidate, HuMab 5B1, which has enabled us to reduce our
expenditures on clinical trials. We plan to continue funding Phase
1 clinical trials of our product candidate MVT-5873 in cancer
patients, MVT-2163 as a diagnostic agent in pancreatic cancer
patients, and MVT-1075 as a radioimmunotherapy agent for the
treatment of various cancers, preclinical testing of follow-on
antibody candidates, investor and public relations, SEC compliance
efforts, and the general and administrative expenses associated
with each of these activities, and prepare for a mid-stage
proof-of-concept clinical trial of MVT-5873 as a treatment for
pancreatitis. We will also support research efforts and continued
Phase 1 clinical development by MSK of our PET imaging agent
MVT-2163 under an R01 Research Grant provided by the National
Institutes of Health (“NIH”) to MSK in April 2018, with
the bulk of the costs of the research and clinical development
being borne by the NIH. Although we achieved two strategic
transactions in late June 2018 and early July 2018, there can be no
assurance that we will be able to achieve additional license and or
sales agreements and earn revenues large enough to offset our
operating expenses in the future. We cannot be sure that asset
sales or licensing agreements can be signed in a timely manner, if
any, or that capital funding will be available on reasonable terms,
or at all. If we are unable to secure significant asset sales or
licensing agreements and 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, suspend or curtail planned
programs and/or cease our operations entirely. 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 the
Company will continue to incur net losses into the foreseeable
future as we: (i) continue our clinical trial of MVT-5873 in cancer
patients, (ii) continue our clinical trial for the development of
MVT-1075 as a radioimmunotherapy, (iii) prepare for a mid-stage
proof-of-concept clinical trial of MVT-5873 as a treatment for
pancreatitis, to be initiated in early 2019, and (iv) continue
operations as a public company. Based on receipt of $2.7 million
net of transaction costs in February 2018, an additional $830,000
from a financing in May 2018, and receipt of $700,000 from an
upfront payment under a sublicense agreement with Y-mAbs
Therapeutics, Inc. (“Y-mAbs”) during the first nine
months of 2018; and receipt of $4.0 million in gross proceeds from
an asset purchase and license agreement with Boehringer Ingelheim
in July 2018, and without any other additional funding or receipt
of payments from potential asset sales or licensing agreements, we
expect we will have sufficient funds to meet our obligations until
December 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
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 could 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.
Summary of the Offering
The selling
stockholders may offer and resale of up to 6,175,000 shares of our
common stock, par value $0.01 per share, pursuant to this
prospectus. Up to 6,000,000 of such shares represent shares of our
common stock issuable upon conversion of our Series P Preferred
Stock, which Triton has agreed to purchase from us pursuant to the
terms and conditions of an Equity Purchase Agreement that we
entered into with them on November 19, 2018 (the “Equity
Purchase Agreement”), which is described below. The remaining
175,000 shares of common stock are shares that we agreed to issue
to Triton Funds LLC, manager of Triton, upon execution of the
Equity Purchase Agreement to support the cost of the student-run
fund.
Equity Purchase Agreement and Registration Rights Agreement with
Triton Funds LLC
Subject
to the terms and conditions of the Equity Purchase Agreement, we
have the right to “put,” or sell, to Triton up to
$1,000,000 worth of shares of our Series P Preferred Stock
convertible into shares of our common stock. Unless terminated
earlier, Triton’s purchase commitment will automatically
terminate on the earlier of the date
on which Triton shall have purchased shares pursuant to the Equity
Purchase Agreement for an aggregate purchase price of $1,000,000 or
90 days after the effectiveness of a registration statement
registering the resale of the shares of our common stock underlying
the Series P Preferred Stock. This arrangement is also
sometimes referred to herein as the “Triton
Offering.”
As
provided in the
Equity Purchase Agreement, we may require Triton to purchase shares
of Series P Preferred Stock from time to time, subject to a maximum
purchase price of $300,000 for the initial purchase and terms
providing we may not direct Triton to purchase shares of Series P
Preferred Stock during the 30 day period immediately following the
initial put notice, by delivering a put notice to Triton specifying
the total number of shares to be purchased (such number of shares
of Series P Preferred Stock, the “Investment Amount”).
Per the terms of the Equity Purchase Agreement and the Series P
Certificate of Designations (defined on page 83 below), Triton may
convert each share of Series P Preferred Stock into shares of
common stock at the rate of $100.00 divided by 75% of the 5-day
volume-weighted average price of the
Company’s common stock prior to the Series P Preferred Stock
conversion notice (the “Market Price”), except
that Triton, together with its affiliates and certain related
parties, will be restricted from converting its Series P Preferred
Stock into common stock to the extent the conversion would cause
Triton to own beneficially more than 4.99% of our outstanding
common stock immediately following the
conversion.
The
closing date is one day after the shares have been delivered to
Triton in accordance with the Equity Purchase Agreement. On the
settlement date, Triton will purchase the applicable number of
shares subject to customary closing conditions, including without
limitation a requirement that a registration statement remain
effective registering the resale by Triton of the shares of common
stock issuable upon conversion of the preferred stock to be issued
under the Triton Offering as contemplated by the Registration
Rights Agreement described below. The Equity Purchase Agreement is
not transferable, and any benefits attached thereto may not be
assigned.
The
Equity Purchase Agreement contains covenants, representations and
warranties of us and Triton that are typical for transactions of
this type. In addition, we and Triton have granted each other
customary indemnification rights in connection with the Equity
Purchase Agreement. The Equity Purchase Agreement may be terminated
by mutual agreement, at any time.
In
connection with the Equity Purchase Agreement, we also entered into
a Registration Rights Agreement with Triton requiring us to prepare
and file a registration statement registering the resale by Triton
of shares of common stock issuable upon conversion of Series P
Preferred Stock under the Triton Offering, to use commercially
reasonable efforts to cause such registration statement to become
effective, and to keep such registration statement effective until
(i) the date as of which the Triton may sell all of the Registrable
Securities (as defined in the Registration Rights Agreement)
without restriction pursuant to Rule 144 promulgated under the
Securities Act and (ii) the date on which the Investor shall have
sold all the Registrable Securities covered thereby. In accordance
with the Registration Rights Agreement, on November 20, 2018, we
filed the registration statement of which this prospectus is a part
registering the resale by Triton of up to 6,000,000 shares that may
be issued, which represents shares of common stock issuable upon
conversion of Series P Preferred Stock and sold to Triton under the
Triton Offering, and the resale by Triton Funds LLC of 175,000
shares of common stock we agreed to issue upon execution of the
Equity Purchase Agreement to support the cost of the student-run
fund.
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. The risks and uncertainties described below are
not the only ones we face. Additional risks and uncertainties that
of which we are unaware, or that we currently believe are not
material, may also become important factors that affect us. If any
of the following risks occur, our business, operating results and
prospects could be materially harmed. In that event, the price of
our common stock could decline, and you could lose part or all of
your investment.
Risks Related to our Common Stock
The SEC Action (as defined on Page 61) may negatively harm our
business and negatively affect the price of our common stock.
Further, we have been unable to have certain of our previously
filed registration statements declared effective. This
substantially impairs our ability to raise capital and our business
may be materially and adversely affected. Our ability to continue
as a going concern may be substantially impaired. Further, the SEC
Action could be concluded in a manner adverse to the Company and
members of its leadership team, which could negatively affect the
perception of the Company, the price of our common stock, and our
ability to raise capital on attractive terms, if at
all.
On
January 29, 2018, the Company received notice that the SEC was
conducting the SEC Action and on September 7, 2018, the SEC filed
the Complaint against the Investor Defendants for misconduct in
connection with their investment in the Company, as described in
detail on page 61. Although the SEC
has not and may never bring claims against the Company or its
director and officers, our prospects and performance may be
substantially impaired if, in the future, one or more claims are
asserted and resolved in a manner adverse to the Company and/or one
or more of its officer and directors, or if the matters under
investigation give rise to other proceedings or claims against or
related to the Company. Even if the SEC Action concludes in a
manner that is not adverse to the Company and its directors and
officers, the pendency of the SEC Action and the Complaint, any
future resolution of these matters, or any related proceedings that
in the future may arise out of the matters related to the SEC
Action or Complaint, present a variety of risks, including, but not
limited to, the risk that the existence of the SEC Action and
Complaint may negatively affect the price of our common stock, our
ability to raise capital on attractive terms, if at all, and our
ability to attract and retain personnel and outside
professionals.
In
addition to the potential material impact on our ability to raise
capital, the expense of responding to matters relating to the SEC
Action, and on behalf of those individuals whom we may be obligated
to indemnify and defend in connection with the SEC Action, may
exceed our available resources. Further, these expenses may not be
covered by our existing insurance, and even where coverage exists,
may require exhaustion of self-insured retentions or deductibles
that could exceed the cash currently available to the Company. At
this time, we cannot predict how the SEC Action, Complaint or any
related matters may impact the market for our common stock or the
perceptions of potential partners and investors considering a
transaction with the Company. To the extent the market, potential
investors or potential partners have a negative perception of us
during the pendency of the SEC Action, the price of our common
stock may be negatively affected, and potential partners and
investors may be less likely to transact business with
us.
The SEC
has informed the Company that it will not declare certain
registration statements previously filed effective during the
pendency of the SEC Action. The SEC may refuse to declare any
future registration statements we may file effective. Without an
ability to have our registration statements declared effective, our
capital raising options are limited to private investments and
capital raising structures that do not require the use of
registration statements. These offerings, should they ever occur,
could be more dilutive to our stockholders than a registered
offering. We have historically been heavily reliant on our ability
to raise funds in the public market and heavily reliant on our
ability to raise funds from the Aggregated Investors (as defined on
Page 78), several of whom have been sued in a complaint filed by
the SEC on September 7, 2018, for alleged fraud and other offenses
in connection with the purchase or sale of the Company’s
securities. Without the ability to raise capital from other sources
on attractive terms privately or through the public markets, we may
be forced to make additional reductions in spending and personnel,
extend payment terms with suppliers, liquidate assets where
possible, suspend or curtail planned programs or make concessions
to financial terms in out-licensing IP and/or sale of assets, or
cease our operations entirely. Any or all of these actions or
conditions could jeopardize the value of our existing assets and
operations and our ability to continue as a going
concern.
We only have a limited number of employees to manage and operate
our business and it may be necessary for these employees to devote
substantial time to matters relating to the SEC Action, which could
materially harm our business.
As of
November 19, 2018, we had a total of six (6) full-time employees.
Our focus on limiting cash utilization requires us to manage and
operate our business in a highly efficient manner. Due in part to
our limited staff, we may be unable to retain adequate staffing
levels to run our operations and/or to accomplish all the
objectives that we otherwise would seek to accomplish. In addition,
the SEC Action has already required, and likely will continue to
require, substantial management and Board attention, thus reducing
our limited personnel’s ability to attend to other
matters.
Information we have learned in connection with the SEC Action has
placed doubt on the reporting of beneficial ownership by several of
our stockholders, creating uncertainty of whether we will ever be
able to rely on such reports, or be able to calculate beneficial
ownership of such outside investors.
Historically, we
calculated and reported beneficial ownership in reliance upon the
accuracy of the beneficial ownership reporting of our stockholders
and assuming their compliance with their own reporting obligations,
including reports filed on Schedules 13D and 13G, and information
provided by our stockholders directly to us. In the past, we also
relied on the accuracy of stockholder-reported beneficial ownership
when effecting conversions of shares of preferred stock. Since
2015, we also relied heavily on the advice of the Company’s
former outside counsel in calculating and reporting beneficial
ownership, and in effecting conversions of preferred stock held by
outside investors whose beneficial ownership we were advised should
not be aggregated for purposes of SEC reporting.
As
disclosed in the May Form 8-K, and in filings the Company made with
the SEC thereafter, facts and circumstances reviewed in connection
with the SEC Action, raised substantial questions about the
accuracy of our prior reports of beneficial ownership and other
matters concerning our outside investors. We believe that
significant facts and circumstances were known by our former
outside counsel but were not disclosed to the Company. The Company
has reason to believe that beneficial ownership and other
information reported by certain outside investors, that includes
the Company’s former outside counsel, is not accurate and
complete, and that the members of the Aggregated Investors have
failed to properly report their beneficial ownership and other
matters on SEC Schedules 13D or 13G, or otherwise. For this reason,
the Company concluded voluntarily that it may no longer rely on the
information reported by the Aggregated Investors, nor on the legal
advice previously provided by its former counsel. Investors in our
common stock are again cautioned not to rely on our prior
disclosures regarding the beneficial ownership of our capital stock
included in our prior registration statements, Exchange Act reports
and other filings filed with the SEC for the Aggregated Investors
on or after January 1, 2014; although our prior disclosures
regarding the beneficial ownership of the officers and directors
were correct as of their respective dates and may continue to be
relied upon.
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 or sale of
assets below their potential value.
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 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, and legal costs associated
with the SEC Action and other litigation matters. If we are unable
to enter into additional asset sales and license agreements or
raise additional capital, then we may have to substantially curtail
our clinical trials which could slow the progress in the
development of our product candidates. In addition, the
further development of our product candidates and ongoing clinical
trials will depend on upcoming analysis and results of those trials
and our financial resources at the time of these
results.
Although we have
raised approximately $8.2 million since the beginning of 2018,
including $3.5 million, net of offering costs, during the first six
months of 2018 in the form of private placements, and $4.7 million
in gross revenues from two asset sales and license agreements in
late June and early July 2018, 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. As of November 19, 2018, we have
sufficient cash to fund our planned operations into December 2018
assuming we do not complete any additional strategic or financing
transactions or partnering collaborations before December
2018.
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. Our current lender has given
notice asserting events of default have occurred and are
continuing, and we are disputing the lender’s alleged default
events.
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 December 31, 2017, we had an outstanding principal balance of
approximately $3.6 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. On August 14, 2018,
Oxford Finance gave notice asserting that certain events of default
have occurred and are continuing under their loan agreement with
us. In the notice, Oxford Finance does not specify which provisions
of the loan agreement are allegedly implicated by each of the
alleged default events, stating only generally its position that
events of default have occurred or may have occurred. The Company
informed Oxford Finance that it disputes the alleged default
events, individually or collectively, constitute a “Material
Adverse Change” or other event of default as those terms are
defined in the loan agreement, as further described on Page 63.
Defaults Upon Senior Securities, on Page F-14. 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.
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 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. 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.
Several 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. Several 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-5873, MVT-1075 and
MVT-2163, and we cannot provide any assurance that any of
our product candidates will be commercialized.
To
date, our focus and the investment of a significant portion of our
efforts and financial resources has been in the development of our
product candidates, MVT-5873, MVT-1075, 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 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 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 will 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, 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 is 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 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
November 19, 2018, we were the exclusive licensee or sole assignee
of 14 granted United States patents, 4 pending United States patent
applications, and 19 pending foreign 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. A second US patent directed to a
candidate antibody will expire in 2035. 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 2019 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 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, the America Invents Act signed into
law in September 2011 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 several 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 where
we seek to expand our intellectual property portfolio and 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, as a result 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 in connection with
patents to which we hold licenses or in bringing suit to protect
our own patents against infringement.
We
require employees and the institutions that perform our preclinical
and clinical trials to enter into 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 in-licenses,
including our in-licenses from MSK, we could lose our rights under
these agreements. Any such dispute may not be resolvable on
favorable terms, or at all. Whether or not 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. For example, 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
as a result 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 of 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 as a result 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 U.S. 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.
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, Series L Preferred Stock, Series M
Preferred Stock, Series N Preferred Stock and Series O Preferred
Stock; these rights may have a negative effect on the value of
shares of our common stock.
As
of November 19, 2018, the holders of our Series D Convertible
Preferred Stock (the “Series D Preferred Stock”),
Series E Convertible Preferred Stock (the “Series E Preferred
Stock”), Series I Convertible Preferred Stock (the
“Series I Preferred Stock”), Series J Convertible
Preferred Stock (the “Series J Preferred Stock”),
Series K Convertible Preferred Stock (the “Series K Preferred
Stock”), Series L Convertible Preferred Stock (the
“Series L Preferred Stock”), Series M Convertible
Preferred Stock (the “Series M Preferred Stock”),
Series N Convertible Preferred Stock (the “Series N Preferred
Stock”), and Series O Convertible Preferred Stock (the
“Series O 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, Series L
Preferred Stock certificate of designations, Series M Preferred
Stock certificate of designations, Series N Preferred Stock
certificate of designations, and Series O 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 $6,456 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, $100.00 per share or approximately $4.6 million for the
Series L Preferred Stock, $300 per share or approximately $1.5
million for the Series M Preferred Stock, $0.01per share or
approximately $54 for the Series N Preferred Stock and $0.01 per
share or approximately $106 for Series O Preferred
Stock.
We may not be able to achieve compliance for listing on a national
exchange which could make it more difficult for investors to sell
their shares.
Our
common stock was delisted on The Nasdaq Capital Market on July 11, 2018 and
currently trades on the OTC Pink market. Delisting of our common
stock effectively results in our common stock 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. Additionally, subsequent transfers of the shares of our common
stock 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. These state securities
laws and 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
November 19, 2018, we had 7,869,860 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, Series L Preferred
Stock, Series M Preferred Stock, Series N Preferred Stock, and
Series O 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 year ended
December 31, 2017, our common stock traded between $1.28 per
share and $10.76 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
November 19, 2018, represents approximately 46% 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
November 19, 2018, we had 9,254,582 shares of common stock issued
and outstanding. Up to an additional 7,869,860 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, Series L Preferred Stock; Series M Preferred
Stock; Series N Preferred Stock and Series O Preferred Stock A
1,221,935 shares issuable upon exercise of warrants at a weighted
average price of $7.15; 1,820,589 shares upon exercise of all
outstanding options to purchase our common stock at a weighted
average price of $7.44;, resulting in a total of up to 20,166,966
shares that may be issued and outstanding. The issuance of any and
all of the 9,254,582 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.
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.
Risks Related to the Offering with Triton
Resales
of shares purchased by Triton under the Equity Purchase Agreement
may cause the market price of our common stock to
decline.
Subject to the terms and conditions of the Equity
Purchase Agreement, we have the right to “put,” or
sell, to Triton up to $1,000,000 worth of shares of our Series P
Preferred Stock, which are convertible into shares of our common
stock at a conversion rate of $100.00 divided by 75% of the
5-day volume-weighted average price of
the Company’s common stock prior to the Series P Preferred
Stock conversion notice. Unless terminated earlier, Triton’s
purchase commitment will automatically terminate on the earlier of
the date on which Triton shall have purchased shares pursuant to
the Equity Purchase Agreement for an aggregate purchase price of
$1,000,000 or 90 days after the effectiveness of a registration
statement registering the resale of the shares of common stock
underlying the Series P Preferred Stock purchased under the Equity
Purchase Agreement. This arrangement is also sometimes referred to
herein as the “Triton Offering.” The Series P Preferred
Stock to be issued to Triton pursuant to the Equity Purchase
Agreement will be purchased at a price equal to the stated value of
$100.00 per share. Triton will have the financial incentive to sell
the shares of our common stock issuable upon conversion of Series P
Preferred Stock in advance of or upon receiving such shares and to
realize the profit equal to the difference between the discounted
price and the current market price of the shares. This may cause
the market price of our common stock to decline. The foregoing
description of the terms of the Equity Purchase Agreement does not
purport to be complete and is subject to and qualified in its
entirety by reference to the Equity Purchase Agreement
itself.
Puts under Equity Purchase Agreement may cause dilution to existing
stockholders.
From
time to time during the term of the Equity Purchase Agreement, and
at our sole discretion, we may present Triton with a put notice
requiring Triton to purchase shares of our Series P Preferred
Stock. As a result, our existing stockholders will experience
immediate dilution upon the conversion into common stock of any of
the shares of Series P Preferred Stock held by Triton. Triton may
resell some, if not all, of the shares of our common stock issuable
upon conversion of Series P Preferred Stock that we issue to it
under the Equity Purchase Agreement and such sales could cause the
market price of our common stock to decline significantly. To the
extent of any such decline, any subsequent conversions of Series P
Preferred Stock into common stock could require us to issue a
greater number of shares to Triton in exchange for each dollar of
the put amount depending on the timing of when Triton exercises its
rights to conversions of Series P Preferred Stock. Under these
circumstances, the existing stockholders of our company will
experience greater dilution. The effect of this dilution may, in
turn, cause the price of our common stock to decrease further, both
because of the downward pressure on the stock price that would be
caused by a large number of sales of our shares into the public
market by Triton, and because our existing stockholders may dislike
our decision to sell Series P Preferred Stock to Triton at a time
when our stock price is low, and may in response decide to sell
their own shares, further decreasing our stock price. If we draw
down amounts under the Triton Offering when our share price is
decreasing, we could be required to issue more shares to Triton
upon subsequent conversions of Series P Preferred
Stock.
There is no guarantee that we will satisfy the conditions to the
Equity Purchase Agreement.
Although the Equity Purchase Agreement provides that we can require
Triton to purchase, at our discretion, up to $1,000,000 worth of
shares of our Series P Preferred Stock convertible into common
stock, our ability to put shares to Triton and obtain funds when
requested is limited by the terms and conditions of the Equity
Purchase Agreement.
We may not have access to the full amount available under the
Equity Purchase Agreement with Triton.
Our
ability to draw down funds and sell shares under the Equity
Purchase Agreement requires that a registration statement be
declared effective and continue to be effective registering the
resale of shares of our common stock issuable upon conversion of
the Series P Preferred Stock purchased under the Equity Purchase
Agreement. The registration statement of which this prospectus is a
part registers the resale of up to 6,000,000 shares of our common
stock issuable upon conversion of shares of our Series P Preferred
Stock under the Triton Offering, and an additional 175,000 shares
issued to Triton Fund LLC per the terms of the Share Donation
Agreement. This registration statement (and any post-effective
amendments thereto) may be subject to review and comment by the
staff of the SEC and will require the consent of our independent
registered public accounting firm. Therefore, the timing of
effectiveness of the registration statement (and any post-effective
amendments thereto) cannot be assured. Even if we are successful in
causing the registration statement registering the resale of some
or all of the shares issuable upon conversion of the Series P
Preferred Stock under the Equity Purchase Agreement to be declared
effective by the SEC in a timely manner, we may not be able to sell
the shares unless certain other conditions are met. Accordingly,
because our ability to draw down any amounts under the Equity
Purchase Agreement with Triton is subject to a number of
conditions, there is no guarantee that we will be able to draw down
all of the proceeds of $1,000,000 under the Equity Purchase
Agreement.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements, other than
statements of historical facts, contained in this prospectus are,
or may be deemed to be, forward-looking statements. Words such as,
but not limited to, “anticipate,” “intend,”
“indicate,” “plan,” “continue”
“goal,” “seek,” “believe,”
“project,” “estimate,”
“expect,” “potential,”
“future,” “likely,” “may,”
“should,” “could,” “will,” and
similar expressions or phrases, or the negative of those
expressions or phrases, are intended to identify forward-looking
statements, although not all forward-looking statements contain
these identifying words. Although we believe we have a reasonable
basis for each forward-looking statement contained in this
prospectus, we caution you that these statements are based on our
projections of the future that are subject to known and unknown
risks and uncertainties and other factors that may cause our actual
results, level of activity, performance or achievements expressed
or implied by these forward-looking statements, to differ.
You should also carefully read the risk factors
described in more detail beginning on Page 5 of this prospectus. It is not possible for our
management to predict all risks, nor can we assess the impact of
all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements
we may make. The forward-looking statements contained in this
prospectus are made as of the date of this prospectus, and we do
not assume any obligation to update any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by applicable law.
Our
current product candidates are undergoing clinical development and
have not been approved by the United States Food and Drug
Administration (“FDA”) or any comparable foreign
regulatory authority. These product candidates have not been, nor
may they ever be, approved by any regulatory agency nor marketed
anywhere in the world.
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 5
of this prospectus. We
qualify all of the information presented in this prospectus, and
particularly our forward-looking statements, by these cautionary
statements.
We will not receive any proceeds from the sale of
the common stock by the selling stockholders. However, we will
receive proceeds from the sale of shares of our of Series P
Preferred Stock to Triton under the Equity Purchase
Agreement. We will use these proceeds for developing a proof
of concept clinical trial protocol for the treatment of
pancreatitis using our antibody designated as MVT-5873 and general corporate and working capital
purposes. We have agreed to bear the expenses relating to the
registration of the offer and resale by the selling stockholders of
the shares being offered hereby.
PRICE RANGE OF COMMON
STOCK
Our common stock has been quoted on the OTC Pink
under the symbol “MBVX” since July 11,
2018, from August 17, 2016 to July 10,
2018 we were listed on The Nasdaq Capital Market under the symbol
“MBVX” and, prior to that, on the OTCQB Marketplace
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 for the periods on which our
common stock was traded on the OTCQB Marketplace and OTC Pink
market 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-7.4 reverse split
of our common stock effected on August 16, 2016, and a 1-for-3
reverse split on February 16, 2018.
|
High
|
Low
|
2018
|
|
|
Quarter ended March 31, 2018
|
$3.27
|
$1.42
|
Quarter
ended June 30, 2018
|
$1.85
|
$0.75
|
Quarter
ended September 30, 2018
|
$2.55
|
$0.27
|
Quarter ended December 31, 2018 (through November
19, 2018)
|
$0.51
|
$0.26
|
|
|
|
2017
|
|
|
Quarter
ended March 31, 2017
|
$10.77
|
$6.30
|
Quarter
ended June 30, 2017
|
$7.80
|
$4.05
|
Quarter
ended September 30, 2017
|
$4.35
|
$1.29
|
Quarter
ended December 31, 2017
|
$2.91
|
$1.71
|
|
|
|
2016
|
|
|
Quarter
ended March 31, 2016
|
$19.53
|
$9.09
|
Quarter
ended June 30, 2016
|
$19.32
|
$10.44
|
Quarter
ended September 30, 2016
|
$18.15
|
$10.89
|
Quarter
ended December 31, 2016
|
$13.50
|
$9.30
|
On
November 19, 2018, the closing bid price of our common stock was
$0.27.
As
of November 19, 2018, there were 99 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.
SELLING
STOCKHOLDERS
This prospectus covers the resale by the selling
stockholders of up to 6,175,000 shares of our common stock.
These shares represent: (i) up to 6,000,000 shares of common stock issuable upon
conversion of Series P Preferred Stock which may be issued by us to
Triton under the Equity Purchase Agreement; and (ii) 175,000
shares of common stock (the “Commitment Shares”) we
agreed to issue to Triton Funds LLC, manager of Triton, upon
execution of the Equity Purchase Agreement to support the cost of
the student-run fund. Triton is an
“underwriter” within the meaning of the Securities Act
in connection with its resale of our common stock pursuant to this
prospectus. The selling stockholders have not had any position or
office, or other material relationship with us or any of our
affiliates over the past three years. The following table sets
forth certain information regarding the beneficial ownership of
shares of common stock by the selling stockholders as of November
19, 2018, and the number of shares of our common stock being
offered pursuant to this prospectus.
|
|
|
Number
of shares to be
beneficially owned and
percentage
of beneficial
ownership
after the
offering
(1)(2)
|
|
Name
of selling stockholder
|
Shares
beneficially owned as of the
date
of this prospectus (1)
|
Number
of
shares
being
offered
|
Number
of
shares
|
Percentage
of
class
(3)
|
Triton Funds
LLC
|
0
|
175,000
|
0
|
0%
|
Triton
LP
|
0
|
6,000,000
|
0
|
0%
|
Triton Funds was founded by Yash Thukral, Sam Yaffa and Nathan
Yee.
___________
(1)
Beneficial
ownership is determined in accordance with Securities and Exchange
Commission rules and generally includes voting or investment power
with respect to shares of common stock. Shares of common stock
subject to options and warrants currently exercisable, or
exercisable within 60 days, are counted as outstanding for
computing the percentage of the person holding such options or
warrants but are not counted as outstanding for computing the
percentage of any other person.
(2)
The
amount and percentage of shares of our common stock that will be
beneficially owned by the selling stockholder after completion of
the offering assume that they will sell all shares of our common
stock being offered pursuant to this prospectus.
(3)
Based
on 9,254,582 shares of our common stock issued and outstanding as
of November 19, 2018.
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
5 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 5.
Overview
We are
a clinical stage biopharmaceutical company engaged in the discovery
and development of proprietary human monoclonal antibody products
for the diagnosis and treatment of a variety of cancers. We
discovered a pipeline of human monoclonal antibody product
candidates based on the protective immune responses generated by
patients who have been vaccinated against targeted cancers. Our
therapeutic vaccine product candidates under development were
discovered at MSK and are exclusively licensed to us as well as
blood samples from patients who were vaccinated with the same
licensed vaccines. 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 equity financings in the
form of common stock and preferred stock, licensing agreements,
asset sales, strategic collaborations, issuance of common stock in
lieu of cash for services, government grants, debt financings or
other arrangements. 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 product candidates. 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, 2018, we recognized revenue of
$4,700,000, including $700,000 from a license agreement with Y-mAbs
in June 2018 and $4.0 million in gross proceeds from an asset
purchase and license agreement with Boehringer Ingelheim in July
2018. Our loss from operations during this nine-month period was
$5,410,200 and our net loss was $5,908,068. Net cash used in
operating activities for the nine months ended September 30, 2018
was $2,620,437, cash and cash equivalents and working capital
deficit as of September 30, 2018 were $951,751 and $6,334,244,
respectively. As of September 30, 2018, we had
an accumulated deficit of $118,349,884 and stockholders’
equity of $42,558.
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. For a product candidate to be
commercialized, it is 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 Splits
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 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, or the 2016 Reverse Stock Split. On
February 14, 2018, we filed a certificate of amendment to our
Amended and Restated Certificate of Incorporation with the
Secretary of State of the State of Delaware to effectuate another
reverse stock split of our issued and outstanding common stock on a
1-for-3 basis, effective on February 16, 2018, or the 2018 Reverse
Stock Split; collectively with the 2016 Reverse Stock Split, the
“Reverse Stock Splits”). 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 included in this prospectus have been retroactively
adjusted for all periods presented to give effect to the Reverse
Stock Splits, including reclassifying an amount equal to the
reduction in par value of common stock to additional paid-in
capital.
Court
Validation of Previously Issued Shares of Common Stock upon
Conversion of Preferred Stock
On
September 20, 2018, the Court of Chancery of the State of Delaware
(the “Court”) entered an order validating (i) issuances
of common stock upon conversions of the Company’s preferred
stock occurring between June 30, 2014 and February 12, 2018, and
(ii) stockholder approval of corporate actions presented to the
Company’s stockholders from June 30, 2014 to February 12,
2018. In so doing, the Court granted the Company’s Verified
Petition for Relief Under 8 Del.
C. § 205 (the “Delaware Petition”)
captioned In re: MabVax
Therapeutics Holdings, Inc., filed on July 27, 2018, in
order to rectify the uncertainty regarding whether shares of our
common stock were validly issued upon conversion of our preferred
stock from June 30, 2014 to February 12, 2018.
As
disclosed in our Current Report on Form 8-K filed with the SEC on
May 21, 2018 (the “May Form 8-K”), facts previously
came to our attention indicating that certain shares of our common
stock issued upon conversion of shares of our preferred stock may
not have been validly issued in compliance with the 4.99% blocker
provisions set forth in the applicable certificates of designation
for conversions occurring between June 30, 2014 and February 12,
2018.
Withdrawal
and Reinstatement of Auditor Reports; Auditor Resignation and
Appointment of New Auditor
As disclosed in the May Form 8-K and in part due to the
uncertainty regarding the valid issuance of certain shares of our
common stock addressed in the Delaware Petition, on May 20, 2018,
our Board of Directors, upon the recommendation of management,
concluded our prior annual and interim period financial statements
for the years 2014, 2015, 2016 and 2017 included in our Reports on
Form 10-K and Form 10-Q for such years, and our registration
statements filed during the years 2014, 2015, 2016, 2017 and to
date for 2018 with respect to the number of shares of common stock
outstanding, and the weighted average number of shares used in
calculating earnings per share and related per share figures should
not be relied upon. Accordingly, on May 20, 2018, our then-engaged
independent registered
public accounting firm, CohnReznick LLP, withdrew their audit
reports included in our Annual Reports on Form 10-K for the years
2014, 2015, 2016 and 2017. Our Board of Directors further
determined the Company could not file its Quarterly Report on Form
10-Q for the quarter ended March 31, 2018 in compliance with
applicable laws and regulations.
As disclosed on August 8, 2018, effective August 3, 2018,
CohnReznick LLP resigned as the Company’s independent
auditor. During the Company’s two most recent fiscal years
ended December 31, 2017 and December 31, 2016, and during the
subsequent interim reporting periods through March 31, 2018,
and the interim period through August 3, 2018, there were no
disagreements with CohnReznick LLP on any matter of GAAP or
practices, financial statement disclosures, or auditing scope or
procedures, which disagreements, if not resolved to the
satisfaction of CohnReznick LLP would have caused CohnReznick LLP
to make reference to the subject matter of the disagreements in
connection with its reports. Additionally, there were no
events of the type listed in paragraphs (A) through
(D) of Item 304(a)(1)(v) of Regulation S-K.
Subsequent to the
ratification of the shares by the Court on September 20, 2018, on
October 12, 2018 CohnReznick LLP issued their audit report for the
consolidated financial statements for the years 2016 and 2017,
included in our Form 10-K/A
filed with the SEC on October 15, 2018, and the
auditors’ consent to including their reports in our
registration statements filed during the years 2016 and
2017.
On
August 22, 2018, we entered into an engagement agreement pursuant
to which we appointed our new independent
registered public accounting firm, Haskell & White
LLP.
Nasdaq
De-listing and Application for Listing on the OTCQB
Marketplace
On July
2, 2018, the Listing Qualifications Department of The Nasdaq Stock
Market (the “Staff”) notified the Company of its
determination to delist our securities. In this notice, the Staff
indicated their determination was based upon the Company’s
non-compliance with the Rule as well as the Company’s
non-compliance with the $2.5 million stockholders’ equity
requirement for continued listing on The Nasdaq Capital Market per
Nasdaq listing rule 5550(b)(1). The Company elected not to appeal
the Staff’s decision and, as a result, on July 2, 2018, we
received a letter from the Staff indicating trading of the
Company’s common stock would be suspended on The Nasdaq
Capital Market at the open of business on Wednesday, July 11, 2018.
On July 11, 2018, our common stock began trading on the OTC Pink,
continuing under the symbol MBVX. On May 21, 2018, we notified the
Staff that we would not be filing our Quarterly Report on Form 10-Q
for the quarter ended March 31, 2018, by the required deadline as
required for continued listing on The Nasdaq Capital Market per
Nasdaq listing rule 5250(c)(1) (the “Rule”). Further,
on June 29, 2018, the Company’s Board of Directors determined
not to submit a plan to the Staff to regain compliance with the
Rule, and we announced this decision in a press release on July 2,
2018. On September 26, 2018, The Nasdaq Stock Market announced that
it will delist the common stock of MabVax by filing a Form 25 with
the SEC to complete the delisting process. The delisting became
effective ten days after the Form 25 was filed. The Company applied
for listing on the OTCQB Venture Marketplace (the “OTCQB
Marketplace”) on October 16, 2018, however, there can be no
assurance of being listed while the SEC Action is
underway.
Resignation
and Appointment of Members of the Board of Directors
Effective July 31, 2018, Paul Maier,
Jeffrey E. Eisenberg, Thomas C. Varvaro and Kenneth Cohen, resigned
as members of the Company’s Board of Directors. There
were no disagreements between the resigning Board members and
management.
Following the
resignations, in a separate action, the Board of Directors
appointed our Chief Financial Officer, Gregory Hanson, as a member
of the Board. Mr. Hanson has served as our Chief Financial Officer
since July 2014, and of its subsidiary, MabVax Therapeutics, Inc.
since February 2014. Mr.
Hanson has over 30 years’ experience serving as the CFO,
financial executive and director of public and private life
sciences and hi-tech companies. Since October 2016, he has served
as a member of the board of directors of a private pharmaceutical
contract research organization.
Our
Clinical Development Programs
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 treated with our therapeutic antibody
product candidate, MVT-5873, as a monotherapy in a poster
presentation at the American Society of Clinical Oncology
(“ASCO”) Annual Meeting on June 3, 2017. MVT-5873 has
been evaluated for safety and tolerability in patients with
advanced pancreatic cancer and other CA19-9 positive cancers. In
this poster presentation, the Company highlighted that the single
agent MVT-5837 appeared safe and well tolerated in patients at
biologically active doses based on the results of the Phase 1a
trial. Furthermore, all patients in the Phase 1a trial 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 support that this
fully-human antibody targeting CA19-9 cancers can be administered
at doses with acceptable safety and have a potentially positive
impact on disease. The cancer antigen 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. We plan to continue to
evaluate MVT-5873 at higher doses.
MVT-5873 in Combination with a Standard of
Care Chemotherapy – Based upon observations from the
first two cohorts of patients treated, we are evaluating further
clinical development of MVT-5873 in combination with gemcitabine
and nab-paclitaxel as a first line therapy for the treatment of
patients newly diagnosed with pancreatic cancer. MabVax has treated
seventeen patients as of August 24, 2018, with the objective of
obtaining additional safety and tumor response (RECIST 1.1) data
for this treatment regimen. Dr. Eileen O’Reilly,
Associate Director of the David M. Rubenstein Center for Pancreatic
Cancer Research, attending physician, member at MSK and Professor
of Medicine at Weill Cornell Medical College, is the lead
investigator in the MVT-5873 Phase 1 clinical trial.
On
February 12, 2018, we reported on interim results of the current
cohort of the Phase 1 study, in which MVT-5873 was given in
combination with nab-paclitaxel and gemcitabine to patients newly
diagnosed with CA19-9 positive pancreatic cancer. MVT-5873 at a
dose of 0.125 mg/kg when added to first-line chemotherapy was
generally well tolerated by all subjects. At that time, all six
patients in the current cohort demonstrated measurable tumor
reductions, with four patients meeting the criteria for partial
response (PR) and two patients meeting the criteria for stable
disease (SD). We believe these results further confirm results
reported on a portion of the cohort in late 2017. Patient CA19-9
levels, which are a prognostic indicator of the disease state, were
markedly reduced in all subjects with this combination therapy. Due
to adverse events potentially related to the combination of
nab-paclitaxel, gemcitabine and MVT-5873, not seen in the
monotherapy clinical study, the Company has suspended patient
enrollment at the current dose. We are evaluating plans to enroll
additional patients at a lower dose to further explore safety and
response in a larger population.
MVT-5873 – for the Treatment of Pancreatitis
Pancreatitis is a
severe and common medical condition that can lead to death or a
chronic condition with significant morbidity, systemic inflammatory
response and multiple organ dysfunction syndromes. Pancreatitis is
also associated with a 16.5-fold elevated risk for developing
pancreatic cancer. Best available treatment for pancreatitis is
primarily supportive care consisting of rehydration, pain relief,
nutritional support followed by antibiotic therapy, and surgery for
biliary pancreatitis and other more severe cases. Acute and chronic
pancreatitis in the United States accounts for 361,000 hospital
admissions each year and for direct health care costs of $3.1
billion annually (Forsmark et al, NEJM 375;20 and Yadav et al,
Pancreapedia, July 28,
2016).
Investigators at
CSHL have made significant new discoveries elucidating the
biological pathways that cause both acute and chronic pancreatitis.
Investigators found that expression of
CA19-9 in the pancreas is sufficient to induce pancreatitis.
Specifically, CA19-9 elevation resulted in rapid elevation of
pancreatic enzymes in the blood, pancreatic infiltration of immune
cells, acinar-to-ductal metaplasia and atrophy, as well as
increased proliferation. Investigators then explored the utility of
CA19-9 as a therapeutic target for both acute and chronic
pancreatitis. This avenue of treatment strategy exhibits potential
given that turning off or blocking CA19-9 expression results in the
normalization of pancreatic enzyme levels within four days
following an acute episode of pancreatitis.
MVT-5873
specifically targets CA19-9, and subsequent studies have
demonstrated that antibodies capable of binding to CA19-9 and
blocking the downstream biological pathways of pancreatitis have a
positive effect on ameliorating the disease. Combining the
preclinical science supporting the use of the CA19-9 blocking
antibodies in the treatment of pancreatitis with the clinically
validated data and supplies of MVT-5873 already available gives
MabVax the opportunity, assuming adequate funding, to move quickly
into the clinic in a mid-stage proof of concept clinical trial in
the near-term.
MVT-2163 – as an Imaging Agent for Pancreatic
Cancer
We
reported results from our Phase 1a clinical trial of ImmunoPET
imaging agent product candidate, 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, Colorado on June 10-14, 2017.
The
Phase 1a clinical trial of MVT-2163 Phase I trial was intended to
evaluate our next generation diagnostic PET imaging agent in
patients with PDAC or other CA19-9 positive malignancies. MVT-2163
(89Zr-HuMab-5B1) combines the well-established PET imaging
radiolabel Zirconium-89, a positron emitting isotope typically
labeled as 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, twelve (12) patients were 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. 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 did not
interfere with the uptake of MVT-2163 on cancer
lesions.
Uptake
of MVT-2163 was observed in primary tumors and metastases as early
as day two and continuously through day seven. Standard Uptake
Values (“SUVs”), a measurement of activity in PET
imaging, reached as high as 101 in the study. The investigators
reported that the 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.
In
summary, the MVT-2163 product candidate demonstrated acceptable
safety tolerability, pharmacokinetics and biodistribution in this
trial. MVT-2163 also produced high quality PET images identifying
both primary tumor and metastatic sites. We believe 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. We believe the
continual increase in high SUVs on cancer lesions in this study
supports the use of the Company’s MVT-1075 radioimmunotherapy
product candidate, which utilizes the same antibody to deliver a
radiation dose for the treatment of patients with pancreatic, lung
and colon cancers.
In
April 2018, the NIH awarded an R01 Research Grant to MSK for
continued Phase 1b development of MVT-2163 as a PET diagnostic
imaging agent. The R01 grant extends
the Phase 1 work already completed by MabVax by evaluating MVT-2163
visual images and biopsies of targeted tissues
illuminated with the PET agent. This information will then be used
to determine if the new PET imaging agent can improve pre-surgical
staging of patients with pancreatic ductal adenocarcinoma. Since
surgery is currently the only cure for pancreatic cancer and the
success rate of surgical intervention is low, having a new
diagnostic tool to more accurately assess the location and extent
of the dissemination of the cancer has the potential to improve
surgical outcomes. Additionally, these data can be used to support
the dose and dose distribution determinations for the
Company’s HuMab-5B1 antibody based radioimmunotherapy
agent, MVT-1075, currently
being evaluated in a Phase 1 trial. MabVax will support MSK
in its research efforts and allow the clinical study to be
conducted under a MabVax IND; however, the bulk of the costs will
be borne by the NIH.
MVT-1075 – as a Radioimmunotherapy for Pancreatic
Cancer
On
February 28, 2018, we announced positive interim results from the
initial three-patient cohort of the Phase 1 clinical trial for
MVT-1075, which combines the demonstrated targeting specificity of
the MVT-5873 antibody with the proven clinical success of a
low-energy radiation emitter, 177Lutetium, often referred to as
177Lu. Results from the first three patients dosed in the initial
cohort of this dose escalation Phase 1 safety trial demonstrated
that MVT-1075 was reasonably well tolerated and accumulated on
tumor as evidenced by dosimetry measurements performed after the
first dose. At this initial dose, two subjects met the criteria for
stable disease (SD) and one met the criteria of progressive disease
(PD) as measured using RECIST 1.1 criteria. Hematologic toxicities
were manageable, and the Company is enrolling the first patient in
the second cohort.
This
Phase 1 first-in human dose escalation clinical trial, which began
in June 2017, is an open-label, multi-center study evaluating the
safety and efficacy of MVT-1075 in up to 22 patients for patients
with PDAC or other CA19-9 positive malignancies including colon and
lung cancers. The primary endpoint of this trial is to determine
the maximum tolerated dose and safety profile in late stage
patients with recurring disease who have failed prior therapies.
Secondary endpoints include evaluating tumor response rate and
duration of response by RECIST 1.1 and determining dosimetry and
pharmacokinetics. This dose-escalation study utilizes a traditional
3+3 design and is based on experience we gained through prior
clinical studies that treated 50 patients with either MVT-5873, or
our imaging agent MVT-2163. The
investigative sites are Honor Health in Scottsdale, Arizona, and
MSK in New York City.
In
April 2017, we 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 candidate 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 ASCO and the SSNMMI, 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.
Asset
Sales and License Agreements
License Grant to Y-mAbs Therapeutics, Inc.
On
June 27, 2018, we entered into a Sublicense Agreement with Y-mAbs,
pursuant to which we granted Y-mAbs an exclusive sublicense to a
bi-valent ganglioside-based vaccine product candidate intended to
treat neuroblastoma, a rare pediatric cancer.
Neuroblastoma is a
rare solid tumor in childhood with only about 650 cases diagnosed
each year in North America. The incidence is about 10.54 cases per
1 million per year in children younger than 15 years. About 37% are
diagnosed as infants, and 90% are younger than 5 years at
diagnosis, with a median age at diagnosis of 19 months.
Neuroblastoma is responsible for 12% of all cancer deaths in
children less than 15 years of age.
Total value of the transaction to MabVax is $1.3
million, $700,000 of which was paid upon execution of the
agreement and $600,000 of which is to be paid within five (5) days
of the first anniversary of the execution date, provided the
agreement as not been terminated prior to the anniversary,
plus a share of a Priority Review
Voucher if granted by the FDA to Y-mAbs on approval of the vaccine
and the Priority Review Voucher is subsequently sold. Additionally,
Y-mAbs will be responsible for all further development of the
product candidate as well as any downstream payment obligations
related to this specific vaccine to MSK that were specified in the
original MabVax-MSK license agreement. If Y-mAbs successfully
develops and receives FDA approval for the Neuroblastoma vaccine
product candidate, it is obligated to file with the FDA for a
Priority Review Voucher. If this voucher is granted to Y-mAbs and
subsequently sold, then MabVax will receive a percentage of the
proceeds from the sale of the voucher by
Y-mAbs.
The neuroblastoma vaccine product candidate was
originally developed by Dr. Philip Livingston and colleagues at MSK
and licensed as part of a broader portfolio of anti-cancer vaccines
licensed to MabVax. MabVax filed for and was granted an Orphan Drug
Designation for the neuroblastoma vaccine and has manufactured
Phase II clinical supplies for a planned but not initiated clinical
trial to be conducted with the consortium New Advances in
Neuroblastoma Therapy (“NANT”). NANT is the only consortium of academic
medical centers in the world solely dedicated to developing novel
treatments and biomarkers for children with Neuroblastoma.
Over the last several years, MabVax
has shifted its focus and resources to the Company’s human
antibody discovery and development programs that are currently in
early stage clinical trials and have attracted partner
interest.
Sale of Asset to Boehringer Ingelheim and Related
Agreements
On July 6, 2018, we entered into the Asset
Purchase Agreement with Boehringer Ingelheim, pursuant to which
Boehringer Ingelheim purchased all of our rights to assets owned or
controlled by us that related to a specific human antibody research
and development program to identify and characterize antibodies
that bind to an undisclosed glycan antigen. The transaction closed on July 6,
2018.
Pursuant
to the Asset Purchase Agreement, MabVax may receive a total of $11
million, $4 million of which was received upfront and the remainder
upon the achievement by Boehringer Ingelheim of various specified
milestone events, plus further earn-out payments through the later
of the expiration of the last to expire valid claim of the licensed
program patent covering a Boehringer Ingelheim product, or ten (10)
years from the date of first commercial sale of such Boehringer
Ingelheim product on a country-by-country and product-by-product
basis. The asset acquisition is separate and distinct from other
programs under development at MabVax, enabling MabVax to retain all
rights to its lead HuMab-5B1 antibody program which is in Phase 1
clinical trials as a therapeutic product candidate and as a
diagnostic product candidate, as well as other antibody discovery
programs from the Company’s antibody discovery portfolio
targeting other cancer antigens.
MabVax
discovered the antibody series at the center of this transaction
from biological samples, originally from patients who were
vaccinated against their solid tumors with a glycan
antigen-containing vaccine. We believe our methods of discovery of
fully human antibodies directly from vaccinated cancer patients has
potential advantages, which include greater specificity and reduced
toxicities.
Plan
for Remainder of 2018
Based
on the experience with recent asset sales and license agreements,
and continuing inquiries from third parties regarding their
interest in other MabVax assets and clinical progress to date
related to MVT-5873, MVT-1075, and MVT-2163, we intend on
continuing to explore additional licensing and/or collaboration
opportunities for certain fields of use of our technology. However,
there can be no assurance that any such transaction will
occur.
If we
are able to secure additional funds, we intend to, among other
things:
●
continue
enrollment in our clinical study of MVT-5873 in combination with
gemcitabine and nab-paclitaxel in first line therapy for the
treatment of patients newly diagnosed with pancreatic cancer with
the objective of confirming early observations seen to date, to
enable discussions with potential strategic partners and
investors.
●
enroll
additional patients into the MVT-5873 monotherapy trial with the
aim of establishing a higher maximum tolerated dose. We have
submitted our Investigational New Drug Application
(“IND”), to the FDA, for a revised protocol to enable
continuation of the trial at higher doses.
●
support
the continued development of the MVT-2163 imaging agent under the
R01 grant made to MSK for the Phase 1b portion of this clinical
program.
●
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; also, to enable discussions with potential strategic
partners and investors.
●
Use a
portion of existing supplies of MVT-5873 to pursue a proof of
concept clinical trial of MVT-5873 in the treatment of
pancreatitis.
Comparison of the Year Ended December 31, 2017 and
2016
Results of Operations
Revenues
Revenues
for the years ended December 31, 2017 and 2016 were $0 and
$148,054, respectively, primarily from grant revenues. This
decrease was primarily due to the completion of the current phase
of our contract with the National Institute of Health, or NIH (the
“NIH Imaging Contract”), during the first quarter of
2016.
|
Years Ended December 31,
|
% change
|
|
|
2017
|
2016
|
2016 to 2017
|
Revenues
|
$-
|
$148,054
|
*%
|
*Not meaningful
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, 2017
and 2016 were $7,544,122 and $7,800,723, respectively. Our research
and development costs consist primarily of clinical trial site
costs, clinical data management and statistical analysis support,
drug manufacturing, storage and distribution, regulatory services
and other outside services related to drug
development.
|
Years Ended December 31,
|
% change
|
|
|
2017
|
2016
|
2016 to 2017
|
Research
and development
|
$7,544,122
|
$7,800,723
|
(3%)
|
Stock-based
compensation expense included in research and development expenses
for the years ended December 31, 2017 and 2016 were $1,570,809
and $1,192,126, respectively, an increase of $378,683. The increase
in stock-based compensation was offset by a reduction in executive
bonuses of $114,450 and overall research and development expenses
decreased $520,834, exclusive of the stock-based compensation and
executive bonuses, compared to the same period in
2016.
Research
and development expenses for the year ended December 31, 2017 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
external research contract services and consulting/contractor fees
for our clinical trials and preclinical and clinical development
which were brought in-house in towards the end of the second
quarter in 2016.
We expect our total research and development
expenditures in the next twelve months to remain approximately the
same as we continue to fund the clinical studies 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 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,
2017 and 2016 were $10,526,340 and $9,010,450,
respectively.
|
Years Ended December 31,
|
% change
|
|
|
2017
|
2016
|
2016 to 2017
|
General
and administrative
|
$10,526,340
|
$9,010,450
|
17%
|
The
increase in general and administrative expenses of 17%, or
$1,515,890 in 2017, compared to the same period in 2016, was
primarily due to an increase in stock-based compensation due to
additional restricted stock units and options awarded to executive
officers and non-executive employees of the company. Stock-based
compensation expense included in general and administrative
expenses for the years ended December 31, 2017 and 2016 were
$5,276,122 and $3,211,152, respectively. In addition to
stock-based compensation increasing $2,064,970, franchise taxes
increased $76,696 and other employee benefits increased $49,463.
The increase was offset by a decrease in professional fees of
$298,810, executive bonuses of $248,284, travel expenses of
$72,397, facility expenses of $48,037 and business insurance of
$33,688.
Interest Income and Interest Expense
|
Years Ended December 31,
|
% change
|
|
|
2017
|
2016
|
2016 to 2017
|
Interest
and other income (expense), net
|
$(950,217)
|
$(997,364)
|
(5)%
|
Interest
and other income (expense), net was $950,217 and $997,364 for the
years ended December 31, 2017 and 2016, respectively. Interest
expense in 2017 primarily relate to interest, amortization of
financing costs and warrant amortization on the Company’s
term loan from Oxford Finance LLC. The Company incurred interest
costs of $576,124, amortization of financing costs of $166,104 and
warrant amortization of $208,530 for the year ended December 31,
2017 compared to interest costs of $603,875, amortization of
financing costs of $174,475 and warrant amortization of $219,039
for the year ended December 31, 2016.
The
fair value of the warrants issued to Oxford Finance LLC, 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.
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
accounting principles generally accepted in the United States of
America, or 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. NIH and other 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 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. For the year ended December 31, 2017, we performed
our annual review with 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 year ended
December 31, 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 December 31, 2017, 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.
The
above listing is not intended to be a comprehensive list of all our
accounting policies. In many cases, the accounting treatment of a
transaction is specifically dictated by GAAP. See our audited
consolidated financial statements and notes thereto included in our
2017 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 December 31, 2017, we had an accumulated deficit
of $111,053,637 and stockholders’ equity of $1,130,440.
In February 2018 we completed a series of private placements
totaling $2.7 million, net of approximately $55,000 in costs of
financing. However, until such time as we have completed one or
more license agreements of portions of our technology and we have
sufficient funding from such licenses and financing transactions to
continue to sustain operations, we anticipate continuing to incur
substantial losses over at least the next several years to continue
Phase I clinical trials of MVT-5873 in combination with a
chemotherapy agent and MVT-1075 as a radioimmunotherapy agent for
the treatment of various cancers, preclinical testing of follow-on
antibody candidates, investor and public relations, SEC compliance
efforts, and the general and administrative expenses associated
with each of these activities. 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 $885,710 and a
working capital deficit of $4,598,748 as of December 31,
2017.
|
2017
|
2016
|
December 31:
|
|
|
Cash
and cash equivalents
|
$885,710
|
$3,979,290
|
Working
capital/(deficit)
|
$(4,598,748)
|
$(1,396,656)
|
Current
ratio
|
0.21:1
|
0.75:1
|
|
|
|
Cash provided by (used in);
|
|
|
Operating
activities
|
$(10,995,511)
|
$(12,363,411)
|
Investing
activities
|
$(21,072)
|
$(563,196)
|
Financing
activities
|
$7,923,003
|
$12,821,812
|
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, and collaborative arrangements with
corporate partners, and interest earned on investments. At
December 31, 2017, we had available cash and cash equivalents
of $885,710. 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 2017 was $10,995,511 compared to
$12,363,411 for the same period in 2016. Net loss of $19,020,679 in
2017 included non-cash charges of $6,846,931 for stock-based
compensation, $553,284 for issuance of restricted common stock for
service, $393,829 for amortization and accretion related to our
notes payable and $159,842 in depreciation and amortization. Cash
used in 2016 resulted from a net loss of $17,660,483 and included
non-cash charges of $4,403,278 for stock-based compensation and
$96,553 in depreciation.
Cash Flows
from Investing Activities. Cash used in investing activities for 2017 was
$21,072 compared to $563,196 during the same period in 2016. Cash
used in both 2017 and 2016 was primarily used to purchase property
and equipment for the lab department.
Cash Flows
from Financing Activities. Net cash provided by financing activities was
$7,923,003 after paying approximately $1.5 million in principal
payments on debt for the year ended December 31, 2017, compared to
$12,891,812 after paying approximately $200,000 in principal
payments on debt in the comparable period in 2016. Net cash
provided by financing activities for the year ended December 31,
2016 included $4,610,324 from net proceeds from the January 2016
Oxford Finance LLC Term Loan and $8,567,448 from the sale of common
stock and warrants in a registered offering completed in August
2016 whereas the net cash provided by financing activities for the
year ended December 31, 2017 were attributable to the following
financing activities:
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, 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 $5.25 per share, each
subject to adjustment for stock splits, stock dividends,
recapitalizations, combinations, subdivisions or other similar
events.
On
May 19, 2017, we closed a public offering of 447,620 shares of
common stock and 1,000,000 shares of newly designated Series G
Preferred Stock, at $5.25 per share of common stock, after
adjusting for the Reverse Stock Splits, and $1.75 per share of
Series G Preferred Stock. The Series G Preferred Stock is
initially convertible into 333,334 shares of common stock, after
adjusting for the Reverse Stock Splits and subject to further
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 estimate underwriting discounts, commissions and
offering expenses of $416,217.
On
July 27, 2017, we entered into a subscription agreement with an
accredited investor pursuant to which we agreed to sell 50,715
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 75,075 shares of common stock
from $33.30 to $6.00 per warrant share and remove the cashless
exercise feature. The transaction closed on August 2, 2017.
The impact of repricing the warrants to $6.00 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 $2.10 and the warrants
at $6.00 a share, and expired on October 10, 2017,
unexercised.
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 Series J Preferred
Stock, at a stated value
of $550 per share, representing an aggregate of approximately
$1,312,500 before offering expenses of $123,083 in an August 2017
financing. The shares of Series J Preferred Stock are
convertible into shares of common stock (the “Series J
Conversion Shares”) 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 $1.65 per share, each subject to adjustment for
stock splits, stock dividends, recapitalizations, combinations,
subdivisions or other similar events.
On
September 11, 2017, the Company entered into subscription
agreements with select accredited investors relating to the
Company’s registered direct offering, issuance and sale of
1,333,334 shares of the Company’s common stock. The purchase
price per share was $1.50. We received $2.0 million in gross
proceeds, before offering expenses of $142,639. 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 672,043 shares of the Company’s common stock. The
purchase price per share was $1.86. We received $1.25 million in
gross proceeds, before offering expenses estimated at $14,000. 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
256,410 shares of the Company’s common stock. The purchase
price per share was $1.95. We received $500,000 in gross proceeds,
before offering expenses totaling approximately $3,750. The
offering closed on October 11, 2017.
We
plan to fund the Company’s losses from operations for the
foreseeable future through upfront and milestone payments from
strategic collaborations and licensing arrangements, or other
arrangements, or with equity or debt financings if strategic
opportunities are not closed in a timely fashion, or at all.
Further, to extend availability of existing cash available for our
programs for the purpose of achieving one or more strategic
transactions as well as our own development initiatives, we cut
personnel in mid-2017 from 25 full time people to 11, 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 expect to
continue to develop MVT-5873 in combination with chemotherapy, and
our radioimmunotherapy product MVT-1075, while exploring
out-licensing opportunities for our technology for certain fields
of use, as discussed further in Management’s Discussion and
Analysis of Financial Condition and Results of
Operations. However, we cannot be sure that completing one or
more strategic transactions can be timely completed, or at all, or
whether capital funding will be available on reasonable terms if
strategic transactions are not timely. If we are unable to secure
one or more strategic transactions or adequate additional funding,
then 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. 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.
Based
on receipt of $2.7 million in private placements, net of
approximately $55,000 in costs of financing in February 2018, and
without any other additional funding or receipt of payments from
potential licensing agreements, we expect we will have sufficient
funds to meet our obligations through April 2018. These conditions
give rise to substantial doubt as to the Company’s ability to
continue as a going concern. Any of these actions to reduce
spending 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 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.
Working
Capital. Our working capital deficit was $4,598,748 at
December 31, 2017, as compared to a working capital deficit of
$1,396,656 at December 31, 2016. The decrease in working
capital was primarily due to increased capital usage during 2017
primarily related to the Company’s clinical development
programs.
Going
Concern. We believe our cash
and cash equivalents as of December 31, 2017, together with
$2.7 million in a private placement with accredited investors, net
of approximately $55,000 in transaction costs in February 2018, and
assuming no additional revenue generating license agreements are
signed, will be sufficient to fund our projected operating
requirements through approximately April 2018. In order to continue
our current and future operations and continue our clinical product
development programs through 2018 and beyond, we will depend
substantially on our ability to obtain upfront and milestone
payments from potential license and/or partnering agreements for
use of our technologies in certain fields of use and raising
capital through other financing transactions 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 2018 without
licensing and/or partnering transactions and additional financings.
We have been exploring potential licensing and/or partnering
transactions and other arrangement through which the value of our
Company could be enhanced. We may raise funds through such
potential arrangements with collaborators or others that may
require us to sell product candidates that we might otherwise seek
to develop or commercialize independently. Our failure to enter
into licensing and/or partnering transactions or raise capital when
needed could materially harm our business, financial condition and
results of operations. See Risk Factors.
We
anticipate that we will continue to incur substantial net losses
into the foreseeable future as we: (i) continue our Phase I
clinical trials of MVT-5873 in combination with chemotherapy and
our Phase I clinical trial of our radioimmunotherapy product
MVT-1075 for the treatment of various cancers, (ii) continue
preclinical development activities related to developing a product
targeting Tn for the treatment of breast cancer and small cell lung
cancer and other product development candidates in our library, and
(iii) 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 or licensing portions of our
technology for particular uses, we expect we will have sufficient
funds to meet our obligations through April 2018.
We
plan to continue to fund our research and development and operating
activities through 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, and through public or private equity financings and
debt financings or other arrangements if the strategic transactions
are not timely, if at all. However, we cannot be sure that such
strategic transactions or additional funds will be available on
reasonable terms, or at all. If we are unable to secure strategic
transactions or 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 and results of operations.
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.
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;
●
our
ability to establish license agreements with third parties and
reliance on receipt of payments from milestones;
●
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 research
collaborations;
●
our
ability to raise capital on attractive terms, if at all, while the
SEC investigation of our registration statements is
underway;
●
the
costs and timing of obtaining, enforcing and defending our patent
and intellectual property rights; and
●
competing
technological and market developments.
Contractual Obligations
Offices
Leases. 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”). Given 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. Monthly
rent commenced upon occupancy at $2.38 per square foot, totaling
$35,631, and escalates at an annual rate of 3% a year over the
six-year term of the lease as set forth in the Lease. Pursuant to
the terms of the Lease, the current monthly base rent paid by the
Company is $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.
Our
master lease and sublease of our facility located at 3165 Porter
Drive in Palo Alto, California (the “Porter Drive
Facility”) 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.
May 2017
Letter Agreement. As a condition to the Lead Investor participating
in the May 2017 Public Offering, the Company agreed to the
requirement that we offer incentive shares (the “May 2017
Inducement Shares”) to investors from prior periods who
participate in making a certain minimum required investment in the
May 2017 Public Offering, as further described in Note 7,
“Convertible Preferred Stock, Common Stock and
Warrants” in the Notes to Consolidated Financial
Statements.
Further, the Company 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 350,000 options
to certain employees and members of the Board, at a price not less
than $6.00 per share, and 16,667 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.
|
Funds
Held in Escrow
|
|
$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, the
May 2017 Consent Rights: the right to approve future (i) issuances
of our securities, (ii) equity or debt financings and (iii) sales
of any development product assets currently held by us, subject to
certain exceptions, if such securities are sold at price below
$7.50 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 the May 2017 Public
Offering. 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 December 31, 2017,
the Company exceeded the minimum $500,000 in expenses related to
outside investor relations services fulfilling the Company’s
obligation for spending on investor relations. The Lead Investor
elected not to hold the funds in escrow. Further, the Company
issued the May 2017 Inducement Shares per the May 2017 Letter
Agreement. Also, two Board members resigned during 2017, achieving
one of the conditions of the Lead Investor. The Company adjusted
the Board compensation per the May 2017 Letter Agreement but did
not nominate a new Board member nor did it hire a new C-level
executive in light of limited amount of cash available to the
Company.
Letter
Agreement Regarding Future Financing
Transactions. In connection
with a financing that took place in August 2017 (the “August
2017 Offering”), we agreed with the Lead Investor pursuant to
a letter agreement dated August 9, 2017 (the “August 2017
Letter Agreement”), whereby the Lead Investor together with
certain other investors would purchase an aggregate of $2,350,000
in a financing, and the Company would issue incentive shares in the
form of newly designated shares of Series K Preferred Stock
convertible into an aggregate of 2,166,667 shares of common stock
(the “August 2017 Inducement Shares”) to be distributed
to certain existing investors of the Company (the “Prior
Investors”), as directed by the Lead Investor, as an
incentive to invest in the August 2017 Offering, as more fully
described in Note 8, “Convertible Preferred Stock, Common Stock
and Warrants” in the Notes to Consolidated Financial
Statements starting on page F-36.
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 August 2017
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.
In
connection with the Lead Investor’s and Company’s
obligations under the August 2017 Letter Agreement, neither party
completed all of its obligations as of December 31, 2017.
Further, there are no financial penalties or repercussions to
either party for nonperformance that would lead to a materially
adverse impact on our financial statements.
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, 2018 and
2017
Revenues, Cost of Revenues and Net Sales:
|
Three
Months Ended
September
30,
|
%
Increase/
|
Nine
Months Ended
September
30,
|
%
Increase/
|
||
|
2018
|
2017
|
(Decrease)
|
2018
|
2017
|
(Decrease)
|
Revenues
|
$4,000,000
|
$-
|
100%
|
$4,700,000
|
$-
|
100%
|
Cost of
revenues
|
785,000
|
-
|
100%
|
785,000
|
-
|
100%
|
Gross
profit
|
$3,215,000
|
-
|
100%
|
$3,915,000
|
-
|
100%
|
For the
three months ended September 30, 2018, we recognized $4,000,000 in
revenues, as compared to no revenues for the same period in the
prior year. The revenues in 2018 were due to the revenues
recognized from the sale to Boehringer Ingelheim of all of our rights to certain assets owned or
controlled by us that related to a specific human antibody research
and development program to identify and characterize antibodies
that bind to an undisclosed glycan antigen. The cost of
revenues was $785,000 resulting in a gross profit of $3,215,000.
The Company had no continuing obligations to provide any services
under the contract, enabling the revenues to be recognized. Given
the uncertainty of Boehringer Ingelheim achieving any of the future
milestones, the Company did not recognize as revenue any of the
future potential milestones as of September 30, 2018.
For the
nine months ended September 30, 2018, we recognized $4,700,000 in
revenues, as compared to no revenues for the same period in the
prior year. The cost of revenues was $785,000 resulting in a gross
profit of $3,915,000. The revenues in 2018 were due to the revenues
recognized from the upfront payment by Y-mAbs for rights to develop
the neuroblastoma vaccine and the sale to Boehringer Ingelheim of
our rights to certain assets owned or controlled by us related to a
specific human antibody research and development program to
identify and characterize antibodies that bind to an undisclosed
glycan antigen.
Research and development expenses:
|
Three
Months Ended
September
30,
|
%
Increase/
|
Nine
Months Ended
September
30,
|
%
Increase/
|
||
|
2018
|
2017
|
(Decrease)
|
2018
|
2017
|
(Decrease)
|
Research and
development
|
$199,367
|
$1,017,061
|
(80.4)%
|
$2,915,709
|
$6,168,125
|
(52.7)%
|
For
the three months ended September 30, 2018, we incurred research and
development expenses of $199,367, as compared to $1,017,061 for the
same period a year ago. Stock-based compensation expense included
in research and development expenses for the three months ended
September 30, 2018 and 2017 was $96,157 and $292,523, respectively.
Decreased expenses in the three months ended September 30, 2018,
compared to the same period in the prior year are primarily due to
reduced 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 a reduction in staff that supported
preclinical and clinical development efforts.
For
the nine months ended September 30, 2018, we incurred research and
development expenses of $2,915,709 as compared to $6,168,125 for
the same period a year ago. Stock-based compensation expense
included in research and development expenses for the nine months
ended September 30, 2018 and 2017 was $340,979 and $989,884,
respectively. Decreased expenses in the nine months ended September
30, 2018, compared to the same period in the prior year are
primarily due to decreased 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 a reduction
in staff that supported preclinical and clinical development
efforts.
General and administrative expenses:
|
Three Months Ended
September 30,
|
%
Increase/
|
Nine Months Ended
September 30,
|
% Increase/
|
||
|
2018
|
2017
|
(Decrease)
|
2018
|
2017
|
(Decrease)
|
General
and administrative
|
$2, 520,950
|
$1,831,629
|
37.6%
|
$6,409,491
|
$7,513,621
|
(14.7)%
|
For
the three months ended September 30, 2018, we incurred general and
administrative expenses of $2,520,950 as compared to $1,831,629 for
the same period a year ago. Stock-based compensation expense
included in general and administrative expenses for the three
months ended September 30, 2018 and 2017 was $172,458 and $721,213,
respectively. Stock-based compensation expense for the three months
ended September 30, 2018 and 2017 included $0 and $ 68,250 in
restricted stock for services, respectively. The increase in
general and administrative expenses was primarily due to higher
legal costs of $1,553,041 and outside professional services of
$208,098, partially offset by lower staff costs, as compared to the
same period last year.
For
the nine months ended September 30, 2018, we incurred general and
administrative expenses of $6,409,491, as compared to $7,513,621
for the same period a year ago. Stock-based compensation expense
included in general and administrative expenses for the nine months
ended September 30, 2018 and 2017 was $966,183 and $3,526,488,
respectively. Stock-based compensation expense for the nine months
ended September 30, 2018 and 2017 included $0 and $ 131,800 in
restricted stock for services, respectively. The decrease in
general and administrative expenses was primarily due to lower
compensation costs of $2,966,631 including a decrease of
stock-based compensation expenses of $2,560,305, and lower
consulting service costs of $48,420 offset by higher legal costs of
$2,569,994 compared to the same period last year.
Interest income and other income (expense):
|
Three Months Ended
September 30,
|
%
Increase/
|
Nine Months Ended
September 30,
|
% Increase/
|
||
|
2018
|
2017
|
(Decrease)
|
2018
|
2017
|
(Decrease)
|
Interest and other expense
|
$(154,002)
|
$(231,471)
|
(32.3)%
|
$(497,689)
|
$(743,137)
|
(33.0)%
|
Interest
and other expense was $154,002 and $231,471 for the three months
ended September 30, 2018 and 2017, respectively. The amount for the
three months ended September 30, 2018, consisted primarily of
$96,755 of interest expense related to interest on the
Company’s term loan from Oxford Finance, LLC (“Oxford
Finance”), $23,612 of financing cost amortization, and
$31,468 of warrant amortization. The amount for the three months
ended September 30, 2017, consisted primarily of $142,007 related
to Oxford Finance, First Insurance financing, and the Company's
capital lease, $39,654 of financing cost amortization, and $49,782
of warrant amortization.
The
amount of interest for the nine months ended September 30, 2018,
consisted primarily of $308,271 interest expense related to
interest on the Company’s term loan from Oxford Finance,
$82,636 of financing cost amortization, and $105,568 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
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 being 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 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
Effective January 1, 2018, the Company adopted
Accounting Standards Codification, or ASC, Topic 606,
Revenue from
Contracts with Customers (Topic
606), using the full retrospective transition method. Under this
method, the Company would have been required to revise its
financial statements, if applicable, for the years ended December
31, 2016 and 2017, and applicable interim periods within those
years, as if Topic 606 had been effective for those periods.
However, Topic 606 did not have any impact on the Company’s
revenue recognition upon adoption. This standard applies to all
contracts with customers, except for contracts that are within the
scope of other standards, such as leases, insurance, collaboration
arrangements and financial instruments. Under Topic 606, an entity
recognizes revenue when its customer obtains control of promised
goods or services in an amount that reflects the consideration
which the entity expects to receive in exchange for those goods and
services. To determine revenue recognition for arrangements that an
entity determines are within the scope of Topic 606, the entity
performs the following five steps: (i) identify the contract(s)
with the customer(s); (ii) identify the performance obligations in
the contract; (iii) determine the transaction price; (iv) allocate
the transaction price to the performance obligations in the
contract; and (v) recognize revenue when (or as) the entity
satisfies a performance obligation. The Company only applies the
five-step model to contracts when it is probable that the entity
will collect the consideration it is entitled to in exchange for
the goods and services it transfers to the customer. At contract
inception, the Company assesses the goods or services promised
within each contract that falls under the scope of Topic 606,
determines those that are performance obligations and assesses
whether each promised good or service is distinct. The Company then
recognizes as revenue the amount of the transaction price that is
allocated to the respective performance obligation when (or as) the
performance obligation is satisfied.
License and Other Revenues
The
Company enters into licensing agreements which are within the scope
of Topic 606, under which it licenses certain of its product
candidates’ rights to third parties. The terms of these
arrangements typically include payment of one or more of the
following: non-refundable, up-front license fees; development,
regulatory and commercial milestone payments; and royalties on
Gross Profit of the licensed product, which will be classified as
royalty revenues, if and when earned.
In
determining the appropriate amount of revenue to be recognized as
it fulfills its obligation under each of its agreements, the
Company performs the five steps described above. As part of the
accounting for these arrangements, the Company must develop
assumptions that require judgment to determine the stand-alone
selling price, which may include forecasted revenues, development
timelines, reimbursement of personnel costs, discount rates and
probabilities of technical and regulatory success.
Licensing
of Intellectual Property – If the license to the Company’s intellectual
property is determined to be distinct from the other performance
obligations identified in the arrangement, the Company recognizes
revenue from non-refundable, up-front fees allocated to the license
when the license is transferred to the licensee and the licensee is
able to use and benefit from the license. For licenses that are
bundled with other performance obligations, the Company utilizes
judgment to assess the nature of the combined performance
obligation to determine whether the combined performance obligation
is satisfied over time or at a point in time and, if over time, the
appropriate method of measuring progress for purposes of
recognizing revenue from non-refundable, up-front fees. The Company
evaluates the measure of progress each reporting period, and, if
necessary, adjusts the measure of performance and related revenue
recognition.
Milestone
Payments – At the inception of each arrangement that includes
development milestone payments, the Company evaluates whether the
milestones are considered probable of being reached and estimates
the amount to be included in the transaction price using the most
likely amount method. If it is probable that a significant revenue
reversal will not occur, the associated milestone value is included
in the transaction price. Milestone payments that are not within
the control of the Company or the licensee, such as regulatory
approvals, are not considered probable of being achieved until
those approvals are received. The transaction price is then
allocated to each performance obligation on a relative stand-alone
selling price basis, for which the Company recognizes revenue as or
when the performance obligations under the contract are satisfied.
At the end of each subsequent reporting period, the Company
re-evaluates the probability of achievement of such development
milestones and any related constraint and, if necessary, adjusts
its estimate of the overall transaction price. Any such adjustments
are recorded on a cumulative catch-up basis, which would affect
license, collaboration and other revenues and earnings in their
period of adjustment. To date, the Company has not recognized any
milestone payments, because the milestones are not within the
control of the Company and the technology is at an early stage of
development, or the licensee has the ability to terminate the
agreement before the milestone payment is due.
Royalties
– For arrangements that
include sales-based royalties, including milestone payments based
on the level of sales, and for which the license is deemed to be
the predominant item to which royalties relate, the Company
recognizes revenue at the later of (i) when the related sales occur
or (ii) when the performance obligation to which some or all of the
royalty has been allocated has been satisfied (or partially
satisfied). To date, the Company has not recognized any royalty
revenue from its license agreements.
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.
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. 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, 2018, 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
our accounting policies. In many cases, the accounting treatment of
a transaction is specifically dictated by GAAP. See our audited
consolidated financial statements and notes thereto included in our
2017 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 upfront
payments from asset sales and license agreements, 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, 2018, we had an accumulated deficit
of $118,349,884. 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 additional licenses or asset sales of our product
candidates that are under development, or revenues from research
collaborations or services. There can be no assurance that we will
be able to achieve additional license and sales revenue, or that
such revenues would be large enough to offset our operating
expenses. We had cash of $951,751 and a working capital deficit of
$6,334,244 as of September 30, 2018.
|
Nine Months Ended
September 30,
|
|
|
2018
|
2017
|
Cash
provided by (used in):
|
|
|
Operating
activities
|
$(2,620,437)
|
$(8,702,932)
|
Investing
activities
|
$—
|
$(21,072)
|
Financing
activities
|
$2,686,478
|
$3,897,063
|
Net
cash used in operating activities was $2,620,437 for the nine
months ended September 30, 2018, compared to $8,702,932 for the
same 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, 2018 was also impacted by a decrease of $437,094 in accrued
clinical operations and site costs and an increase of $1,356,273 in
accounts payable related primarily to unpaid professional
fees.
The
net cash used in investing activities for the nine months
ended September 30, 2018 and 2017, amounted to $0 and $21,072,
respectively.
Net cash provided by financing activities for the
nine months ended September 30, 2018 was $2,686,478. Net cash
provided by financing activities was $3,897,063 for the nine months
ended September 30, 2017. Net cash provided by financing activities
for the nine months ended September 30, 2018 was attributable to
the fundraising from the February 2018 Private Placements and May
2018 Private Placements. Net cash provided by financing activities
for the nine months ended September 30, 2017 was attributable to
the net proceeds from the May 2017 Public Offering, a private
offering that closed on May 3, 2017, in which the Company sold 850
shares of Series H Preferred
Stock for an aggregate purchase price of $850,000
before offering costs of $29,429, and
a private placement and underwritten offering in August 2017 and
two registered direct offerings in September
2017.
Overview of 2018 Private Placements
Between February 2 and February 10, 2018, the
Company entered into separate purchase agreements with investors
pursuant to which the Company sold (i) shares of its common stock,
(ii) shares of its convertible preferred stock, and (iii) warrants to purchase shares of common
(the “February 2018 Private Placements”). From April 30
to May 2, 2018, the Company entered into separate purchase
agreements with investors pursuant to which we agreed to sell
shares of its common stock and convertible preferred stock
(the
“May 2018 Private Placements”). No financial advisor was used in connection with
the February 2018 Private Placements nor the May 2018 Private
Placements.
The
securities issued in connection with the February 2018 Private
Placements and the May 2018 Private Placements 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. The Company entered into separate
registration rights agreements with each of the investors in the
February 2018 Private Placements and the May 2018 Private
Placements, pursuant to which the Company agreed to undertake to
file a registration statement to register the resale of the shares
of common stock and the shares of common stock underlying the
warrants and preferred stock. The Company also agreed to use
reasonable best efforts to cause such registration statement to be
declared effective 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.
February 2018 Private Placements
In connection with the February 2018 Private
Placements, the Company sold (i) an aggregate of 555,562 shares of
its common stock for an aggregate purchase price of $1,250,000, or
$2.25 per share, (ii) 5,000 shares of our newly
designated 0% Series M Convertible
Preferred Stock (the “Series M Preferred Stock”) for an
aggregate purchase price of $1,500,000, or $300.00 per
share, and (iii) warrants to
purchase up to an aggregate of 855,561 shares of common stock each
with an exercise price of $2.70 per share. The net proceeds of the
February 2018 Private Placements were $2,700,000 after transaction
costs of $50,000.
May 2018 Private Placements
In connection with the May 2018 Private
Placements, the Company agreed to sell (i) 218,182 shares of common
stock at an aggregate purchase price of $240,000, or $1.10 per
share, and (ii) 5,363.64 shares of newly designated 0%
Series N
Convertible Preferred Stock (the “Series N Preferred
Stock”) at an aggregate purchase price of $590,000, or
$110.00 per share. The
following investors in the May 2018 Private Placements
also
invested in the February 2018 Private Placements (the “Prior
Investors”): GRQ Consultants Inc., Roth 401K FBO Renee Honig;
GRQ Consultants Inc., Roth 401K FBO Barry Honig; Melechdavid, Inc.;
Grander Holdings Inc. 401K; Robert S. Colman Trust UDT 3/13/85; Ben
Brauser; Joshua A. Brauser; Daniel A. Brauser; Gregory Aaron
Brauser; Erick E. Richardson; and Ronald B.
Low.
Under the terms of the May 2018 Private
Placements, we were required to offer an aggregate of 12,777.77
shares (the “May 2018 Inducement Shares”) of newly
designated 0% Series O Preferred Stock (the “Series O
Preferred Stock”) to investors who previously purchased
securities in the February 2018 Private Placements and who also
purchased securities in the May 2018 Private Placements with an
aggregate purchase price of at least 40% of their investment
amounts in the February 2018 Private Placements. Based on the
closing of the offering, and participation of the Prior Investors
who invested an aggregate of $830,000 (the “May 2018
Inducement Investors”), the Company issued an aggregate of
10,605.56 May 2018 Inducement Shares in the form of Series O
Preferred Stock convertible into an aggregate of 1,060,556 shares
of common stock. The May 2018 Private
Placements closed on May 15, 2018, with the Company receiving gross
proceeds totaling $830,000.
Working Capital
Our
working capital deficit was $6,334,244 at September 30, 2018, as
compared to a working capital deficit of $4,598,748 at
December 31, 2017. The decrease in working capital was
primarily due to increased capital usage during the first nine
months of 2018 primarily related to the Company’s clinical
development programs and professional services.
Going
Concern
We
believe our cash and cash equivalents as of September 30, 2018,
will be sufficient to fund our projected operating requirements
into December 2018. In order to continue our current and future
operations and continue our clinical product development programs
beyond December 2018, we will depend substantially on our ability
to obtain upfront and milestone payments from potential additional
license and/or partnering agreements for use of our technologies in
certain fields of use and on raising capital through other
financing transactions in a timely manner, of which we can make no
assurances that any such transaction will occur. As discussed on
page 5, we cannot conclude that any future registration statements
that we may file with the SEC will be declared effective during the
pendency of the SEC Action as defined on page 61. As a result, our
ability to raise capital is and will likely remain severely
impaired during the pendency of the SEC Action, and certain capital
raising structures involving the registration of our securities
with the SEC upon which we have heavily relied in the past to fund
our operations may not be available to us for the immediate future.
Further, we still owe a balance of approximately $2.8 million to
Oxford Finance for which principal payments will begin to be made
in January 2019 under the Second Amendment to the Loan and Security
Agreement (see Note 6). We are uncertain about our ability to raise
sufficient funds to continue our existing operations after December
2018 without additional licensing and/or collaborating transactions
and without financing structures that do not involve the use of or
reliance upon our ability to register securities with the SEC. We
have been exploring potential additional licensing and/or
partnering transactions and other arrangements through which the
value of our Company could be enhanced. We may raise funds through
such potential arrangements with collaborators or others that may
require us to sell product candidates that we might otherwise seek
to develop or commercialize independently. Our failure to enter
into licensing and/or partnering transactions or raise capital when
needed could materially harm our business, financial condition and
results of operations.
We
anticipate we will continue to incur substantial net losses into
the foreseeable future as we: (i) continue our Phase I clinical
trials of MVT-5873 in combination with chemotherapy and our Phase I
clinical trial of our radioimmunotherapy product candidate MVT-1075
for the treatment of various cancers, (ii) continue preclinical
development activities related to developing other product
candidates in our library, (iii) monitor patients in clinical
trials that have already completed their treatment regimens, and
(iv) incur legal expenses related to the SEC Action. Based on
management’s assumptions for continuing to develop its
existing pipeline of product candidates without additional funding
or licensing portions of our technology for particular uses, we
expect we will have sufficient funds to meet our obligations into
December 2018. We may also incur costs and expenses in connection
with liabilities under our organizational documents and
indemnification agreements that we have with our officers and
directors who may individually incur expenses in relation to the
SEC Action.
We
plan to continue to fund our debt securities, research and
development and operating activities through additional strategic
partnerships or other arrangements with organizations that have
capabilities and/or products that are complementary to our own
capabilities and/or product candidates, licensing arrangements, and
through public or private equity financings and debt financings or
other arrangements if the strategic transactions are not timely, if
at all. However, we cannot be sure that such strategic transactions
or additional funds will be available on reasonable terms, or at
all. If we are unable to secure strategic transactions or adequate
additional funding, we may be forced to reduce spending, extend
payment terms with suppliers, liquidate assets where possible,
suspend or curtail planned programs and/or cease our operations
entirely. In addition, if we do not meet our payment obligations to
third parties as they come due, including any payment we owe to
Oxford Finance, 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 and results
of operations.
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.
Our
future capital uses and requirements depend on numerous factors,
including the following:
●
our
ability to establish license agreements with third parties and
reliance on receipt of payments from milestones;
●
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 research
collaborations;
●
our
ability to raise capital on attractive terms, if at all, during the
pendency of the SEC Action;
●
the
costs and timing of obtaining, enforcing and defending our patent
and IP rights; and
●
competing
technological and market developments.
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
office and laboratory space in buildings located at 11535
Sorrento Valley Rd., San Diego, California, to serve as the
Company’s 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 on February 28, 2022, 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
$37,801, 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 relating to 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 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.
Recently Issued Accounting Standards
Adopted Accounting Standards
In May 2014, the FASB issued Topic 606 which
amends the guidance for accounting for revenue from contracts with
customers. This ASU supersedes the revenue recognition requirements
in ASC Topic 605, Revenue Recognition,
and creates a new Topic 606,
Revenue from
Contracts with Customers. The
Company did not have any revenue generating contracts in 2017,
therefore, the adoption of this standard had no effect on the
financial statement line items that could have been affected by the
transition. For further discussion on the adoption of this
standard, see “Revenue Recognition” above and Note 10,
“Contracts and Agreements.”
In January 2017, the FASB issued ASU No.
2017-01, Business Combinations (Topic
805), Clarifying the Definition of a Business. The guidance changes the definition of a
business to assist entities with evaluating when a set of
transferred assets and activities is a business. The new guidance
requires an entity to evaluate if substantially all of the fair
value of the gross assets acquired is concentrated in a single
identifiable asset or a group of similar identifiable assets; if
so, the set of transferred assets and activities is not a business.
The Company adopted this ASU as of January 1, 2018. The adoption of
this ASU had no impact on the Company’s financial statements
for the three and nine months ended September 30,
2018.
In May 2017, the FASB issued ASU No.
2017-09, Compensation – Stock
Compensation (Topic 718), Scope of Modification
Accounting, which clarifies
when a change to the terms or conditions of a share-based payment
award must be accounted for as a modification. The new guidance
requires modification accounting if the fair value, vesting
conditions or classification of the award is not the same
immediately before and after a change to the terms and conditions
of the award. The Company adopted this ASU on a
prospective basis as of January 1, 2018. The adoption of this ASU
had no impact on the Company’s financial statements for the
three and nine months ended September 30, 2018.
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. The Company adopted this ASU effective
January 1, 2018. The adoption of this new standard did not have a
material impact on our condensed consolidated financial
statements.
Accounting Standards Not Yet Adopted
In February 2016, the FASB issued ASU No.
2016-02, Leases (Topic
842), which supersedes existing
guidance on accounting for leases in Leases (Topic 840)
and generally requires all leases,
including operating leases, to be recognized in the statement of
financial position as right-of-use assets and lease liabilities by
lessees. The provisions of ASU 2016-02 are to be applied using a
modified retrospective approach and are effective for reporting
periods beginning after December 15, 2018; early adoption is
permitted. The Company plans to elect the transition option
provided under ASU 2018-11, which will not require adjustments to
comparative periods nor require modified disclosures in those
comparative periods. Upon adoption, the Company expects to elect
the transition package of practical expedients permitted within the
new standard, which among other things, allows the carryforward of
the historical lease classification. Based on its anticipated
election of practical expedients, the Company anticipates the
recognition of right of use assets and related lease liabilities on
its balance sheets related to its leases. The Company intends
on engaging a professional services firm to assist in the
implementation of ASC 842, and to analyze the impact of adopting
ASC 842 on the Company’s statements of income and balance
sheets.
In June 2018, the FASB issued ASU No.
2018-07, Compensation – Stock
Compensation (Topic 718): Improvements to Nonemployee
Share-based Payment Accounting,
to simplify the accounting for share-based payments to nonemployees
by aligning it with the accounting for share-based payments to
employees, with certain exceptions. The provisions of ASU 2018-07
are effective for reporting periods beginning after December 15,
2018, including interim periods within that fiscal year; early
adoption is permitted, but no earlier than a company’s
adoption date of Topic 606. Upon transition, the Company will be
required to measure these nonemployee awards at fair value as of
the adoption date. The Company had not early adopted
this ASU as of September 30, 2018, but plans on adopting this ASU
for its reporting period beginning January 1, 2019. The Company is
currently evaluating the effect that this ASU will have on its
financial statements.
In June 2016, the FASB issued ASU
No. 2016-13, “Financial
Instruments—Credit Losses (Topic 326): 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 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.
With
the exception of the new standards discussed above, there have been
no new accounting pronouncements that have significance, or
potential significance, to the Company’s financial
statements.
Off-Balance
Sheet Arrangements
We have
no material off-balance sheet arrangements.
BUSINESS
Overview
We are
a clinical stage biopharmaceutical company engaged in the discovery
and development of proprietary human monoclonal antibody products
for the diagnosis and treatment of a variety of cancers. We
discovered a pipeline of human monoclonal antibody product
candidates based on the protective immune responses generated by
patients who have been vaccinated against targeted cancers. Our
therapeutic vaccine product candidates under development were
discovered at MSK and are exclusively licensed to us as well as
blood samples from patients who were vaccinated with the same
licensed vaccines. 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 equity financings in the
form of common stock and preferred stock, licensing agreements,
asset sales, strategic collaborations, issuance of common stock in
lieu of cash for services, government grants, debt financings or
other arrangements. 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 product candidates. 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, 2018, we recognized revenue of
$700,000 from a license agreement with Y-mAbs and $4,000,000 from
an asset sale to Boehringer Ingelheim, resulting in gross profit of
$3,915,000. Our loss from operations during this nine-month period
was $5,410,200 and our net loss was $5,908,068. Net cash used in
operating activities for the nine months ended September 30, 2018
was $2,620,437, cash and cash equivalents and working capital
deficit of as of September 30, 2018 were $951,751 and $6,334,244
respectively. As of September 30, 2018, we had
an accumulated deficit of $118,349,884 and a
stockholders’ equity of $42,558.
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. For a product candidate to be
commercialized, it is 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.
Our
Clinical Development Programs
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 treated with our therapeutic antibody
product candidate, MVT-5873, as a monotherapy in a poster
presentation at the American Society of Clinical Oncology
(“ASCO”) Annual Meeting on June 3, 2017. MVT-5873 has
been evaluated for safety and tolerability in patients with
advanced pancreatic cancer and other CA19-9 positive cancers. In
this poster presentation, the Company highlighted that the single
agent MVT-5837 appeared safe and well tolerated in patients at
biologically active doses based on the results of the Phase 1a
trial. Furthermore, all patients in the Phase 1a trial 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 support that this
fully-human antibody targeting CA19-9 cancers can be administered
at doses with acceptable safety and have a potentially positive
impact on disease. The cancer antigen 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. We plan to continue to
evaluate MVT-5873 at higher doses.
MVT-5873 in Combination with a Standard of
Care Chemotherapy – Based upon observations from the
first two cohorts of patients treated, we are evaluating further
clinical development of MVT-5873 in combination with gemcitabine
and nab-paclitaxel as a first line therapy for the treatment of
patients newly diagnosed with pancreatic cancer. MabVax has treated
seventeen patients as of August 24, 2018, with the objective of
obtaining additional safety and tumor response (RECIST 1.1) data
for this treatment regimen. Dr. Eileen O’Reilly,
Associate Director of the David M. Rubenstein Center for Pancreatic
Cancer Research, attending physician, member at MSK and Professor
of Medicine at Weill Cornell Medical College, is the lead
investigator in the MVT-5873 Phase 1 clinical trial.
On
February 12, 2018, we reported on interim results of the current
cohort of the Phase 1 study, in which MVT-5873 was given in
combination with nab-paclitaxel and gemcitabine to patients newly
diagnosed with CA19-9 positive pancreatic cancer. MVT-5873 at a
dose of 0.125 mg/kg when added to first-line chemotherapy was
generally well tolerated by all subjects. At that time, all six
patients in the current cohort demonstrated measurable tumor
reductions, with four patients meeting the criteria for partial
response (PR) and two patients meeting the criteria for stable
disease (SD). We believe these results further confirm results
reported on a portion of the cohort in late 2017. Patient CA19-9
levels, which are a prognostic indicator of the disease state, were
markedly reduced in all subjects with this combination therapy. Due
to adverse events potentially related to the combination of
nab-paclitaxel, gemcitabine and MVT-5873, not seen in the
monotherapy clinical study, the Company has suspended patient
enrollment at the current dose. We are evaluating plans to enroll
additional patients at a lower dose to further explore safety and
response in a larger population.
MVT-5873 – for the Treatment of Pancreatitis
Pancreatitis is a
severe and common medical condition that can lead to death or a
chronic condition with significant morbidity, systemic inflammatory
response and multiple organ dysfunction syndromes. Pancreatitis is
also associated with a 16.5-fold elevated risk for developing
pancreatic cancer. Best available treatment for pancreatitis is
primarily supportive care consisting of rehydration, pain relief,
nutritional support followed by antibiotic therapy, and surgery for
biliary pancreatitis and other more severe cases. Acute and chronic
pancreatitis in the United States accounts for 361,000 hospital
admissions each year and for direct health care costs of $3.1
billion annually (Forsmark et al, NEJM 375;20 and Yadav et al,
Pancreapedia, July 28,
2016).
Investigators at
CSHL have made significant new discoveries elucidating the
biological pathways that cause both acute and chronic pancreatitis.
Investigators found that expression of
CA19-9 in the pancreas is sufficient to induce pancreatitis.
Specifically, CA19-9 elevation resulted in rapid elevation of
pancreatic enzymes in the blood, pancreatic infiltration of immune
cells, acinar-to-ductal metaplasia and atrophy, as well as
increased proliferation. Investigators then explored the utility of
CA19-9 as a therapeutic target for both acute and chronic
pancreatitis. This avenue of treatment strategy exhibits potential
given that turning off or blocking CA19-9 expression results in the
normalization of pancreatic enzyme levels within four days
following an acute episode of pancreatitis.
MVT-5873
specifically targets CA19-9, and subsequent studies have
demonstrated that antibodies capable of binding to CA19-9 and
blocking the downstream biological pathways of pancreatitis have a
positive effect on ameliorating the disease. Combining the
preclinical science supporting the use of the CA19-9 blocking
antibodies in the treatment of pancreatitis with the clinically
validated data and supplies of MVT-5873 already available gives
MabVax the opportunity, assuming adequate funding, to move quickly
into the clinic in a mid-stage proof of concept clinical trial in
the near-term.
MVT-2163 – as an Imaging Agent for Pancreatic
Cancer
We
reported results from our Phase 1a clinical trial of ImmunoPET
imaging agent product candidate, 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, Colorado on June 10-14, 2017.
The
Phase 1a clinical trial of MVT-2163 Phase I trial was intended to
evaluate our next generation diagnostic PET imaging agent in
patients with PDAC or other CA19-9 positive malignancies. MVT-2163
(89Zr-HuMab-5B1) combines the well-established PET imaging
radiolabel Zirconium-89, a positron emitting isotope typically
labeled as 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, twelve (12) patients were 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. 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 did not
interfere with the uptake of MVT-2163 on cancer
lesions.
Uptake
of MVT-2163 was observed in primary tumors and metastases as early
as day two and continuously through day seven. Standard Uptake
Values (“SUVs”), a measurement of activity in PET
imaging, reached as high as 101 in the study. The investigators
reported that the 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.
In
summary, the MVT-2163 product candidate demonstrated acceptable
safety tolerability, pharmacokinetics and biodistribution in this
trial. MVT-2163 also produced high quality PET images identifying
both primary tumor and metastatic sites. We believe 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. We believe the
continual increase in high SUVs on cancer lesions in this study
supports the use of the Company’s MVT-1075 radioimmunotherapy
product candidate, which utilizes the same antibody to deliver a
radiation dose for the treatment of patients with pancreatic, lung
and colon cancers.
In
April 2018, the NIH awarded an R01 Research Grant to MSK for
continued Phase 1b development of MVT-2163 as a PET diagnostic
imaging agent. The R01 grant extends
the Phase 1 work already completed by MabVax by evaluating MVT-2163
visual images and biopsies of targeted tissues
illuminated with the PET agent. This information will then be used
to determine if the new PET imaging agent can improve pre-surgical
staging of patients with pancreatic ductal adenocarcinoma. Since
surgery is currently the only cure for pancreatic cancer and the
success rate of surgical intervention is low, having a new
diagnostic tool to more accurately assess the location and extent
of the dissemination of the cancer has the potential to improve
surgical outcomes. Additionally, these data can be used to support
the dose and dose distribution determinations for the
Company’s HuMab-5B1 antibody based radioimmunotherapy
agent, MVT-1075, currently
being evaluated in a Phase 1 trial. MabVax will support MSK
in its research efforts and allow the clinical study to be
conducted under a MabVax IND; however, the bulk of the costs will
be borne by the NIH.
MVT-1075 – as a Radioimmunotherapy for Pancreatic
Cancer
On
February 28, 2018, we announced positive interim results from the
initial three-patient cohort of the Phase 1 clinical trial for
MVT-1075, which combines the demonstrated targeting specificity of
the MVT-5873 antibody with the proven clinical success of a
low-energy radiation emitter, 177Lutetium, often referred to as
177Lu. Results from the first three patients dosed in the initial
cohort of this dose escalation Phase 1 safety trial demonstrated
that MVT-1075 was reasonably well tolerated and accumulated on
tumor as evidenced by dosimetry measurements performed after the
first dose. At this initial dose, two subjects met the criteria for
stable disease (SD) and one met the criteria of progressive disease
(PD) as measured using RECIST 1.1 criteria. Hematologic toxicities
were manageable, and the Company is enrolling the first patient in
the second cohort.
This
Phase 1 first-in human dose escalation clinical trial, which began
in June 2017, is an open-label, multi-center study evaluating the
safety and efficacy of MVT-1075 in up to 22 patients for patients
with PDAC or other CA19-9 positive malignancies including colon and
lung cancers. The primary endpoint of this trial is to determine
the maximum tolerated dose and safety profile in late stage
patients with recurring disease who have failed prior therapies.
Secondary endpoints include evaluating tumor response rate and
duration of response by RECIST 1.1 and determining dosimetry and
pharmacokinetics. This dose-escalation study utilizes a traditional
3+3 design and is based on experience we gained through prior
clinical studies that treated 50 patients with either MVT-5873, or
our imaging agent MVT-2163. The
investigative sites are Honor Health in Scottsdale, Arizona, and
MSK in New York City.
In
April 2017, we 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 candidate 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 ASCO and the SSNMMI, 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.
Asset
Sales and License Agreements
License Grant to Y-mAbs Therapeutics, Inc.
On
June 27, 2018, we entered into a Sublicense Agreement with Y-mAbs,
pursuant to which we granted Y-mAbs an exclusive sublicense to a
bi-valent ganglioside-based vaccine product candidate intended to
treat neuroblastoma, a rare pediatric cancer.
Neuroblastoma is a
rare solid tumor in childhood with only about 650 cases diagnosed
each year in North America. The incidence is about 10.54 cases per
1 million per year in children younger than 15 years. About 37% are
diagnosed as infants, and 90% are younger than 5 years at
diagnosis, with a median age at diagnosis of 19 months.
Neuroblastoma is responsible for 12% of all cancer deaths in
children less than 15 years of age.
Total value of the transaction to MabVax is $1.3
million, $700,000 of which was paid upon execution of the
agreement and $600,000 of which is to be paid within five (5) days
of the first anniversary of the execution date, provided the
agreement as not been terminated prior to the anniversary,
plus a share of a Priority Review
Voucher if granted by the FDA to Y-mAbs on approval of the vaccine
and the Priority Review Voucher is subsequently sold. Additionally,
Y-mAbs will be responsible for all further development of the
product candidate as well as any downstream payment obligations
related to this specific vaccine to MSK that were specified in the
original MabVax-MSK license agreement. If Y-mAbs successfully
develops and receives FDA approval for the Neuroblastoma vaccine
product candidate, it is obligated to file with the FDA for a
Priority Review Voucher. If this voucher is granted to Y-mAbs and
subsequently sold, then MabVax will receive a percentage of the
proceeds from the sale of the voucher by
Y-mAbs.
The neuroblastoma vaccine product candidate was
originally developed by Dr. Philip Livingston and colleagues at MSK
and licensed as part of a broader portfolio of anti-cancer vaccines
licensed to MabVax. MabVax filed for and was granted an Orphan Drug
Designation for the neuroblastoma vaccine and has manufactured
Phase II clinical supplies for a planned but not initiated clinical
trial to be conducted with the consortium New Advances in
Neuroblastoma Therapy (“NANT”). NANT is the only consortium of academic
medical centers in the world solely dedicated to developing novel
treatments and biomarkers for children with Neuroblastoma.
Over the last several years, MabVax
has shifted its focus and resources to the Company’s human
antibody discovery and development programs that are currently in
early stage clinical trials and have attracted partner
interest.
Sale of Asset to Boehringer Ingelheim and Related
Agreements
On July 6, 2018, we entered into the Asset
Purchase Agreement with Boehringer Ingelheim, pursuant to which
Boehringer Ingelheim purchased all of our rights to assets owned or
controlled by us that related to a specific human antibody research
and development program to identify and characterize antibodies
that bind to an undisclosed glycan antigen. The transaction closed on July 6,
2018.
Pursuant
to the Asset Purchase Agreement, MabVax may receive a total of $11
million, $4 million of which was paid upfront and the remainder
upon the achievement by Boehringer Ingelheim of various specified
milestone events, plus further earn-out payments through the later
of the expiration of the last to expire valid claim of the licensed
program patent covering a Boehringer Ingelheim product, or ten (10)
years from the date of first commercial sale of such Boehringer
Ingelheim product on a country-by-country and product-by-product
basis. The asset acquisition is separate and distinct from other
programs under development at MabVax, enabling MabVax to retain all
rights to its lead HuMab-5B1 antibody program which is in Phase 1
clinical trials as a therapeutic product candidate and as a
diagnostic product candidate, as well as other antibody discovery
programs from the Company’s antibody discovery portfolio
targeting other cancer antigens.
MabVax
discovered the antibody series at the center of this transaction
from biological samples, originally from patients who were
vaccinated against their solid tumors with a glycan
antigen-containing vaccine. We believe our methods of discovery of
fully human antibodies directly from vaccinated cancer patients has
potential advantages, which include greater specificity and reduced
toxicities.
Plan
for Remainder of 2018
Based
on the experience with recent asset sales and license agreements,
and continuing inquiries from third parties regarding their
interest in other MabVax assets and clinical progress to date
related to MVT-5873, MVT-1075, and MVT-2163, we intend on
continuing to explore additional licensing and/or collaboration
opportunities for certain fields of use of our technology. However,
there can be no assurance that any such transaction will
occur.
If we
are able to secure additional funds, we intend to, among other
things:
●
continue
enrollment in our clinical study of MVT-5873 in combination with
gemcitabine and nab-paclitaxel in first line therapy for the
treatment of patients newly diagnosed with pancreatic cancer with
the objective of confirming early observations seen to date, to
enable discussions with potential strategic partners and
investors.
●
enroll
additional patients into the MVT-5873 monotherapy trial with the
aim of establishing a higher maximum tolerated dose. We have
submitted our Investigational New Drug Application
(“IND”), to the FDA, for a revised protocol to enable
continuation of the trial at higher doses.
●
support
the continued development of the MVT-2163 imaging agent under the
R01 grant made to MSK for the Phase 1b portion of this clinical
program.
●
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; also, to enable discussions with potential strategic
partners and investors.
●
Use a
portion of existing supplies of MVT-5873 to pursue a proof of
concept clinical trial of MVT-5873 in the treatment of
pancreatitis.
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.
Other Contracts and Agreements
Asset
Purchase and License Agreement with Boehringer
Ingelheim
On July
6, 2018, the Company entered into an Asset Purchase Agreement and License
Agreement with Boehringer Ingelheim (the “Asset Purchase
Agreement”) centered on MabVax's program targeting a
glycan commonly overexpressed on multiple solid tumor cancers.
Boehringer Ingelheim has acquired all rights in and to the program.
MabVax received $4 million upon signing the agreement and receiving
the funds and will receive an additional $7 million in connection
with near-term milestones and downstream regulatory milestone
payments plus further earn-out payments. The Company has not
recognized as revenue as of June 30, 2018, any of the future
milestones given the uncertainty of continuing development by
Boehringer Ingelheim. The asset acquisition is separate and
distinct from other programs under development at MabVax, enabling
MabVax to retain all rights to its lead HuMab-5B1 antibody program
which is in Phase 1 clinical trials as a therapeutic product
candidate and as a diagnostic product candidate, as well as other
antibody discovery programs from the Company's antibody discovery
portfolio targeting other cancer antigens.
Cold
Spring Harbor Laboratory License Agreement
On
September 8, 2018, the Company entered into an agreement with Cold
Spring Harbor Laboratory (“CSHL”), a nonprofit New York
State education corporation, whereby the Company licensed the
exclusive worldwide rights to certain discoveries and technology
including exclusive interest in certain patent applications filed
by the Company on behalf of CSHL for use of MVT-5873 as a treatment
for pancreatitis. The Company paid $20,000 as an upfront license
fee and will pay to CSHL a nonrefundable annual license maintenance
fee of the same amount beginning on January 1, 2020 and continuing
each year thereafter during the term of the agreement and will
increase to $50,000 a year upon issuance of the first patent in
connection with the technology. The annual license fee will be
reduced for any patent prosecution and maintenance costs and will
be fully creditable against any royalties or milestone payments
earned during the year. Future milestone payments are in the
aggregate less than $2.5 million, with royalties that range from
0.25% if no valid claim to patents, to 2.5% if there is a valid
claim of the patent in the territory of sales.
Sublicense Grant to Y-mAbs Therapeutics, Inc.
On June 27, 2018, we granted an exclusive
sublicense to Y-mAbs, a privately held clinical stage
biopharmaceutical company, for a bi-valent ganglioside-based
vaccine intended to treat neuroblastoma, a rare pediatric cancer
(the “Y-mAbs Sublicense”). Total value of the
transaction to MabVax is $1.3 million plus a share of a Priority
Review Voucher (as defined in the sublicense agreement) if granted
by the FDA to Y-mAbs on approval of the vaccine and the Priority
Review Voucher is subsequently sold. Additionally, Y-mAbs will be
responsible for all further development of the product as well as
any downstream payment obligations related to this specific vaccine
to MSK that were specified in the original MabVax-MSK license
agreement dated April 30, 2008. If Y-mAbs successfully develops and
receives FDA approval for the neuroblastoma vaccine, it is
obligated to file with the FDA for a Priority Review Voucher. If
the voucher is granted to Y-mAbs and subsequently sold, then MabVax
will receive a percentage of the proceeds from the sale of the
voucher by Y-mAbs. Upon entering the Y-mAbs Sublicense, the Company
received a non-refundable upfront payment of $700,000 and will
receive an additional $600,000 upon the one-year anniversary of
entering into the agreement, provided Y-mAbs has not terminated the
agreement prior to the one-year anniversary. The Sublicense
Agreement contains termination provisions allowing for the
termination of the agreement (i) upon material breach if the
breaching party fails to cure the breach within 60 days of notice
by the non-breaching party, (ii) by Y-mAbs at any time upon 90
days’ advance notice to MabVax, or (iii) the expiration or
termination of the underlying license from MSK to MabVax, provided
that MSK will assume the agreement if Y-mAbs is in material
compliance with the agreement upon the termination of the
MSK-MabVax license. There were no
continuing obligations on the part of the Company in connection
with the agreement other than one-time administrative matters that
were completed within thirty (30) days of signing the agreement.
Therefore, the Company recognized $700,000 as revenue upon signing
the agreement and receiving the funds. Because Y-mAbs has the right
to terminate the Y-mAbs Sublicense before the one-year anniversary
and the uncertainty of continuing clinical development by Y-mAbs,
the Company has determined not to recognize as revenue any of the
$600,000 due upon one one-year anniversary until the termination
provisions are no longer applicable.
Letter Agreement with MSK
On
June 27, 2018, we entered into a letter agreement with MSK (the
“MSK Letter”) in connection with obtaining the consent
from MSK for the Company to enter into the Y-mAbs Sublicense and
allow Y-mAbs to “step into the shoes” of the
obligations that the Company would have had to pay MSK if the
Company had continued development of the neuroblastoma vaccine,
including future payment obligations of the Company regarding
future milestones. As part of the agreement, the Company and MSK
agreed that MabVax would receive 100% of both the $700,000 upfront
payment and $600,000 upon the one-year anniversary of the Y-mAbs
Sublicense. All of the obligations to MSK in the MSK Letter were
fully expensed as of June 30, 2018.
May
2017 Letter Agreement
On May
15, 2017, as a condition to the participation of HS Contrarian
Investments, LLC (“HS Contrarian”) in the public
offering of the Company’s common stock and Series G Preferred
Stock in May 2017 (the “May 2017 Public Offering”), the
Company entered into a Letter Agreement with HS Contrarian (the
“May 2017 Letter Agreement”) where the Company agreed
to offer incentive shares (the “May 2017 Inducement
Shares”) to investors who (i) participated in both the
Company’s August 2016 public offering and the Company’s
April 2015 private offering, (ii) purchased securities in the May
2017 Public Offering equal to at least 50% of their original
investment in the August 2016 public offering or 25% of their
original investment in the April 2015 private offering, and (iii)
still hold 100% of their common stock or preferred stock purchased
in those investments.
Further, the
Company agreed to the following in the May 2017 Letter
Agreement:
Board
Nomination:
|
|
To
nominate one (1) candidate to the Board of Directors acceptable to
the holder of a majority of the Series G Preferred Stock by
December 31, 2017, and that (2) two current Board members would
resign.
|
Executive
Hire:
|
|
To hire
a new C-level executive in a leadership role by July 15,
2017.
|
Board
Compensation:
|
|
To
issue an aggregate of 350,000 options to certain employees and
members of the Board of Directors, at a price not less than $6.00
per share, and 16,667 options to each other member of the Board of
Directors at the current market price in connection with this
offering. The options were issued pursuant to the Company’s
option plan, subject to the requisite approvals and availability
under the plan. The company was responsible for obtaining the
approval of the Board of Directors and stockholders of the Company
to the extent the company needed their approval to increase the
number of shares available under the plan. All Board of Director
fees were waived for 2017.
|
Funds
Held in Escrow:
|
|
$500,000
of the funds from the May 2017 Public Offering were to 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 HS Contrarian consent rights: the right to approve future
(i) issuances of our securities, (ii) equity or debt financings and
(iii) sales of any development product assets currently held by us,
subject to certain exceptions, if such securities are sold at a
price below $7.50 per share and for as long as HS Contrarian in the
offering holds 50% or more of the shares of Series G Preferred
Stock purchased by HS Contrarian in the May 2017 Public Offering
(the “Consent Rights”). All other prior consent rights
of HS Contrarian were superseded by these consent rights. As of
June 30, 2018, none of the shares of Series G Preferred Stock is
outstanding. Thus, HS Contrarian no longer holds the Consent
Rights.
For the
period from the May 2017 Public Offering to December 31, 2017, the
Company exceeded the minimum $500,000 in expenses related to
outside investor relations services fulfilling the Company’s
obligation for spending on investor relations. HS Contrarian
elected not to hold the funds in escrow. Further, the Company
issued the May 2017 Inducement Shares and adjusted the Board of
Directors compensation per the May 2017 Letter Agreement. Also, two
members of the Board of Directors resigned during 2017, achieving
one of the conditions of HS Contrarian. The Company did not
nominate a new member to the Board of Directors, nor did it hire a
new C-level executive in light of limited amount of cash available
to the Company.
Letter
Agreement Regarding Future Financing Transactions
On
August 9, 2017, in connection with an offering in the aggregate
amount of $1,312,500 in which the Company sold shares of its Series
J Preferred Stock (the “August 2017 Offering”), we
entered into a Letter Agreement with HS Contrarian (the
“August 2017 Letter Agreement”), whereby HS Contrarian
consented to and agreed that, the Company may sell securities to
the investors set forth below, of an aggregate amount of up to
$2,350,000, and the Company would issue incentive shares in the
form of newly designated shares of Series K Preferred Stock
convertible into an aggregate of 2,166,667 shares of common stock
to be distributed to the following individuals or entities, as
directed by HS Contrarian, as an incentive (the “Inducement
Shares”) for HS Contrarian and these entities and individuals
to invest in the August 2017 Offering.
HS
Contrarian Investments, LLC
|
GRQ
Consultants, Inc. Roth 401K FBO Barry Honig Trustee
|
GRQ
Consultants, Inc. Roth 401K FBO Renee Honig Trustee
|
Grander
Holdings, Inc. 401K
|
Robert
B. Prag
|
David
Moss
|
Paradox
Capital Partners, LLC
|
Melechdavid,
Inc.
|
Melechdavid,
Inc. Retirement Plan
|
Robert
S. Colman Trust UDT 3/13/85
|
Sargeant
Capital Ventures, LLC
|
Edward
W. Easton TTEE The Easton Group ORP PSP U/A DTD
02/09/2000
|
Donald
E. Garlikov
|
Airy
Properties
|
Ryan
O'Rourke
|
Corey
Patrick O'Rourke
|
In addition, the Company agreed to the following in the August 2017
Letter Agreement:
●
To file a proxy statement for a special meeting of stockholders
within 10 days of closing the August 2017 Offering.
Proposals were to 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 common stock upon the conversion of Series J
Preferred Stock and (v) the issuance of incentive shares in the form of shares of Series K
Preferred Stock convertible into an aggregate of 2,166,667 shares
of common stock.
●
Subject
to agreement on terms and conditions of the investment, HS
Contrarian committed to a $1,000,000 lead order in an offering
amount of $8,000,000 (the “$8,000,000 Financing”). The
$8,000,000 Financing was subject to the Company obtaining approval
of a reverse stock split, issuance of the Series J Preferred Stock,
and filing a proxy statement for stockholder approval of the
Inducement Shares as 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 would 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.
In
connection with HS Contrarian’s and the Company’s
obligations under the August 2017 Letter Agreement, neither the
$8,000,000 Financing nor the change in employment terms from three
years to two years were completed as of November 19,
2018.
Memorial
Sloan Kettering Cancer Center
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 candidate, imaging agent product
candidate, and radioimmunotherapy product candidate programs. For
the nine months ended September 30, 2018, there were no expenses
incurred related to these contracts.
Patheon
Biologics LLC Agreement
On
April 14, 2014, the Company entered into a development and
manufacturing services agreement with Patheon Biologics LLC (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 nine months ended September 30, 2018 and
2017, the Company recorded no expenses associated with the
agreement, as no manufacturing was completed during either
period.
Intellectual Property
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.
As of November 19, 2018, we are the exclusive
licensee or sole assignee of 14 granted U.S. patents, 4 pending
U.S. patent applications and 19 pending foreign 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 granted U.S. patents have claims to
human anti-sLea and anti-GD2 monoclonal antibodies,
conjugates and pharmaceutical compositions of the human
anti-sLea and anti-GD2 monoclonal antibodies, nucleic
acids encoding the human anti-sLea and anti-GD2 monoclonal antibodies and
processes for the use of the anti-sLea monoclonal antibodies as therapeutic and
diagnostic agents. Two of the pending United States patent
applications and the 19 foreign patent applications have claims to
human anti-sLea and anti-GD2 monoclonal antibodies,
conjugates and pharmaceutical compositions of the human
anti-sLea and anti-GD2 monoclonal antibodies, nucleic
acids encoding the human anti-sLea and anti-GD2 monoclonal antibodies,
processes for their use as therapeutic agents and processes for the
use of the anti-sLea monoclonal antibodies as diagnostic
agents.
On
October 13, 2017, the Company filed a patent application for its
series of HuMab-Tn fully-human monoclonal antibodies that target
the tumor associated Thomsen-nouveau (Tn) antigen that will be
developed as therapeutic and diagnostic products targeting ovarian,
lung and breast cancers. The Tn target is a carbohydrate antigen
significantly expressed on the surface of cancer cells as a result
of the transformation of normal cells into cancer cells. The Tn
target is present on a broad array of tumor types but not found on
normal tissues. This patent application represents another valuable
antibody asset brought forward by MabVax and the third patent filed
on the antibody portfolio created through the Company’s
unique discovery platform.
Our
success depends 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 to use contract manufacturers
to manufacture our product candidates. Our contract manufacturers
are subject to extensive governmental regulation. Regulatory
authorities in the pharmaceutical industry 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 likely will 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 several companies engaged in 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 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 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, or 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,
or 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 New Drug Application, or 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. 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 new drug applications. 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 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
several 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 several 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 reports is required
following FDA approval of an NDA. The FDA also may require
post-marketing testing, known as Phase 4 testing, risk
minimization action plans and surveillance 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.
Foreign Regulation
Before
our products can be marketed outside of the U.S., they are subject
to regulatory approval of the respective authorities in the country
that the product will 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 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 foreign 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
SEC
Complaint and SEC Action
As disclosed in a press release and a
Current Report on Form 8-K filed with the SEC on January 30, 2018, the Company
reported that it received notice
on January 29, 2018,
from
the SEC
of an
investigation (along with the SEC Complaint, defined below, the
“SEC Action”). We stated at that time that we believe
the SEC is investigating (i) potential violations by the Company
and its officers, directors and others of Section 10(b) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and Section 17(a) of the Securities Act of 1933, as
amended (as amended, the “Securities Act”); and (ii)
potential violations by multiple holders of our preferred stock,
who are among those included in the Aggregated
Investors (as defined on Page
78), of the reporting and disclosure requirements imposed by
Section 13(d) of the Exchange Act and pursuant to Schedules 13D and
13G. We further believe the SEC Action pertains to our
relationships with certain of the Aggregated Investors, including
(i) the circumstances under which those certain Aggregated
Investors invested in the Company and whether certain Aggregated
Investors have acted as an undisclosed group in connection with
their investment; (ii) the manner with or in which those
individuals and entities may have sought to control or influence
the Company and its leadership since their respective investments
(and the extent to which those efforts to control or influence have
been successful); and (iii) our prior disclosures regarding the
control of the Company and beneficial ownership of our common and
preferred stock included in our registration statements filed in
2017 and 2018 and in our Exchange Act reports.
On
September 7, 2018, the SEC filed a complaint (the “SEC
Complaint”) in the U.S. District Court for the Southern
District of New York against the following Aggregated Investors:
Barry C. Honig, John Stetson, Michael Brauser, John R. O'Rourke
III, Mark Groussman, Phillip Frost, Alpha Capital Anstalt,
ATG Capital LLC, Frost Gamma Investments Trust, GRQ
Consultants, Inc., Grander Holdings, Inc., Melechdavid, Inc.,
OPKO Health, Inc., HS Contrarian Investments, LLC, and Southern
Biotech, Inc. (collectively, the “Investor
Defendants”), and against others who we believe have not made
any investment in the Company. SEC
v. Honig et al., No. 1:18-cv-01875 (S.D.N.Y. 2018). In the
Complaint, the SEC alleges a variety of misconduct with respect to
the Investor Defendants’ transactions and/or relationships
with three public issuers, including a public issuer identified as
“Company C,” which we understand to be MabVax
Therapeutics Holdings, Inc. With respect to “Company C”
in particular, the SEC alleges certain of the Investor Defendants
manipulated the price of the Company’s securities by writing,
or causing to be written, false or misleading promotional articles,
and a variety of other manipulative trading practices. The SEC
further alleges certain of the Investor Defendants filed false
reports of their beneficial ownership or failed to file reports of
their beneficial ownership when required to do so. The SEC claims
that, by engaging in this and other alleged actions in the SEC
Complaint, the Investor Defendants and other defendants violated
the anti-fraud and many other provisions of the Exchange Act, the
Securities Act, and SEC Rules promulgated thereunder. The SEC
Complaint does not assert any claims against the Company or any of
its directors or officers, nor otherwise allege that the Company or
any of its directors or officers were culpable participants in the
misconduct allegedly undertaken by the Investor
Defendants.
We have cooperated with the SEC in connection with
the SEC Action. Although the SEC has not asserted claims against
the Company or any of its directors or officers, we cannot predict
whether the SEC Action ultimately will conclude in a manner adverse
to the Company or any of its directors and officers, or in a manner
adverse to the Investor Defendants or other of the Company’s
current or former stockholders. We also cannot predict when the SEC
Action or any related matters may conclude, or how any such matters
or resolution may impact how the Company is perceived by the
market, potential partners and potential investors in our
securities.
Company Filed Complaint Against Sichenzia Ross Ference
LLP
On September 10, 2018, the Company
filed, in the Superior Court of California, County of San Diego, a
complaint (the “Sichenzia Complaint”) against Sichenzia
Ross Ference LLP, a law firm that previously represented the
Company in certain corporate, securities, and SEC matters
(“Sichenzia”), and eight current Sichenzia partners,
and one former Sichenzia partner, Harvey Kesner,
MabVax
Therapeutics Holdings, Inc. v.
Sichenzia Ross Ference LLP et al., No.
37-2018-00045609-CU-PN-CTL. The Sichenzia Complaint asserts claims
for negligent professional practice, breach of fiduciary
duty, breach of contract,
unjust enrichment, deceit, and fraud by the defendants. The Company
is evaluating additional claims it may have against others in
connection with the same or similar subject
matter.
Delaware
Order Granting Petition for Relief
On September 20, 2018, the Court entered an order validating (i)
issuances of common stock upon conversions of the Company’s
preferred stock occurring between June 30, 2014 and February 12,
2018, and (ii) stockholder approval of corporate actions presented
to the Company’s stockholders from June 30, 2014 to February
12, 2018. In so doing, the Court granted the Delaware Petition,
filed on July 27, 2018, in order to rectify the uncertainty
regarding whether shares of the Company’s common stock were
validly issued upon conversion of the Company’s preferred
stock from June 30, 2014 to February 12, 2018.
Class Action and Derivative Complaints
In re MabVax Therapeutics
Securities Litigation, Case
No. 18-cv-1160-BAS-NLS. On June 4, 2018, and August 3,
2018, two securities class action complaints were filed by
purported stockholders of the Company in the United States District
Court for the Southern District of California (the “U. S.
District Court”) against the Company and certain of its
current officers. On September 6, 2018, the U.S. District Court
consolidated the two actions and appointed lead plaintiffs. On
October 10, 2018, lead plaintiffs filed their consolidated
complaint, which, in addition to naming the Company and certain
current officers as defendants, also names certain investors as
defendants. The consolidated complaint alleges, among other things,
that the defendants violated Sections 10(b) and 20(a) of the
Exchange Act, and Rule 10b-5 thereunder, by misleading investors
about problems with the Company’s internal controls, improper
calculation of its beneficial ownership, and improper influence by
certain investors. The consolidated complaint also alleges that
some of the investor defendants violated Section 9 of the Exchange
Act by manipulating the Company’s stock price. The
consolidated complaint seeks unspecified damages, interest, fees
and costs. The current deadline to respond to the consolidated
complaint is December 6, 2018.
Liesman v. Hansen et
al., Case No. 18-cv-2237-BTM-WVG. On September
26, 2018, a shareholder derivative complaint was filed in the
United States District Court for the Southern District of
California. The complaint arises from similar allegations as
In re MabVax Therapeutics
Securities Litigation but asserts a state law breach of
fiduciary duty claim against certain of the Company’s current
and former directors and officers. In particular, the
complaint alleges that the defendants breached their fiduciary
duties by failing to implement the necessary controls to ensure
that certain financial disclosures and disclosures concerning stock
ownership were accurate. Plaintiff seeks, on behalf of the
Company, damages, fees, costs, and equitable relief.
Jackson v. Hansen et
al., Case No.
18-cv-2302-BAS-MSB-BGS. On October 4,
2018, a shareholder derivative complaint was filed in the United
States District Court for the Southern District of
California. The complaint arises from similar allegations as
In re MabVax Therapeutics
Securities Litigation and Liesman v. Hansen et al. but, in
addition to a breach of fiduciary duty claim, also includes causes
of action for unjust enrichment, abuse of control, gross
mismanagement and waste of corporate assets. Plaintiff seeks,
on behalf of the Company, damages, fees, costs, and equitable
relief. The deadline to respond to the complaint is December 21,
2018.
Nasdaq De-listing and Application for Listing on the OTCQB
Marketplace
On July
2, 2018, the Listing Qualifications Department of The Nasdaq Stock
Market (the “Staff”) notified the Company of its
determination to delist the Company’s securities. In this
notice, the Staff indicated their determination was based upon the
Company’s failure to timely file all required reports with
the SEC per Nasdaq listing rule 5250(c)(1), and for the
Company’s non-compliance with the $2.5 million
stockholders’ equity requirement per Nasdaq listing rule
5550(b)(1). The Company elected not to appeal the Staff’s
decision and, as a result, on July 2, 2018, the Company received a
letter from the Staff indicating trading of the Company’s
common stock would be suspended on The Nasdaq Capital Market at the
open of business on Wednesday, July 11, 2018. On July 11, 2018, the
Company’s common stock began trading on the OTC Pink,
continuing under the symbol MBVX. The Hearing Department of The
Nasdaq Stock Market notified us on September 24, 2018, that it
would announce the delisting of our common stock. On September 26,
2018, The Nasdaq Stock Market issued a press release and posted a
notice to its website announcing it would delist our common stock
and file a Form 25 with the SEC to complete the delisting. The
delisting becomes effective ten (10) days after the Form 25 is
filed with the SEC.
The
Company applied for listing on the OTCQB Marketplace on October 16,
2018, of which there can be no assurance of being listed while the
SEC Action is underway.
Resignation
and Appointment of Members of the Board of
Directors
Effective July 31, 2018, Paul Maier,
Jeffrey E. Eisenberg, Thomas C. Varvaro and Kenneth Cohen, resigned
as members of the Company’s Board of Directors. There
were no disagreements between the resigning members of the Board of
Directors and management.
Following the
resignations, in a separate action, the Company’s Board of
Directors appointed the Company’s Chief Financial Officer,
Gregory Hanson, as a member of the Board of Directors. Mr. Hanson
has served as the Company’s Chief Financial Officer since
July 2014, and of its subsidiary, MabVax Therapeutics, Inc., since
February 2014. Mr. Hanson
has over 30 years' experience serving as the CFO, financial
executive and director of public and private life sciences and
hi-tech companies. Since October 2016, he has served as a member of
the board of directors of a private pharmaceutical contract
research organization.
Notice of Events of Default under Loan and Security
Agreement
The
Company believes it has been in compliance with all applicable
covenants set forth in the Loan Agreement from its inception on
January 15, 2016, through November 19, 2018. However, on
August 14, 2018, the Company received a letter from Oxford Finance
(the “Notice”) asserting certain events of default had
occurred under the loan agreement with Oxford Finance as a result
of certain events the Company reported as having occurred,
including, without limitation, (i) the resignation of the
Company’s external auditor, CohnReznick LLP (“CohnReznick”),
effective August 3, 2018, and its withdrawal of its audit reports
for the years 2014 through 2017, (ii) the resignation of four (4)
members of the Board of Directors, effective as of July 31, 2018,
and (iii) the delisting of the Company’s common stock from
The Nasdaq Stock Market LLC on July 11, 2018 (collectively, the
“Alleged Default Events”). The Company informed Oxford
Finance that it disputes the Alleged Default Events, individually
or collectively, constitute a “Material Adverse Change”
or other event of default under the Loan Agreement. In addition,
the Company already engaged a new auditor, Haskell & White LLP,
effective August 22, 2018, and on September 20, 2018, the Court
ratified the Delaware Petition. The Company also has applied for
listing on the OTCQB Venture Marketplace (the “OTCQB
Marketplace”); however, there can be no assurances of being
listed while the SEC Action is underway.
Company Background
We are a Delaware corporation, originally
incorporated in 1988 under the name “Terrapin Diagnostics,
Inc.” in the state of Delaware. In 1998, we changed our
corporate name to “Telik, Inc.” and changed our name
again to “MabVax Therapeutics Holdings, Inc.” in 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. Our internet address is www.mabvax.com.
Information on our website is not incorporated into this
prospectus.
Employees
As
of November 19, 2018, we had 6 full time employees. 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 (1)(2)(3)
|
|
|
|
Gregory P. Hanson CMA
|
|
Director, Chief Financial Officer (1)(2)(3)
|
|
|
|
Philip O. Livingston, M.D.
|
|
Director, Chief Science Officer (2)
|
(1)
|
Member of our audit committee
|
(2)
|
Member of our nominating and governance committee
|
(3)
|
Member of our compensation committee
|
The following is a summary of the background of
each of our directors. The ages below were calculated as of
November 19, 2018.
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.
Gregory P. Hanson, CMA,
MBA, 72, serves as our CFO, and since August 2018, as a
member of our Board of Directors, 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.
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.
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. As of July 31, 2018,
the Company has no independent directors. 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, when present on the Board of Directors, has been a
regular practice through July 31, 2018, which Mr. Hansen does not
attend. The Company believes that the current leadership structure
and processes maintains an effective oversight of management and
the Board of Directors as a whole without separate designation of a
lead independent director, when there are independent members on
the Board of Directors. 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, when there are
independent members on the Board of Directors.
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 participating on 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 none 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. As required under the listing standards
of The Nasdaq Capital Market,
the Company’s independent directors, when there are
independent directors on the Board of Directors, meet in regularly
scheduled executive sessions at which only independent directors
are present. The Board of Directors met 17 times and acted by unanimous written consent
17 times during the fiscal year
ended December 31, 2017. 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 none of the
members of each committee currently meets the applicable rules and
regulations regarding “independence.”
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.
As of November 19, 2018, the Audit Committee is
composed of two directors who are also executives of the Company:
Mr. Hansen and Mr. Hanson. Prior to July 31, 2018, all members of
the Audit Committee were independent. The Audit Committee met
five times during the fiscal year ended December 31, 2017.
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 has determined that Mr. Hanson qualifies as an
“audit committee financial expert,” as defined in
applicable SEC rules. The Board of Directors made a qualitative
assessment of Mr. Hanson’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
and Senior Vice President for public life sciences companies, and
member of the board of directors of a private, for profit contract
research organization serving the life sciences industry, pursuant
to which he has experience preparing, reviewing and supervising the
preparation of financial reports. In addition, Mr. Hanson holds an
M.B.A from the University of Michigan and has passed the
examination for certified public accountants and is a Certified
Management Accountant. For further information on Mr.
Hanson’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 November 19, 2018, the Compensation
Committee was composed of two directors who are both executives of
the Company: Mr. Hansen and Mr. Hanson. Prior to July
31, 2018, all members of the Compensation Committee were
independent. The Compensation Committee met 4 times and acted 1 time by written consent during the fiscal year ended
December 31, 2017. 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
Prior
to July 31, 2018, no member of our compensation committee has at
any time been an employee of ours. As of July 31, 2018, both Mr.
Hansen and Mr. Hanson serve as officers of the Company. 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.
As of November 19, 2018, the Nominating &
Governance Committee is currently composed of three directors: Mr.
Hansen, Mr. Hanson, and Dr. Livingston. None of
the 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). Prior to July 31, 2018, all of
the members of the Nominating & Governance Committee were
independent. The Nominating & Governance Committee met 1
time during the fiscal year ended
December 31, 2017. 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
|
|
Member of the Board of Directors, Chief Financial
Officer
|
|
|
|
Paul W. Maffuid, Ph.D.
|
|
Executive Vice President of Research and Development
|
The following is a brief summary of the background
of each of our executive officers. The ages below were calculated
as of November 19, 2018.
J. David
Hansen, 66, 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, 72, serves as our CFO, and since August 2018 as a
member of our Board of Directors. Biographical information
regarding Mr. Hanson is provided above under Board of
Directors.
Paul W.
Maffuid, Ph.D., 63, 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.
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 2017, SEC filings and certain written representations that
no other reports were required during the fiscal year ended
December 31, 2017, our officers, directors and greater than ten
percent stockholders complied with all applicable Section 16(a)
filing requirement, except for late filings of Form 4s for J. David
Hansen, Gregory P. Hanson, and Paul W Maffuid, eventually filed on
August 2, 2017, for shares of common stock they purchased, and
warrants to purchase common stock they disposed of, in the
Company’s public offering on May 19, 2017.
EXECUTIVE
COMPENSATION
Item 11.
|
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
Officers, 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
|
-0-
|
448,500
|
1,252,905
|
36,634
|
2,165,915
|
President,
Chief Executive Officer and Chairman
|
2016
|
418,438
|
141,400
|
—
|
393,702
|
35,717
|
989,257
|
Gregory
P. Hanson
|
2017
|
309,312
|
-0-
|
277,016
|
224,945
|
36,928
|
848,201
|
Chief
Financial Officer
|
2016
|
276,014
|
62,790
|
—
|
99,743
|
15,055
|
453,602
|
Paul
W. Maffuid
|
2017
|
321,859
|
-0-
|
250,634
|
263,263
|
39,607
|
875,363
|
Executive
Vice President of Research and Development
|
2016
|
278,737
|
61,950
|
—
|
91,213
|
34,121
|
466,021
|
Paul
F. Resnick
|
2017
|
269,192
|
-0-
|
18,469
|
111,972
|
36,408
|
436,041
|
Vice
President, Chief Business Officer (1)
|
2016
|
210,781
|
44,094
|
—
|
323,532
|
20,680
|
599,087
|
(1)
|
Dr. Resnick is a former officer of the Company. He was appointed as
Vice President and Chief Business Officer of the Company in March
2016 and resigned effective August 24, 2018.
|
(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 with vesting dates after
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, 2017,
and after giving effect to the Reverse Stock Splits. Each option
grant is shown separately for each Named Executive Officer. The
vesting schedule for each option grant is shown following this
table.
|
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
|
564
|
-0-
|
-0-
|
15.99
|
2/1/2020
|
-0-
|
-0-
|
President,
Chief Executive Officer and Chairman
|
2/28/2013
|
1,127
|
-0-
|
-0-
|
31.98
|
2/28/2023
|
-0-
|
-0-
|
|
4/2/2015
|
27,125
|
13,562
|
-0-
|
51.06
|
4/2/2025
|
13,563
|
28,481
|
|
2/16/2016
|
7,508
|
15,015
|
-0-
|
10.89
|
2/16/2026
|
-0-
|
-0-
|
|
8/29/2016
|
7,045
|
14,089
|
-0-
|
15.00
|
8/29/2026
|
-0-
|
-0-
|
|
1/1/2017
|
7,044
|
14,090
|
-0-
|
10.14
|
1/1/2027
|
-0-
|
-0-
|
|
2/6/2017
|
-0-
|
83,334
|
-0-
|
8.97
|
2/6/2027
|
-0-
|
-0-
|
|
5/19/2017
|
166,667
|
-0-
|
-0-
|
6.00
|
5/19/2027
|
-0-
|
-0-
|
|
9/6/2017
|
-0-
|
-0-
|
-0-
|
-0-
|
NA
|
58,685
|
123,238
|
|
10/2/2017
|
-0-
|
-0-
|
-0-
|
-0-
|
NA
|
183,719
|
385,809
|
|
|
|
|
|
|
|
|
|
Gregory
P. Hanson
|
3/13/2014
|
813
|
64
|
-0-
|
179.82
|
3/13/2024
|
-0-
|
-0-
|
Chief
Financial Officer
|
4/2/2015
|
14,043
|
7,021
|
-0-
|
51.06
|
4/2/2025
|
7,021
|
14,744
|
|
2/16/2016
|
301
|
601
|
-0-
|
10.89
|
2/16/2026
|
-0-
|
-0-
|
|
8/29/2016
|
2,934
|
5,867
|
-0-
|
15.00
|
8/29/2026
|
-0-
|
-0-
|
|
1/1/2017
|
2,933
|
5,868
|
-0-
|
10.14
|
1/1/2027
|
-0-
|
-0-
|
|
2/6/2017
|
-0-
|
25,000
|
-0-
|
8.97
|
2/6/2027
|
-0-
|
-0-
|
|
9/6/2017
|
-0-
|
-0-
|
-0-
|
-0-
|
NA
|
36,247
|
76,117
|
|
10/2/2017
|
-0-
|
-0-
|
-0-
|
-0-
|
NA
|
113,474
|
238,294
|
|
|
|
|
|
|
|
|
|
Paul
W. Maffuid
|
9/8/2014
|
508
|
119
|
-0-
|
188.25
|
9/8/2024
|
-0-
|
-0-
|
Executive
Vice President, Research and Development
|
4/2/2015
|
10,031
|
5,015
|
-0-
|
51.06
|
4/2/2025
|
5,015
|
10,532
|
|
2/16/2016
|
901
|
1,802
|
-0-
|
10.89
|
2/16/2026
|
-0-
|
-0-
|
|
8/29/2016
|
2,234
|
4,467
|
-0-
|
15.00
|
8/29/2026
|
-0-
|
-0-
|
|
1/1/2017
|
3,350
|
6,700
|
-0-
|
10.14
|
1/1/2027
|
-0-
|
-0-
|
|
2/6/2017
|
-0-
|
33,334
|
-0-
|
8.97
|
2/6/2027
|
-0-
|
-0-
|
|
9/6/2017
|
-0-
|
-0-
|
-0-
|
-0-
|
NA
|
32,795
|
68,868
|
|
10/2/2017
|
-0-
|
-0-
|
-0-
|
-0-
|
NA
|
102,667
|
215,599
|
|
|
|
|
|
|
|
|
|
Paul
F. Resnick (1)
|
3/16/2016
|
5,046
|
10,090
|
-0-
|
16.44
|
3/16/2026
|
-0-
|
-0-
|
Vice
President, Chief Business Officer
|
3/16/2016
|
3,364
|
6,727
|
-0-
|
38.85
|
3/16/2026
|
-0-
|
-0-
|
|
8/29/2016
|
1,689
|
3,378
|
-0-
|
15.00
|
8/29/2026
|
-0-
|
-0-
|
|
1/1/2017
|
1,689
|
3,378
|
-0-
|
10.14
|
1/1/2027
|
-0-
|
-0-
|
|
2/6/2017
|
-0-
|
11,667
|
-0-
|
8.97
|
2/6/2027
|
-0-
|
-0-
|
|
9/6/2017
|
-0-
|
-0-
|
-0-
|
-0-
|
NA
|
2,416
|
5,074
|
|
10/2/2017
|
-0-
|
-0-
|
-0-
|
-0-
|
NA
|
7,565
|
15,887
|
(1)
|
Dr. Resnick is a former officer of the Company. He was appointed as
Vice President and Chief Business Officer of the Company in March
2016 and resigned August 24, 2018.
|
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
three percent matching contributions to the 401(k) Plan in
2017.
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 Hansen 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 Hansen
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 877 shares of the Company common
stock at an exercise price of $179.82 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 Hanson 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 Hanson
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
626 shares of the Company’s common stock at an exercise price
of $188.25 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 Maffuid 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 Maffuid
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.
Management Bonus Plan
On
April 2, 2015, our Compensation Committee approved a management
bonus plan outlining maximum target bonuses of the base salaries of
certain of our executive officers. Under the terms of
this 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 new
management bonus plan outlining maximum target bonuses of the base
salaries of certain of our executive officers. Under the terms of
this 2016 management bonus 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. On February 21, 2018, the Compensation Committee determined
that no management bonuses would be paid for 2017
performance.
DIRECTOR COMPENSATION
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 (11)
|
Option Awards (1)
|
Stock Awards (2)
|
Total
|
Philip
O. Livingston, M.D. (3)
|
$—
|
$57,987
|
$61,675
|
$119,662
|
Robert
E. Hoffman (4)(7)(12)*
|
$8,500
|
$68,281
|
$—
|
$76,781
|
Jeffrey
Ravetch, M.D. (5)(7)(9)**
|
$7,000
|
$593,362
|
$—
|
$600,362
|
Paul
V. Maier (4)(5)(6)(7)***
|
$10,250
|
$88,868
|
$61,675
|
$160,793
|
Kenneth
M. Cohen (4)(5)(6)(7)***
|
$9,250
|
$88,868
|
$61,675
|
$159,793
|
Tom
Varvaro (4)(5)(6)(10)***
|
$7,000
|
$87,840
|
$61,675
|
$156,515
|
Jeffrey
F. Eisenberg (4)(5)(6)(8)***
|
$7,000
|
$84,197
|
$61,675
|
$152,872
|
*
**
***
|
Former Board member. Mr. Hoffman became a consultant after being a
Board member and the consulting agreement expired on June 12,
2018.
Dr. Ravetch was a consultant while he was a Board member and he has
continued to be a consultant after his Board membership
ended.
Former Board member.
|
(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 did not receive any cash compensation as a director
in either 2017 or 2016. Dr. Livingston’s employee
compensation in 2017 consisted of $60,000 in cash compensation. In
addition to his employee compensation, Dr. Livingston was granted
234 options on January 1, 2017 at an exercise price of $10.14 with
a grant date fair value of $1,700 vesting over three years. Also,
he was granted 16,667 options on May 19, 2017 at an exercise price
of $6.00 with a grant date fair value of $56,595, 8,070 restricted
stock units on September 6, 2017 with a grant date fair value of
$10,895, and 25,264 restricted stock units on October 10, 2017 with
a grant date fair value of $50,779 both restricted stock issuances
fully vested on January 8, 2018. Effective January 1, 2018, Dr.
Livingston no longer receives a salary as the Chief Science
Officer,
|
(4)
|
Mr. Cohen, Mr. Eisenberg, Mr. Hoffman, Mr. Maier, and Mr. Varvaro
were each granted 16,667 options on May 19, 2017 at an exercise
price of $5.40 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, Dr. Ravetch and Mr. Varvaro
were each granted 6,667 options on October 1, 2017, at an exercise
price of $4.71 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 8,070 restricted stock units on September 6, 2017 with a
grant date fair value of $10,895, and 25,264 restricted stock units
on October 2, 2017 with a grant date fair value of $50,779 both
restricted stock issuances fully vested on January 8,
2018.
|
(7)
|
In addition to the options granted to all non-employee directors,
Mr. Cohen, Mr. Hoffman, Mr. Maier and Dr. Ravetch were each granted
1,367 options on January 1, 2017 at an exercise price of $10.14 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 767 options on January 1, 2017 at an
exercise price of $10.14 per share with a grant date fair value of
$5,585 vesting over three years.
|
(9)
|
On April 1, 2016, we entered into a two-year consulting agreement
with Dr. Ravetch, a former director, whereby Dr. Ravetch has been
providing his expertise in reviewing key technology,
predevelopment, and corporate development activities of the
Company, and other consulting services in exchange for $100,000 in
cash compensation each year of the agreement. As well,
in addition to the options granted to all non-employee directors,
Dr. Ravetch was granted 166,667 options on May 19, 2017 at an
exercise price of $6.00 per share with a grant date fair value of
$565,950. The Company extended Dr. Ravetch’s consulting
agreement to April 1, 2019, although he does not receive any
additional compensation.
|
(10)
|
In addition to the options granted to all non-employee directors,
Mr. Varvaro was granted 1,267 options on January 1, 2017 at an
exercise price of $10.14 per share with a grant date fair value of
$9,228 vesting over three years.
|
(11)
|
Fees paid in first quarter of 2017 were for fees earned during last
quarter of 2016.
|
(12)
|
Effective June 12, 2017, we entered into a one-year consulting
agreement with Mr. Hoffman, a former director, whereby Mr. Hoffman
provides his availability to provide advice on corporate
development activities of the Company in exchange for continued
vesting of his stock options and RSUs. Mr. Hoffman’s
consulting agreement expired on June 12, 2018 and was not
renewed.
|
Non-employee Director option awards and restricted stock units
outstanding at December 31, 2017 were:
Name of Director
|
Option Awards
|
Stock Awards
|
Robert
E. Hoffman*
|
24,599
|
513
|
Jeffrey
Ravetch, M.D.*
|
187,100
|
513
|
Paul
V. Maier*
|
31,266
|
33,847
|
Kenneth
M. Cohen*
|
31,266
|
33,847
|
Tom
Varvaro*
|
30,565
|
33,847
|
Jeffrey
F. Eisenberg*
|
28,698
|
33,334
|
*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 501 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: 3,086
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 1,594 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 901 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 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 2,253 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 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 8,334 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 5,834 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 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 10,000 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 6,667 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.
In
connection with the May 19, 2017 Letter Agreement, all Board fees
were waived for 2017 in exchange for fully vested options to
purchase 16,667 shares of the Company’s Common Stock to each
of the non-employee directors, except for Dr. Ravetch who received
a fully vested option to purchase 166,667 shares of the
Company’s Common Stock.
On
February 21, 2018, the Compensation Committee approved that the
Board’s cash fees would also be waived for 2018. In lieu of
cash fees for 2018, the Compensation Committee approved that each
of the non-employee directors receive options to purchase 35,000
shares of the Company’s Common Stock at $2.04 per share, with
equal monthly vesting over a 12-month period from the commencement
date until fully vested on the one-year anniversary of the
commencement date.
On
July 9, 2018, the Compensation Committee approved that the
Board’s cash fees would be re-instated retroactive to April
1, 2018, and that the rate would the same for each non-employee
director of $3,000 a month.
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.
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Historically, we
calculated and reported beneficial ownership in reliance upon the
accuracy of the beneficial ownership reporting of our stockholders
and assuming their compliance with their own reporting obligations,
including reports filed on Schedules 13D and 13G, and information
provided by our stockholders directly to us. In the past, we also
relied on the accuracy of stockholder-reported beneficial ownership
when effecting conversions of shares of preferred stock. Since
2015, we also relied heavily on the advice of the Company’s
former outside counsel in calculating and reporting beneficial
ownership, and in effecting conversions of preferred stock held by
outside investors whose beneficial ownership we were advised should
not be aggregated for purposes of SEC reporting.
As
disclosed in the May Form 8-K, and in filings the Company made with
the SEC thereafter, facts and circumstances reviewed in connection
with the SEC Action raised substantial questions about the accuracy
of our prior reports of beneficial ownership and other matters
concerning our outside investors. We believe that significant facts
and circumstances were known by our former outside counsel but were
not disclosed to the Company. The Company has reason to believe
that beneficial ownership and other information reported by certain
outside investors, which includes the Company’s former
outside counsel, is not accurate and complete, and that the members
of the Aggregated Investors have failed to properly report their
beneficial ownership and other matters on SEC Schedules 13D or 13G,
or otherwise. For this reason, the Company concluded voluntarily
that it may no longer rely on the information reported by the
Aggregated Investors, nor on the legal advice previously provided
by its former counsel. Investors in our common stock are again
cautioned not to rely on our disclosures prior to October 15, 2018,
regarding the beneficial ownership of our capital stock included in
our prior registration statements, Exchange Act reports and other
filings filed with the SEC for the Aggregated Investors on or after
January 1, 2014; although our prior disclosures regarding the
beneficial ownership of the officers and directors were correct as
of their respective dates and may continue to be relied
upon.
Beneficial
ownership is determined in accordance with the rules of the SEC and
includes voting or investment power with respect to the securities
and a variety of facts and circumstances. We deem shares of common
stock that may be acquired by an individual or group within 60 days
of November 19, 2018, upon conversion of shares of our preferred
stock and/or upon exercise of options or warrants to be outstanding
for the purpose of computing the percentage ownership of such
individual or group, but those shares are not deemed to be
outstanding for the purpose of computing the percentage ownership
of any other person or group shown in the table. Percentage of
ownership is based on 9,254,582 shares of common stock outstanding
on November 19, 2018.
The
Company has determined that, based on the facts and circumstances
now before it, the beneficial ownership interests of members of the
Aggregated Investors should be aggregated in order for the Company
to comply with its reporting obligations. As of November 19, 2018,
and absent a change in the facts and circumstances known by the
Company, the Company will presume the Aggregated Investors
beneficially own their shares of our capital stock as a group when
construing the blocker provisions of our certificates of
designation for all series of our preferred stock and when
effecting conversions. Regarding matters in which our preferred
holders are entitled to vote their shares on an as converted basis,
we will record their votes after taking into account any applicable
blocker provisions per the terms of the certificates of
designation, again aggregating the beneficial ownership of the
Aggregated Investors based on the facts and circumstances known to
the Company as of any applicable record date.
Based
on the facts and circumstances as of November 19, 2018, the
following investors and entities, including those named in the SEC
Action, are being reported in the aggregate (the “Aggregated
Investors”):
Barry
Honig
|
Renee
Honig
|
Alan
Honig
|
Jonathan
Honig
|
John
Stetson
|
Roger
H. Stetson
|
Michael
Brauser
|
Ben
Brauser
|
Joshua
A. Brauser
|
Daniel
A. Brauser
|
Gregory
Aaron Brauser
|
John
O’Rourke
|
Corey
Patrick O’Rourke
|
Ryan
O’Rourke
|
Mark
Groussman
|
Phillip
Frost
|
Steven
Rubin
|
Harvey
Kesner
|
Michael
Ference
|
Robert
Prag
|
Scott
Wilfong
|
Darren
Weingrow
|
Ronald
Low
|
Vivian
Zhang
|
David
Moss
|
Donald
Garlikov
|
Erick
E. Richardson
|
Sandor
Capital Master Fund
|
Nico P.
Pronk
|
Alex
Partners LLC
|
JSL
Kids Partners
|
Paradox
Capital Partners, LLC
|
Del Mar
Consulting Group, Inc.
|
Sichenzia
Ross Ference, LLP
|
Darwin
Retirement, LLC
|
11 East
Airy Street Partnership
|
Airy
Properties
|
ATG
Capital LLC
|
Alpha
Capital Anstalt
|
GRQ
Consultants, Inc. Roth 401K FBO Barry Honig
|
Frost
Gamma Investments Trust
|
GRQ
Consultants, Inc. Roth 401K FBO Renee Honig
|
GRQ
Consultants, Inc. 401K
|
Four
Kids Investment Fund, LLC
|
Barry
& Renee Honig Charitable Foundation Inc.
|
Grander
Holdings, Inc.
|
HS
Contrarian Investments, LLC
|
OPKO
Health, Inc.
|
Melechdavid,
Inc.
|
MDM
Worldwide
|
Southern
Biotech, Inc.
|
Sylva
International
|
IRTH
Communications
|
TSX
Ventures
|
Caribbean
Consulting Partners
|
Shawn
Milemore Titcomb and Jennifer Elizabeth Bove-Titcomb Living
Trust
|
RedChip
Companies, Inc.
|
Bebe
LLC
|
Robert
S. Colman Trust UDT 3/13/85
|
JSL
Kids Partners
|
Merge
Capital, LLC
|
John
Lemak
|
Sargeant
Capital Ventures, LLC
|
Edward
W. Easton TTEE The Easton Group QRP PSP
|
Melechdavid, Inc. Retirement Plan
|
Grander Holdings Inc. 401K
|
Brauser Family Trust 2008
|
|
|
|
The
following table sets forth, based on our knowledge, certain
information with respect to the beneficial ownership of our common
stock as of November 19, 2018 for (a) our named executive officers,
(b) each of our directors, (c) all of our current directors and
executive officers as a group and (d) each stockholder known by us
to own beneficially more than 5% of our common stock.
Name and Address of Beneficial Owner
|
Number of Shares of Common
Stock *
|
Percentage of Common Stock
|
5% Stockholders including investors identified above as the
Aggregated Investors (1):
|
|
|
Phillip Frost,
M.D., John Stetson, Barry Honig, and Mike Brauser based on filings
of either a 13D/A, a 13G or a 13G/A in the last 12 months or based
on preferred stock holdings (2) and all other individuals and
entities included in the Aggregated Investors list (3) with 4.99% conversion
blockers
|
Estimated to be
at least 9,726,057
|
Estimated to be at
least 55.54%
|
Directors and Executive Officers
|
|
|
J. David Hansen (4)
|
572,548
|
5.94%
|
Philip O. Livingston, M.D. (5)
|
237,419
|
2.55%
|
Gregory P. Hanson CMA (6)
|
226,307
|
2.42%
|
Paul W. Maffuid, Ph.D. (7)
|
208,287
|
2.22%
|
All executive officers and directors as a group (4
persons)
|
1,244,561
|
7.00%
|
* For calculation of beneficial ownership, the number of shares of
common stock for the Aggregated Investors, the Directors and the
Executive Officers in each of the line items in the table below
includes shares of common stock issuable upon conversion of all
shares of preferred stock, exercise of warrants, and exercise of
stock options within 60 days of November 19, 2018.
(1)
Includes
in the aggregate those individuals and entities who comprise the
list of Aggregated Investors described above.
(2)
Based
on filings of Schedules 13D/A, 13G or 13G/A in the last 12 months
and preferred stock holdings and warrants to purchase common stock
for Phillip Frost, M.D., John Stetson, Barry Honig, and Mike
Brauser and the other Aggregated Investors, we have assumed all
preferred stock is converted into common stock to reflect the
percentage ownership of the Company in the event of a change in
control, regardless of the conversion blockers in each of the
series of preferred stock.
(3)
Based
on holdings of preferred stock, the following Aggregated
Investors’ ownership of preferred stock have been included
with those who have filed Schedules 13D/A, 13G, or 13G/A: Mark
Groussman, Melechdavid Inc, and Melechdavid, Inc. Retirement Plan;
Edward W. Easton TTEE The Easton Group QRP PSP; Sargeant Capital
Ventures, LLC; Robert B. Prag; David Moss; Paradox Capital
Partners, LLC; Robert S. Colman Trust UDT 3/13/85; Donald E.
Garlikov; Airy Properties; Ryan O’Rourke; Corey Patrick
O’Rourke; Ben Brauser; Joshua A. Brauser; Gregory Aaron
Brauser; Ronald B. Low; Erick E. Richardson; and including Roger
Stetson; Steve Rubin; Robert Prag; Darren Weingrow; Airy
Properties; Alpha Capital Anstalt; ATG Capital; Sylva
International; and Caribbean Consulting Partners, for which shares
appear to be held at Computershare, Inc, the Company’s
transfer agent.
(4)
Includes 381,721 shares subject to options exercisable within 60
days of November 19, 2018.
(5)
Consists of (i)
19,631 shares held by RTP Venture Fund, (ii) 8,651 shares held by
Philip O. Livingston, (iii) 192 shares held by the Joan L. Tweedy
2011 Revocable Trust (the “Tweedy Trust”), and (iv)
44,138 shares subject to options exercisable within 60 days of
November 19, 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.
(6)
Includes
112,000 shares subject to options exercisable within 60 days of
November 19, 2018.
(7)
Includes
108,410 shares subject to options exercisable within 60 days of
November 19, 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)
|
953,937
|
$13.97
|
1,521,481
|
Equity
compensation plans not approved by security holders
|
—
|
N/A
|
—
|
Total
|
953,937
|
|
1,521,481
|
(1)
The
information presented in this table is as of December 31, 2017 and
after giving effect to the 2018 Reverse Stock 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 two 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 none of the Company’s current directors are
independent, as of November 19, 2018, within the meaning of the
applicable SEC rules.
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 November 19, 2018, there were (i) 9,254,582
shares of common stock outstanding, (ii) 44,104 shares of Series D
Preferred Stock outstanding that are convertible into 198,667
shares of common stock, (iii) 33,333 shares of Series E Preferred
Stock outstanding that are convertible into 173,249 shares of
common stock (iv) 645,640 shares of Series I Preferred Stock
outstanding that are convertible into 215,214 shares of common
stock, (vi) 772.73 shares of Series J Preferred Stock outstanding
that are convertible into 386,365 shares of common stock, (vii)
63,150 shares of Series K Preferred Stock outstanding that are
convertible into 2,105,000 shares of common stock, (viii) 45,500
shares of Series L Preferred Stock outstanding that are convertible
into 2,527,778 shares of common stock, 5,000 shares of Series M
Preferred Stock outstanding that are convertible into 666,667
shares of common stock, 5,363.64 shares of Series N Preferred Stock
outstanding that are convertible into 536,364 shares of common
stock, and 10,605.56 shares of Series O Preferred Stock outstanding
that are convertible into 1,060,556 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 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.
Overview of Preferred Stock & Beneficial Ownership
Blockers
All
issued and outstanding shares of the Company’s preferred
stock have a par value of $0.01 per share and rank prior to any
class or series of the Company’s common stock as to the
distribution of assets upon liquidation, dissolution or winding up
of the Company or as to the payment of dividends. The Company must
obtain the consent of a majority of the holders of each series of
preferred stock before taking any action that materially and
adversely affects the rights, preferences, or privileges of the
applicable series of preferred stock. Also, the holders of each
series of preferred stock are entitled to vote on any matter on
which the holders of common stock are entitled to vote.
Additionally, the Company must obtain the consent of the holders of
the Series E Preferred Stock, Series J Preferred Stock, Series L
Preferred Stock, and Series N Preferred Stock (as each of those
terms are defined below) prior to increasing or decreasing (other
than by conversion) the authorized number of the applicable series
of preferred stock or issuing any additional shares of the
applicable series of preferred stock.
Generally, the same investors participated in each
of the Company’s preferred stock offerings such that the same
investors own most of the shares of each series of the
Company’s issued and outstanding preferred stock. Pursuant to
terms negotiated in connection with the Company’s sales of
preferred stock, the certificates of
designation for the Company’s preferred stock each include a
4.99% and/or 9.99% beneficial ownership conversion blocker.
These conversion blockers
may be decreased or increased, at the option of each holder, to a
percentage not to exceed 9.99% upon written notice to the Company,
as further specified in the applicable certificate of
designation. The certificate of
designation for our Series N
Preferred Stock includes a 19.99%
blocker provision applicable until stockholders approve issuances of common stock in
excess of such amount. The stated values, as applicable, and
conversion prices of our preferred stock are subject to adjustment
in the event of stock splits, stock dividends, combination of
shares and similar recapitalization transactions. The
Company’s ability to administer the blockers according to
their terms depends on group determinations and accurate reporting
by outside investors with respect to their own beneficial
ownership.
Series
D Preferred Stock
As of
November 19, 2018, there were 44,104 shares of Series D Convertible
Preferred Stock (“Series D Preferred Stock”) issued and
outstanding, and convertible into an aggregate of 198,667 shares of
common stock. As of November 19, 2018,
each one share of Series D Preferred Stock is convertible
into 4.5045 shares of Common
Stock.
Series
E Preferred Stock
As of
November 19, 2018, there were 33,333 shares of Series E Convertible
Preferred Stock (“Series E Preferred Stock”) issued and
outstanding, and convertible into 173,249 shares of common 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 ($75 per 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 $14.43
per share.
Series
I Preferred Stock
As of
November 19, 2018, there were 645,640 shares of our Series I
Preferred Stock issued and outstanding, and convertible into
215,214 shares of our common stock. The Series I Preferred Stock has a stated value of
$0.01 per share. Each one share of Series I Preferred Stock is
convertible into one-third share of common stock.
Series
J Preferred Stock
As of
November 19, 2018, there were 772.73 shares of our Series J
Convertible Preferred Stock (“Series J Preferred
Stock”) issued and outstanding and convertible into 386,365
shares of our common 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 ($550), 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
($1.10). If we issue or sell common stock, or common equivalent
shares, for consideration per share that is less than the
conversion price in effect immediately prior to the issuance, then
the conversion price in effect immediately prior to such issuance
will be adjusted to the lower issuance price, but not be less than
$0.10.
Series
K Preferred Stock
As of
November 19, 2018, there were 63,150 shares of our Series K
convertible preferred stock (“Series K Preferred
Stock”) issued and outstanding, and convertible into
2,105,000 of our common 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 ($0.01) divided by the conversion price
($0.0003).
Series
L Preferred Stock
As of
November 19, 2018, there were 45,500 shares of our Series L
Preferred Stock issued and outstanding, and convertible into
2,527,778 shares of our common stock. 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 ($100), 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
($1.80).
Series
M Preferred Stock
As of
November 19, 2018, there were 5,000 shares of our Series M
Preferred Stock issued and outstanding, and convertible into
666,667 shares of our common stock. The shares of Series M
Preferred Stock are convertible into shares of common stock based
on a conversion calculation equal to the stated value of the Series
M Preferred Stock ($300), plus all accrued and unpaid dividends, if
any, on such Series M Preferred Stock, as of such date of
determination, divided by the conversion price
($2.25).
Series
N Preferred Stock
As of
November 19, 2018, there were 5,363.64 shares of our Series N
Preferred Stock issued and outstanding, and convertible into
536,364 shares of our common stock. The shares of Series N
Preferred Stock are convertible into shares of common stock based
on a conversion calculation equal to the stated value of the Series
N Preferred Stock ($110), plus all accrued and unpaid dividends, if
any, on such Series N Preferred Stock, as of such date of
determination, divided by the conversion price ($1.10). If we issue
or sell common stock, or common equivalent shares, for
consideration per share that is less than the conversion price in
effect immediately prior to the issuance, then the conversion price
in effect immediately prior to such issuance will be adjusted to
the lower issuance price, but not be less than $0.10.
Series
O Preferred Stock
As of
November 19, 2018, there were 10,605.56 shares of our Series O
Preferred Stock issued and outstanding, and convertible into
1,060,556 shares of our common stock. The shares of Series O
Preferred Stock are convertible into shares of common stock based
on a conversion calculation equal to the stated value of the Series
O Preferred Stock ($0.01), plus all accrued and unpaid dividends,
if any, on such Series O Preferred Stock, as of such date of
determination, divided by the conversion price ($0.0001). We are
not permitted to issue any shares of common stock upon conversion
of the Series O Preferred Stock until our stockholders approve, in
accordance with the rules of The Nasdaq Stock Market LLC, the
conversion of Series N Preferred Stock authorized on April 26,
2018, or the conversion of Series O Preferred Stock.
Series
P Preferred Stock
In
connection with the Equity Purchase Agreement, the Company agreed
to file a Certificate of Designations for the Series P Preferred
Stock in the form included as Exhibit 3.20 hereto (the
“Series P Certificate of Designations”), prior to the
issuance of any Series P Preferred Stock. The Company expects to
designate 100,000 shares of its blank check preferred stock as
Series P Preferred Stock, par value of $0.01 per
share.
Pursuant to the
Series P Certificate of Designations, each share of Series P
Preferred Stock will be convertible into shares of common stock at
a rate equal to $100 divided by an amount equal to 75% of the 5-day
volume-weighted average price of the common stock prior to the
Series P Conversion Notice. The conversion rate will be 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 P Preferred Stock to the extent that, as a
result of such conversion, the holder would beneficially 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
conversion of the Series P Preferred Stock (the “Beneficial
Ownership Limitation”). The Beneficial Ownership Limitation
may be increased by the holder up to, but not exceeding,
9.99%. Each share of Series P 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 P Preferred
Stock entitles the holder to cast such number of votes equal to the
number of shares of common stock such shares of Series P Preferred
Stock are convertible into at such time, but not in excess of the
Beneficial Ownership Limitation.
Stock Options and Restricted Stock Units under Equity
Plans
As
of November 19, 2018, there were 1,820,589 shares of common stock
reserved for issuance under our Fifth Amended and Restated 2014
Employee, Director and Consultant Equity Incentive Plan (the
“MabVax Equity Incentive Plan”). Of this
number, all of the shares are reserved for issuance upon
exercise of outstanding options. There are no shares reserved for
issuance upon vesting of restricted stock units as there are no
restricted stock units outstanding as of November 19, 2018. Shares
of common stock that may be granted in the future under the MabVax
Equity Incentive Plan amount to 646,059 as of November 19,
2018.
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 quoted on the OTC Pink under the symbol
“MBVX.” On November 19, 2018, the last reported bid
price for our common stock on the OTC Pink Market was $0.27 per
share. As of November 19, 2018, we had approximately 99
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
The
selling stockholders may, from time to time, sell any or all of
shares of our common stock covered hereby on the OTC Pink
marketplace., or any other stock exchange, market or trading
facility on which the shares are traded or in private transactions.
The selling stockholders may sell all or a portion of the shares
being offered pursuant to this prospectus at fixed prices, at
prevailing market prices at the time of sale, at varying prices or
at negotiated prices. The selling stockholders may use any one or
more of the following methods when selling securities:
●
ordinary brokerage
transactions and transactions in which the broker-dealer solicits
purchasers;
●
block trades in
which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
●
purchases by a
broker-dealer as principal and resale by the broker-dealer for its
account;
●
an exchange
distribution in accordance with the rules of the applicable
exchange;
●
privately
negotiated transactions;
●
in transactions
through broker-dealers that agree with the selling stockholders to
sell a specified number of such securities at a stipulated price
per security;
●
through the writing
or settlement of options or other hedging transactions, whether
through an options exchange or otherwise;
●
a combination of
any such methods of sale; or
●
any other method
permitted pursuant to applicable law.
The
selling stockholders may also sell securities under Rule 144 under
the Securities Act, if available, rather than under this
prospectus.
Broker-dealers
engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any
broker-dealer acts as agent for the purchaser of securities, from
the purchaser) in amounts to be negotiated, provided such amounts
are in compliance with FINRA Rule 2121. Discounts, concessions,
commissions and similar selling expenses, if any, that can be
attributed to the sale of common stock will be paid by the selling
stockholders and/or the purchasers.
Triton
is an underwriter within the meaning of the Securities Act and any
broker-dealers or agents that are involved in selling the shares
may be deemed to be “underwriters” within the meaning
of the Securities Act in connection with such sales. In such event,
any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed
to be underwriting commissions or discounts under the Securities
Act. Because Triton is an underwriter within the meaning of the
Securities Act, it will be subject to the prospectus delivery
requirements of the Securities Act.
Under
applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale securities may not
simultaneously engage in market making activities with respect to
the common stock for the applicable restricted period, as defined
in Regulation M, prior to the commencement of the distribution. In
addition, the selling stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of
purchases and sales of securities of the common stock by the
selling stockholders or any other person. We will make copies of
this prospectus available to the selling security holders and have
informed them of the need to deliver a copy of this prospectus to
each purchaser at or prior to the time of the sale.
Although
Triton has agreed not to enter into any “short sales”
of our common stock, sales after delivery of a put notice of a
number of shares reasonably expected to be purchased under a put
notice shall not be deemed a “short sale.” Accordingly,
Triton may enter into arrangements it deems appropriate with
respect to sales of shares of our common stock after it receives a
put notice under the Equity Purchase Agreement so long as such
sales or arrangements do not involve more than the number of put
shares reasonably expected to be purchased by Triton under such put
notice.
Listing
Our
common stock is quoted on the OTC Pink 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 Mintz Levin Cohn Ferris Glovsky and
Popeo PC.
EXPERTS
The
consolidated financial statements of MabVax Therapeutics Holdings,
Inc. as of December 31, 2017 and 2016, 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 report included an
explanatory paragraph regarding substantial doubt about MabVax
Therapeutics Holdings, Inc.’s ability to continue as a going
concern, given on the authority of 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.
-86-
INDEX TO FINANCIAL
STATEMENTS
|
|
|
|
Condensed
Consolidated Balance Sheets at September 30, 2018 and December 31,
2017 (Unaudited)
|
|
F-1
|
|
|
|
|
|
Condensed
Consolidated Statements of Operations for the Three and Nine Months
Ended September 30, 2018 and 2017 (Unaudited)
|
|
F-2
|
|
|
|
|
|
Condensed
Consolidated Statement of Stockholders’ (Deficit) Equity for
the Nine Months Ended September 30, 2018 (Unaudited)
|
|
F-3
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2018 and 2017 (Unaudited)
|
|
F-4
|
|
|
|
|
|
Notes
to Unaudited Condensed Consolidated Financial
Statements
|
|
F-5
|
|
Report
of Independent Registered Public Accounting Firm
|
|
F-24
|
|
|
|
|
|
Consolidated
Balance Sheets at December 31, 2017 and 2016
|
|
F-25
|
|
|
|
|
|
Consolidated
Statements of Operations for the Years Ended December 31, 2017
and 2016
|
|
F-26
|
|
|
|
|
|
Consolidated
Statements of Stockholders’ Equity for the Years Ended
December 31, 2017 and 2016
|
|
F-27
|
|
|
|
|
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2017 and
2016
|
|
F-28
|
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
|
F-29
|
|
-87-
Item
1.
Financial Statements.
MABVAX THERAPEUTICS HOLDINGS, INC.
Condensed Consolidated Balance Sheets
|
September
30,
2018
|
December
31,
2017
|
Assets
|
(Unaudited)
|
Note
1
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$951,751
|
$885,710
|
Prepaid
expenses
|
341,511
|
150,462
|
Other current
assets
|
141,872
|
171,346
|
Total current
assets
|
1,435,134
|
1,207,518
|
Property and
equipment, net
|
457,526
|
578,206
|
Goodwill
|
6,826,003
|
6,826,003
|
Other
assets
|
178,597
|
178,597
|
Total
assets
|
$8,897,260
|
$8,790,324
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$2,447,175
|
$1,090,904
|
Accrued
compensation
|
311,162
|
311,675
|
Accrued clinical
operations and site costs
|
2,106,295
|
1,669,201
|
Accrued lease
termination fee
|
590,504
|
590,504
|
Other accrued
expenses
|
442,210
|
404,923
|
Interest
payable
|
31,027
|
39,373
|
Current portion of
notes payable
|
1,822,062
|
1,681,876
|
Current portion of
capital lease payable
|
18,943
|
17,810
|
Total current
liabilities
|
7,769,378
|
5,806,266
|
Non-current
liabilities:
|
|
|
Non-current portion
of notes payable, net
|
813,039
|
1,621,483
|
Non-current portion
of capital lease payable
|
31,504
|
45,857
|
Other non-current
liabilities
|
240,781
|
186,278
|
Total non-current
liabilities
|
1,085,324
|
1,853,618
|
Total
liabilities
|
8,854,702
|
7,659,884
|
Commitments and
contingencies (Note 11)
|
|
|
Stockholders’
equity:
|
|
|
Series D
convertible preferred stock, $0.01 par value, 1,000,000 shares
authorized, 44,104 shares issued and outstanding as of September
30, 2018 and December 31, 2017, with a liquidation preference
of $441
|
441
|
441
|
Series E
convertible preferred stock, $0.01 par value, 100,000 shares
authorized, 33,333 shares issued and outstanding as of September
30, 2018 and December 31, 2017, with a liquidation preference
of $333
|
333
|
333
|
Series I
convertible preferred stock, $0.01 par value, 1,968,664 shares
authorized, 645,640 and 798,460 shares issued and outstanding as of
September 30, 2018 and December 31, 2017, respectively, with a
liquidation preference of $6,456 and $7,984 as of September 30,
2018 and December 31, 2017, respectively
|
6,456
|
7,984
|
Series J
convertible preferred stock, $0.01 par value, 3,400 shares
authorized, 772.73 shares issued and outstanding as of
September 30, 2018 and December 31, 2017, with a liquidation
preference of $531,252
|
8
|
8
|
Series K
convertible preferred stock, $0.01 par value, 65,000 shares
authorized, 63,150 shares issued and outstanding as of September
30, 2018 and December 31, 2017, with a liquidation preference of
$632
|
632
|
632
|
Series L
convertible preferred stock, $0.01 par value, 58,000 shares
authorized, 45,500 and 58,000 shares issued and outstanding as
of September 30, 2018, and December 31, 2017, respectively, with a
liquidation preference of $4,550,000 and $5,800,000 as of September
30, 2018 and December 31, 2017, respectively
|
455
|
580
|
Series M
convertible preferred stock, $0.01 par value, 10,000 shares
authorized, 5,000 and no shares issued and outstanding as of
September 30, 2018 and December 31, 2017, respectively, with a
liquidation preference of $1,500,000 and $0 as of September 30,
2018 and December 31, 2017, respectively
|
50
|
0
|
Series N
convertible preferred stock, $0.01 par value, 20,000 shares
authorized, 5,363.64 and no shares issued and outstanding as of
September 30, 2018 and December 31, 2017, respectively, with a
liquidation preference of $53.64 and $0 as of September 30, 2018
and December 31, 2017, respectively
|
54
|
0
|
Series O
convertible preferred stock, $0.01 par value, 20,000 shares
authorized, 10,605.56 and no shares issued and outstanding as of
September 30, 2018 and December 31, 2017, respectively, with a
liquidation preference of $106.06 and $0 as of September 30, 2018
and December 31, 2017, respectively
|
106
|
0
|
Common stock, $0.01
par value, 150,000,000 shares authorized, 9,254,582 and 6,862,928
shares issued and outstanding as of September 30, 2018 and
December 31, 2017, respectively
|
92,546
|
68,629
|
Additional paid-in
capital
|
118,291,361
|
112,105,470
|
Accumulated
deficit
|
(118,349,884)
|
(111,053,637)
|
Total
stockholders’ equity
|
42,558
|
1,130,440
|
Total liabilities
and stockholders’ equity
|
$8,897,260
|
$8,790,324
|
See
Accompanying Notes to Unaudited Condensed Consolidated Financial
Statements
F-1
MABVAX THERAPEUTICS HOLDINGS, INC.
(Unaudited)
|
Three
Months Ended
|
Nine
Months Ended
|
||
|
September
30,
|
September
30,
|
||
|
2018
|
2017
|
2018
|
2017
|
Revenues:
|
|
|
|
|
License
agreements
|
$4,000,000
|
$—
|
$4,700,000
|
$—
|
Total
revenues
|
4,000,000
|
—
|
4,700,000
|
—
|
|
|
|
|
|
Cost of
revenues
|
785,000
|
—
|
785,000
|
—
|
Gross
Profit
|
3,215,000
|
—
|
3,915,000
|
—
|
|
|
|
|
|
Operating costs and
expenses:
|
|
|
|
|
Research
and development
|
199,367
|
1,017,061
|
2,915,709
|
6,168,125
|
General
and administrative
|
2,520,950
|
1,831,629
|
6,409,491
|
7,513,621
|
Total operating
costs and expenses
|
2,720,317
|
2,848,690
|
9,325,200
|
13,581,746
|
Income/(loss) from
operations
|
494,683
|
(2,848,690)
|
(5,410,200)
|
(13,681,746)
|
Interest and other
expense
|
(154,002)
|
(231,471)
|
(497,868)
|
(743,137)
|
Net income
(loss)
|
340,681
|
(3,080,161)
|
(5,908,068)
|
(14,424,883)
|
Deemed dividend on
inducement shares
|
—
|
—
|
(1,388,179)
|
(5,220,000)
|
Deemed dividend on
incentive shares
|
—
|
(3,120,000)
|
—
|
(3,120,000)
|
Deemed dividend on
warrant reprice
|
—
|
—
|
—
|
(19,413)
|
Net income (loss)
allocable to common stockholders
|
$340,681
|
$(6,200,161)
|
$(7,296,247)
|
$(22,784,296)
|
Basic net income
(loss) per share
|
$0.04
|
$(1.62)
|
$(0.81)
|
$(8.04)
|
Diluted net income
(loss) per share
|
$0.02
|
$(1.62)
|
$(0.81)
|
$(8.04)
|
|
|
|
|
|
Shares used in
calculation of net income (loss) per share
|
|
|
|
|
Basic
|
9,253,880
|
3,830,280
|
8,983,980
|
2,834,692
|
Diluted
|
17,123,742
|
3,830,280
|
8,983,980
|
2,834,692
|
See
Accompanying Notes to Condensed Consolidated Financial
Statements
F-2
MABVAX
THERAPEUTICS HOLDINGS, INC.
Condensed Consolidated Statement of Stockholders’
Equity
For the Nine Months Ended September 30, 2018
(Unaudited)
|
Series
D through O Convertible
Preferred
Stock
|
Common
Stock
|
Additional
Paid-in
|
Accumulated
|
Total
Stockholders'
|
||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
Balance at
December 31, 2017
|
997,820
|
$9,978
|
6,862,928
|
$68,629
|
$112,105,470
|
$(111,053,637)
|
$1,130,440
|
Issuance of common
stock, Series M Convertible Preferred Stock and warrants in
connection with February 2018 financing
|
5,000
|
50
|
555,557
|
5,556
|
2,694,394
|
—
|
2,700,000
|
Issuance of common
stock, Series N Convertible Preferred Stock in connection with May
2018 financing
|
5,364
|
54
|
218,182
|
2,182
|
827,764
|
—
|
830,000
|
Issuance of
inducement shares of Series O Convertible Preferred Stock in
connection with May 2018 financing
|
10,606
|
106
|
—
|
—
|
(106)
|
—
|
—
|
Deemed dividends on
inducement shares, May 2018
|
—
|
—
|
—
|
—
|
1,388,179
|
(1,388,179)
|
—
|
Conversion of
Series I Preferred Stock to common stock
|
(152,820)
|
(1,528)
|
50,940
|
509
|
1,019
|
—
|
—
|
Conversion of
Series L Preferred Stock to common stock
|
(12,500)
|
(125)
|
694,445
|
6,944
|
(6,819)
|
—
|
—
|
Issuance of whole
in lieu of fractional shares resulting from reverse split in
February 2018
|
—
|
—
|
50,991
|
510
|
(510)
|
|
—
|
Common stock issued
upon vesting of restricted stock units in January 2018, net of
payroll taxes
|
—
|
—
|
797,977
|
7,980
|
(7,980)
|
—
|
—
|
Common stock issued
upon vesting of restricted stock units in April 2018, net of shares
withheld for payroll taxes
|
—
|
—
|
22,061
|
221
|
(17,197)
|
—
|
(16,976)
|
Common stock issued
upon vesting of restricted stock units in August 2018
|
—
|
—
|
1,501
|
15
|
(15)
|
—
|
—
|
Stock-based
compensation
|
—
|
—
|
—
|
—
|
1,307,162
|
—
|
1,307,162
|
Net
loss
|
—
|
—
|
|
—
|
—
|
(5,908,068)
|
(5,908,068)
|
Balance at
September 30, 2018
|
853,470
|
$8,535
|
9,254,582
|
$92,546
|
$118,291,361
|
$(118,349,884)
|
$42,558
|
See
Accompanying Notes to Unaudited Condensed Consolidated Financial
Statements
F-3
MABVAX
THERAPEUTICS HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
Nine
Months
Ended
September 30,
|
|
|
2018
|
2017
|
Operating
activities
|
|
|
Net
loss
|
$(5,908,068)
|
$(14,424,883)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
Depreciation and
amortization
|
120,680
|
122,315
|
Stock-based
compensation
|
1,307,162
|
4,516,372
|
Issuance of
restricted stock for services
|
—
|
236,666
|
Amortization and
accretion related to notes payable
|
190,729
|
309,213
|
Increase (decrease)
in cash from changes in operating assets and
liabilities:
|
|
|
Other
receivables
|
29,474
|
(7,061)
|
Prepaid expenses
and other
|
(189,916)
|
(62,672)
|
Accounts
payable
|
1,356,273
|
403,210
|
Accrued clinical
operations and site costs
|
437,094
|
283,864
|
Accrued
compensation
|
(513)
|
(28,307)
|
Other accrued
expenses
|
36,648
|
(51,649)
|
Net cash used in
operating activities
|
(2,620,437)
|
(8,702,932)
|
|
|
|
Investing
activities
|
|
|
Purchases of
property and equipment
|
—
|
(21,072)
|
Net cash used in
investing activities
|
—
|
(21,072)
|
|
|
|
Financing
activities
|
|
|
February 2018
private placement, net of issuance costs
|
2,700,000
|
—
|
May 2018 and 2017
private placements, net of issuance costs
|
830,000
|
820,571
|
Proceeds from
issuance of common stock and Series G Preferred Stock, Net of
costs, May 2017
|
—
|
3,647,391
|
Proceeds from
issuance of common stock, net of costs, August 2017
|
—
|
125,000
|
Proceeds from
issuance of Series J Preferred Stock, net of costs, August
2017
|
—
|
1,189,417
|
Proceeds from
issuance of common stock, net of costs, September 2017
|
—
|
1,852,361
|
Proceeds from
issuance of common stock, net of costs, September 2017
|
—
|
1,215,000
|
Principal payments
on notes payable to Oxford Finance
|
(833,333)
|
(972,223)
|
Principal payments
on financed insurance policies
|
21,140
|
(69,240)
|
Principal payments
on capital lease
|
(14,353)
|
(10,785)
|
Purchase of vested
employee stock in connection with tax withholding
obligation
|
(16,976)
|
—
|
Net cash provided
by financing activities
|
2,686,478
|
7,797,492
|
Net change in cash
and cash equivalents
|
(66,041)
|
(926,512)
|
Cash and cash
equivalents at beginning of period
|
885,710
|
3,979,290
|
Cash and cash
equivalents at end of period
|
$951,751
|
$3,052,778
|
|
|
|
Supplemental
disclosures:
|
|
|
Cash
paid during the period for income taxes
|
$1,900
|
$1,600
|
Cash
paid during the period for interest on notes payable and the
capital lease
|
$317,391
|
$302,256
|
|
|
|
Supplemental
disclosures of non-cash investing and financing
information:
|
|
|
Deemed dividend on
issuance of inducement shares
|
$1,388,179
|
$5,220,000
|
Deemed dividend on
issuance of incentive shares
|
$—
|
$3,120,000
|
Conversion of
preferred stock to common stock – Series D
|
$—
|
$3,981
|
Conversion of
preferred stock to common stock – Series I
|
$509
|
$3,067
|
Conversion of
preferred stock to common stock – Series J
|
$—
|
$5,227
|
|
|
|
Conversion of
preferred stock to common stock – Series L
|
$6,944
|
$—
|
Fair value of
repricing warrants issued in previous financing
|
$—
|
$19,413
|
Common stock issued
upon vesting of RSUs
|
$8,201
|
$—
|
See Accompanying Notes to Unaudited Condensed Consolidated
Financial Statements
F-4
MABVAX THERAPEUTICS HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Financial
Statements
1.
Nature of Business and Basis of
Presentation.
We are
a Delaware corporation, originally incorporated in 1988 under the
name “Terrapin Diagnostics, Inc.” in the State of
Delaware. In 1998, we changed our corporate name to “Telik,
Inc.” and changed our name again to “MabVax
Therapeutics Holdings, Inc.” in 2014. Unless the context
requires otherwise, references to “we,”
“our,” “us,” “MabVax” or the
“Company” in this prospectus mean MabVax Therapeutics
Holdings, Inc. on a condensed consolidated financial statement
basis with our wholly-owned subsidiary, MabVax Therapeutics,
Inc.
Nature
of Business – About Us
MabVax
Therapeutics Holdings, Inc. is a clinical-stage biotechnology
company with a fully human antibody discovery platform focused on
the rapid translation into clinical development of products to
address unmet medical needs in the treatment of cancer and
pancreatitis. We discovered a pipeline of human monoclonal antibody
product candidates based on the protective immune responses
generated by patients who have been vaccinated against targeted
cancers. Our therapeutic vaccine product candidates under
development were discovered at Memorial Sloan Kettering Cancer
Center (“MSK”) and are exclusively licensed to us as
well as exclusive rights to blood samples from patients who were
vaccinated with the same licensed vaccines. We operate in only one
business segment.
Our
lead development product, MVT-5873, is a fully human IgG1
monoclonal antibody (mAb) that targets sialyl Lewis A (sLea), an
epitope on CA19-9. MVT-5873 is currently in Phase 1 clinical
trials as a therapeutic agent for patients with pancreatic cancer
and other CA19-9 positive tumors. CA19-9 is expressed in over 90%
of pancreatic cancers and in other diseases including pancreatitis.
CA19-9 plays an important role in tumor adhesion and metastasis and
is a marker of an aggressive cancer phenotype. CA19-9 also has an
important role in the biological pathways that can result in
pancreatitis. CA19-9 serum levels are considered a valuable adjunct
in the diagnosis, prognosis and treatment monitoring of pancreatic
cancer and now pancreatitis. With our collaborators including MSK,
Sarah Cannon Research Institute, Honor Health and Imaging
Endpoints, we have treated more than 56 patients with either our
therapeutic antibody designated as MVT-5873 or our PET imaging
diagnostic product designated as MVT-2163 in Phase 1 clinical
studies, and demonstrated early safety, specificity for the target
and a potential efficacy signal. The Company also has a
radioimmunotherapy product, designated as MVT-1075, that is also in
Phase 1 clinical development. For additional information,
please visit the Company's website, www.mabvax.com.
Information on the Company’s
website is not incorporated herein.
Studies
conducted by Cold Spring Harbor Laboratories have demonstrated that
antibodies capable of binding to CA19-9 and blocking the downstream
biological pathways of pancreatitis have a positive effect on
ameliorating the disease. Combining the preclinical science
supporting the use of the CA19-9 blocking antibodies in the
treatment of pancreatitis with the clinically validated data and
supplies of MVT-5873 already available gives MabVax the
opportunity, assuming adequate funding, to move quickly into the
clinic in a mid-stage proof of concept clinical trial in the
near-term.
The
Company completed a preclinical asset sale and license agreement
with Boehringer Ingelheim International GmbH (“Boehringer
Ingelheim”) in July 2018, and a license agreement for a
cancer vaccine to Y-mAbs Therapeutics, Inc. in June 2018. The
Company received nearly $5 million in upfront payments from these
two transactions to begin the third quarter, with an additional
$7.6 million in downstream milestones the Company may receive based
either on reaching an anniversary date of entering the agreement,
provided the agreement is not canceled before a milestone has been
earned or due, or upon reaching a milestone.
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 revenues earned from asset sale and
license agreements, proceeds from the sale of common and preferred
stock, government grants, 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 product candidates; or we
license our technology after achieving one or more milestones of
interest to a potential partner.
F-5
Reverse Stock Splits
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 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 “2016 Reverse Stock
Split”). On February 14, 2018, we filed a certificate of
amendment to our Amended and Restated Certificate of Incorporation
with the Secretary of State of the State of Delaware to effectuate
another reverse stock split of our issued and outstanding common
stock on a 1-for-3 basis, effective on February 16, 2018 (the
“2018 Reverse Stock Split”; collectively with the 2016
Reverse Stock Split, the “Reverse Stock Splits”). 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 Splits, including rounding for fractional shares and
reclassifying any amount equal to the reduction in par value of
common stock to additional paid-in capital.
Delaware
Order Granting Petition for Relief
On
September 20, 2018, the Court of Chancery of the State of Delaware
(the “Court”) entered an order validating (i) issuances
of common stock upon conversions of the Company’s preferred
stock occurring between June 30, 2014 and February 12, 2018, and
(ii) stockholder approval of corporate actions presented to the
Company’s stockholders from June 30, 2014 to February 12,
2018. In so doing, the Court granted the Company’s Verified
Petition for Relief Under 8 Del.
C. § 205 (the “Delaware Petition”)
captioned In re: MabVax
Therapeutics Holdings, Inc., filed on July 27, 2018, in
order to rectify the uncertainty regarding whether shares of our
common stock were validly issued upon conversion of our preferred
stock from June 30, 2014 to February 12, 2018. The Delaware
Petition and the Court’s order granting the Delaware Petition
are discussed further in the Section below titled, “Court
Validation of Previously Issued Shares of Common Stock upon
Conversion of Preferred Stock.”
Basis
of Presentation
The
balance sheet data at December 31, 2017, was 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
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,
2017, included in our Annual Report on Form 10-K filed with
the SEC on April 2, 2018 and amended
on Form 10-K/A as filed with the SEC on October 15, 2018.
These quarterly results are not necessarily indicative of future
results.
Use
of Estimates
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.
Fair
Value Measurements
The
Company had no assets or liabilities that were measured using
quoted prices for similar assets and liabilities or significant
unobservable inputs (Level 2 and Level 3 assets and liabilities,
respectively) as of September 30, 2018 and December 31, 2017. The
carrying value of cash held in money market funds of $864,110 and
$1,196 as of September 30, 2018 and December 31, 2017,
respectively, is included in cash and cash equivalents and
approximates market values based on quoted market prices (Level 1
inputs).
Concentration
of Credit Risk
Credit
risk represents the risk that the Company would incur a loss if
counterparties failed to perform pursuant to the terms of their
agreements. Financial instruments that potentially expose the
Company to concentrations of credit risk consist primarily of cash
and cash equivalents. Cash and cash equivalents consist of money
market funds with major financial institutions in the United
States. These funds may be redeemed upon demand and, therefore,
bear minimal risk. The Company does not anticipate any losses on
such balances.
Consideration
of Impairment of Goodwill
The
Company maintains a goodwill balance of $6,826,003 on its balance
sheet as of September 30, 3018 and December 31, 2017, and tests for
impairment at least annually and whenever there has been a material
change in the Company by applying GAAP principles related to ASC
350 Intangibles – Goodwill
and Other (ASC 350). Based on a qualitative analysis of the
Company’s products in the pipeline as of September 30, 2018,
the $4.0 million in revenue earned during the quarter, and a
potential new indication for the Company’s lead antibody
program, MVT-5873, for the treatment of pancreatitis, the Company
concluded there was no goodwill impairment as of September 30,
2018. The goodwill was established in connection with the merger of
MabVax Therapeutics, Inc. a Delaware corporation, with a subsidiary
of the Company on July 8, 2014, pursuant to an Agreement and Plan
of Merger, dated May 12, 2014, by and among the Company, a
subsidiary of the Company and MabVax Therapeutics, Inc. as amended
June 30, 2014 and July 7, 2014 (the
“Merger”), whereby MabVax Therapeutics, Inc. is the
surviving company in the Merger, as a wholly-owned subsidiary of
the Company.
F-6
Revenue
Recognition
Effective January
1, 2018, the Company adopted Accounting Standards Codification, or
ASC, Topic 606, Revenue from
Contracts with Customers (Topic 606), using the full
retrospective transition method. Under this method, the Company
would have been required to revise its financial statements, if
applicable, for the years ended December 31, 2016 and 2017, and
applicable interim periods within those years, as if Topic 606 had
been effective for those periods. However, Topic 606 did not have
any impact on the Company’s revenue recognition upon
adoption. This standard applies to all contracts with customers,
except for contracts that are within the scope of other standards,
such as leases, insurance, collaboration arrangements and financial
instruments. Under Topic 606, an entity recognizes revenue when its
customer obtains control of promised goods or services in an amount
that reflects the consideration which the entity expects to receive
in exchange for those goods and services. To determine revenue
recognition for arrangements that an entity determines are within
the scope of Topic 606, the entity performs the following five
steps: (i) identify the contract(s) with the customer(s); (ii)
identify the performance obligations in the contract; (iii)
determine the transaction price; (iv) allocate the transaction
price to the performance obligations in the contract; and (v)
recognize revenue when (or as) the entity satisfies a performance
obligation. The Company only applies the five-step model to
contracts when it is probable that the entity will collect the
consideration it is entitled to in exchange for the goods and
services it transfers to the customer. At contract inception, the
Company assesses the goods or services promised within each
contract that falls under the scope of Topic 606, determines those
that are performance obligations and assesses whether each promised
good or service is distinct. The Company then recognizes as revenue
the amount of the transaction price that is allocated to the
respective performance obligation when (or as) the performance
obligation is satisfied.
License and Other Revenues
The
Company enters into licensing agreements which are within the scope
of Topic 606, under which it licenses certain of its product
candidates’ rights to third parties. The terms of these
arrangements typically include payment of one or more of the
following: non-refundable, up-front license fees; development,
regulatory and commercial milestone payments; and royalties on
Gross Profit of the licensed product, which will be classified as
royalty revenues, if and when earned.
In
determining the appropriate amount of revenue to be recognized as
it fulfills its obligation under each of its agreements, the
Company performs the five steps described above. As part of the
accounting for these arrangements, the Company must develop
assumptions that require judgment to determine the stand-alone
selling price, which may include forecasted revenues, development
timelines, reimbursement of personnel costs, discount rates and
probabilities of technical and regulatory success.
Licensing of Intellectual
Property – If
the license to the Company’s intellectual property is
determined to be distinct from the other performance obligations
identified in the arrangement, the Company recognizes revenue from
non-refundable, up-front fees allocated to the license when the
license is transferred to the licensee and the licensee is able to
use and benefit from the license. For licenses that are bundled
with other performance obligations, the Company utilizes judgment
to assess the nature of the combined performance obligation to
determine whether the combined performance obligation is satisfied
over time or at a point in time and, if over time, the appropriate
method of measuring progress for purposes of recognizing revenue
from non-refundable, up-front fees. The Company evaluates the
measure of progress each reporting period, and, if necessary,
adjusts the measure of performance and related revenue
recognition.
Milestone Payments
– At the inception of
each arrangement that includes development milestone payments, the
Company evaluates whether the milestones are considered probable of
being reached and estimates the amount to be included in the
transaction price using the most likely amount method. If it is
probable that a significant revenue reversal will not occur, the
associated milestone value is included in the transaction price.
Milestone payments that are not within the control of the Company
or the licensee, such as regulatory approvals, are not considered
probable of being achieved until those approvals are received. The
transaction price is then allocated to each performance obligation
on a relative stand-alone selling price basis, for which the
Company recognizes revenue as or when the performance obligations
under the contract are satisfied. At the end of each subsequent
reporting period, the Company re-evaluates the probability of
achievement of such development milestones and any related
constraint and, if necessary, adjusts its estimate of the overall
transaction price. Any such adjustments are recorded on a
cumulative catch-up basis, which would affect license,
collaboration and other revenues and earnings in their period of
adjustment. To date, the Company has not recognized any milestone
payments, because the milestones are not within the control of the
Company and the technology is at an early stage of development, or
the licensee has the ability to terminate the agreement before the
milestone payment is due.
Royalties –
For arrangements that include sales-based royalties, including
milestone payments based on the level of sales, and for which the
license is deemed to be the predominant item to which royalties
relate, the Company recognizes revenue at the later of (i) when the
related sales occur or (ii) when the performance obligation to
which some or all of the royalty has been allocated has been
satisfied (or partially satisfied). To date, the Company has not
recognized any royalty revenue from its license
agreements.
F-7
Accrued Liabilities
The
Company is required to estimate accrued liabilities as part of the
process of preparing its financial statements. The estimation of
accrued liabilities involves identifying services that have been
performed on the Company’s behalf, and then estimating the
level of service performed and the associated cost incurred for
such services as of each balance sheet date. Accrued liabilities
include professional service fees, such as for lawyers and
accountants, contract service fees, such as those under contracts
with clinical monitors, data management organizations and
investigators in conjunction with clinical trials, and fees to
contract manufacturers in conjunction with the production of
clinical materials. Pursuant to the Company’s assessment of
the services that have been performed, the Company recognizes these
expenses as the services are provided. Such assessments include:
(i) an evaluation by the project manager of the work that has been
completed during the period; (ii) measurement of progress prepared
internally and/or provided by the third-party service provider;
(iii) analyses of data that justify the progress; and (iv) the
Company’s judgment.
Research and Development Costs
Except
for payments made in advance of services, research and development
costs are expensed as incurred. For payments made in advance, the
Company recognizes research and development expense as the services
are rendered. Research and development costs primarily consist of
salaries and related expenses for personnel, laboratory supplies
and raw materials, and sponsored research, Other research and
development expenses include fees paid to consultants and outside
service providers including clinical research organizations and
clinical manufacturing organizations.
Recently Issued Accounting Standards
Adopted Accounting Standards
In May 2014, the FASB issued Topic 606 which
amends the guidance for accounting for revenue from contracts with
customers. This ASU supersedes the revenue recognition requirements
in ASC Topic 605, Revenue Recognition,
and creates a new Topic 606,
Revenue from
Contracts with Customers. The
Company did not have any revenue generating contracts in 2017,
therefore, the adoption of this standard had no effect on the
financial statement line items that could have been affected by the
transition. For further discussion on the adoption of this
standard, see “Revenue Recognition” above and Note 10,
“Contracts and Agreements.”
In
January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805), Clarifying
the Definition of a Business. The guidance changes the
definition of a business to assist entities with evaluating when a
set of transferred assets and activities is a business. The new
guidance requires an entity to evaluate if substantially all of the
fair value of the gross assets acquired is concentrated in a single
identifiable asset or a group of similar identifiable assets; if
so, the set of transferred assets and activities is not a business.
The Company adopted this ASU as of January 1, 2018. The adoption of
this ASU had no impact on the Company’s financial statements
for the three and nine months ended September 30,
2018.
In May
2017, the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (Topic
718), Scope of Modification Accounting, which clarifies when
a change to the terms or conditions of a share-based payment award
must be accounted for as a modification. The new guidance requires
modification accounting if the fair value, vesting conditions or
classification of the award is not the same immediately before and
after a change to the terms and conditions of the
award. The Company adopted this ASU on a prospective
basis as of January 1, 2018. The adoption of this ASU had no impact
on the Company’s financial statements for the three and nine
months ended September 30, 2018.
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. The Company adopted this ASU effective January 1, 2018. The
adoption of this new standard did not have a material impact on our
condensed consolidated financial statements.
F-8
Accounting Standards Not Yet Adopted
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes
existing guidance on accounting for leases in Leases (Topic 840) and generally
requires all leases, including operating leases, to be recognized
in the statement of financial position as right-of-use assets and
lease liabilities by lessees. The provisions of ASU 2016-02 are to
be applied using a modified retrospective approach and are
effective for reporting periods beginning after December 15, 2018;
early adoption is permitted. The Company plans to elect the
transition option provided under ASU 2018-11, which will not
require adjustments to comparative periods nor require modified
disclosures in those comparative periods. Upon adoption, the
Company expects to elect the transition package of practical
expedients permitted within the new standard, which among other
things, allows the carryforward of the historical lease
classification. Based on its anticipated election of practical
expedients, the Company anticipates the recognition of right of use
assets and related lease liabilities on its balance sheets related
to its leases. The Company intends on engaging a professional
services firm to assist in the implementation of ASC 842, and to
analyze the impact of adopting ASC 842 on the Company’s
statements of income and balance sheets.
In June
2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic
718): Improvements to
Nonemployee Share-based Payment Accounting, to simplify the
accounting for share-based payments to nonemployees by aligning it
with the accounting for share-based payments to employees, with
certain exceptions. The provisions of ASU 2018-07 are effective for
reporting periods beginning after December 15, 2018, including
interim periods within that fiscal year; early adoption is
permitted, but no earlier than a company’s adoption date of
Topic 606. Upon transition, the Company will be required to measure
these nonemployee awards at fair value as of the adoption
date. The Company had not early adopted this ASU as of
September 30, 2018, but plans on adopting this ASU for its
reporting period beginning January 1, 2019. The Company is
currently evaluating the effect that this ASU will have on its
financial statements.
In
June 2016, the FASB issued ASU No. 2016-13,
“Financial
Instruments—Credit Losses (Topic 326): 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
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.
With
the exception of the new standards discussed above, there have been
no new accounting pronouncements that have significance, or
potential significance, to the Company’s 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 $5,908,068, net cash used in operating
activities of $2,620,437, net cash used in investing activities of
$0, and net cash provided by financing activities of $2,686,478 for
the nine months ended September 30, 2018. As of September 30, 2018,
the Company had $951,751 in cash and cash equivalents, a working
capital deficit of $6,334,244, an accumulated deficit of
$118,349,884, and stockholders’ equity of $42,558. The
Company also has significant debt payments due within the next
twelve months.
F-9
Overview
of 2018 Private Placements
Between
February 2 and February 10, 2018, the Company entered into separate
purchase agreements with investors pursuant to which the Company
sold (i) shares of its common stock, (ii) shares of its convertible
preferred stock, and
(iii) warrants to purchase shares of common (the “February
2018 Private Placements”). From April 30 to May 2, 2018, the
Company entered into separate purchase agreements with investors
pursuant to which we agreed to sell shares of its common stock and
convertible preferred stock (the “May 2018 Private
Placements”). No financial advisor was used in
connection with the February 2018 Private Placements nor the May
2018 Private Placements.
The
securities issued in connection with the February 2018 Private
Placements and the May 2018 Private Placements 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. The Company entered into separate
registration rights agreements with each of the investors in the
February 2018 Private Placements and the May 2018 Private
Placements, pursuant to which the Company agreed to undertake to
file a registration statement to register the resale of the shares
of common stock and the shares of common stock underlying the
warrants and preferred stock. The Company also agreed to use
reasonable best efforts to cause such registration statement to be
declared effective 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.
February
2018 Private Placements
In
connection with the February 2018 Private Placements, the Company
sold (i) an aggregate of 555,557 shares of its common stock for an
aggregate purchase price of $1,250,000, or $2.25 per share, (ii)
5,000 shares of our newly designated 0% Series M Convertible Preferred Stock
(the “Series M Preferred Stock”) for an aggregate
purchase price of $1,500,000, or $300.00 per share, and
(iii) warrants to purchase up to an aggregate of 855,561 shares of
common stock each with an exercise price of $2.70 per share. The
net proceeds of the February 2018 Private Placements were
$2,700,000 after transaction costs of $50,000.
May
2018 Private Placements
In
connection with the May 2018 Private Placements, the Company agreed
to sell (i) 218,182 shares of common stock at an aggregate purchase
price of $240,000, or $1.10 per share, and (ii) 5,363.64 shares of
newly designated 0% Series
N Convertible Preferred Stock (the “Series N Preferred
Stock”) at an aggregate purchase price of $590,000, or
$110.00 per share. The following investors in the May 2018
Private Placements also
invested in the February 2018 Private Placements (the “Prior
Investors”): GRQ Consultants Inc., Roth 401K FBO
Renee Honig; GRQ Consultants Inc., Roth 401K FBO Barry Honig;
Melechdavid, Inc.; Grander Holdings Inc. 401K; Robert S. Colman
Trust UDT 3/13/85; Ben Brauser; Joshua A. Brauser; Daniel A.
Brauser; Gregory Aaron Brauser; Erick E. Richardson; and Ronald B.
Low.
Under
the terms of the May 2018 Private Placements, we were required to
offer an aggregate of 12,777.77 shares (the “May 2018
Inducement Shares”) of newly designated 0% Series O Preferred
Stock (the “Series O Preferred Stock”) to investors who
previously purchased securities in the February 2018 Private
Placements and who also purchased securities in the May 2018
Private Placements with an aggregate purchase price of at least 40%
of their investment amounts in the February 2018 Private
Placements. Based on the closing of the offering, and participation
of the Prior Investors who invested an aggregate of $830,000 (the
“May 2018 Inducement Investors”), the Company issued an
aggregate of 10,605.56 May 2018 Inducement Shares in the form of
Series O Preferred Stock convertible into an aggregate of 1,060,556
shares of common stock. The
May 2018 Private Placements closed on May 15, 2018, with the
Company receiving gross proceeds totaling
$830,000.
F-10
Plans
for Continuing to Fund the Company’s Losses from
Operations
We plan
to continue to fund the Company’s losses from operations and
capital funding needs through equity financings in the form of
common stock and preferred stock, licensing agreements, asset
sales, strategic collaborations, government grants, issuance of
common stock in lieu of cash for services, debt financings or other
arrangements. Further, to extend availability of existing cash
available for our programs for achieving milestones or a strategic
transaction, in mid-2017 we began reducing personnel from
twenty-five (25) full time employees to six (6) as of November 12,
2018, and reduced other operating expenses following the completion
of two (2) Phase 1a clinical trials of our lead antibody product
candidate, HuMab 5B1, which has enabled us to reduce our
expenditures on clinical trials. We plan to continue funding Phase
1 clinical trials of our product candidate MVT-5873 in cancer
patients, MVT-2163 as a diagnostic agent in pancreatic cancer
patients, and MVT-1075 as a radioimmunotherapy agent for the
treatment of various cancers, preclinical testing of follow-on
antibody candidates, investor and public relations, SEC compliance
efforts, and the general and administrative expenses associated
with each of these activities, and prepare for a mid-stage
proof-of-concept clinical trial of MVT-5873 as a treatment for
pancreatitis. We will also support research efforts and continued
Phase 1 clinical development by MSK of our Positron-emission
tomography (“PET”) imaging agent MVT-2163 under an R01
Research Grant provided by the National Institutes of Health
(“NIH”) to MSK in April 2018, with the bulk of the
costs of the research and clinical development being borne by the
NIH. Although we achieved two strategic transactions in late June
2018 and early July 2018, there can be no assurance that we will be
able to achieve additional license and or sales agreements and earn
revenues large enough to offset our operating expenses in the
future, as discussed further in Management’s Discussion and
Analysis of Financial Condition and Results of Operations of our
Quarterly Report. We cannot be sure that asset sales or licensing
agreements can be signed in a timely manner, if any, or that
capital funding will be available on reasonable terms, or at all.
If we are unable to secure significant asset sales or licensing
agreements and 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, suspend or curtail planned programs and/or cease
our operations entirely. 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 the Company will continue to incur net losses into the
foreseeable future as we: (i) continue our clinical trial of
MVT-5873 in cancer patients, (ii) continue our clinical trial for
the development of MVT-1075 as a radioimmunotherapy, (iii) prepare
for a mid-stage proof-of-concept clinical trial of MVT-5873 as a
treatment for pancreatitis, to be initiated in early 2019, and (iv)
continue operations as a public company. Based on receipt of $2.7
million net of transaction costs in February 2018, an additional
$830,000 from a financing in May 2018, and receipt of $700,000 from
an upfront payment under a sublicense agreement with Y-mAbs
Therapeutics, Inc. (“Y-mAbs”) during the first nine
months of 2018; and receipt of $4.0 million in gross proceeds from
an asset purchase and license agreement with Boehringer Ingelheim
International GmbH (“Boehringer Ingelheim”) in July
2018, and without any other additional funding or receipt of
payments from potential asset sales or licensing agreements, we
expect we will have sufficient funds to meet our obligations until
December 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
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 could 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, all 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 have ever been declared by the Board of Directors of the
Company (the “Board of Directors”) since our inception
on any series of convertible preferred stock.
F-11
Overview of Preferred Stock & Beneficial Ownership
Blockers
All
issued and outstanding shares of the Company’s preferred
stock have a par value of $0.01 per share and rank prior to any
class or series of the Company’s common stock as to the
distribution of assets upon liquidation, dissolution or winding up
of the Company or as to the payment of dividends. The Company must
obtain the consent of a majority of the holders of each series of
preferred stock before taking any action that materially and
adversely affects the rights, preferences, or privileges of the
applicable series of preferred stock. Also, the holders of each
series of preferred stock are entitled to vote on any matter on
which the holders of common stock are entitled to vote.
Additionally, the Company must obtain the consent of the holders of
the Series E Preferred Stock, Series J Preferred Stock, Series L
Preferred Stock, and Series N Preferred Stock (as each of those
terms are defined below) prior to increasing or decreasing (other
than by conversion) the authorized number of the applicable series
of preferred stock or issuing any additional shares of the
applicable series of preferred stock.
Generally, the same investors participated in each
of the Company’s preferred stock offerings such that the same
investors own most of the shares of each series of the
Company’s issued and outstanding preferred stock. Pursuant to
terms negotiated in connection with the Company’s sales of
preferred stock, the certificates of
designation for the Company’s preferred stock each include a
4.99% and/or 9.99% beneficial ownership conversion blocker.
These conversion blockers
may be decreased or increased, at the option of each holder, to a
percentage not to exceed 9.99% upon written notice to the Company,
as further specified in the applicable certificate of
designation. The certificate of
designation for our Series N
Preferred Stock includes a 19.99%
blocker provision applicable until stockholders approve issuances of common stock in
excess of such amount. The stated values, as applicable, and
conversion prices of our preferred stock are subject to adjustment
in the event of stock splits, stock dividends, combination of
shares and similar recapitalization transactions. The
Company’s ability to administer the blockers according to
their terms depends on group determinations and accurate reporting
by outside investors with respect to their own beneficial
ownership.
Series
D Preferred Stock
As of
September 30, 2018 and December 31, 2017, there were 44,104 shares
of Series D Convertible Preferred Stock (“Series D Preferred
Stock”) issued and outstanding, and convertible into an
aggregate of 198,667 shares of common stock. As of September 30, 2018, each one share of Series
D Preferred Stock is convertible into 4.5045 shares of Common Stock.
Series
E Preferred Stock
As of
September 30, 2018 and December 31, 2017, there were 33,333 shares
of Series E Convertible Preferred Stock (“Series E Preferred
Stock”) issued and outstanding, and convertible into 173,249
shares of common 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 ($75
per 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 $14.43 per
share.
Series
I Preferred Stock
As of
September 30, 2018 and December 31, 2017, there were 645,640 and
798,460 shares of our Series I Preferred Stock issued and
outstanding, and convertible into 215,214 and 266,154 shares of our
common stock, respectively. During the nine months ended September
30, 2018, 152,820 shares of Series I Preferred Stock were converted
by Grander Holdings, Inc. 401K into 50,940 shares of common
stock.
The Series I Preferred Stock has a stated value of
$0.01 per share. Each one share of Series I Preferred Stock is
convertible into one-third share of common stock.
F-12
Series
J Preferred Stock
As of
September 30, 2018 and December 31, 2017, there were 772.73 shares
of our Series J Convertible Preferred Stock (“Series J
Preferred Stock”) issued and outstanding and convertible into
386,365 shares of our common 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 ($550), 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 ($1.10). If we issue or sell common
stock, or common equivalent shares, for consideration per share
that is less than the conversion price in effect immediately prior
to the issuance, then the conversion price in effect immediately
prior to such issuance will be adjusted to the lower issuance
price, but not be less than $0.10.
Series
K Preferred Stock
As of
September 30, 2018 and December 31, 2017, there were 63,150 shares
of our Series K convertible preferred stock (“Series K
Preferred Stock”) issued and outstanding, and convertible
into 2,105,000 of our common 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 ($0.01) divided by the
conversion price ($0.0003).
Series
L Preferred Stock
As of
September 30, 2018, and December 31, 2017, there were 45,500 and
58,000 shares of our Series L Preferred Stock issued and
outstanding, and convertible into 2,527,778 and 3,222,223 shares of
our common stock, respectively. During the nine months ended
September 30, 2018, 12,500 shares of Series L Preferred Stock were
converted into 694,445 shares of common stock by GRQ Consultants, Inc. Roth 401K FBO Renee Honig
Trustee, and HS Contrarian Investments, LLC.
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 ($100), 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
($1.80).
Series
M Preferred Stock
As of
September 30, 2018 and December 31, 2017, there were 5,000 and no
shares of our Series M Preferred Stock issued and outstanding, and
convertible into 666,667 and no shares of our common stock,
respectively.
The
shares of Series M Preferred Stock are convertible into shares of
common stock based on a conversion calculation equal to the stated
value of the Series M Preferred Stock ($300), plus all accrued and
unpaid dividends, if any, on such Series M Preferred Stock, as of
such date of determination, divided by the conversion price
($2.25).
Series
N Preferred Stock
As of
September 30, 2018, and December 31, 2017, there were 5,363.64 and
no shares of our Series N Preferred Stock issued and outstanding,
and convertible into 536,364 and no shares of our common stock,
respectively.
The
shares of Series N Preferred Stock are convertible into shares of
common stock based on a conversion calculation equal to the stated
value of the Series N Preferred Stock ($110), plus all accrued and
unpaid dividends, if any, on such Series N Preferred Stock, as of
such date of determination, divided by the conversion price
($1.10). If we issue or sell common stock, or common equivalent
shares, for consideration per share that is less than the
conversion price in effect immediately prior to the issuance, then
the conversion price in effect immediately prior to such issuance
will be adjusted to the lower issuance price, but not be less than
$0.10.
Series
O Preferred Stock
As of
September 30, 2018, and December 31, 2017, there were 10,605.56 and
no shares of our Series O Preferred Stock issued and outstanding,
and convertible into 1,060,556 and no shares of our common stock,
respectively.
The
shares of Series O Preferred Stock are convertible into shares of
common stock based on a conversion calculation equal to the stated
value of the Series O Preferred Stock ($0.01), plus all accrued and
unpaid dividends, if any, on such Series O Preferred Stock, as of
such date of determination, divided by the conversion price
($0.0001). We are not permitted to issue any shares of common stock
upon conversion of the Series O Preferred Stock until our
stockholders approve, in accordance with the rules of the Nasdaq
Stock Market LLC, the conversion of Series N Preferred Stock
authorized on April 26, 2018, or the conversion of Series O
Preferred Stock.
F-13
Warrants
Issued in Connection with February 2018 Private
Placements
The warrants
issued in the February 2018 Private Placements (the “February
2018 Warrants”) are exercisable, at any time on or after the
sixth month anniversary of the closing date, at a price of $2.70
per share, subject to adjustment, and expire three years from the
initial exercise date. The holders of the February 2018 Warrants
may, subject to certain limitations, exercise the February 2018
Warrants on a cashless basis if the shares of common stock issuable
upon exercise of the February 2018 Warrants are not registered for
resale under the Securities Act within four (4) months of issuance,
or between June 2 and June 10, 2018. The Company is prohibited from
effecting an exercise of any February 2018 Warrants to the extent
that, as a result of any such exercise, the holder would
beneficially own more than 9.99% of the number of shares of common
stock outstanding immediately after giving effect to the issuance
of shares of common stock upon exercise of such February 2018
Warrants. The February 2018 Warrants are not listed or quoted on
any securities exchange or other trading market.
Warrants
Issued in Connection with October 2015 Public Offering
As of
September 30, 2018, and December 31, 2017, warrants to purchase
56,306 shares of common stock previously issued in connection with
our public offering closing on October 5, 2015 (the “October
2015 Warrants”) were outstanding. The October 2015 Warrants,
which had an exercise price of $29.31 per share, expired on
September 30, 2018.
Consultant Grants
On
February 10, 2017, the Company entered into a consulting agreement
with MDM Worldwide, pursuant to which MDM Worldwide agreed to
provide investor relations services to the Company in consideration
for an immediate grant of 6,667 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. The shares granted were
fully vested upon grant and the Company recognized the grant date
fair value of the shares of $56,600 as investor relations expense
upon grant during the first quarter of 2017. The services with MDM
Worldwide, which the Company was required to purchase by some
investors in connection with prior financings of the Company, were
terminated effective June 1, 2018.
On
March 7, 2017, the Company entered into a consulting agreement with
Jenene Thomas Communications, pursuant to which Jenene Thomas
Communications agreed to provide investor relations services to the
Company. In consideration for these services, which began on April
1, 2017, we paid a monthly cash retainer of $12,500. Additionally,
we issued 6,667 restricted shares of common stock on April 1, 2017,
to be vested at 1,667 per quarter over the four quarters of
services under the agreement beginning April 1, 2017. The shares
granted were vested over a one-year period over which the services
were performed and, as such, were amortized over the same period
beginning in April 1, 2017. The services with Jenene Thomas
Communications terminated effective June 1, 2018.
6.
Notes Payable.
Loan
and Security Agreement with Oxford Finance, LLC
On
January 15, 2016, we entered into a loan and security agreement
with Oxford Finance, LLC (“Oxford Finance”) 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 Loans”). The option to fund the second tranche
of $5,000,000 (the “Term B Loans”) was exercisable upon
the Company achieving positive interim data on the Phase 1
HuMab-5B1 antibody trial in pancreatic cancer and successfully
uplisting to either the Nasdaq Stock Market or NYSE MKT on or
before September 30, 2016. The option for the Term B Loans expired
unexercised on September 30, 2016. The interest rate for the Term A
Loans 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 Term A Loans were 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 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
Term A Loans, and this amount is being accreted using the effective
interest rate method over the term of the loans. The Term A Loans
can be prepaid subject to a graduated prepayment fee, depending on
the timing of the prepayment.
Concurrent with the
execution of the Loan Agreement, the Company issued warrants to
purchase up to 75,075 shares of common stock to Oxford Finance with
an exercise price of $16.65 per share. The warrants were
immediately exercisable, 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 a perfected first priority lien on all of
the Company’s assets with a negative pledge on IP. The
Company paid Oxford Finance 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 in
the initiation and administration of the facilities including the
cost of loan documentation.
F-14
At the
initial funding on January 15, 2016, the Company received net
proceeds from the Term A Loans 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 Oxford
Finance’s lien in the collateral or in the value of such
collateral. In the event of default by the Company under the
Loan Agreement, Oxford Finance 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.
First
Amendment to Loan and Security Agreement
On
March 31, 2017, we and Oxford Finance signed the First Amendment to
Loan and Security Agreement providing that the payment of principal
on the Term A Loans that otherwise would have been due on the March
1, 2017 will be due and payable on May 1, 2017 along with any other
payment of principal due on May 1, 2017. We were obligated to pay a
fully earned and non-refundable amendment fee of $15,000 to the
Collateral Agent (as defined in the Loan Agreement). On May 1,
2017, we paid the principal due on May 1, 2017, along with the
$15,000 amendment fee.
Second
Amendment to Loan and Security Agreement
On July
3, 2018, we and Oxford Finance signed the Second Amendment to Loan
and Security Agreement whereby Oxford Finance has (i) consented to
the Company’s license and sale to Boehringer Ingelheim of
certain preclinical assets (the “Acquired Assets”) and
release of any encumbrances under the Loan Agreement that relate to
the Acquired Assets, (ii) payments of advisory fees to Greenhill
& Company of $385,000 over the course of six months in equal
monthly payments, and (iii) deferred principal payments under the
Loan Agreement for six months starting with the July 2018 payment,
in exchange for the Company granting such additional collateral
that was not pledged previously or in which security interest was
not granted prior to the Second Amendment. We are obligated to pay
a fully earned and non-refundable amendment fee of $5,000 to Oxford
Finance, which shall become due and payable upon the earlier of:
(i) the maturity date of the term loans, (ii) the acceleration of
any term loan, or (iii) the prepayment of the term loans pursuant
to the Loan Agreement.
For the
three and nine months ended September 30, 2018, the Company
recorded interest expense related to the Loan Agreement of $94,755
and $308,271, respectively. For the three and nine months ended
September 30, 2017, the Company recorded $138,642 and $445,934 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
11.82% and 12.30% as of September 30, 2018 and 2017,
respectively.
The
future principal payments under notes payable for the Loan
Agreement and financed insurance as of September 30, 2018 are as
follows:
Years ending
December 31:
|
|
2018
(remaining)
|
$36,348
|
2019
|
2,380,952
|
2020
|
396,826
|
Notes payable,
balance as of September 30, 2018
|
2,814,126
|
Unamortized
discount on notes payable
|
(179,025)
|
Notes payable, net,
balance as of September 30, 2018
|
2,635,101
|
Current portion of
notes payable, net
|
(1,822,062)
|
Non-current portion
of notes payable, net
|
$813,039
|
Notice
of Events of Default under Loan and Security Agreement
The
Company believes it was in compliance with all applicable covenants
set forth in the Loan Agreement as of September 30, 2018.
However, on August 14, 2018, the Company received a letter from
Oxford Finance (the “Notice”) asserting certain events
of default under the Loan Agreement had occurred as a result of
certain events the Company reported as having occurred, including,
without limitation, (i) the resignation of the Company’s
external auditor, CohnReznick LLP (“CohnReznick”),
effective August 3, 2018, and its withdrawal of its audit reports
for the years 2014 through 2017, (ii) the resignation of four (4)
members of the Board of Directors, effective as of July 31, 2018,
and (iii) the delisting of the Company’s common stock from
The Nasdaq Stock Market LLC on July 11, 2018 (collectively, the
“Alleged Default Events”). The Company informed Oxford
Finance that it disputes the Alleged Default Events, individually
or collectively, constitute a “Material Adverse Change”
or other event of default under the Loan Agreement. In addition,
the Company already engaged a new auditor, Haskell & White LLP,
effective August 22, 2018, and on September 20, 2018, the Court
ratified the Delaware Petition. Also, on October 16, 2018, the
Company applied for listing on the OTCQB Venture Marketplace (the
“OTCQB Marketplace”) and believes it now meets the
requisite eligibility requirements; however, there can be no
assurance of being listed while the SEC Action is underway. As of
November 12, 2018, Company management has been meeting at least
weekly since September 30, 2018, to keep Oxford Finance informed on
potential fund-raising activities.
F-15
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 member of the Board
of Directors at that time, 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 made quarterly
payments thereafter beginning January 1, 2017. On February 16,
2018, the Company extended Dr. Ravetch’s consulting agreement
until February 16, 2019, with services to be provided, as may be
needed by the Company. During the three and nine months ended
September 30, 2018, Dr. Ravetch provided no consulting services
related to this agreement and no payments were made. During the
three and nine months ended September 30, 2017, the Company
recorded $25,000 and $50,000, respectively, in consulting expenses
as part of general and administration expenses related to this
agreement.
On
November 3, 2016, the Company granted 5,833 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, 2018, the
Company recognized $0 and $6,584, respectively, of stock-based
compensation expense, as part of general and administration
expenses, related to this option grant. During the three and nine
months ended September 30, 2017, the Company recognized $3,826 and
$7,652, respectively, of stock-based compensation expense, 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 member of the Board of Directors at the
time) and Philip Livingston, 16,667 options at a market price of
$5.40, with immediate vesting for their continuing service to the
Company, in exchange for giving up their director fees for the
remainder of the year. J. David Hansen and Jeffrey Ravetch were
each granted 166,667 options and Philip Livingston was granted
16,667 options each at an exercise price of $6.00 per share with
immediate vesting and no performance obligations. Options granted
to J. David Hansen and Philip Livingston were granted as a
condition of the May 2017 financing transaction. The 166,667
options granted to Dr. Ravetch in addition to the 16,667 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. Because of the immediate
vesting and all of the expenses recorded in 2017, no expenses are
being recorded for these grants in 2018. During the three and nine
months ended September 30, 2017, the Company recorded $0 and
$1,480,089, respectively, in stock-based compensation expenses in
general and administration expenses, related to these
grants.
8.
Stock-based
Activity
Stock-based
Compensation
We
measure stock-based compensation expense for equity-classified
awards, principally related to stock options and restricted stock
units (“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.
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, 2018 and 2017, the following
valuation assumptions were used:
|
Three
Months Ended
September
30,
|
Nine
Months Ended September
30,
|
||
|
2018
|
2017
|
2018
|
2017
|
Risk-free interest
rate
|
-
|
-
|
2.4%
|
1.5 to
2.0%
|
Dividend
yield
|
-
|
-
|
0%
|
0%
|
Expected
volatility
|
-
|
-
|
87%
|
73 to
85%
|
Expected life of
options, in years
|
-
|
-
|
5.5 yrs.
|
1.4 to 6.0
yrs.
|
Weighted-average
grant date fair value
|
-
|
-
|
$1.42
|
$1.53
|
Total
estimated stock-based compensation expense, related to all the
Company’s stock-based payment awards recognized under ASC
718, “Compensation—Stock
Compensation” 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,
|
|
2018
|
2017
|
2018
|
2017
|
Research and
development
|
$96,157
|
$292,523
|
$340,979
|
$989,884
|
General and
administrative
|
172,458
|
721,213
|
966,183
|
3,526,488
|
Total stock-based
compensation expense
|
$268,615
|
$1,013,736
|
$1,307,162
|
$4,516,372
|
F-16
Stock-based
Award Activity
The
following table summarizes the Company’s stock option
activity during the nine months ended September 30,
2018:
|
Options
Outstanding
|
Weighted-Average
Exercise
Price
|
Outstanding at
December 31, 2017
|
953,937
|
$13.97
|
Granted
|
1,186,000
|
1.99
|
Exercised
|
—
|
—
|
Forfeited/cancelled/expired
|
(319,348)
|
6.71
|
Outstanding and
expected to vest at September 30, 2018
|
1,820,589
|
$7.44
|
Vested and
exercisable at September 30, 2018
|
1,060,093
|
$10.24
|
The
total unrecognized compensation cost related to unvested stock
option grants as of September 30, 2018, was $1,549,114 and the
weighted average period over which these grants are expected to
vest is 1.3 years. The weighted average remaining contractual life
of stock options outstanding at September 30, 2018 and 2017 is 9.2
and 9.1 years, respectively.
During
the first nine months of 2018, the Company granted 1,186,000
options to officers and employees with a weighted average exercise
price of $1.99 and vesting over a three-year period with a vesting
starting at the one-year anniversary date of the grant date. During
the first nine months of 2017, the Company granted 682,230 options
to officers and employees with a weighted average exercise price of
$7.11 and vesting over a three-year period with vesting starting at
the one-year anniversary of the grant date.
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, 2018, 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, 2018 and 2017.
A
summary of activity related to restricted stock grants under the
Fifth Amended and Restated MabVax Therapeutics Holdings, Inc. 2014
Employee, Director and Consultant Equity Incentive Plan for the
nine months ended September 30, 2018 is presented
below:
|
Shares
|
Weighted
Average
Grant-Date
Fair
Value
|
Non-vested at
December 31, 2017
|
832,226
|
$3.88
|
Granted
|
—
|
—
|
Vested
|
(832,226)
|
50.26
|
Forfeited
|
—
|
—
|
Non-vested at
September 30, 2018
|
—
|
$—
|
As of
September 30, 2018, there were no non-vested RSUs remaining
outstanding.
F-17
Management
Bonus Plan
On
February 21, 2018, the compensation committee of the Board of
Directors reviewed 2017 results and concluded that the year’s
performance, relative to the objectives set at the beginning of the
year, did not merit any bonus payment. The compensation committee
also determined that management base salaries would currently
remain unchanged from 2017 levels.
Common
stock reserved for future issuance
Common
stock reserved for future issuance consists of the following at
September 30, 2018:
Common stock
reserved for conversion of preferred stock
|
7,869,862
|
Warrants to
purchase common stock
|
1,221,935
|
Common stock
options outstanding
|
1,820,589
|
Authorized for
future grant or issuance under the Stock Plan
|
646,059
|
Total
|
11,558,445
|
9.
Net Income (Loss) per
Share
The
Company calculates basic and diluted net income (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.
Basic
and diluted net loss per share is computed as follows:
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
||
|
2018
|
2017
|
2018
|
2017
|
Net
income (loss) allocable to common stockholders
|
$340,681
|
$(6,200,161)
|
$(7,296,247)
|
$(22,784,296)
|
Basic
net income (loss) per common share
|
$0.04
|
$(1.62)
|
$(0.81)
|
$(8.04)
|
Diluted
net income (loss) per share
|
$0.02
|
$(1.62)
|
$(0.81)
|
$(8.04)
|
Weighted
average common shares outstanding
|
9,253,880
|
3,830,280
|
8,983,980
|
2,834,692
|
Diluted
weighted average shares outstanding
|
17,123,742
|
3,830,280
|
8,983,980
|
2,834,692
|
Diluted
weighted average shares outstanding for the three months ended
September 30, 2018, includes only the common stock reserved for
conversion of preferred stock, as the exercise price for the
warrants to purchase common stock and the exercise price for common
stock options outstanding are substantially above the weighted
average price per share during the period. The table below presents
the potentially dilutive securities that would have been included
in the calculation of diluted net loss per share for the three
months ended September 30, 2017, and for the Nine Months ended
September 30, 2018 and 2017, respectively, if they were not
antidilutive for those periods presented.
|
Nine
Months Ended September 30,
|
|
|
2018
|
2017
|
Common stock
reserved for conversion of preferred stock
|
7,869,862
|
3,877,796
|
Warrants to
purchase common stock
|
1,221,935
|
691,139
|
Common stock
options outstanding
|
1,820,589
|
938,413
|
Unvested restricted
stock
|
—
|
317,902
|
Total
|
10,912,386
|
5,825,250
|
F-18
10.
Contracts and
Agreements
Asset
Purchase and License Agreement with Boehringer
Ingelheim
On July
4, 2018, the Company entered into an Asset Purchase Agreement and License
Agreement with Boehringer Ingelheim International GmbH
(hereafter, “BII” and the “Asset Purchase Agreement”)
centered on MabVax's program targeting a glycan commonly
overexpressed on multiple solid tumor cancers. BII has acquired all
rights in and to the program. MabVax received a non-refundable $4
million payment upon signing the agreement and expects to receive
an additional $7 million in connection with BII reaching certain
near-term milestones and downstream regulatory milestones plus
further earn-out payments.
The
Company recognized the initial $4 million non-refundable upfront
payment as revenue, as BII obtained the exclusive rights to use the
intellectual property and there were no continuing obligations
other than to deliver materials and documents of an administrative
nature that were completed within 15 days of entering into the
agreement. As of September 30, 2018, the Company had not recognized
as revenue any of the future milestones given the high risk and
uncertainty of continuing development by BII given such
risks.
In
connection with the Asset Purchase Agreement, the Company incurred
cost of sales totaling $785,000, including 10% of the $4 million
payment or $400,000 to MSK to obtain MSK’s consent to enter
into the Asset Purchase Agreement, and $385,000 in a fixed fee to
investment banker Greenhill & Co. MabVax agreed to share with
MSK 20% or $1.4 million of the $7.0 million in near-term milestones
if achieved by BII.
The
asset acquisition is separate and distinct from other programs
under development at MabVax, enabling MabVax to retain all rights
to its lead HuMab-5B1 antibody program which is in Phase 1 clinical
trials as a therapeutic product candidate and as a diagnostic
product candidate, as well as other antibody discovery programs
from the Company's antibody discovery portfolio targeting other
cancer antigens.
Cold
Spring Harbor Laboratory License Agreement
On
September 8, 2018, the Company entered into an agreement with Cold
Spring Harbor Laboratory (“CSHL”), a nonprofit New York
State education corporation, whereby the Company licensed the
exclusive worldwide rights to certain discoveries and technology
including exclusive interest in certain patent applications filed
by the Company on behalf of CSHL for use of MVT-5873 as a treatment
for pancreatitis. The Company paid $20,000 as an upfront license
fee and will pay to CSHL a nonrefundable annual license maintenance
fee of the same amount beginning on January 1, 2020 and continuing
each year thereafter during the term of the agreement and will
increase to $50,000 a year upon issuance of the first patent in
connection with the technology. The annual license fee will be
reduced for any patent prosecution and maintenance costs and will
be fully creditable against any royalties or milestone payments
earned during the year. Future milestone payments are in the
aggregate less than $2.5 million, with royalties that range from
0.25% if no valid claim to patents, to 2.5% if there is a valid
claim of the patent in the territory of sales.
Sublicense Grant to Y-mAbs Therapeutics, Inc.
On June 27, 2018, we granted an exclusive
sublicense to Y-mAbs, a privately held clinical stage
biopharmaceutical company, for a bi-valent ganglioside-based
vaccine intended to treat neuroblastoma, a rare pediatric cancer
(the “Y-mAbs Sublicense”). Total value of the
transaction to MabVax is $1.3 million plus a share of a Priority
Review Voucher (as defined in the sublicense agreement) if granted
by the FDA to Y-mAbs on approval of the vaccine and the Priority
Review Voucher is subsequently sold. Additionally, Y-mAbs will be
responsible for all further development of the product as well as
any downstream payment obligations related to this specific vaccine
to MSK that were specified in the original MabVax-MSK license
agreement dated April 30, 2008. If Y-mAbs successfully develops and
receives FDA approval for the neuroblastoma vaccine, it is
obligated to file with the FDA for a Priority Review Voucher. If
the voucher is granted to Y-mAbs and subsequently sold, then MabVax
will receive a percentage of the proceeds from the sale of the
voucher by Y-mAbs. Upon entering the Y-mAbs Sublicense, the Company
received a non-refundable upfront payment of $700,000 and will
receive an additional $600,000 upon the one-year anniversary of
entering into the agreement, provided Y-mAbs has not terminated the
agreement prior to the one-year anniversary. The Sublicense
Agreement contains termination provisions allowing for the
termination of the agreement (i) upon material breach if the
breaching party fails to cure the breach within 60 days of notice
by the non-breaching party, (ii) by Y-mAbs at any time upon 90
days’ advance notice to MabVax, or (iii) the expiration or
termination of the underlying license from MSK to MabVax, provided
that MSK will assume the agreement if Y-mAbs is in material
compliance with the agreement upon the termination of the
MSK-MabVax license. There were no
continuing obligations on the part of the Company in connection
with the agreement other than one-time administrative matters that
were completed within thirty (30) days of signing the agreement.
Therefore, the Company recognized $700,000 as revenue upon signing
the agreement and receiving the funds. Because Y-mAbs has the right
to terminate the Y-mAbs Sublicense before the one-year anniversary
and the uncertainty of continuing clinical development by Y-mAbs,
the Company will not recognize additional revenue until it is
likely the termination provisions are no longer
applicable.
F-19
Letter Agreement with MSK
On
June 27, 2018, we entered into a letter agreement with MSK (the
“MSK Letter”) in connection with obtaining the consent
from MSK for the Company to enter into the Y-mAbs Sublicense and
allow Y-mAbs to “step into the shoes” of the
obligations that the Company would have had to pay MSK if the
Company had continued development of the neuroblastoma vaccine,
including future payment obligations of the Company regarding
future milestones. As part of the agreement, the Company and MSK
agreed that MabVax would receive 100% of both the $700,000 upfront
payment and $600,000 upon the one-year anniversary of the Y-mAbs
Sublicense. All of the obligations to MSK in the MSK Letter were
fully expensed as of June 30, 2018.
May
2017 Letter Agreement
On May
15, 2017, as a condition to the participation of HS Contrarian
Investments, LLC (“HS Contrarian”) in the public
offering of the Company’s common stock and Series G Preferred
Stock in May 2017 (the “May 2017 Public Offering”), the
Company entered into a Letter Agreement with HS Contrarian (the
“May 2017 Letter Agreement”) where the Company agreed
to offer incentive shares (the “May 2017 Inducement
Shares”) to investors who (i) participated in both the
Company’s August 2016 public offering and the Company’s
April 2015 private offering, (ii) purchased securities in the May
2017 Public Offering equal to at least 50% of their original
investment in the August 2016 public offering or 25% of their
original investment in the April 2015 private offering, and (iii)
still hold 100% of their common stock or preferred stock purchased
in those investments.
Further, the
Company agreed to the following in the May 2017 Letter
Agreement:
Board
Nomination:
|
|
To
nominate one (1) candidate to the Board of Directors acceptable to
the holder of a majority of the Series G Preferred Stock by
December 31, 2017, and that (2) two current Board members would
resign.
|
Executive
Hire:
|
|
To hire
a new C-level executive in a leadership role by July 15,
2017.
|
Board
Compensation:
|
|
To
issue an aggregate of 350,000 options to certain employees and
members of the Board of Directors, at a price not less than $6.00
per share, and 16,667 options to each other member of the Board of
Directors at the current market price in connection with this
offering. The options were issued pursuant to the Company’s
option plan, subject to the requisite approvals and availability
under the plan. The company was responsible for obtaining the
approval of the Board of Directors and stockholders of the Company
to the extent the company needed their approval to increase the
number of shares available under the plan. All Board of Director
fees were waived for 2017.
|
Funds
Held in Escrow:
|
|
$500,000
of the funds from the May 2017 Public Offering were to 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 HS Contrarian consent rights: the right to approve future
(i) issuances of our securities, (ii) equity or debt financings and
(iii) sales of any development product assets currently held by us,
subject to certain exceptions, if such securities are sold at a
price below $7.50 per share and for as long as HS Contrarian in the
offering holds 50% or more of the shares of Series G Preferred
Stock purchased by HS Contrarian in the May 2017 Public Offering
(the “Consent Rights”). All other prior consent rights
of HS Contrarian were superseded by these consent rights. As of
September 30, 2018, none of the shares of Series G Preferred Stock
is outstanding. Thus, HS Contrarian no longer holds the Consent
Rights.
For the
period from the May 2017 Public Offering to December 31, 2017, the
Company exceeded the minimum $500,000 in expenses related to
outside investor relations services fulfilling the Company’s
obligation for spending on investor relations. HS Contrarian
elected not to hold the funds in escrow. Further, the Company
issued the May 2017 Inducement Shares and adjusted the Board of
Directors compensation per the May 2017 Letter Agreement. Also, two
members of the Board of Directors resigned during 2017, achieving
one of the conditions of HS Contrarian. The Company did not
nominate a new member to the Board of Directors, nor did it hire a
new C-level executive in light of limited amount of cash available
to the Company.
Letter
Agreement Regarding Future Financing Transactions
On
August 9, 2017, in connection with an offering in the aggregate
amount of $1,312,500 in which the Company sold shares of its Series
J Preferred Stock (the “August 2017 Offering”), we
entered into a Letter Agreement with HS Contrarian (the
“August 2017 Letter Agreement”), whereby HS Contrarian
consented to and agreed that, the Company may sell securities to
the investors set forth below, of an aggregate amount of up to
$2,350,000, and the Company would issue incentive shares in the
form of newly designated shares of Series K Preferred Stock
convertible into an aggregate of 2,166,667 shares of common stock
to be distributed to the following individuals or entities, as
directed by HS Contrarian, as an incentive (the “Inducement
Shares”) for HS Contrarian and these entities and individuals
to invest in the August 2017 Offering.
HS
Contrarian Investments, LLC
|
GRQ
Consultants, Inc. Roth 401K FBO Barry Honig Trustee
|
GRQ
Consultants, Inc. Roth 401K FBO Renee Honig Trustee
|
Grander
Holdings, Inc. 401K
|
Robert
B. Prag
|
David
Moss
|
Paradox
Capital Partners, LLC
|
Melechdavid,
Inc.
|
Melechdavid, Inc.
Retirement Plan
|
Robert
S. Colman Trust UDT 3/13/85
|
Sargeant Capital
Ventures, LLC
|
Edward
W. Easton TTEE The Easton Group ORP PSP U/A DTD
02/09/2000
|
Donald
E. Garlikov
|
Airy
Properties
|
Ryan
O'Rourke
|
Corey
Patrick O'Rourke
|
F-20
In addition, the Company agreed to the following in the August 2017
Letter Agreement:
●
|
To file a proxy statement for a special meeting of stockholders
within 10 days of closing the August 2017 Offering.
Proposals were to 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 common stock upon the conversion of Series J
Preferred Stock and (v) the issuance of incentive shares in the form of shares of Series K
Preferred Stock convertible into an aggregate of 2,166,667 shares
of common stock.
|
●
|
Subject
to agreement on terms and conditions of the investment, HS
Contrarian committed to a $1,000,000 lead order in an offering
amount of $8,000,000 (the “$8,000,000 Financing”). The
$8,000,000 Financing was subject to the Company obtaining approval
of a reverse stock split, issuance of the Series J Preferred Stock,
and filing a proxy statement for stockholder approval of the
Inducement Shares as 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 would 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.
|
In
connection with HS Contrarian’s and the Company’s
obligations under the August 2017 Letter Agreement, neither the
$8,000,000 Financing nor the change in employment terms from three
years to two years were completed as of November 19,
2018.
Memorial
Sloan Kettering Cancer Center
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 candidate, imaging agent product
candidate, and radioimmunotherapy product candidate programs. For
the three months ended September 30, 2018, there were no expenses
incurred related to these contracts.
Patheon
Biologics LLC Agreement
On
April 14, 2014, the Company entered into a development and
manufacturing services agreement with Patheon Biologics LLC (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 months ended September 30, 2018 and
2017, the Company recorded no expenses associated with the
agreement, as no manufacturing was completed during either
period.
11.
Commitments and
Contingencies
Capital
Leases
On March 21, 2016, the Company entered into
a lease agreement with ThermoFisher Scientific
(“Lessor”). Under the terms of the agreement, the
Company agreed to lease two pieces of equipment from the Lessor, a
liquid chromatography system and an incubator, totaling in cost of
$95,656. The term of the lease is five years (60 months), and
the monthly lease payment is $1,942. In addition, there is a $1.00
buyout option at the end of the lease term.
Minimum
future annual capital lease obligations are as follows as of
September 30, 2018:
2018
(remaining)
|
$5,601
|
2019
|
22,402
|
2020
|
22,402
|
2021
|
7,468
|
Less
interest
|
(7,426)
|
Principal
|
50,447
|
Less current
portion
|
(18,943)
|
Noncurrent
portion
|
$31,504
|
F-21
Operating
Leases
In
2015, the Company recorded a $590,504 contingent lease termination
fee of the master lease and sublease of 3165 Porter Drive in Palo
Alto, California, which was payable to ARE-San Francisco No. 24
(“ARE”), if the Company received $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 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 on February 28, 2022, unless
earlier terminated in accordance with the Lease. Pursuant to the
terms of the Lease, the monthly base rent is $35,631, subject to
annual increases as set forth in the Lease.
The
Company has an option to extend the Lease term for a single,
five-year period. If the Lease term is extended for the optional
five-year period, the monthly base rent will be adjusted based on
fair market rental value. In addition to rent, the Company agreed
to pay a portion of the taxes and utility, maintenance and other
operating costs paid or accrued in connection with the ownership
and operation of the property.
The
Company recognized rent expense on a straight-line basis over the
term of the lease.
During
the three and nine months ended September 30, 2018, the Company
recorded rent expense of $115,238 and $345,714,
respectively.
Minimum
future annual operating lease obligations are as follows as of
September 30, 2018:
2018
(remaining)
|
$151,204
|
2019
|
466,085
|
2020
|
480,068
|
2021
|
494,470
|
2022
|
41,306
|
Total
|
$1,633,133
|
F-22
Legal
Proceedings
See
Item 1 of Part II “Other Information” and Note 12
“Subsequent Events” for a discussion of legal
proceedings.
12.
Subsequent
Events
Legal
Proceedings
Jackson v. Hansen et
al., Case No.
18-cv-2302-BEN-BGS. On October 4,
2018, a shareholder derivative complaint was filed in the United
States District Court for the Southern District of
California. The complaint arises from similar allegations as
In re MabVax Therapeutics
Securities Litigation and Liesman v. Hansen et al., filed on
September 26, 2018 (See Part II. Item 1. “Legal
Proceedings”) but, in addition to a breach of fiduciary duty
claim, also includes causes of action for unjust enrichment, abuse
of control, gross mismanagement and waste of corporate
assets. Plaintiff seeks, on behalf of the Company, damages,
fees, costs, and equitable relief.
F-23
To the Stockholders
and Board of Directors
MabVax Therapeutics
Holdings, Inc.
Opinion on the Financial Statements
We have audited the
accompanying consolidated balance sheets of MabVax Therapeutics
Holdings, Inc. (the “Company”) as of December 31,
2017 and 2016, and the related consolidated statements of
operations, stockholders’ equity, and cash flows, for the
years then ended, and the related notes (collectively referred to
as the “consolidated financial statements”). In our
opinion, the consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of
December 31, 2017 and 2016, 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.
Substantial Doubt about the Company’s Ability to Continue as
a Going Concern
The accompanying
consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
2 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 2 to the consolidated financial statements. The
consolidated financial statements do not include any adjustments
that might result from the outcome of this
uncertainty.
Basis for Opinion
These consolidated financial statements are the
responsibility of the Company’s management. Our
responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audits. We are a
public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our
audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an
understanding of internal control over financial reporting 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.
Our audits included
performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the
overall presentation of the consolidated financial statements. We
believe that our audits provide a reasonable basis for our
opinion.
/s/ CohnReznick
LLP
We have served as
the Company’s auditor from 2014 to 2018.
San Diego,
California
October 12,
2018
F-24
MABVAX THERAPEUTICS HOLDINGS,
INC.
Consolidated Balance
Sheets
|
December 31,
|
|
|
2017
|
2016
|
Assets
|
|
|
Current
assets:
|
|
|
Cash
and cash equivalents
|
$885,710
|
$3,979,290
|
Prepaid
expenses
|
150,462
|
281,858
|
Other
current assets
|
171,346
|
32,830
|
Total
current assets
|
1,207,518
|
4,293,978
|
Property
and equipment, net
|
578,206
|
731,712
|
Goodwill
|
6,826,003
|
6,826,003
|
Other
long-term assets
|
178,597
|
168,597
|
Total
assets
|
$8,790,324
|
$12,020,290
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$1,090,904
|
$1,137,903
|
Accrued
compensation
|
311,675
|
770,592
|
Accrued
clinical operations and site costs
|
1,669,201
|
1,218,641
|
Accrued
lease termination fee
|
590,504
|
590,504
|
Other
accrued expenses
|
404,923
|
315,034
|
Interest
payable
|
39,373
|
51,295
|
Current
portion of notes payable
|
1,681,876
|
1,589,661
|
Current
portion of capital lease payable
|
17,810
|
17,004
|
Total
current liabilities
|
5,806,266
|
5,690,634
|
Long-term
liabilities:
|
|
|
Long-term
portion of notes payable, net
|
1,621,483
|
2,774,627
|
Long-term
portion of capital lease payable
|
45,857
|
68,113
|
Other
long-term liabilities
|
186,278
|
144,394
|
Total
long-term liabilities
|
1,853,618
|
2,987,134
|
Total
liabilities
|
7,659,884
|
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 as of
December 31, 2017 and 2016, respectively, with liquidation
preference of $441 and $1,325 as of December 31, 2017 and 2016,
respectively
|
441
|
1,325
|
Series
E convertible preferred stock, $0.01 par value, 100,000 shares
authorized, 33,333 shares issued and outstanding as of
December 31, 2017 and 2016, with a liquidation preference of
$333 as of December 31, 2017 and 2016
|
333
|
333
|
Series
F convertible preferred stock, $0.01 par value, 1,559,252 shares
authorized, no shares and 665,281 shares issued and
outstanding as of December 31, 2017 and 2016, respectively, with a
liquidation preference of $0 and $6,653
as of December 31, 2017 and 2016, respectively
|
—
|
6,653
|
Series
I convertible preferred stock, $0.01 par value, 1,968,664 shares
authorized,
798,460
and no shares issued and outstanding as of December 31, 2017 and
2016, respectively, with a liquidation preference of $7,984 and $0
as of December 31, 2017 and 2016, respectively
|
7,984
|
—
|
Series
J convertible preferred stock, $0.01 par value, 3,400 shares
authorized,
773
and no shares issued and outstanding as of December 31, 2017 and
2016, respectively, with a liquidation preference of $531,252 and
$0 as of December 31, 2017 and 2016, respectively
|
8
|
—
|
Series
K convertible preferred stock, $0.01 par value, 65,000 shares
authorized,
63,150
and no shares issued and outstanding as of December 31, 2017 and
2016, respectively, with a liquidation preference of $632 and $0 as
of December 31, 2017 and 2016, respectively
|
632
|
—
|
Series
L convertible preferred stock, $0.01 par value, 58,000 shares
authorized,
58,000
and 0 shares issued and outstanding as of December 31, 2017 and
2016, respectively, with a liquidation preference of $5,800,000 and
$0 as of December 31, 2017 and 2016, respectively
|
580
|
—
|
Common
stock, $0.01 par value, 150,000,000 shares authorized, 6,862,928
and 2,098,705 shares issued and outstanding as of December 31,
2017 and 2016, respectively
|
68,629
|
20,987
|
Additional
paid-in capital
|
112,105,470
|
81,575,485
|
Accumulated
deficit
|
(111,053,637)
|
(78,262,261)
|
Total
stockholders’ equity
|
1,130,440
|
3,342,522
|
Total
liabilities and stockholders’ equity
|
$8,790,324
|
$12,020,290
|
See
Accompanying Notes to Consolidated Financial
Statements.
F-25
MABVAX THERAPEUTICS HOLDINGS,
INC.
Consolidated Statements of Operations
|
For the Years Ended
December 31,
|
|
|
2017
|
2016
|
Revenues:
|
|
|
Grants
|
$—
|
$148,054
|
Total
revenues
|
—
|
148,054
|
|
|
|
Operating
costs and expenses:
|
|
|
Research
and development
|
7,544,122
|
7,800,723
|
General
and administrative
|
10,526,340
|
9,010,450
|
Total
operating costs and expenses
|
18,070,462
|
16,811,173
|
Loss
from operations
|
(18,070,462)
|
(16,663,119)
|
Interest
and other expenses, net of income
|
(950,217)
|
(997,364)
|
Net
loss
|
(19,020,679)
|
(17,660,483)
|
Deemed
dividend on May 2017 inducement shares
|
(5,220,000)
|
—
|
Deemed
dividend on August 2017 inducement shares
|
(3,120,000)
|
—
|
Deemed
dividend on warrant repricing
|
(19,413)
|
—
|
Deemed
dividend on preferred stock exchange
|
(5,411,284)
|
—
|
Net
loss allocable to common stockholders
|
$(32,791,376)
|
$(17,660,483)
|
Basic
and diluted net loss per share
|
$(8.56)
|
$(10.91)
|
Shares
used to calculate basic and diluted net loss per share
|
3,830,162
|
1,619,251
|
See
Accompanying Notes to Consolidated Financial
Statements.
F-26
MABVAX THERAPEUTICS HOLDINGS,
INC.
Consolidated Statements of Stockholders’ Equity
|
Series D through
L 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
|
1,278,877
|
$12,788
|
$68,025,506
|
$(60,601,778)
|
$7,438,764
|
Issuance
of warrants in connection with notes payable transaction in January
2016
|
—
|
—
|
—
|
—
|
607,338
|
—
|
607,338
|
Issuance
of whole in lieu of fractional shares resulting from reverse split
in August 2016
|
—
|
—
|
809
|
8
|
(8)
|
—
|
—
|
Issuance
of Series F Preferred Stock, common stock and warrants in August
public offering, net of costs
|
665,281
|
6,653
|
432,346
|
4,323
|
8,556,472
|
—
|
8,567,448
|
Issuance
of additional common stock related to April 2015
financing
|
—
|
—
|
85,153
|
852
|
(852)
|
—
|
—
|
Common
stock issued for services
|
—
|
—
|
11,882
|
119
|
163,881
|
—
|
164,000
|
Conversion
of Series D Preferred Stock to common stock
|
(59,001)
|
(590)
|
265,771
|
2,658
|
(2,068)
|
—
|
—
|
Common
stock issued upon vesting of restricted stock units in April, July
and August of 2016, net of payroll taxes
|
—
|
—
|
23,867
|
239
|
(178,062)
|
—
|
(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
|
2,098,705
|
20,987
|
81,575,485
|
(78,262,261)
|
3,342,522
|
Issuance
of Series H Preferred Stock, net of costs, May 2017
|
850
|
9
|
—
|
—
|
820,562
|
—
|
820,571
|
Issuance
of Series G Preferred Stock and common stock, net of costs, May
2017
|
1,000,000
|
10,000
|
447,620
|
4,476
|
3,669,307
|
—
|
3,683,783
|
Issuance
of common stock, net of costs, August 2017
|
—
|
—
|
50,715
|
507
|
124,493
|
—
|
125,000
|
Issuance
of Series J Preferred stock, net of costs, August 2017
|
2,386
|
24
|
—
|
—
|
1,189,393
|
—
|
1,189,417
|
Issuance
of common stock, net of costs, September 2017
|
—
|
—
|
1,333,334
|
13,333
|
1,844,028
|
—
|
1,857,361
|
Issuance
of common stock, net of costs, September 2017
|
—
|
—
|
672,043
|
6,720
|
1,229,280
|
—
|
1,236,000
|
Issuance
of common stock, net of costs, October 2017
|
—
|
—
|
256,410
|
2,564
|
493,686
|
—
|
496,250
|
Issuance
of inducement shares of common stock and Series I Preferred Stock,
May 2017
|
1,968,664
|
19,687
|
310,446
|
3,105
|
(22,792)
|
—
|
—
|
Deemed
dividends on inducement shares, May 2017
|
—
|
—
|
—
|
—
|
5,220,000
|
(5,220,000)
|
—
|
Deemed
dividends on incentive shares of Series K Preferred Stock, August
2017
|
65,000
|
650
|
—
|
—
|
3,119,350
|
(3,120,000)
|
—
|
Deemed
dividends on preferred stock exchange, October 2017
|
—
|
—
|
—
|
—
|
5,411,284
|
(5,411,284)
|
—
|
Repricing
of warrants
|
—
|
—
|
—
|
—
|
19,413
|
(19,413)
|
—
|
Issuance
of common stock for services
|
—
|
—
|
271,667
|
2,717
|
550,567
|
—
|
553,284
|
Issuance
of common stock upon conversion of Series D Preferred
Stock
|
(88,384)
|
(884)
|
398,131
|
3,981
|
(3,097)
|
—
|
—
|
Issuance
of common stock upon conversion of Series I Preferred
Stock
|
(1,170,204)
|
(11,702)
|
390,068
|
3,901
|
7,801
|
—
|
—
|
Issuance
of common stock upon conversion of Series J Preferred
Stock
|
(1,614)
|
(16)
|
537,874
|
5,379
|
(5,363)
|
—
|
—
|
Issuance
of common stock upon conversion of Series K Preferred
Stock
|
(1,850)
|
(19)
|
61,667
|
617
|
(598)
|
—
|
—
|
Preferred
Stock exchange – Series F
|
(665,281)
|
(6,653)
|
—
|
—
|
—
|
—
|
(6,653)
|
Preferred
Stock exchange – Series G
|
(1,000,000)
|
(10,000)
|
—
|
—
|
—
|
—
|
(10,000)
|
Preferred
Stock exchange – Series H
|
(850)
|
(9)
|
—
|
—
|
—
|
—
|
(9)
|
Preferred
Stock exchange – Series L
|
58,000
|
580
|
—
|
—
|
16,082
|
—
|
16,662
|
Common
stock issued upon vesting of RSUs
|
—
|
—
|
34,248
|
342
|
(342)
|
—
|
—
|
Stock-based
compensation
|
—
|
—
|
—
|
—
|
6,846,931
|
—
|
6,846,931
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(19,020,679)
|
(19,020,679)
|
Balance at December 31, 2017
|
997,820
|
$9,978
|
6,862,928
|
$68,629
|
$112,105,470
|
$(111,053,637)
|
$1,130,440
|
See
Accompanying Notes to Consolidated Financial
Statements.
F-27
MABVAX THERAPEUTICS
HOLDINGS, INC.
Consolidated Statements of Cash Flows
|
For the Years Ended
December 31,
|
|
|
2017
|
2016
|
Operating activities
|
|
|
Net
loss
|
$(19,020,679)
|
$(17,660,483)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
Depreciation
and amortization
|
159,842
|
96,553
|
Stock-based
compensation
|
6,846,931
|
4,403,278
|
Issuance
of restricted common stock for services
|
553,284
|
164,000
|
Amortization
and accretion related to notes payable
|
393,829
|
413,676
|
Increase
(decrease) in operating assets and liabilities:
|
|
|
Grants
receivable
|
—
|
757,562
|
Prepaid
expenses and other
|
25,980
|
340,187
|
Accounts
payable
|
(46,999)
|
(1,898,520)
|
Accrued
clinical operations and site costs
|
450,560
|
827,600
|
Accrued
compensation
|
(458,917)
|
207,837
|
Other
accrued expenses
|
100,658
|
(15,101)
|
Net
cash used in operating activities
|
(10,995,511)
|
(12,363,411)
|
Investing activities
|
|
|
Purchases
of property and equipment
|
(21,072)
|
(563,196)
|
Net
cash used in investing activities
|
(21,072)
|
(563,196)
|
Financing activities
|
|
|
Principal
payments on financed insurance policies
|
(80,087)
|
(167,597)
|
Principal
payments on capital lease
|
(16,403)
|
(10,540)
|
Principal
payments on bank loan
|
(1,388,889)
|
—
|
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 common stock and Series F Preferred Stock, net of
costs, August 2016
|
|
8,567,448
|
Proceeds
from issuance of Series H Preferred Stock, net of costs, May
2017
|
820,571
|
—
|
Proceeds
from issuance of common stock and Series G Preferred Stock, net of
costs, May 2017
|
3,683,783
|
—
|
Proceeds
from issuance of common stock, net of costs, August
2017
|
125,000
|
—
|
Proceeds
from issuance of Series J Preferred Stock, net of costs, August
2017
|
1,189,417
|
—
|
Proceeds
from issuance of common stock, net of costs, September
2017
|
1,857,361
|
—
|
Proceeds
from issuance of common stock, net of costs, September
2017
|
1,236,000
|
—
|
Proceeds
from issuance of common stock, net of costs, October
2017
|
496,250
|
—
|
Net
cash provided by financing activities
|
7,923,003
|
12,821,812
|
Net
change in cash and cash equivalents
|
(3,093,580)
|
(104,795)
|
Cash
and cash equivalents at beginning of year
|
3,979,290
|
4,084,085
|
Cash
and cash equivalents at end of year
|
$885,710
|
$3,979,290
|
Supplemental disclosures of cash flow information:
|
|
|
Cash
paid during the year for income taxes
|
$1,600
|
$1,600
|
Cash
Paid during the year for interest on term note
|
$568,852
|
$532,436
|
Supplemental disclosures of non-cash investing and financing
information:
|
|
|
Purchase
of equipment accrued in accounts payable
|
$—
|
$33,934
|
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
|
$3,981
|
$2,658
|
Conversion
of Series I preferred stock to common stock
|
$3,901
|
$—
|
Conversion
of Series J preferred stock to common stock
|
$5,379
|
$—
|
Conversion
of Series K preferred stock to common stock
|
$617
|
$—
|
Exchange
preferred stock Series F for Series L
|
$6,653
|
$—
|
Exchange
preferred stock Series G for Series L
|
$10,000
|
$—
|
Exchange
preferred stock Series H for Series L
|
$9
|
$—
|
Exchange
preferred stock Series L for Series F, Series G and Series
H
|
$580
|
$—
|
Deemed
dividends on May 2017 inducement shares
|
$5,220,000
|
$—
|
Deemed
dividends on August 2017 inducement shares
|
$3,120,000
|
$—
|
Deemed
dividends on preferred stock exchange
|
$5,411,284
|
$—
|
Capital
lease in connection with purchase of equipment
|
$—
|
$95,657
|
See
Accompanying Notes to Consolidated Financial
Statements.
F-28
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”) was originally
incorporated in 1988 under the name “Terrapin Diagnostics,
Inc.” in the State of Delaware. In 1998, we changed our
corporate name to “Telik, Inc.” and changed our name
again to “MabVax Therapeutics Holdings, Inc.” in
2014. Unless the context otherwise
requires, references to “we,” “our,”
“us,” “MabVax,” or the
“Company” in this Annual Report mean MabVax
Therapeutics Holdings, Inc. on a consolidated financial statement
basis with our wholly owned subsidiary, MabVax Therapeutics, Inc.,
as applicable.
Nature
of Business
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 and other disease states. We have discovered a pipeline of
human monoclonal antibody product candidates based on the
protective immune responses generated by patients who have been
immunized against targeted cancers with our proprietary
vaccines. We have the exclusive license to these vaccines
and blood samples from vaccinated patients as antibody discovery
materials 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 revenues earned from
asset sale and license agreements, proceeds from the sale of common
and preferred stock, government grants, 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 product candidates; or we
license our technology after achieving one or more milestones of
interest to a potential partner.
Reverse
Stock Splits
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 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 “2016 Reverse Stock Split”). On
February 14, 2018, we filed a certificate of amendment to our
Amended and Restated Certificate of Incorporation with the
Secretary of State of the State of Delaware to effectuate another
reverse stock split of our issued and outstanding common stock on a
1-for-3 basis, effective on February 16, 2018, (the “2018
Reverse Stock Split”; collectively with the 2016 Reverse
Stock Split, the “Reverse Stock Splits”). 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 Splits,
including rounding for fractional shares and reclassifying any
amount equal to the reduction in par value of common stock to
additional paid-in capital.
Delaware
Order Granting Petition for Relief
On September 20,
2018, the Court of Chancery of the State of Delaware (the
“Court”) entered an order validating (i) issuances of
common stock upon conversions of the Company’s preferred
stock occurring between June 30, 2014 and February 12, 2018, and
(ii) stockholder approval of corporate actions presented to the
Company’s stockholders from June 30, 2014 to February 12,
2018. In so doing, the Court granted the Company’s Verified
Petition for Relief Under 8 Del.
C. § 205 (the “Delaware Petition”)
captioned In re: MabVax
Therapeutics Holdings, Inc., filed on July 27, 2018, in
order to rectify the uncertainty regarding whether shares of our
common stock were validly issued upon conversion of our preferred
stock from June 30, 2014 to February 12, 2018.
Basis
of Presentation
The preparation of consolidated 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 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.
F-29
2. 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 $19,020,679, net cash used in operating activities of
$10,995,511 and net cash used in investing activities of $21,072
for the year ended December 31, 2017. As of December 31,
2017, the Company had $885,710 in cash and cash equivalents and an
accumulated deficit of $111,053,637.
The Company
has been able to achieve several financing transactions that in the
aggregate have been able to sustain the Company’s operations
for periods not exceeding one year for any one financing during the
last few years, resulting in the consolidated financial statements
being prepared on the going concern basis. Terms of financing from
investors have caused substantial dilution in the Company, which
could continue to be dilutive in the future without other forms of
non-dilutive financing transactions such as through licensing our
technology and other strategic transactions. Since July 8, 2014, we
have been subject to restrictions on financing and other material
transactions of the Company that require the consent of either a
holder of preferred stock or HS Contrarian Investments, LLC
(“HS Contrarian”).
Additionally, we granted HS Contrarian in the May 2017 Public
Offering (defined below) the right to approve future (i) issuances
of our securities, (ii) equity or debt financings and (iii) sales
of any development product assets currently held by us, subject to
certain exceptions, if such securities are sold at a price below
$7.50 per share and for as long as HS Contrarian in the offering
holds 50% or more of the shares of Series G Preferred Stock
purchased by HS Contrarian in the May 2017 Public Offering (the
“May 2017 Consent Right”). On October 18, 2017, HS
Contrarian exchanged the Series G Preferred Stock for Series L
Preferred Stock. As of December 31, 2017, none of the shares of
Series G Preferred Stock is outstanding. Thus, HS Contrarian no
longer holds the May 2017 Consent Rights. All other prior consent
rights of HS Contrarian were superseded by the May 2017 Consent
Right. The financings in 2016 and 2017 are summarized below and
described in more detail along with details of letter agreements
with HS Contrarian in Note 8, “Convertible Preferred Stock,
Common Stock and Warrants.”
On January 15, 2016, the Company and Oxford
Finance LLC (“Oxford Finance”), 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. 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 March 31, 2017, we
and Oxford Finance signed a First Amendment to the Loan Agreement,
providing that the payment of principal of $138,889 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. On May 1, 2017, we paid the principal that was due on May
1, 2017, along with the $15,000 amendment
fee.
On
August 22, 2016, we closed a public offering of 432,346 shares of
common stock and 665,281 shares of Series F Preferred Stock, and
warrants to purchase 654,107 shares of common stock at $16.65 per
share and warrants to purchase 654,107 shares of common stock at
$18.87 per share, at an offering price of $14.43 per share (the
“August 2016 Public Offering”). For every
one-third share of common stock or Series F Preferred Stock sold,
we issued one warrant to purchase one share of common stock at
$16.65 per share and one warrant to purchase one share of common
stock at $18.87 per share. We received $9,438,753 in gross
proceeds, before underwriting discounts and commissions and
offering expenses totaling $871,305. The gross proceeds include the
underwriters’ over-allotment option, which they exercised on
the closing date.
On May 3, 2017, we
sold 850 shares of 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 conversion price is $5.25 per
share, after adjusting for the 2018 Reverse Stock Split, and
subject to further adjustment for stock splits, stock dividends,
recapitalizations, combinations, subdivisions or other similar
events.
On
May 19, 2017, we closed a public offering of 447,620 shares of
common stock and 1,000,000 shares of newly designated Series G
Preferred Stock, at $5.25 per share of common stock and $1.75 per
share of Series G Preferred Stock (the “May 2017 Public
Offering”). The Series G Preferred Stock is initially
convertible into 333,334 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 of $416,217. This Offering is described in more
detail in Note 8, Convertible Preferred Stock, Common Stock and
Warrants of the Notes to Consolidated Financial
Statements.
F-30
On
July 27, 2017, we entered into a subscription agreement with an
accredited investor pursuant to which we agreed to sell 50,715
restricted shares of common stock for $125,000 (the “July
2017 Private Placement”). As part of the July 2017 Private
Placement, the Company agreed to reprice the investor’s
warrant to purchase 75,075 shares of common stock from $33.30 to
$6.00 per warrant share and remove the cashless exercise feature.
The transaction closed on August 2, 2017. The impact of
repricing the warrants to $6.00 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 $2.10 and the warrants at $6.00
a share, and 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 $1.65 per
share, subject to adjustment for stock splits, stock dividends,
recapitalizations, combinations, subdivisions or other similar
events. The total amount of the securities purchase agreements
amounted to approximately $1,312,500, before offering 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.
On September 11,
2017, we entered into
an agreement to sell 1,333,334 shares of common stock at $1.50 a
share for gross proceeds of approximately $2.0 million, before
offering expenses of $142,639. The shares were offered and sold to
certain accredited investors in a registered direct offering.
Laidlaw & Company (UK) Ltd.
(“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 672,043 shares of the
Company’s common stock, $0.01 par value per share. The
purchase price per share was $1.86. The total amount of the
subscription agreements amounted to $1,250,000, before estimated
expenses of $14,000.
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
256,410 shares of the Company’s common stock. The purchase
price per share was $1.95. We received $500,000 in gross proceeds,
before offering expenses totaling approximately $3,750. 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 achieving milestones or a
strategic transaction, in mid-2017 we cut personnel from 25 full
time people to 11, and reduced other operating expenses following
the completion of two Phase Ia clinical trials of our lead antibody
HuMab 5B1, which has enabled us to reduce our expenditures on
clinical trials. We plan to continue spending on Phase I clinical
trials of MVT-5873 in combination with a chemotherapy agent and
MVT-1075 as a radioimmunotherapy agent for the treatment of various
cancers, preclinical testing of follow-on antibody candidates,
investor and public relations, SEC compliance efforts, and the
general and administrative expenses associated with each of these
activities. There can be no assurance that we will be able to
achieve a license and earn revenues large enough to offset our
operating expenses, as discussed further in Management’s
Discussion and Analysis of Financial Condition and Results of
Operations. We cannot be sure that licensing agreements can be
signed in a timely manner, if any, or that capital funding will be
available on reasonable terms, or at all. If we are unable to
secure significant licensing agreements and 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 $9.4 million
net of transaction costs in 2017, $2.7 million net of transaction
costs in February 2018, and including other transactions as
disclosed in Note 16, and without any other additional funding or
receipt of payments from potential licensing agreements, we expect
we will have sufficient funds to meet our obligations through
December 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 consolidated
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
F-31
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. 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 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.
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, 2017, cash and cash
equivalents exceeded federally insured limits by approximately $0.6
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.
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,
2017 and 2016.
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, 2017 and 2016, 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, 2017 and
2016. 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.
F-32
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. National Institute of Health (“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, 2017, and 2016, 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.
4. Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board
(“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.
The adoption of this new standard did not have a material impact on
our consolidated financial statements.
F-33
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. The adoption of this new standard did
not have a material impact on our 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 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
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. The
adoption of this new standard did have a material impact on our
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 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 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 consolidated financial
statements.
F-34
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 consolidated financial
statements.
5. Property and Equipment, Net
Property
and equipment consisted of the following as of December 31,
2017 and 2016:
|
December 31,
|
|
|
2017
|
2016
|
Furniture
and fixtures
|
$51,909
|
$51,909
|
Office
equipment
|
52,547
|
52,547
|
Lab
equipment
|
909,589
|
894,942
|
Capital
lease equipment
|
90,952
|
95,657
|
Leasehold
improvement
|
55,949
|
59,555
|
|
1,160,946
|
1,154,610
|
Less
accumulated depreciation and amortization
|
(582,740)
|
(422,898)
|
Totals
|
$578,206
|
$731,712
|
Depreciation
expense for the years ended December 31, 2017 and 2016 was
$159,842 and $96,553, respectively.
6. Reverse Stock Splits
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 to effectuate the 2016 Reverse Stock Split, which
was on a 1-for-7.4 basis, effective on August 16, 2016. On February
14, 2018, we filed a certificate of amendment to our Amended and
Restated Certificate of Incorporation with the Secretary of State
of the State of Delaware to effectuate the 2018 Reverse Stock
Split, which was on a 1-for-3 basis, effective on February 16,
2018. 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 Splits, including rounding for fractional shares
and reclassifying any amount equal to the reduction in par value of
common stock to additional paid-in capital.
7. Notes Payable, Net
On
January 15, 2016, we entered into the Loan Agreement with Oxford
Finance 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 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.
F-35
Concurrent
with the closing of the transaction, the Company issued a warrant
to purchase 75,076 shares of common stock to Oxford Finance with an
exercise price of $16.65 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 a perfected first priority lien on all of
the Company’s assets with a negative pledge on intellectual
property. The Company paid Oxford Finance 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 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, 2017.
The
Company recorded interest expense related to the term loan of
$929,106 for the year ended December 31, 2017. 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
12.8%.
As
of December 31, 2017, the Company had one insurance premium
note outstanding with a balance totaling $15,210, which
matured in April 2018. This note bears interest at a
rate of 6.7% per annum, and the monthly payments are
$3,855.
Future
principal payments under the Loan Agreement and insurance premium
note as of December 31, 2017 are as follows:
Years
ending December 31:
|
|
2018
|
$1,681,888
|
2019
|
1,666,667
|
2020
|
277,778
|
Notes
payable, balance as of December 31, 2017
|
3,626,333
|
Unamortized
discount on notes payable
|
(322,974)
|
Notes
payable, net, balance as of December 31, 2017
|
3,303,359
|
Current
portion of notes payable, net
|
(1,681,876)
|
Long-term
portion of notes payable, net
|
$1,621,483
|
8. Convertible Preferred Stock, Common Stock and
Warrants
At
December 31, 2017 and 2016, there were no financial instruments
requiring fair value measurement.
Dividends on Preferred Stock
Since
the Company’s inception, no dividends were ever declared or
paid by the Company’s Board of Directors.
F-36
Conversion of Preferred Stock into Common Stock
During
2017 holders of Series D Preferred Stock converted 88,384 shares
into 398,131 shares of common stock, holders of Series I Preferred
Stock converted 1,170,204 shares into 390,068 shares of common
stock, holders of Series J Preferred Stock converted 1,614 shares
into 537,874 shares of common stock and holders of Series K
Preferred Stock converted 1,850 shares into 61,667 shares of common
stock.
Exchange of Series F Preferred Stock, Series G Preferred Stock and
Series H Preferred Stock into Series L Preferred Stock
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 convertible into 3,222,223 shares of common
stock. In connection with the Exchange Agreement the Company
became obligated to schedule and hold a special meeting of the
stockholders of the Company within 60 days of the date of signing
the Exchange Agreement, at which time the Company shall present to
its stockholders a proposal for approval of the potential issuance
of up to an aggregate of 3,222,223 shares of common stock, in
excess of 19.99% of the number of shares of common stock that were
issued and outstanding on October 17, 2017, upon the conversion of
58,000 shares of the Series L Preferred Stock issued to the holders
pursuant to the Exchange Agreements. On December 1, 2017, the
stockholders approved the number of shares underlying the Series L
Preferred Stock upon conversion.
On
December 21, 2017, following the completion of the exchange of
Series L Preferred Stock for all outstanding Series F Preferred
Stock, Series G Preferred Stock and Series H Preferred Stock and
related documentation, the Company filed with the Secretary of
State of the State of Delaware a Certificate of Elimination
eliminating from its 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.
Series D Preferred Stock
As
of December 31, 2017 and 2016, there were 44,104 and 132,489 shares
of Series D Preferred Stock issued and outstanding, respectively.
Shares outstanding as of December 31, 2017 and 2016 were
convertible into 198,667 and 596,798 shares of common stock,
respectively.
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 4.5045 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, 2017, and 2016, there were 33,333 shares of Series
E Preferred Stock issued and outstanding, convertible into 173,251
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.
F-37
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 $16.65 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 $16.65 per share was
reduced to $14.43 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 173,251 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 $14.43 per share by the
Company.
Series F Preferred Stock
As
of December 31, 2017, and 2016, there were no shares and 665,281
shares, respectively, of Series F Preferred Stock issued and
outstanding. Shares outstanding as of December 31, 2016 were
convertible into 221,761 shares of common stock. These shares were
exchanged for Series L Preferred Stock in connection with the
Exchange Agreement.
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 were 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 $14.43
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 was entitled to a per share
preferential payment equal to the par value. All shares of the
Company’s capital stock were 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 were
entitled to receive dividends if and when declared by our Board of
Directors. The Series F Preferred
Stock had the ability to participate on an “as
converted” basis, with all dividends declared on the
Company’s common stock. In addition, if we had granted,
issued or sold any rights to purchase our securities pro rata to
all our record holders of our common stock, each holder was
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 were 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 was entitled to vote on all matters submitted to
stockholders of the Company and would have had 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 December 31,
2017, and 2016, there were no shares of our Series G Preferred
Stock issued and outstanding. On May 19, 2017, we closed a public
offering of 1,000,000 shares of newly designated 0% Series G
Convertible Preferred stock; however, on October 17, 2017, these
shares were exchanged for our Series L Preferred Stock in
connection with the Exchange Agreement.
F-38
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 were 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 $5.25 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 had the right to nominate a candidate for the
Company’s Board of Directors, 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 was entitled to a per share
preferential payment equal to the par value. All shares of our
capital stock were 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 were entitled to receive
dividends if and when declared by our Board of Directors. The
Series G Preferred Stock were entitled to participate on an
“as converted” basis, with all dividends declared on
our common stock. In addition, if we had granted, issued
or sold any rights to purchase our securities pro rata to all our
record holders of our common stock, each holder was 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 were 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 was
entitled to vote on all matters submitted to stockholders of the
Company and would have had 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 December 31,
2017 and 2016, there were no shares of our Series H Preferred Stock
issued and outstanding. On May 3, 2017 we closed a private
placement of 850 shares; however, these shares were exchanged for
our Series L Preferred Stock in connection with the Exchange
Agreement.
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 were 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 was $1,000 and the initial
conversion price was $5.25 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 was entitled to a per share
preferential payment equal to the base amount. All shares of
our capital stock were 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 were entitled to receive
dividends if and when declared by our Board of Directors. The
Series H Preferred Stock holders were entitled to participate on an
“as converted” basis, with all dividends declared on
our common stock. In addition, if we granted, issued or
sold any rights to purchase our securities pro rata to all our
record holders of our common stock, each holder was 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 were 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 was
entitled to vote on all matters submitted to stockholders of the
Company, and would have had 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 December 31,
2017 and 2016, there were 798,460 and no shares of our Series I
convertible preferred stock (the “Series I Preferred
Stock”) issued and outstanding and convertible into 266,154
and no shares of our common stock, respectively.
F-39
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-third 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, 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 above beneficial ownership
limitation.
Series
J Preferred Stock
As of December 31,
2017, and December 31, 2016, there were 773 and no shares of our
Series J Preferred Stock issued and outstanding and convertible
into 257,577 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 $1.65 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 $0.03.
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.
F-40
Series
K Preferred Stock
As of December 31,
2017 and 2016, there were 63,150 and no shares, respectively, of
our Series K convertible preferred stock (“Series K Preferred
Stock”) issued and outstanding and convertible into 2,105,000
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 $0.0003 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.
Series
L Preferred Stock
As of December 31,
2017 and 2016, there were 58,000 and no shares of our Series L
Preferred Stock issued and outstanding and convertible into
3,222,223 and no shares of our common stock,
respectively.
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 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 $1.80 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.
F-41
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
representing the sum of the stated value and any unpaid dividends
(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.
Warrants
Issued in Connection with April 2015 Private Placement
As of December 31,
2017, there were no warrants outstanding in connection with the
April 2015 Private Placement as all of the warrants expired on
October 10, 2017. As of December 31, 2016, there were warrants
outstanding to purchase 268,454 shares of common stock at $33.30
per share.
The warrants priced
at $33.30 and $6.00 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 553,424 shares of common stock, together
with warrants to all investors to purchase 351,787 shares of common
stock at $33.30 per share. Each Unit was sold at a
purchase price of $16.65 per Unit. OPKO Health, Inc., the lead
investor in the April 2015 Private Placement, purchased $2,500,000
worth of Units consisting all 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 108,108 shares of common stock that had an exercise price
of $33.30 per share, such that the amended warrants shall have an
exercise price of $6.00 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 $6.00 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 December 31,
2017 and 2016, there were warrants outstanding to purchase 56,307
shares of common stock at $29.31 per share in connection with a
public offering on October 5, 2015.
The warrants were
issued in connection with our public offering on October 5, 2015,
which consisted of the sale of 112,613 shares of common stock at a
price of $24.42 per share and warrants to purchase 56,307 shares of
common stock at an exercise price of $29.31 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 expired unexercised on September 30,
2018.
Warrants
Issued in Connection with August 2016 Public Offering
As of December 31,
2017, there were warrants outstanding to purchase 145,444 shares of
common stock at $16.65 per share and 145,444 shares of common stock
at $18.87 per share. As of December 31, 2016, there were warrants
outstanding to purchase 654,107 shares of common stock at $16.65
per share and 654,107 shares of common stock at $18.87 per
share.
The warrants were
issued on August 22, 2016, in connection with a public offering of
432,346 shares of common stock and 665,281 shares of Series F
preferred stock, and warrants to purchase 654,107 shares of common
stock at $16.65 per share and warrants to purchase 654,107 shares
of common stock at $18.87 per share, at an offering price of $14.43
per share. For every share of common stock or Series F
preferred stock sold, we issued one warrant to purchase one-third
share of common stock at $16.65 per share and one warrant to
purchase one-third share of common stock at $18.87 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.
August 22, 2016 Public Offering
On
August 22, 2016, we closed a public offering of 432,346 shares of
common stock and 665,281 shares of Series F Preferred Stock
convertible into 221,761 shares of common stock, and warrants to
purchase 654,107 shares of common stock at $16.65 per share and
warrants to purchase 654,107 shares of common stock at $18.87 per
share, at an offering price of $14.43 per share. For every
one-third share of common stock or Series F Preferred Stock sold,
we issued one warrant to purchase one-third share of common stock
at $16.65 per share and one warrant to purchase one-third share of
common stock at $18.87 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.
F-42
May 3, 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 conversion price is $5.25 per share, after adjusting for
the 2018 Reverse Stock Split, and subject to further 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. 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 19, 2017 Public Offering
On
May 19, 2017, we closed the May 2017 Public Offering. The
Series G Preferred Stock is initially convertible into 333,334
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 $416,217.
The
May 2017 Public Offering was consummated pursuant to an
underwriting agreement that we signed on May 15, 2017, with
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 447,620 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
67,143 additional shares of our common stock at the public offering
price of $5.25 per share, less the underwriting discount, solely to
cover overallotments, which was not exercised.
F-43
In connection with the May 2017 Public Offering, we agreed
with HS Contrarian, the lead
investor of the August 2016 Public Offering pursuant to a Letter
Agreement, dated May 18, 2017, to issue inducement shares (the
“May 2017 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
(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
966,667 shares, after HS Contrarian 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 870,000 shares remaining after HS
Contrarian receives the first 96,667 shares, elect to receive their
May 2017 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-third share of common stock for one 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 May 2017 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 $33.30 per share, such that the
amended warrants shall have an exercise price of $6.00 per share
and no cashless exercise feature (as amended, the “Inducement
Amended Warrants”). The Company agreed with HS Contrarian to
register for resale on a registration statement all the May 2017
Inducement Shares and shares of common stock underlying the
Inducement Amended Warrants, and to issue the May 2017 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,
310,446 May 2017 Inducement Shares of common stock were issued and
1,968,664 May 2017 Inducement Shares were issued in the form of
Series I Preferred Stock convertible into 656,222 shares of common
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 May 2017 Inducement Shares have been met. The
Company recorded a deemed dividend of $5,220,000 in June 2017 in
connection with issuing the May 2017 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 warrants to purchase 30,033 shares of common stock from $33.30
to $6.00 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 warrants to purchase an additional 75,075
warrants from $33.30 to $6.00 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 $2.10, 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
On May 15, 2017, as a condition to the participation of HS
Contrarian in the May 2017 Public Offering, the Company entered
into a Letter Agreement with HS Contrarian (the “May 2017
Letter Agreement”) where the Company agreed to offer
incentive shares (the “May 2017 Inducement Shares”) to
investors who (i) participated in both the Company’s August
2016 public offering and the Company’s April 2015 private
offering, (ii) purchased securities in the May 2017 Public Offering
equal to at least 50% of their original investment in the August
2016 public offering or 25% of their original investment in the
April 2015 private offering, and (iii) still hold 100% of their
common stock or preferred stock purchased in those
investments.
Further, the
Company agreed to the following in the May 2017 Letter
Agreement:
Board
Nomination:
|
|
To nominate one (1)
candidate to the Board of Directors acceptable to the holder of a
majority of the Series G Preferred Stock by December 31, 2017, and
that (2) two current members of the Board of Directors would
resign.
|
Executive
Hire:
|
|
To hire a new
C-level executive in a leadership role by July 15,
2017.
|
Board
Compensation:
|
|
To issue an
aggregate of 350,000 options to certain employees and members of
the Board of Directors, at a price not less than $6.00 per share,
and 16,667 options to each other member of the Board of Directors
at the current market price in connection with this offering. The
options were issued pursuant to the Company’s option plan,
subject to the requisite approvals and availability under the plan.
The company was responsible for obtaining the approval of the Board
of Directors and stockholders of the Company to the extent the
company needed their approval to increase the number of shares
available under the plan. All Board of Director fees were waived
for 2017.
|
Funds Held in
Escrow:
|
|
$500,000 of the
funds from the May 2017 Public Offering were to be held in escrow
and released to one or more investor relations services acceptable
to the Company following the closing of this offering.
|
F-44
Additionally, we
granted HS Contrarian consent rights: the right to approve future
(i) issuances of our securities, (ii) equity or debt financings and
(iii) sales of any development product assets currently held by us,
subject to certain exceptions, if such securities are sold at a
price below $7.50 per share and for as long as HS Contrarian in the
offering holds 50% or more of the shares of Series G Preferred
Stock purchased by HS Contrarian in the May 2017 Public Offering
(the “Consent Rights”). All other prior consent rights
of HS Contrarian were superseded by these consent rights. As of
March 31, 2018, none of the shares of Series G Preferred Stock is
outstanding. Thus, HS Contrarian no longer holds the Consent
Rights.
For the period from
the May 2017 Public Offering to December 31, 2017, the Company
exceeded the minimum $500,000 in expenses related to outside
investor relations services fulfilling the Company’s
obligation for spending on investor relations. HS Contrarian
elected not to hold the funds in escrow. Further, the Company
issued the May 2017 Inducement Shares and adjusted the Board of
Directors compensation per the May 2017 Letter Agreement. Also, two
members of the Board of Directors resigned during 2017, achieving
one of the conditions of HS Contrarian . The Company did not
nominate a new member to the Board of Directors, nor did it hire a
new C-level executive in light of limited amount of cash available
to the Company.
July 27, 2017 Private Placement
On
July 27, 2017, we entered into a subscription agreement with an
accredited investor pursuant to which we agreed to sell 50,715
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
75,075 shares of common stock from $33.30 to $6.00 per warrant
share and remove the cashless exercise feature. The transaction
closed on August 2, 2017. The impact of repricing the
warrants to $6.00 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 $2.10 and the warrants at $6.00 a share, and
expired on October 10, 2017, unexercised.
Letter
Agreement Regarding Future Financing Transactions
In
connection with an offering of the Company’s Series J.
Preferred Stock that took place in August 2017 (the “August
2017 Offering”), we agreed with HS Contrarian pursuant to a
letter agreement dated August 9, 2017 (the “August 2017
Letter Agreement”), whereby HS Contrarian together with
certain other investors would invest an aggregate of $2,350,000 in
a financing, and the Company would issue incentive shares in the
form of newly designated shares of Series K Preferred Stock
convertible into an aggregate of 2,166,667 shares of common stock
(the “August 2017 Inducement Shares”) to be distributed
to certain existing investors of the Company as directed by HS
Contrarian, as an incentive to invest in the August 2017
Offering.
F-45
In addition, the Company agreed to the following in the August 2017
Letter Agreement:
●
|
To file a proxy statement for a special
meeting of stockholders within 10 days of closing the August
2017 Offering. Proposals were to 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 common stock
upon the conversion of Series J Preferred Stock and (v) the
issuance of incentive shares in the
form of shares of Series K Preferred Stock convertible into an
aggregate of 2,166,667 shares of common stock.
|
●
|
Subject to
agreement on terms and conditions of the investment, HS Contrarian
committed to a $1,000,000 lead order in an offering amount of
$8,000,000 (the “$8,000,000 Financing”). The $8,000,000
Financing was subject to the Company obtaining approval of a
reverse stock split, issuance of the Series J Preferred Stock, and
filing a proxy statement for stockholder approval of the Inducement
Shares as 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 would 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.
|
In connection with
HS Contrarian’s and the Company’s obligations under the
August 2017 Letter Agreement, neither the $8,000,000 Financing nor
the change in employment terms from three years to two years were
completed as of October 15, 2018.
F-46
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 could 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 of common
stock underlying all of the Series J Preferred Stock and the Series
K Preferred Stock upon conversion.
September 11, 2017 Registered Direct Offerings
On
September 11, 2017, we entered into an agreement to sell
1,333,334 shares of common stock at $1.50 a share for gross
proceeds of approximately $2.0 million, before offering
expenses of $142,639. 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 672,043 shares of
the Company’s common stock, $0.01 par value per share. The
purchase price per share was $1.86. The total amount of the
subscription agreements amounted to $1,250,000, before expenses of
$14,000.
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 256,410 shares of
the Company’s common stock, $0.01 par value per share. The
purchase price per share was $1.95. The total amount of the
subscription agreements amounted to $500,000, before expenses of
$3,750.
Grant of Restricted Shares
Ravetch Grant
On
April 4, 2015, the Board of Directors approved the issuance of an
additional restricted stock award of 5,924 shares to Jeffrey
Ravetch, M.D., Ph. D, who is one of the members of the
Company’s Board of Directors. 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) 1,543 restricted shares and (ii) options to purchase
1,543 shares of common stock with an exercise price of $51.06 per
share, for a total grant of 9,010 restricted shares and options. As
the 5,924 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.
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 13,514
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 9,009
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 13,514 shares or $690,000, as investor
relations expense upon grant during the second quarter of 2015. The
performance condition for the 9,009 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 5,406
shares with vesting terms ranging from one to three years, valued
from $39.30 to $47.28 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.
F-47
On
January 13, 2016, the Board of Directors approved the issuance of
4,505 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
7,377 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 7,377 shares of $100,000 as investor relations expense upon
grant during the third quarter of 2016.
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 6,667 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 6,667 shares, or $56,600, as investor
relations expense upon grant during the first quarter of 2017. The
consulting agreement with MDM Worldwide was amended on October 15,
2017 to increase their monthly retainer to $12,500 a month for
ongoing services payable immediately upon signing the agreement and
an immediate grant of 13,334 shares. 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 13,334 shares, or
$30,400, as investor relations expense upon grant during the last
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 6,667 restricted shares of common stock on April 1, 2017, to
be vested at 1,667 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. For the year ended December 31, 2017, we have
recognized $13,700, in general and administrative expenses related
to this arrangement in common stock for services.
On
May 24, 2017, we issued 15,525 restricted shares of common stock
for legal services in connection with the May 2017 Private
Offering, on August 21, 2017 we issued 32,961 restricted shares of
common stock for legal services in connection with the May 2017
Public Offering, on September 14, 2017, we issued 33,334 restricted
shares of common stock for legal services and 33,334 restricted
shares of common stock for due diligence services in connection
with the September 11, 2017 registered direct offering and also on
September 22, 2017 we issued 4,849 restricted shares of common
stock for legal services in connection with the September 22, 2017
Registered Direct Offering. The total common stock value for these
shares issued were $201,470.
During
the month of October 2017, we issued an aggregate of 138,334 shares
of restricted common stock valued at $306,650 based on the closing
market prices ranging from $1.89 to $2.34, 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.
9. Related Party Transactions
On
April 1, 2016, the Company entered into a two-year consulting
agreement with Jeffrey Ravetch, M.D., Ph.D., a member of the
Company’s Board of Directors at the time, 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 paid quarterly thereafter beginning January
1, 2017. On November 3, 2016, the Company granted 5,834 stock
options at an exercise price of $11.25 to Jeffrey Ravetch, M.D.,
Ph.D., a member of the Company’s Board of Directors, for his
ongoing consulting services to the Company. The option award vests
over a three-year period. Dr. Ravetch resigned from the
Company’s Board of Directors on August 3, 2017, although he
continued under the consulting agreement subsequent to his
resignation.
On
May 19, 2017, the Company granted each director, other than J.
David Hansen, Jeffrey Ravetch, a member of the Company’s
Board of Directors at the time, and Philip Livingston, 16,667
options at market price, $5.40 on May 19, 2017, with immediate
vesting for their continuing service to the Company, in exchange
for giving up their Board of Director fees for the remainder of the
year. J. David Hansen and Jeffrey Ravetch were each granted 166,667
options and Philip Livingston was granted 16,667 options each at
$6.00 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 150,000 options granted to Dr. Ravetch
in addition to the 16,667 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 year ended December 31, 2017, the
Company recorded $1,480,089 in stock-based compensation expense in
general and administration expenses, related to these
grants.
F-48
10. 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 2,951 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 7,023. 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 15,831
shares, 6,847 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 7,121 to 376,613 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) 360,361
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) 10,316; and (iii) an
amount determined by the Board.
●
Provision
that no more than 135,136 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 376,613 to 402,769
shares of common stock, under the annual evergreen provision for
the Plan.
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 402,769 to 719,784 shares of common stock, under the
annual evergreen provision for the Plan, plus a fixed amount of
10,315.
F-49
On
June 12, 2017, the Company’s stockholders at its annual
meeting approved a proposal to increase the number of shares
reserved for issuance under the Plan, increasing the total shares
reserved under the Plan from 709,469 (including the fixed amount of
10,315) to 1,376,136, and increasing the number of shares that may
be granted to any participant in any fiscal year to 300,000, from
135,136.
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 1,376,136 to 2,042,802 shares.
On
December 1, 2017, in a special meeting of stockholders, the Company
received approval to increase the number of shares reserved for
issuance under the Plan, increasing the total shares reserved under
the Plan from 2,042,802 to 3,376,136.
Stock-based Compensation
Total estimated stock-based compensation expense,
related 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,
|
|
|
2017
|
2016
|
Research
and development
|
$1,570,809
|
$1,192,126
|
General
and administrative
|
5,276,122
|
3,211,152
|
Total
stock-based compensation expense
|
$6,846,931
|
$4,403,278
|
Stock-based Award Activity
The
following table summarizes the Company’s stock option
activity for the years ended December 31, 2017 and
2016:
|
Options
Outstanding
|
Weighted
Average
Exercise Price
|
Outstanding
at December 31, 2015
|
141,910
|
$51.90
|
Granted
|
149,871
|
15.39
|
Exercised
|
—
|
—
|
Forfeited/cancelled/expired
|
(7,936)
|
44.15
|
Outstanding
and expected to vest at December 31, 2016
|
283,845
|
$32.84
|
Granted
|
715,588
|
7.00
|
Exercised
|
—
|
—
|
Forfeited/cancelled/expired
|
(45,496)
|
22.02
|
Outstanding
and expected to vest at December 31, 2017
|
953,937
|
$13.97
|
Vested
and exercisable at December 31, 2017
|
605,822
|
$13.37
|
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
149,871 options to its directors, officers, employees with a
weighted average exercise price of $15.39 and vesting over a
three-year period with vesting starting at the one-year anniversary
of the grant date. During 2017, the Company granted 715,588 options
to its directors, officers, employees with a weighted average
exercise price of $7.00 and vesting over a three-year period with
vesting starting at the one-year anniversary of the grant date
except for the 433,334 options issued to the Company’s
directors and officers in May 2017 which were fully vested upon
issuance.
The
total unrecognized compensation cost related to unvested stock
option grants as of December 31, 2017 was $1,932,026 and the
weighted average period over which these grants are expected to
vest is 1.6 years. The Company has elected to account for
forfeitures as they occur and reverse compensation cost as
forfeitures occur. The weighted average remaining contractual life
of stock options outstanding at December 31, 2017 and 2016 is
8.90 years and 8.82 years, respectively.
F-50
A
summary of activity related to restricted stock grants under the
Plan for the years December 31, 2017 and 2016 is presented
below:
|
Shares
|
Weighted
Average Grant-Date Fair Value
|
Non-vested
at December 31, 2015
|
103,646
|
$50.54
|
Granted
|
—
|
—
|
Vested
|
(35,155)
|
50.54
|
Forfeited
|
—
|
—
|
Non-vested
at December 31, 2016
|
68,491
|
50.54
|
Granted
|
840,222
|
1.89
|
Vested
|
(34,252)
|
48.65
|
Forfeited
|
(42,235)
|
2.10
|
Non-vested
at December 31, 2017
|
832,226
|
$3.88
|
There
were no shares of restricted stock issued during the year ended
2016; however, 35,155 restricted stock units have vested relating
to restricted stock units granted in 2015 to directors, officers,
employees and consultants. During 2017, 34,252 shares of restricted
stock units vested upon the one-year anniversary of restricted
stock units granted to the Company’s directors and
officers. Accordingly, 21,464 shares were issued and the
Company withheld 11,283 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 July and August of 2016, 2,403 shares were
issued to outside consultants upon vesting of previously issued
restricted stock units. As of December 31, 2016, there were 68,491
non-vested restricted stock units remaining
outstanding.
During
the year ended December 31, 2017, 840,222 shares of restricted
stock units were issued to directors, officers, employees and
consultants which will vest in January 2018 and 34,252 restricted
share units have vested relating to restricted stock units granted
in 2015 to directors, officers, employees and consultants. As of
December 31, 2017, there were 832,226 non-vested restricted stock
units remaining outstanding.
During
the year ended December 31, 2017, the Company has recognized
$1,381,969 in stock based compensation expense related to
restricted stock units. As of December 31, 2017, and 2016,
unamortized compensation expense related to restricted stock grants
amounted to $530,232 and $2,214,859, which is expected to be
recognized over a weighted average period of .02 and 2.27 years,
respectively.
Valuation Assumptions
The
Company used the Black-Scholes-Merton option valuation 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,
|
|
|
2017
|
2016
|
Risk-free interest
rate
|
1.5 to 2.0
%
|
0.9 to 1.4
%
|
Dividend
yield
|
0%
|
0%
|
Expected
volatility
|
73 to
85%
|
71 to
86%
|
Expected life of
options, in years
|
1.61 to
6.0
|
1.61
and 6.0
|
Weighted average
grant date fair value
|
$1.53
|
$3.16
|
Because
the Company had a net operating loss carryforward as of
December 31, 2017 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 no stock option exercises in
the corresponding period of 2017.
Management Bonus Plan and Compensation for Non-Employee
Directors
On
February 16, 2016, our Compensation Committee approved a new
management bonus plan outlining maximum target bonuses of the base
salaries of certain of our executive officers. Under the terms of
this 2016 management bonus 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.
F-51
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 2,253 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 8,334 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 5,834 shares of the Company's common
stock, under the Company's Second Amended and Restated 2014 Equity
Incentive Plan with 1-year vesting and a strike price equal to the
closing price of the Company's common stock on the date of the
annual meeting.
On
February 6, 2017, the Compensation Committee of the Board of
Directors of the Company approved the following amendments to
Company's policy for compensating non-employee members of the
Board:
●
The
initial equity grant upon first appointment (or election) of future
non-employee directors to the Board shall be a 10-year option to
purchase 10,000 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 6,667 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.
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 was 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.
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, and that the employment agreements between the Company and
each executive were being modified to reduce the terms of their
employment agreements from three years to two years from the
effective date of each applicable agreement. 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, primarily because of concerns of a
potential permanent loss of salary and that nothing in writing had
been provided as possible equity compensation. The Company cured
each executive’s concerns within the 30-day cure period
provided under their employment agreements, 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 approvals by the
Board of Directors. Both executives rescinded their notices of good
reason for termination on September 7, 2017, and the employment
agreements with the Company remain unchanged.
F-52
Common Stock Reserved for Future Issuance
Common
stock reserved for future issuance consists of the following at
December 31, 2017:
Common
stock reserved for conversion of preferred stock and
warrants
|
6,645,559
|
Common
stock options outstanding
|
953,937
|
Authorized
for future grant or issuance under the Stock Plan
|
1,521,481
|
Unvested
restricted stock
|
832,224
|
Total
|
9,953,201
|
11. 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. The
securities were antidilutive because the Company incurred a loss in
both 2017 and 2016. Including the securities in the diluted net
loss per share would have resulted in the loss per share being less
than it would without including the securities.
|
Years Ended December 31,
|
|
|
2017
|
2016
|
Stock
options
|
953,937
|
283,845
|
Preferred
stock
|
6,222,872
|
991,808
|
Unvested
restricted stock
|
832,224
|
68,493
|
Warrants
to purchase common stock
|
422,687
|
1,708,048
|
Total
|
8,431,720
|
3,052,194
|
F-53
12. Contracts and 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 12 issued patents in the
U.S. 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. United States and an foreign patent applications for each
of the anti-sLea antibodies and the anti-GD2 antibodies described
in this document have been filed. Within these filings, one U.S.
patent has issued for each of the anti-sLea antibodies and the
anti-GD2 antibodies.
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. The agreement allowed 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
right to enter into negotiations with Rockefeller for the right to
exclusively license the technology used to improve our antibody for
clinical and commercial development. If we and
Rockefeller fail to reach agreement on terms for a license to the
drug candidate that contains the combined technologies, Rockefeller
does not have the right to license the drug candidate to a third
party without our consent because the drug candidate contains our
intellectual property embodied in the antibody. The research
collaboration agreement expired in July of 2017 but the provisions
of confidentiality and right to enter negotiations for certain
technology remain in place.
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, 2017 and 2016, the Company recorded $55,845 and $0 of expense,
respectively, associated with the Services Agreement. During 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 third quarter of
2016.
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 the
Company’s binding domains for use in the construction of CAR
T-cells.
During
the years ended December 31, 2017 and 2016, no revenues had been
earned under the Option Agreement.
F-54
13. 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 $91,941. 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
December 31, 2017:
2018
|
$22,402
|
2019
|
22,402
|
2020
|
22,402
|
2021
|
5,601
|
Less
interest
|
(9,140)
|
Principal
|
63,667
|
Less
current portion
|
(17,810)
|
Noncurrent
portion
|
$45,857
|
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 $460,952 and $433,397 was recognized in the
years ended December 31, 2017 and 2016,
respectively.
Minimum
future annual operating lease obligations are as follows as of
December 31, 2017:
2018
|
$451,409
|
2019
|
464,951
|
2020
|
478,900
|
2021
|
493,267
|
Thereafter
|
82,612
|
Total
|
$1,971,139
|
14. Employee Benefit Plans
401(k) Plan
Effective
January 1, 2017, the Company initiated a safe harbor contribution
program for the benefit of the Company’s Contribution Benefit
plan (the “Plan”) whereby, for all employees who were
eligible to participate in the Plan in compliance with
Section 401(k) of the Internal Revenue Code, the Company
contributed 3% of each participant’s salary to the Plan
which vested immediately. For the year ended December 31, 2017, the
Company paid $116,888 to the Plan.
F-55
15. Income Taxes
The components of
the provision for income taxes for the years ended December 31,
2017 and 2016 is as follows:
|
2017
|
2016
|
Deferred:
|
|
|
Federal
|
$3,451,500
|
$(5,745,300)
|
State
|
(2,869,600)
|
(990,400)
|
|
581,900
|
(6,735,700)
|
Less valuation
allowance
|
(581,900)
|
6,735,700
|
|
|
|
Income tax
expense
|
$—
|
$—
|
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, 2017 and
2016:
|
2017
|
2016
|
Deferred tax
assets:
|
|
|
Net operating loss
carryforwards
|
$17,638,000
|
$20,169,000
|
Tax
credits
|
6,222,000
|
5,065,000
|
Accrued expenses
and other
|
3,460,000
|
2,667,900
|
Total deferred tax
assets
|
27,320,000
|
27,901,900
|
Less valuation
allowance
|
(27,320,000)
|
(27,901,900)
|
|
|
|
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 $27,320,000 against its deferred tax assets
as of December 31, 2017. 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, 2017, the Company had a net decrease in deferred
tax asset of $581,900. This change is a result of current year
activity as well as a change in the federal tax rates. The change
as a result of current year increase in deferred tax assets is
$7,425,100 offset by a $8,007,000 decrease due to a remeasurement
of the deferred tax asset based on new tax rates established
through the Tax Cuts and Jobs Act passed December 22, 2017. The
remeasurement is a provisional estimate under SAB 118 that could be
revised based on any additional guidance issued by the U.S.
Treasury Department, the U.S. Internal Revenue Service, and other
standard-setting bodies. On December 22, 2017, H.R.1, known as the
Tax Cuts and Jobs Act, was enacted. This new law did not have a
significant impact on the Company’s consolidated financial
statements for the year ended December 31, 2017 because the company
maintains a valuation allowance on the entirety of its deferred tax
assets. However, the reduction of the U.S. federal corporate tax
rate from 35% to 21% resulted in a remeasurement of the deferred
tax asset reflected in the tax rate reconciliation below as well as
the deferred tax asset listed above.
Given the
significant impact of the Tax Cuts and Jobs Act, the SEC staff
issued Staff Accounting Bulletin (“SAB”) 118 which
provides guidance on accounting for uncertainties of the effects of
the Tax Act. Specifically, SAB 118 allows companies to record a
provisional estimate of the impact of the Tax Act during a one year
“measurement period”. The company has recognized the
provisional tax impact related to the revaluation of deferred tax
assets and liabilities and included these amounts in its
consolidated financial statements for the year ended December 31,
2017. The ultimate impact may differ from these provisional
amounts, due to, among other things, additional analysis, changes
in interpretations and assumptions the Company has made, and
additional regulatory guidance that may be issued.
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 have been reflected in the provision for income
taxes.
F-56
As of December 31,
2017, the Company had net operating loss carryforwards of
approximately $62,885,000 and $63,463,000 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 2037. The Company also has research and development
credits of approximately $744,500 and $6,934,000 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 2037. The state credits may
be used to offset future taxable income, such credits carryforward
indefinitely.
For all years
through December 31, 2017, the Company generated research and
development credits but has not completed a study to document the
qualified activities. This study may result in an adjustment to the
Company’s research and development credit carryforwards;
however, until a study is complete and any adjustment is known, no
amounts are being presented as an uncertain tax position. A full
valuation allowance has been provided against the Company’s
research and development credits, and if an adjustment is required
this adjustment would be offset by an adjustment to the valuation
allowance. Thus, there would be no impact to the balance sheets or
statements of operations and comprehensive loss if an adjustment
were required.
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 ended December 31, 2017 and 2016 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 (the “Code”), 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 2017 and 2016) to income taxes
as follows:
|
2017
|
2016
|
Tax benefit
computed at 34%
|
$(6,466,500)
|
$(6,004,000)
|
|
|
|
State tax
provision, net of federal tax benefit
|
(1,092,444)
|
(989,344)
|
|
|
|
Change in valuation
allowance
|
(581,900)
|
6,735,600
|
Change in valuation
allowance due to overall Federal rate change
|
8,007,000
|
-
|
Other
|
133,844
|
257,744
|
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.
F-57
16. Subsequent Events
Overview
of 2018 Private Placements
Between February 2
and February 10, 2018, the Company entered into separate purchase
agreements with investors pursuant to which the Company sold (i)
shares of its common stock, (ii) shares of its convertible
preferred stock, and
(iii) warrants to purchase shares of common stock (the
“February 2018 Private Placements”). From April 30 to
May 2, 2018, the Company entered into separate purchase agreements
with investors pursuant to which the Company agreed to sell shares
of its common stock and convertible preferred stock (the “May 2018 Private
Placements”). No financial advisor was used in
connection with the February 2018 Private Placements nor the May
2018 Private Placements.
The securities
issued in connection with the February 2018 Private Placements and
the May 2018 Private Placements 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. The Company entered into separate registration
rights agreements with each of the investors in the February 2018
Private Placements and the May 2018 Private Placements, pursuant to
which the Company agreed to undertake to file a registration
statement to register the resale of the shares of common stock and
the shares of common stock underlying the warrants and preferred
stock. The Company also agreed to use reasonable best efforts to
cause such registration statement to be declared effective 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.
February
2018 Private Placements
In connection with
the February 2018 Private Placements, the Company sold (i) an
aggregate of 555,562 shares of its common stock for an aggregate
purchase price of $1,250,000, or $2.25 per share, (ii) 5,000 shares
of its newly designated 0% Series M Convertible Preferred Stock
(the “Series M Preferred Stock”) for an aggregate
purchase price of $1,500,000, or $300.00 per share, and
(iii) warrants to purchase up to an aggregate of 855,561 shares of
common stock each with an exercise price of $2.70 per share. The
net proceeds of the February 2018 Private Placements were
$2,700,000 after transaction costs of $50,000.
May
2018 Private Placements
In connection with
the May 2018 Private Placements, the Company agreed to sell (i)
218,182 shares of common stock at an aggregate purchase price of
$240,000, or $1.10 per share, and (ii) 5,363.64 shares of newly
designated 0% Series N
Convertible Preferred Stock (the “Series N Preferred
Stock”) at an aggregate purchase price of $590,000, or
$110.00 per share.
Under the terms of
the May 2018 Private Placements, the Company was required to offer
an aggregate of 12,777.77 shares (the “May 2018 Inducement
Shares”) of newly designated 0% Series O Preferred Stock (the
“Series O Preferred Stock”) to investors who previously
purchased securities in the February 2018 Private Placements and
who also purchased securities in the May 2018 Private Placements
with an aggregate purchase price of at least 40% of their
investment amounts in the February 2018 Private Placements. Based
on the closing of the offering, and participation of certain prior
investors who invested an aggregate of $830,000 (the “May
2018 Inducement Investors”), the Company issued an aggregate
of 10,605.56 May 2018 Inducement Shares in the form of Series O
Preferred Stock convertible into an aggregate of 1,060,556 shares
of common stock. The May
2018 Private Placements closed on May 15, 2018, with the Company
receiving gross proceeds totaling $830,000.
Series
L Convertible Preferred Stock Conversions
Between January 16
and January 26, 2018, an aggregate of 12,500 shares of Series L
Preferred Stock were converted into 694,445 shares of common
stock.
F-58
Series
I Convertible Preferred Stock Conversions
On February 12,
2018, Grander Holdings, Inc. 401K, a holder of Series I Convertible
Preferred Stock (“Series I Preferred Stock”), converted
152,820 shares of Series I Preferred Stock into 50,940 shares of
common stock.
Reverse
Stock Split
On February 14,
2018, the Company filed a certificate of amendment to its Amended
and Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware to effectuate another reverse stock
split of the Company's issued and outstanding common stock on a
1-for-3 basis, effective on February 16, 2018. 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
rounding for fractional shares and reclassifying any amount equal
to the reduction in par value of common stock to additional paid-in
capital.
Compensation Committee Decisions
On
February 21, 2018, the Compensation Committee of the Company made
the following decisions.
Review of
Management Compensation –
The Compensation Committee determined that no bonus payments would
be made for 2017 performance. Further, the Compensation Committee
determined that in order to continue to conserve cash resources,
management’s base salaries would remain unchanged from
current levels.
The
Compensation Committee granted stock options with an exercise price
based on the closing price of the shares of common stock on
February 21, 2018, or $2.04, to the following officers of the
Company:
J.
David Hansen
|
President
and Chief Executive Officer
|
290,000
stock options
|
Paul
W. Maffuid
|
Executive
Vice President of Research and Development
|
195,000
stock options
|
Gregory
P. Hanson
|
Chief
Financial Officer
|
195,000
stock options
|
Paul
F. Resnick
|
Vice
President and Chief Business Officer
|
80,000
stock options
|
The
stock options will vest at 25% of the total number granted at the
six-month anniversary of the commencement date, with the balance in
equal monthly installments of 4.167% of the number of shares for 18
months, such that 100% of the options will be vested after two
years from the grant date.
Review of
Board of Directors Compensation – The Compensation Committee granted 35,000
stock options to each non-executive member of the Board of
Directors, with vesting on a monthly basis until the options are
fully vested at one year from the grant date, in lieu of cash
compensation for 2018. The Compensation Committee increased the
automatic annual grant on the next annual meeting date from 16,667
shares to 20,000 shares with the same monthly
vesting.
On
July 9, 2018, the Compensation Committee of the Company made the
following decision.
Review of
Board of Directors Compensation – The Compensation Committee authorized the
re-instatement of fees to each non-executive member of the Board of
Directors of $3,000 per month, effective July 1,
2018.
Amendments
to Articles of Incorporation or Bylaws
Amendment to Amended and
Restated Certificate of Incorporation – On February 14, 2018,
the Company filed a certificate of amendment to its amended and
restated certificate of incorporation to effect a 1-for-3 reverse
stock split effective as of 9:00 a.m. Eastern Standard Time on
February 16, 2018 (the “Effective Date”). On the
Effective Date, every three shares of MabVax common stock issued
and outstanding immediately prior to the Effective Date
automatically converted into one share of MabVax common
stock.
Certificate of
Designations, Preferences and Rights of the 0% Series N Convertible
Preferred Stock – On April 30, 2018, the
Company filed a Certificate of Designations, Preferences and Rights
of the 0% Series N Convertible Preferred Stock (the “Series N
Certificate of Designations”) with the Secretary of State of
the State of Delaware, designating 20,000 shares of preferred stock
as Series N Preferred Stock.
The
shares of Series N Preferred Stock are convertible into shares of
common stock based on a conversion calculation equal to the stated
value of the Series N Preferred Stock, plus all accrued and unpaid
dividends, if any, on such Series N Preferred Stock, as of such
date of determination, divided by the conversion price. The stated
value of each share of Series N Preferred Stock is $110 and the
initial conversion price is $1.10 per share, each subject to
adjustment for stock splits, stock dividends, recapitalizations,
combinations, subdivisions or other similar events.
F-59
The Series N
Certificate of Designations includes a 4.9% beneficial ownership
conversion blocker, a 19.99% blocker provision until
stockholders have approved any or all
shares of common stock issuable upon conversion of the Series N
Preferred Stock, and price protection for so long as the holder
owns the Series N Preferred Stock. All shares of the
Company’s capital stock will be junior in rank to the Series
N 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, Series I Preferred
Stock, Series J Preferred Stock, Series K Preferred Stock, Series L
Preferred Stock and Series M Preferred Stock.
In the event of liquidation, the holders of Series
N Preferred Stock shall be entitled to receive in cash out of the
assets of the Company, whether from capital or from earnings
available for distribution to its shareholders (the
“Liquidation Funds”), before any amount shall be paid
to the holders of any of shares of capital stock, an amount per
Series N Preferred Share equal to the greater of (a) the par value
thereof on the date of such payment, and (b) the amount per share
such holder would receive if such holder converted such Series N
Preferred Stock into common stock immediately prior to the date of
such payment; provided, however, that, if the Liquidation Funds are
insufficient to pay the full amount due to the holders and holders
of shares of parity stock (stock ranking equal to the Series N
Preferred Shares), then each holder of Series N Preferred Stock and
each holder of parity stock shall receive a percentage of the
Liquidation Funds equal to the full amount of Liquidation Funds
payable to such holder and such holder of parity stock as a
liquidation preference, in accordance with their respective
certificate of designation (or equivalent), as a percentage of the
full amount of Liquidation Funds payable to all holders of Series N
Preferred Stock and all holders of shares of parity stock. All the
preferential amounts to be paid to the holders of Series N
Preferred Stock shall be paid or set apart for payment before the
payment or setting apart for payment of any amount for, or the
distribution of any Liquidation Funds of the Company to the holders
of shares of junior stock in connection with the
liquidation, dissolution or winding up of the affairs of the
Company, whether voluntary or involuntary, 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.
The
Company is prohibited from effecting a conversion of the Series N
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 N 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 N Preferred Stock, but not in excess of the
beneficial ownership limitations, and except that the holder may
not vote for approval of shares of common stock issuable upon
conversion of Series N Preferred Stock at any meeting of the
Company's stockholders.
Correction to Certificate
of Designations, Preferences and Rights of the 0% Series N
Convertible Preferred Stock – On May 2, 2018,
the Company
filed a correction to the Series N Certificate of
Designations. The inaccuracy or
defect in the Series N Certificate of Designation was that the
Series N Certificate of Designation inadvertently stated a specific
number of shares in Section 4(f) “19.99% Conversion
Blocker.” The Series N Certificate of Designation
was
corrected by amending and restating Section 4(f) in its entirety to remove such
inadvertent inclusion.
Certificate of
Designations, Preferences and Rights of the 0% Series O Convertible
Preferred Stock – On April 30, 2018, the
Company filed a Certificate of Designations, Preferences and Rights
of the 0% Series O Convertible Preferred Stock with the Secretary
of State of the State of Delaware, designating 20,000 shares of
preferred stock as Series O Preferred
Stock.
The
shares of Series O Preferred Stock are convertible into shares of
common stock based on a conversion calculation equal to the stated
value of the Series O Preferred Stock, plus all accrued and unpaid
dividends, if any, on such Series O Preferred Stock, as of such
date of determination, divided by the conversion price. The stated
value of each share of Series O 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 Company is
not permitted to issue any shares of common stock upon conversion
of the Series O Preferred Stock until the Company obtains the
approval of its stockholders.
In the event of a liquidation, dissolution or
winding up of the Company, each share of Series O Preferred Stock
will be entitled to a per share preferential payment equal to the
stated value on the date of such payment. All shares of capital
stock will be junior in rank to Series O 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, Series I Preferred Stock, Series J
Preferred Stock, Series K Preferred Stock, Series L Preferred
Stock, Series M Preferred Stock and Series N Preferred
Stock. The holders of Series O
Preferred Stock will be entitled to receive dividends if and when
declared by the Company’s board of directors. The Series O
Preferred Stock shall participate on an “as converted”
basis, with all dividends declared on the Company’s common
stock. In addition, if the Company grants, issues or
sells any rights to purchase its securities pro rata to all record
holders of the Company’s 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 O
Preferred Stock then held.
F-60
The
Company is prohibited from effecting a conversion of the Series O
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 O 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 O Preferred Stock, but not in excess of the
beneficial ownership limitations, and except that the holder may
not vote for approval of shares of common stock issuable upon
conversion of Series O Preferred Stock at any meeting of the
Company's stockholders.
Sublicense Grant to Y-mAbs Therapeutics, Inc.
On June 27, 2018, the Company granted an exclusive
sublicense to Y-mAbs Therapeutics, Inc., a privately held clinical
stage biopharmaceutical company (“Y-mAbs”), for a
bi-valent ganglioside-based vaccine intended to treat
neuroblastoma, a rare pediatric cancer (the “Y-mAbs
Sublicense”). Total value of the transaction to MabVax is
$1.3 million plus a share of a Priority Review Voucher (as defined
in the sublicense agreement) if granted by the FDA to Y-mAbs on
approval of the vaccine and the Priority Review Voucher is
subsequently sold. Additionally, Y-mAbs will be responsible for all
further development of the product as well as any downstream
payment obligations related to this specific vaccine to
Memorial Sloan Kettering Cancer Center (“MSK”) that were specified in the
original MabVax-MSK license agreement dated April 30, 2008. If
Y-mAbs successfully develops and receives FDA approval for the
neuroblastoma vaccine, it is obligated to file with the FDA for a
Priority Review Voucher. If the voucher is granted to Y-mAbs and
subsequently sold, then MabVax will receive a percentage of the
proceeds from the sale of the voucher by Y-mAbs. Upon entering the
Y-mAbs Sublicense, the Company received an upfront payment of
$700,000 and will receive an additional $600,000 upon the one-year
anniversary of entering into the agreement (assuming the agreement
is still in effect). The Y-mAbs
Sublicense contains termination provisions allowing for the
termination of the agreement (i) upon material breach if the
breaching party fails to cure the breach within 60 days of notice
by the non-breaching party, (ii) by Y-mAbs at any time upon 90
days’ advance notice to MabVax, or (iii) the expiration or
termination of the underlying license from MSK to MabVax, provided
that MSK will assume the agreement if Y-mAbs is in material
compliance with the agreement upon the termination of the
MSK-MabVax license. There were no
continuing obligations on the part of the Company in connection
with the agreement other than one-time administrative matters that
were completed within thirty (30) days of signing the
agreement.
Letter Agreement with MSK
On
June 27, 2018, the Company entered into a letter agreement with MSK
(the “MSK Letter”) in connection with obtaining the
consent from MSK for the Company to enter into the Y-mAbs
Sublicense and allow Y-mAbs to “step into the shoes” of
the obligations that the Company would have had to pay MSK if the
Company had continued development of the neuroblastoma vaccine,
including future payment obligations of the Company regarding
future milestones. As part of the agreement, the Company and MSK
agreed that MabVax would receive 100% of both the $700,000 upfront
payment and $600,000 upon the one-year anniversary of the Y-mAbs
Sublicense, and the Company would pay an aggregate of $398,534 to
MSK in connection with prior expenses incurred by MSK in relation
to MSK’s longstanding relationship and collaboration with the
Company.
Amendments
and Notices Related to Oxford Finance Loan Agreement
On July 3, 2018,
the Company and Oxford Finance signed the Second Amendment to Loan
and Security Agreement whereby Oxford Finance has (i) consented to
the Company’s license and sale to Boehringer Ingelheim
(defined below) of the
Acquired Assets and release of any encumbrances under the Loan
Agreement that relate to the Acquired Assets, (ii) payments of
advisory fees to Greenhill & Company of $385,000 over the
course of six months in equal monthly payments, and (iii) deferred
principal payments under the Loan Agreement for six months starting
with the July 2018 payment, in exchange for the Company granting
such additional collateral that was not pledged previously or in
which security interest was not granted prior to the Second
Amendment. The Company is obligated to pay a fully earned and
non-refundable amendment fee of $5,000 to Oxford Finance, which
shall become due and payable upon the earlier of: (i) the maturity
date of the term loans, (ii) the acceleration of any term loan, or
(iii) the prepayment of the term loans pursuant to the Loan and
Security Agreement.
F-61
As a result of the
deferred principal payments under the Loan Agreement, the future
principal payments under notes payable for the Loan Agreement as of
July 1, 2018 are as follows:
Years ending
December 31:
|
|
2018
(remaining)
|
$-
|
2019
|
2,380,952
|
2020
|
396,826
|
Notes payable,
balance as of July 1, 2018
|
2,777,778
|
Unamortized
discount on notes payable
|
(235,560)
|
Notes payable, net,
balance as of July 1, 2018
|
2,542,218
|
Current portion of
notes payable as of July 1, 2018, net
|
(1,190,476)
|
Non-current portion
of notes payable as of July 1, 2018, net
|
$1,351,742
|
On August 14, 2018,
the Company received a letter from Oxford Finance (the
“Notice”) asserting certain events of default under the
Loan Agreement had occurred as a result of certain events the
Company reported as having occurred, including, without limitation,
(i) the resignation of the Company’s external auditor,
effective August 3, 2018, and its withdrawal of its audit reports
for the years 2014 through 2017, (ii) the resignation of four
members of the Board of Directors, effective as of July 31, 2018,
and (iii) the delisting of the Company’s common stock from
The Nasdaq Stock Market LLC on July 11, 2018 (collectively, the
“Alleged Default Events”). The Company has informed
Oxford Finance that it disputes the Alleged Default Events
individually or collectively constitute a “Material Adverse
Change” or other event of default under the Loan Agreement.
In addition, the Company has already engaged a new auditor, Haskell
& White LLP, effective August 22, 2018, and on September 20,
2018, the Court ratified the Delaware Petition. The Company also
intends to apply for listing on the OTCQB Venture Marketplace (the
“OTCQB Marketplace”) once it meets the requisite
eligibility requirements, which are subject to appointing at least
one independent member to the Board of Directors, with the second
independent member to be placed on the Board of Directors within 30
days of uplisting to the OTCQB Marketplace.
Asset
Purchase and License Agreement with Boehringer
Ingelheim
On July 6, 2018,
the Company entered into an Asset
Purchase Agreement and License Agreement (the “Asset Purchase
Agreement”) with Boehringer Ingelheim International
GmbH (“Boehringer Ingelheim”) centered on MabVax's program
targeting a glycan commonly overexpressed on multiple solid tumor
cancers. Boehringer Ingelheim has acquired all rights in and to the
program. MabVax received $4 million upon signing the agreement and
will receive an additional $7 million in connection with near-term
milestones and downstream regulatory milestone payments plus
further earn-out payments. The asset acquisition is separate and
distinct from other programs under development at MabVax, enabling
MabVax to retain all rights to its lead HuMab-5B1 antibody program
which is in Phase 1 clinical trials as a therapeutic product
candidate and as a diagnostic product candidate, as well as other
antibody discovery programs from the Company's antibody discovery
portfolio targeting other cancer antigens.
Cold
Spring Harbor Laboratory License Agreement
On September 8,
2018, the Company entered into an agreement with Cold Spring Harbor
Laboratory (“CSHL”), a nonprofit New York State
education corporation, whereby the Company licensed the exclusive
worldwide rights to certain technology including interest in
certain patent applications by the Company for a new indication for
MVT-5873. The Company paid $20,000 as an upfront license fee and
will pay to CSHL a nonrefundable annual license maintenance fee of
the same amount beginning on January 1, 2020 and continuing each
year thereafter during the term of the agreement and will increase
to $50,000 a year upon issuance of the first patent in connection
with the technology. The annual license fee will be reduced for any
patent prosecution and maintenance costs and will be fully
creditable against any royalties or milestone payments earned
during the year. Future milestone payments are in the aggregate
less than $2.5 million, with royalties that range from 0.25% if no
valid claim to patents, to 2.5% if there is a valid claim of the
patent in the territory of sales.
Legal
Proceedings
SEC
Complaint and SEC Action
On January 29,
2018, the Company received notice from
the SEC of an investigation (along with the SEC Complaint, defined
below, the "SEC Action"). We believe the SEC is investigating (i)
potential violations by the Company and its officers, directors and
others of Section 10(b) of the Exchange Act and Section 17(a) of
the Securities Act; and (ii) potential violations by multiple
holders of the Company’s preferred stock who are among those
included in the Aggregated Investors (as defined in Part III, Item
12, “Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters” of
Form 10-K/A, filed with the SEC on October 15, 2018) of the
reporting and disclosure requirements imposed by Section 13(d) of
the Exchange Act and pursuant to Schedules 13D and 13G. The Company
further believes the SEC Action pertains to the Company’s
relationships with certain of the Aggregated Investors, including
(i) the circumstances under which those certain Aggregated
Investors invested in the Company and whether certain Aggregated
Investors have acted as an undisclosed group in connection with
their investment; (ii) the manner with or in which those
individuals and entities may have sought to control or influence
the Company and its leadership since their respective investments
(and the extent to which those efforts to control or influence have
been successful); and (iii) the Company’s prior disclosures
regarding the control of the Company and beneficial ownership of
the Company’s common and preferred stock included in its
registration statements filed in 2017 and 2018 and in the
Company’s Exchange Act reports.
F-62
On September 7,
2018, the SEC filed the SEC Complaint in the U.S. District
Court for the Southern District of New York against the following
Aggregated Investors: Barry C. Honig, John Stetson, Michael
Brauser, John R. O'Rourke III, Mark Groussman, Phillip
Frost, Alpha Capital Anstalt, ATG Capital LLC, Frost
Gamma Investments Trust, GRQ Consultants, Inc., Grander
Holdings, Inc., Melechdavid, Inc., OPKO Health, Inc., HS Contrarian
Investments, LLC, and Southern Biotech, Inc. (collectively,
the “Investor Defendants”), and against others who
the Company believes have not made any investment in the Company,
SEC v. Honig et al., No.
1:18-cv-01875 (S.D.N.Y. 2018). In the Complaint, the SEC alleges a
variety of misconduct with respect to the Investor
Defendants’ transactions and/or relationships with three
public issuers, including a public issuer identified as
“Company C,” which the Company understands to be MabVax
Therapeutics Holdings, Inc. With respect to “Company C”
in particular, the SEC alleges certain of the Investor Defendants
manipulated the price of the Company’s securities by writing,
or causing to be written, false or misleading promotional articles,
and a variety of other manipulative trading practices. The SEC
further alleges certain of the Investor Defendants filed false
reports of their beneficial ownership or failed to file reports of
their beneficial ownership when required to do so. The SEC claims
that, by engaging in this and other alleged actions in the SEC
Complaint, the Investor Defendants and other defendants violated
the anti-fraud and many other provisions of the Exchange Act, the
Securities Act, and SEC Rules promulgated thereunder. The SEC
Complaint does not assert any claims against the Company or any of
its directors or officers, nor otherwise allege that the Company or
any of its directors or officers were culpable participants in the
misconduct allegedly undertaken by the Investor
Defendants.
The
Company has cooperated with the SEC in connection with the SEC
Action. Although the SEC has not asserted claims against the
Company or any of its directors or officers, the Company cannot
predict whether the SEC Action ultimately will conclude in a manner
adverse to the Company or any of its directors and officers, or in
a manner adverse to the Investor Defendants or other of the
Company’s current or former stockholders. The Company also
cannot predict when the SEC Action or any related matters may
conclude, or how any such matters or resolution may impact how the
Company is perceived by the market, potential partners and
potential investors in the Company’s securities. In the past,
the SEC informed us it would not declare effective any registration
statements registering the Company’s securities effective
during the pendency of the SEC Action.
Company Filed Complaint Against Sichenzia Ross Ference
LLP
On September 10, 2018, the Company
filed, in the Superior Court of California, County of San Diego, a
complaint (the “Sichenzia Complaint”) against Sichenzia
Ross Ference LLP, a law firm that previously represented the
Company in certain corporate, securities, and SEC matters
(“Sichenzia”), and eight current Sichenzia partners,
and one former Sichenzia partner, Harvey Kesner,
MabVax
Therapeutics Holdings, Inc. v.
Sichenzia Ross Ference LLP et al., No.
37-2018-00045609-CU-PN-CTL. The Sichenzia Complaint asserts claims
for negligent professional practice, breach of fiduciary
duty, breach of contract,
unjust enrichment, deceit, and fraud by the defendants. The Company
is evaluating additional claims it may have against others in
connection with the same or similar subject
matter.
Delaware
Order Granting Petition for Relief
On September 20,
2018, the Court entered an order validating (i) issuances of common
stock upon conversions of the Company’s preferred stock
occurring between June 30, 2014 and February 12, 2018, and (ii)
stockholder approval of corporate actions presented to the
Company’s stockholders from June 30, 2014 to February 12,
2018. In so doing, the Court granted the Delaware Petition, filed
on July 27, 2018, in order to rectify the uncertainty regarding
whether shares of the Company’s common stock were validly
issued upon conversion of the Company’s preferred stock from
June 30, 2014 to February 12, 2018.
Class Action and Derivative Complaints
In re MabVax Therapeutics
Securities Litigation, Case
No. 18-cv-1160-BAS-NLS. On June 4, 2018, and August 3,
2018, two securities class action complaints were filed by
purported stockholders of the Company in the United States District
Court for the Southern District of California (the “U. S.
District Court”) against the Company and certain of its
current officers. On September 6, 2018, the U.S. District Court
consolidated the two actions and appointed lead plaintiffs. On
October 10, 2018, lead plaintiffs filed their consolidated
complaint, which, in addition to naming the Company and certain
current officers as defendants, also names certain investors as
defendants. The consolidated complaint alleges, among other things,
that the defendants violated Sections 10(b) and 20(a) of the
Exchange Act, and Rule 10b-5 thereunder, by misleading investors
about problems with the Company’s internal controls, improper
calculation of its beneficial ownership, and improper influence by
certain investors. The consolidated complaint also alleges that
some of the investor defendants violated Section 9 of the Exchange
Act by manipulating the Company’s stock price. The
consolidated complaint seeks unspecified damages, interest, fees
and costs. The current deadline to respond to the consolidated
complaint is December 6, 2018.
F-63
Liesman v. Hansen et
al., Case No. 18-cv-2237-BTM-WVG. On September
26, 2018, a shareholder derivative complaint was filed in the
United States District Court for the Southern District of
California. The complaint arises from similar allegations as
In re MabVax Therapeutics
Securities Litigation but asserts a state law breach of
fiduciary duty claim against certain of the Company’s current
and former directors and officers. In particular, the
complaint alleges that the defendants breached their fiduciary
duties by failing to implement the necessary controls to ensure
that certain financial disclosures and disclosures concerning stock
ownership were accurate. Plaintiff seeks, on behalf of the
Company, damages, fees, costs, and equitable relief.
Jackson v. Hansen et
al., Case No.
18-cv-2302-BAS-MSB-BGS. On October 4,
2018, a shareholder derivative complaint was filed in the United
States District Court for the Southern District of
California. The complaint arises from similar allegations as
In re MabVax Therapeutics
Securities Litigation and Liesman v. Hansen et al. but, in
addition to a breach of fiduciary duty claim, also includes causes
of action for unjust enrichment, abuse of control, gross
mismanagement and waste of corporate assets. Plaintiff seeks,
on behalf of the Company, damages, fees, costs, and equitable
relief. The deadline to respond to the complaint is December 21,
2018.
Nasdaq
De-listing and Intent to Apply for Listing on the OTCQB
Marketplace
On July 2, 2018,
the Listing Qualifications Department of the Nasdaq Stock Market
(the “Staff”) notified the Company of its determination
to delist the Company’s securities. In this notice, the Staff
indicated their determination was based upon the Company’s
failure to timely file all required reports with the SEC per Nasdaq
listing rule 5250(c)(1), and for the Company’s non-compliance
with the $2.5 million stockholders’ equity requirement per
Nasdaq listing rule 5550(b)(1). The Company elected not to appeal
the Staff’s decision and, as a result, on July 2, 2018, the
Company received a letter from the Staff indicating trading of the
Company’s common stock would be suspended on Nasdaq Capital
Market at the open of business on Wednesday, July 11, 2018. On July
11, 2018, the Company’s common stock began trading on the OTC
Pink, continuing under the symbol MBVX. The Hearing Department of
the Nasdaq Stock Market notified us on September 24, 2018, that it
would announce the delisting of our common stock. On September 26,
2018, the Nasdaq Stock Market issued a press release and posted a
notice to its website announcing it would delist our common stock
and file a Form 25 with the SEC to complete the delisting. The
delisting becomes effective ten (10) days after the Form 25 is
filed with the SEC.
The Company
currently intends to apply for listing on the OTCQB Marketplace
once the Company meets the requisite eligibility requirements for
the OTCQB Marketplace.
Resignation and Appointment of Members of the
Board of Directors
Effective July 31, 2018, Paul Maier,
Jeffrey E. Eisenberg, Thomas C. Varvaro and Kenneth Cohen, resigned
as members of the Company’s Board of Directors. There
were no disagreements between the resigning members of the Board of
Directors and management.
Following the
resignations, in a separate action, the Company’s Board of
Directors appointed the Company’s Chief Financial Officer,
Gregory Hanson, as a member of the Board of Directors. Mr. Hanson
has served as the Company’s Chief Financial Officer since
July 2014, and of its subsidiary, MabVax Therapeutics, Inc., since
February 2014. Mr. Hanson
has over 30 years' experience serving as the CFO, financial
executive and director of public and private life sciences and
hi-tech companies. Since October 2016, he has served as a member of
the board of directors of a private pharmaceutical contract
research organization.
F-64
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
|
$202.07
|
FINRA
filing fee
|
5,000.00
|
Legal
fees and expenses
|
30,000.00
|
Accounting
fees and expenses
|
15,000.00
|
Transfer
agent and registrar fees
|
2,000.00
|
Printing
and engraving expenses
|
500.00
|
Miscellaneous
fees and expenses
|
27,297.93
|
Total
|
$80,000.00
|
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
Triton Private Offering
On November 19,
2018, we entered into an Equity Purchase Agreement whereby Triton
Funds LP (“Triton”), a fund launched by students at the
University of California San Diego (“UCSD”), agreed to
purchase shares of our Series P Preferred Stock, subject to a
maximum purchase of $1.0 million, the effectiveness of this
registrations statement, and pursuant to the terms and conditions
of the Equity Purchase Agreement. In addition, we agreed to issue
175,000 shares of common stock to Triton Funds LLC, manager of
Triton, upon execution of the Equity Purchase Agreement to support
the cost of the student-run fund pursuant to the Share Donation
Agreement.
Overview
of 2018 Private Placements
Between
February 2 and February 10, 2018, the Company entered into separate
purchase agreements with investors pursuant to which the Company
sold (i) shares of its common stock, (ii) shares of its convertible
preferred stock, and
(iii) warrants to purchase shares of common (the “February
2018 Private Placements”). From April 30 to May 2, 2018, the
Company entered into separate purchase agreements with investors
pursuant to which we agreed to sell shares of its common stock and
convertible preferred stock (the “May 2018 Private
Placements”). No financial advisor was used in
connection with the February 2018 Private Placements nor the May
2018 Private Placements.
The
securities issued in connection with the February 2018 Private
Placements and the May 2018 Private Placements 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. The Company entered into separate
registration rights agreements with each of the investors in the
February 2018 Private Placements and the May 2018 Private
Placements, pursuant to which the Company agreed to undertake to
file a registration statement to register the resale of the shares
of common stock and the shares of common stock underlying the
warrants and preferred stock. The Company also agreed to use
reasonable best efforts to cause such registration statement to be
declared effective 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.
February
2018 Private Placements
In
connection with the February 2018 Private Placements, the Company
sold (i) an aggregate of 555,557 shares of its common stock for an
aggregate purchase price of $1,250,000, or $2.25 per share, (ii)
5,000 shares of our newly designated 0% Series M Convertible Preferred Stock
(the “Series M Preferred Stock”) for an aggregate
purchase price of $1,500,000, or $300.00 per share, and
(iii) warrants to purchase up to an aggregate of 855,561 shares of
common stock each with an exercise price of $2.70 per share. The
net proceeds of the February 2018 Private Placements were
$2,700,000 after transaction costs of $50,000.
May
2018 Private Placements
In
connection with the May 2018 Private Placements, the Company agreed
to sell (i) 218,182 shares of common stock at an aggregate purchase
price of $240,000, or $1.10 per share, and (ii) 5,363.64 shares of
newly designated 0% Series
N Convertible Preferred Stock (the “Series N Preferred
Stock”) at an aggregate purchase price of $590,000, or
$110.00 per share. The following investors in the May 2018
Private Placements also
invested in the February 2018 Private Placements (the “Prior
Investors”): GRQ Consultants Inc., Roth 401K FBO
Renee Honig; GRQ Consultants Inc., Roth 401K FBO Barry Honig;
Melechdavid, Inc.; Grander Holdings Inc. 401K; Robert S. Colman
Trust UDT 3/13/85; Ben Brauser; Joshua A. Brauser; Daniel A.
Brauser; Gregory Aaron Brauser; Erick E. Richardson; and Ronald B.
Low.
Under
the terms of the May 2018 Private Placements, we were required to
offer an aggregate of 12,777.77 shares (the “May 2018
Inducement Shares”) of newly designated 0% Series O Preferred
Stock (the “Series O Preferred Stock”) to investors who
previously purchased securities in the February 2018 Private
Placements and who also purchased securities in the May 2018
Private Placements with an aggregate purchase price of at least 40%
of their investment amounts in the February 2018 Private
Placements. Based on the closing of the offering, and participation
of the Prior Investors who invested an aggregate of $830,000 (the
“May 2018 Inducement Investors”), the Company issued an
aggregate of 10,605.56 May 2018 Inducement Shares in the form of
Series O Preferred Stock convertible into an aggregate of 1,060,556
shares of common stock. The
May 2018 Private Placements closed on May 15, 2018, with the
Company receiving gross proceeds totaling
$830,000.
October 2017 Restricted Stock Grants
During
the month of October 2017, we issued an aggregate of 138,333 shares
of restricted common stock valued at $306,650 based on the closing
market prices ranging from $1.89 to $2.34, 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 3,222,223 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 $5.25 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 $33.30 per share,
such that the amended warrants shall have an exercise price of
$6.00 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
50,714 shares of common stock for its investment, including 26,905
inducement shares, and had warrants to purchase 75,075 shares of
common stock repriced from $33.30 to $6.00 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 $5.25 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 4,505 shares of common stock as payment
for consulting services received.
On
September 1, 2016, we issued 7,377 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 75,075 shares of the Company’s
common stock at $16.65 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 4,505 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.
Item 16. Exhibits and Financial
Statement Schedules
(a)
|
Exhibits.
|
|
|
|
Filed with this
|
Incorporated by Reference
|
||||
Exhibit
No.
|
|
Exhibit Title
|
Form
S-1
|
Form
|
|
Date
Filed
|
|
File No.
|
|
|
|
|
|
|
|
|
|
|
Agreement and Plan of Merger and Reorganization, dated May 12,
2014, between the Company, Tacoma Acquisition Corp., Inc. and
MabVax Therapeutics, Inc.
|
|
8-K
(Exhibit 2.1)
|
|
5/12/2014
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Amendment No.1, dated as of June 30, 2014, by and between the
Company and MabVax Therapeutics, Inc.
|
|
8-K
(Exhibit 2.1)
|
|
7/1/2014
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
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
(Exhibit 2.1)
|
|
7/9/2014
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Amended and Restated Certificate of Incorporation
|
|
S-1
(Exhibit
3.1)
|
|
3/16/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Amended and Restated Bylaws
|
|
8-K
(Exhibit 3.2)
|
|
12/14/2007
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of Certificate of Designations, Preferences and Rights of
Series D Convertible Preferred Stock
|
|
8-K
(Exhibit 3.1)
|
|
3/26/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Form of Certificate of Designations, Preferences and Rights of
Series E Convertible Preferred Stock
|
|
8-K
(Exhibit 4.2)
|
|
4/6/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Form of Certificate of Designations, Preferences and Rights of
Series F Convertible Preferred Stock
|
|
8-K
(Exhibit 3.2)
|
|
8/17/2016
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of Series G
Convertible Preferred Stock
|
|
8-K
(Exhibit 3.1)
|
|
5/16/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of Series H
Convertible Preferred Stock
|
|
8-K
(Exhibit 3.1)
|
|
5/3/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of Series I
Convertible Preferred Stock
|
|
8-K
(Exhibit 3.1)
|
|
5/26/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of Series J
Convertible Preferred Stock
|
|
8-K
(Exhibit 3.1)
|
|
8/14/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of Series K
Convertible Preferred Stock
|
|
8-K
(Exhibit 3.2)
|
|
8/14/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of Certificate of Amendment to Amended and Restated
Certificate of Incorporation
|
|
8-K
(Exhibit 3.1)
|
|
8/17/2016
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of Series L
Convertible Preferred Stock
|
|
8-K
(Exhibit 3.1)
|
|
10/19/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Correction to the Designations, Preferences and
Rights of Series L Convertible Preferred Stock
|
|
8-K
(Exhibit 3.2)
|
|
10/19/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Certificate
of Elimination of Series F, Series G, and Series H Preferred
Stock
|
|
8-K
(Exhibit 3.1)
|
|
12/21/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of the 0%
Series M Convertible Preferred Stock
|
|
8-K
(Exhibit 3.1)
|
|
2/6/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Certificate
of Amendment to MabVax’s Amended and Restated Certificate of
Incorporation
|
|
8-K
(Exhibit 3.1)
|
|
2/15/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of the 0%
Series N Convertible Preferred Stock
|
|
8-K
(Exhibit
3.1)
|
|
5/03/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Correction
to Certificate of Designations, Preferences and Rights of the 0%
Series N Convertible Preferred Stock
|
|
8-K
(Exhibit
3.2)
|
|
5/03/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of the 0%
Series O Convertible Preferred Stock
|
|
8-K
(Exhibit
3.3)
|
|
5/03/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
3.20
|
|
Form of
Certificate of Designations, Preferences and Rights of the 0%
Series P Convertible Preferred Stock
|
|
8-K
(Included as
Schedule 1.0 to Exhibit 10.1
|
|
11/20/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
Form of Common Stock Certificate
|
|
S-1
(Exhibit 4.1)
|
|
9/29/2014
|
|
333-199005
|
|
|
|
|
|
|
|
|
|
|
Form of Common Stock Purchase Warrant
|
|
10-K
(Exhibit 4.12)
|
|
3/31/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Form of Secured Promissory Note
|
|
8-K
(Exhibit 4.1)
|
|
1/19/2016
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Form of Warrant
|
|
8-K
(Exhibit 4.2)
|
|
1/19/2016
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Form of Warrant Agency Agreement between MabVax Therapeutics
Holdings, Inc. and Equity Stock Transfer LLC and the Form of
Warrant Certificate
|
|
S-1
(Exhibit 4.10)
|
|
8/25/2015
|
|
333-204803
|
|
|
|
|
|
|
|
|
|
|
|
Form of Warrant
|
|
8-K
(Exhibit 4.1)
|
|
2/6/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Warrant
|
|
8-K
(Exhibit
4.1)
|
|
2/6/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Delaware
Order Granting Verified Petition for Relief
|
|
10-Q
(Exhibit 4.2)
|
|
10/15/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
5.1**
|
|
Opinion
of Mintz Levin Cohn Ferris Glovsky and Popeo PC as to the legality
of the securities being registered
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement, dated July 1, 2014, by and between MabVax
Therapeutics, Inc. and J. David Hansen
|
|
10-Q
(Exhibit 10.9)
|
|
8/8/2014
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement, dated July 1, 2014, by and between MabVax
Therapeutics, Inc. and Gregory P. Hanson
|
|
10-Q
(Exhibit 10.10)
|
|
8/8/2014
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement, dated July 1, 2014, by and between MabVax
Therapeutics, Inc. and Wolfgang W. Scholz, Ph.D.
|
|
10-Q
(Exhibit 10.11)
|
|
8/8/2014
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Second Amended and Restated MabVax Therapeutics Holdings, Inc. 2014
Employee, Director and Consultant Equity Incentive
Plan
|
|
10-K
(Exhibit 10.15)
|
|
3/31/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Form of Exchange Agreement (Series A-1 Preferred Stock and Series
A-1 Warrants).
|
|
8-K
(Exhibit 10.1)
|
|
3/26/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Form of Exchange Agreement (Series B Preferred Stock and Series B
Warrants).
|
|
8-K
(Exhibit 10.2)
|
|
3/26/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
2008 Equity Incentive Plan
|
|
10-K
(Exhibit 10.29)
|
|
3/31/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Form of Option Agreement, 2008 Equity Incentive Plan
|
|
10-K
(Exhibit 10.30)
|
|
3/31/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Form of Lockup Agreement dated as of April 3, 2015
|
|
8-K
(Exhibit 10.3)
|
|
4/6/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Consulting Agreement with The Del Mar Consulting Group, Inc.
and Alex Partners, LLC dated as of April 5, 2015
|
|
8-K
(Exhibit 10.4)
|
|
4/6/2015
|
|
000-31265
|
|
Form of Escrow Deposit Agreement dated as of April 14,
2015
|
|
8K
(Exhibit 10.1)
|
|
4/15/15
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Form of Amendment Agreement to Registration Rights
Agreement
|
|
8-K
(Exhibit 10.1)
|
|
6/10/15
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Amendment
to Escrow Deposit Agreement dated June 22, 2015
|
|
8-K
(Exhibit 10.1)
|
|
6/24/15
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Letter Agreement dated June 30, 2015 between MabVax Therapeutics,
Inc. and OPKO Health, Inc.
|
|
8-K
(Exhibit 10.1)
|
|
7/1/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Form of Proposed Lease Agreement with AGP Sorrento Business
Complex, L.P.
|
|
S-1
(Exhibit 10.37)
|
|
8/25/2015
|
|
333-204803
|
|
|
|
|
|
|
|
|
|
|
|
Form of Amendment Agreement No. 2 to Registration Rights
Agreement
|
|
8-K
(Exhibit 10.1)
|
|
8/6/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Non-Employee Director Compensation Policy
|
|
10-Q/A
(Exhibit 10.1)
|
|
8/12/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Standard Industrial Net Lease, dated as of May 23, 2008, by
and between MabVax Therapeutics, Inc. and Sorrento
Square
|
|
10-Q/A
(Exhibit 10.2)
|
|
8/12/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
First
Amendment to that Standard Industrial Net Lease, dated May 6, 2010,
by and between MabVax Therapeutics, Inc. and Sorrento
Square
|
|
10-Q/A
(Exhibit 10.3)
|
|
8/12/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Second Amendment to that Standard Industrial Net Lease, dated
August 1, 2012, by and between the Company and Sorrento
Square
|
|
10-Q/A
(Exhibit 10.4)
|
|
8/12/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement, dated July 21, 2014, by and between
MabVax Therapeutics, Inc. and Paul Maffuid, Ph.D.
|
|
10-Q/A
(Exhibit 10.5)
|
|
8/12/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Development and Manufacturing Services Agreement,
dated
April 15, 2014, by and between MabVax Therapeutics, Inc. and Gallus
BioPharmaceuticals NJ, LLC
|
|
10-Q/A
(Exhibit 10.6)
|
|
8/12/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Exclusive License Agreement for “Polyvalent Conjugate
Vaccines for Cancer” (SK#14491), dated as of June 30,
2008, by and between MabVax Therapeutics, Inc. and Memorial Sloan
Kettering Institute for Cancer Research
|
|
10-Q/A
(Exhibit 10.7)
|
|
8/12/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Research and License Agreement, dated as of April 7, 2008, by
and between MabVax Therapeutics, Inc. and Memorial Sloan Kettering
Institute for Cancer Research
|
|
10-Q/A
(Exhibit 10.8)
|
|
8/12/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Exclusive License to Unimolecular Antibodies, dated October 13,
2011, by and between MabVax Therapeutics, Inc. and Memorial Sloan
Kettering Institute for Cancer Research
|
|
10-Q/A
(Exhibit 10.9)
|
|
8/12/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Option
Agreement, dated August 29, 2014, by and between MabVax
Therapeutics, Inc. and Juno Therapeutics, Inc.
|
|
10-Q/A
(Exhibit 10.10)
|
|
8/12/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
SBIR
Contract from National Cancer Institute
|
|
10-Q/A
(Exhibit 10.11)
|
|
8/12/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Lease by and between AGP Sorrento Business Complex, L.P., and
MabVax Therapeutics Holdings, Inc., dated as of September 2,
2015
|
|
8-K
(Exhibit 10.1)
|
|
9/3/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Form of Amendment Agreement No.3 to Registration Rights
Agreement
|
|
8-K
(Exhibit 10.1)
|
|
10/13/2015
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Loan and Security Agreement dated as of January 15,
2016
|
|
8-K
(Exhibit 10.1)
|
|
1/19/2016
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Form of Amendment Agreement
|
|
10-K
(Exhibit 10.54)
|
|
3/14/2016
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Consulting Agreement, dated April 1, 2016, by and between MabVax
Therapeutics Holdings, Inc. and Jeffrey Ravetch, M.D.,
Ph.D.
|
|
8-K
(Exhibit 10.1)
|
|
4/7/2016
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Employment
Agreement, dated March 16, 2016, by and between MabVax
Therapeutics Holdings, Inc. and Paul Resnick, M.D.
|
|
10-K/A
(Exhibit 10.56)
|
|
4/19/2016
|
|
000-31265
|
|
|
|
|
|
|
|
|
|
|
|
Non-Employee
Director Compensation Policy, as amended through August 25,
2016
|
|
8-K
(Exhibit 10.1)
|
|
8/31/2016
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Subscription Agreement between the Company and the subscribers set
forth on the signature pages thereto
|
|
8-K
(Exhibit10.1)
|
|
5/3/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Registration Rights Agreement between the Company and the
subscribers set forth on the signature pages
thereto
|
|
8-K
(Exhibit 10.2)
|
|
5/3/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Exchange Agreement
|
|
8-K
(Exhibit 10.1)
|
|
5/10/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Securities Purchase Agreement
|
|
8-K
(Exhibit 10.1)
|
|
8/14/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Securities Purchase Agreement, dated September 11, 2017, by and
between MabVax Therapeutics Holdings, Inc. and each of the
Purchasers (as defined therein).
|
|
8-K
(Exhibit 10.1)
|
|
9/13/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of Subscription Agreement, dated September 22,
2017
|
|
8-K
(Exhibit 10.1)
|
|
9/22/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of Subscription Agreement, dated October 10, 2017
|
|
8-K
(Exhibit 10.1)
|
|
10/11/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Exchange Agreement
|
|
8-K
(Exhibit 10.1)
|
|
10/19/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Registration Rights Agreement
|
|
8-K
(Exhibit 10.2)
|
|
10/19/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
Form of
Subscription Agreement
|
|
S-1
(Exhibit 10.40)
|
|
12/12/2017
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Purchase Agreement
|
|
8-K
(Exhibit 10.1)
|
|
2/6/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Registration Rights Agreement
|
|
8-K
(Exhibit 10.2)
|
|
2/06/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Purchase Agreement
|
|
8-K
(Exhibit
10.1)
|
|
2/06/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Registration Rights Agreement
|
|
8-K
(Exhibit
10.2)
|
|
2/06/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Purchase Agreement
|
|
8-K
(Exhibit
10.1)
|
|
5/3/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Registration Rights Agreement
|
|
8-K
(Exhibit
10.2)
|
|
5/03/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Form of
May 2018 Letter Agreement
|
|
8-K
(Exhibit
10.3)
|
|
5/03/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Sublicense Grant to Y-mAbs Therapeutics, Inc.
|
|
10-Q
(Exhibit
10.6)
|
|
10/15/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Side
Letter with Memorial Sloan-Kettering Institute for Cancer
Research
|
|
10-Q
(Exhibit
10.7)
|
|
10/15/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Second
Amendment to Loan and Security Agreement with Oxford Finance,
LLC
|
|
10-Q
(Exhibit
10.8)
|
|
10/15/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
|
Fifth
Amended and Restated 2014 Employee, Director and Consultant Equity
Incentive Plan
|
|
S-8
(Exhibit
99.1)
|
|
12/21/2017
|
|
333-222204
|
|
|
|
|
|
|
|
|
|
|
10.56
|
|
Equity
Purchase Agreement with Triton Funds LP
|
|
8-K
(Exhibit
10.1)
|
|
11/20/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
10.57
|
|
Registration
Rights Agreement
|
|
8-K
(Exhibit
10.2)
|
|
11/20/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
10.58
|
|
Share Donation
Agreement
|
|
8-K
(Exhibit
10.3)
|
|
11/20/2018
|
|
001-37861
|
|
|
|
|
|
|
|
|
|
|
Asset Purchase and License Agreement with Boehringer
Ingelheim International GmbH
|
|
10-Q
(Exhibit 10.1
)
|
|
11/13/2018
|
|
000-37861
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of per share earnings
|
|
S-1
(Exhibit
11.1)
|
|
9/29/2014
|
|
333-199005
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiaries
of the Registrant
|
|
S-1
(Exhibit
21.1)
|
|
9/29/2014
|
|
333-199005
|
|
|
|
|
|
|
|
|
|
|
23.1*
|
|
Consent
of Independent Registered Public Accounting Firm
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101*
|
|
Interactive
data file
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Furnished
herewith
|
**
|
To be
filed by Amendment
|
†
|
Confidential
treatment requested for portions of this exhibit. Confidential
materials omitted and filed separately with the SEC.
|
±
|
Management
contract or compensatory plan.
|
|
|
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
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(iii)
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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.
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(2)
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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.
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(3)
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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.
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(4)
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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:
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(i)
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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);
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(ii)
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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;
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(iii)
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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
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(iv)
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Any other communication that is an offer in the offering made by
the undersigned registrant to the purchaser.
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(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 20th day of
November, 2018.
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MABVAX THERAPEUTICS HOLDINGS, INC.
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By
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/s/ J. David Hansen
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J. David Hansen
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President and Chief Executive Officer
(Principal executive officer)
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/s/ Gregory P. Hanson
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Gregory P. Hanson
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Chief Financial Officer
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(Principal financial and accounting officer)
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SIGNATURES AND POWER OF ATTORNEY
KNOW
ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints J. David Hansen and
Gregory P. Hanson, and each of them, as his or her true and lawful
attorney-in-fact and agent with full power of substitution, for him
or her in any and all capacities, to sign any and all amendments to
this registration statement (including post-effective amendments or
any abbreviated registration statement and any amendments thereto
filed pursuant to Rule 462(b) increasing the number of
securitiesfor which registration is sought), and to file the same,
with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do
and perform each and every act and thing requisite and necessary to
be done in connection therewith, as fully for all intents and
purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his
substitute, may lawfully do or cause to be done by virtue
hereof.
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
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Title
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Date
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/s/ J. David
Hansen
J.
David Hansen
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Chairman
of the Board, President and
Chief
Executive Officer
(Principal
executive officer)
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November 20, 2018
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/s/ Gregory P.
Hanson
Gregory
P. Hanson
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Chief
Financial Officer
(Principal
financial and accounting officer)
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November 20, 2018
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/s/ Philip O.
Livingston
Philip
O. Livingston, M.D.
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Director
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November 20, 2018
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II-13