Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the Fiscal Year Ended December 31, 2017
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the Transition period from
to .
Commission file number: 0-31265
MABVAX THERAPEUTICS HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
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Delaware
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93-0987903
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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11535 Sorrento Valley Rd., Suite 400, San Diego, CA
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92121
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code:
(858) 259-9405
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $0.01 par value per share
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The NASDAQ Capital Market
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities
Act. YES ☐ NO ☒
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. YES ☐ NO ☒
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports) and (2) has been subject to such filing
requirements for the past 90
days. YES ☒ NO ☐
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). YES ☒ NO ☐
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (Sec.229.405 of this Chapter) is
not contained herein, and will not be contained to the best of
Registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
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 13(a) of the Exchange
Act. ☐
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the
Act.). YES ☐ NO ☒
The aggregate market value of the voting common stock held by
non-affiliates of the Registrant was approximately $12,360,790 as
of June 30, 2017, based upon the closing sale price on
The NASDAQ Capital Market of
$4.17 per share reported on such date.
As of April 2, 2018, there were 8,961,840 shares of the
registrant’s common stock outstanding.
MABVAX THERAPEUTICS HOLDINGS, INC.
2017 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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Page
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PART I
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2
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13
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28
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28
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28
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28
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PART II
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29
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29
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30
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42
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42
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42
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PART III
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44
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52
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60
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61
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62
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PART IV
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63
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Disclosure Regarding Forward-Looking Statements
This Annual Report on Form 10-K, including the documents that we
incorporate by reference, contains statements indicating
expectations about future performance and other forward-looking
statements. Forward-looking statements relate to future events or
our future financial performance. We generally identify
forward-looking statements by terminology such as
“may,” “will,” “should,”
“expects,” “plans,”
“anticipates,” “could,”
“intends,” “target,”
“projects,” “contemplates,”
“believes,” “estimates,”
“predicts,” “potential” or
“continue” or the negative of these terms or other
similar words, although not all forward-looking statements contain
these words. Forward-looking statements include, but are not
limited to, statements regarding our or our management’s
expectations, hopes, beliefs, intentions or strategies regarding
the future, such as our estimates regarding anticipated operating
losses, future performance, future revenues and projected expenses;
our liquidity and our expectations regarding our needs for and
ability to raise additional capital; our ability to manage our
expenses effectively and raise the funds needed to continue our
business; our ability to retain the services of our current
executive officers, directors and principal consultants; our
ability to obtain and maintain regulatory approval of our existing
products and any future products we may develop; the initiation,
timing, progress and results of our preclinical and clinical
trials, research and development programs; regulatory and
legislative developments in the United States and foreign
countries; the timing, costs and other limitations involved in
obtaining regulatory approval for any product; the further
preclinical or clinical development and commercialization of our
product candidates; the potential benefits of our product
candidates over other therapies; our ability to enter into any
collaboration with respect to product candidates; the performance
of our third-party manufacturers; our ability to obtain and
maintain intellectual property protection for our products and
operate our business without infringing upon the intellectual
property rights of others; the successful development of our sales
and marketing capabilities; the size and growth of the potential
markets for our products and our ability to serve those markets;
the rate and degree of market acceptance of any future products;
our reliance on key scientific management or personnel; the payment
and reimbursement methods used by private or governmental
third-party payers; and other factors discussed elsewhere in this
report or any document incorporated by reference herein or
therein.
The words “believe,” “may,”
“will,” “estimate,” “continue,”
“anticipate,” “intend,”
“expect,” “plan” and similar expressions
may identify forward-looking statements, but the absence of these
words does not mean that a statement is not forward-looking. The
forward-looking statements contained in this report are based on
our current expectations and beliefs concerning future developments
and their potential effects on us. There can be no assurance that
future developments affecting us will be those that we have
anticipated. These forward-looking statements involve a number of
risks, uncertainties (many of which are beyond our control) or
other assumptions that may cause actual results or performance to
be materially different from those expressed or implied by these
forward-looking statements. These risks and uncertainties include,
but are not limited to, those factors described in the section
titled “Risk Factors.” Should one or more of these
risks or uncertainties materialize, or should any of our
assumptions prove incorrect, actual results may vary from those
projected in these forward-looking statements. We undertake no
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as may be required under applicable securities laws. The
section entitled “Risk Factors,” as well as other
sections in this report or incorporated by reference into this
report, discuss some of the factors that could contribute to these
differences.
The forward-looking statements made in this report relate only to
events as of the date on which the statements are made. We
undertake no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which the
statement is made or to reflect the occurrence of unanticipated
events.
This report also contains market data related to our business and
industry. These market data include projections that are based on a
number of assumptions. While we believe these assumptions to be
reasonable and sound as of the date of this report, if these
assumptions turn out to be incorrect, actual results may differ
from the projections based on these assumptions. As a result, our
markets may not grow at the rates projected by these data, or at
all. The failure of these markets to grow at these projected rates
may have a material adverse effect on our business, results of
operations, financial condition and the market price of our common
stock.
MabVax(R),
MabVax Therapeutics(R)
and our corporate logo are trademarks
or registered trademarks of MabVax Therapeutics Holdings, Inc. All
other brand names or trademarks appearing in this Annual Report are
the property of their respective holders.
-1-
PART I
Item 1.
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Business.
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Company Background
MabVax
Therapeutics Holdings, Inc. (“We” or the
“Company”) is a Delaware
corporation, originally incorporated in 1988 under the name
Terrapin Diagnostics, Inc. in the state of Delaware, and
subsequently renamed “Telik, Inc.” in 1998, and
thereafter renamed MabVax Therapeutics Holdings, Inc. in September
2014. Our principal corporate office is located at 11535 Sorrento
Valley Road, Suite 400, San Diego, CA 92121 and our telephone
number is (858) 259-9405. On July 8, 2014, we consummated a merger
with MabVax Therapeutics, pursuant to which our subsidiary Tacoma
Acquisition Corp. merged with and into MabVax Therapeutics, with
MabVax Therapeutics surviving as our wholly owned subsidiary. This
transaction is referred to as the “Merger.” Our
internet address is www.mabvax.com.
Information on our website is not incorporated into this
report.
Business Overview
We are
a clinical-stage biotechnology company focused on the development
of antibody-based products to address unmet medical needs in the
treatment of cancer. MabVax has discovered a pipeline of
human monoclonal antibody products based on the protective immune
responses generated by patients who have been vaccinated against
targeted cancers with our proprietary vaccines. MabVax's lead
development program is centered around our HuMab-5B1 antibody,
which is fully human and discovered from the immune response of
cancer patients vaccinated with an antigen-specific vaccine during
a Phase I trial at Memorial Sloan Kettering Cancer Center, or
MSK. The antigen the antibody targets is expressed on
more than 90% of pancreatic cancers, and expressed in significant
percentages on small cell lung cancer, stomach, colon and other
cancers, making the antibody potentially broadly applicable to many
types of cancers. We have multiple antibody candidates,
discovered utilizing the same methodologies that are in preclinical
development.
Monoclonal
antibodies are produced from a single DNA sequence encoded into
multiple cells that all produce the same single antibody. We
generate our pipeline of antibody-based product candidates from
patients who have been vaccinated with proprietary vaccines
licensed from MSK. Our approach involves surveying the protective
immune response from many patients who were vaccinated with the
same vaccine to identify one or more optimal monoclonal antibody
candidates against a specific target on the surface of a cancer
cell. We believe this approach provides us with a novel
next-generation human antibody technology platform. We believe our
approach to antibody discovery allows us to identify antibody
candidates with superior performance characteristics while
minimizing many of the toxicity and off target binding drawbacks
(phenomenon occurring when antibodies bind to non-cancer cells) of
other discovery technologies.
Below
is a summary of our internally developed, proprietary
portfolio:
-2-
Our
clinical development programs are centered around our HuMab-5B1
human antibody, which we have tested in 56 patients as a
monotherapy, in combination with chemotherapy, and conjugated to
radioisotopes in effort to establish safety and tolerability as
well as to assess therapeutic benefit for patients diagnosed with
pancreatic and other cancers. We will continue to enroll patients
in ongoing Phase 1 clinical trials utilizing our HuMab-5B1 human
antibody in the following protocols: (1) In combination with
standard of care chemotherapy in newly diagnosed treatment
naïve patients; and (2) As a radioimmunotherapy
(“RIT”) product which utilizes the same antibody as a
targeting agent and to which we attach a radionuclide to provide
localize cancer cell killing effect.
MVT-5873 in combination with first line therapy for pancreatic
cancer patients
In the Phase 1 study, MabVax’s MVT-5873, a
fully human antibody, was given in combination with nab-paclitaxel
and gemcitabine to patients newly diagnosed with CA19-9 positive
pancreatic cancer. 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. All six patients in the current cohort
had measurable tumor reductions, with four patients meeting the
criteria for partial response (PR) and two patients meeting the
criteria for stable disease (SD). 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. We plan to enroll additional patients at this dose to
further explore safety and increase statistical significance of
results seen to date in a larger population.
MVT-1075 radioimmunotherapy (“RIT”) for pancreatic
cancer patients
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 for patients with locally advanced or
metastatic adenocarcinoma of the pancreas (“PDAC”) or
other CA19-9 positive malignancies including colon and lung
cancers. The primary objective is to determine the maximum
tolerated dose and safety profile in late stage patients with
recurring disease who have failed prior therapies. Secondary
objectives include evaluating tumor response rate and duration of
response by RECIST 1.1, and determining dosimetry and
pharmacokinetics. This dose-escalation study, which began in June
2017, utilizes a traditional 3+3 design, and is based on experience
we gained through prior clinical studies that treated 50 patients
with either our antibody we designate as MVT-5873, or our imaging
agent we designate as MVT-2163.
On
February 28, 2018, we announced positive interim results from the
initial three-patient cohort of the Phase 1 clinical trial. Results
from the first three patients dosed in the initial cohort of this
dose escalation Phase 1 safety trial demonstrated that MVT-1075 is
reasonably well tolerated and accumulates 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.
Exploration and Evaluation of Strategic Options
In
September 2017, we announced our engagement of Greenhill & Co.
(NYSE: GHL) to serve as an advisor to assist the Company in
exploring and evaluating strategic options with the goal of
maximizing stockholder value. Greenhill & Co.’s sole
mandate has been to provide MabVax with opportunities in exploring
and evaluating strategic options while continuing to identify new
opportunities. MabVax is currently in advanced discussions with
several potential strategic partners that could result in one or
more licensing and partnering transactions in the first half of
2018 of certain antibody assets for defined fields of use. However,
there is no guarantee that we will enter into binding agreements
with the parties introduced to us by Greenhill &
Co.
Post
potential transactions, we expect to retain rights to core aspects
of our antibody development program and intend to continue
developing these core assets using funds from one or more strategic
transactions. MabVax will continue to focus on advancing its Phase
1 clinical programs including MVT-5873 in combination with
chemotherapy and MVT-1075 as a radioimmunotherapy.
Our Growth and Core Business Strategy
Our
primary business strategy is to develop our early antibody product
candidates through proof of concept clinical trials, which may
represent either Phase I or Phase II clinical trials depending on
the program and extent of progress. Once through proof of concept
clinical trials, we will decide whether to license, partner or sell
those product candidates, or continue to develop the candidates
depending on several variables such as access to additional
capital, cost of later stage clinical trials, risk of such
development efforts, and the value derived from licensing,
partnering or selling those assets.
-3-
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 being treated with our therapeutic
antibody MVT-5873 as a monotherapy, which was evaluated for
safety and tolerability in patients with advanced pancreatic cancer
and other CA19-9 positive cancers, in a poster presentation at the
American Society of Clinical Oncology (ASCO) Annual Meeting on June
3, 2017. The Company highlighted that the single agent MVT-5837
appears safe and well tolerated in patients at biologically active
doses. Furthermore, all patients were evaluated by RECIST 1.1 for
tumor response, and the Company reported 11 patients achieved
stable disease in this dose escalation safety trial of 32
patients.
The
results of the Phase 1a trial with MVT-5873 indicate that this
fully-human antibody targeting CA19-9 cancers can be administered
at doses with acceptable safety and with a potentially positive
impact on disease. 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. At the maximum tolerated dose
(MTD) established in this trial, we have demonstrated an acceptable
safety margin for the antibody.
MVT-5873 in Combination with a Standard of Care
Chemotherapy – Based upon observations from the first
two cohorts of patients treated, the Company is continuing clinical
development of MVT-5873 in combination with gemcitabine and
nab-paclitaxal as a first line therapy for the treatment of
patients newly diagnosed with pancreatic cancer. MabVax has treated
six patients as of October 12, 2017 and is actively enrolling
additional patients with the objective of obtaining additional
safety and tumor response (RECIST 1.1) data. Dr. Eileen
O’Reilly, Associate Director of the David M. Rubenstein
Center for Pancreatic Cancer Research, attending physician, member
at Memorial Sloan Kettering Cancer Center and Professor of Medicine
at Weill Cornell Medical College, is the lead investigator in the
MVT-5873 Phase 1 clinical trial.
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. All six patients in the current cohort had measurable
tumor reductions, with four patients meeting the criteria for
partial response (PR) and two patients meeting the criteria for
stable disease (SD). 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. We
plan to enroll additional patients at this dose to further explore
safety and increase statistical significance of results seen to
date in a larger population.
MVT-2163 – as an Imaging Agent for Pancreatic
Cancer
We
reported results from our Phase 1a clinical trial of ImmunoPET
imaging agent, MVT-2163, in 12 patients with locally advanced or
metastatic adenocarcinoma of the pancreas (PDAC) or other CA19-9
positive malignancies in a poster presentation and podium talk at
the Society of Nuclear Medicine and Molecular Imaging (SNMMI)
Annual Meeting held in Denver, CO on June 10-14, 2017.
The
Phase 1a clinical trial of MVT-2163 was intended to evaluate our
next generation diagnostic PET imaging agent in patients with
locally advanced or metastatic adenocarcinoma of the pancreas
(PDAC) or other CA19-9 positive malignancies. MVT-2163
(89Zr-HuMab-5B1) combines the well-established PET imaging
radiolabel Zirconium-89 [89Zr] with the targeting specificity of
MVT-5873. We designed the trial to establish safety,
pharmacokinetics, biodistribution, optimal time to obtain the PET
image, and the amount of MVT-5873 to be administered as a blocking
dose prior to administration of MVT-2163 to obtain optimized PET
scan images.
As of
July 2017, 12 patients had been treated in this first-in-human
trial evaluating the safety and feasibility of MVT-2163 to image
pancreatic tumors and other CA19-9 positive malignancies. MVT-2163
was administered alone and in combination with MVT-5873 and was
well tolerated in all cohorts. The only toxicities were infusion
reactions that resolved on the day of the injection, with some
patients requiring standard supportive medication. We reported that
administering MVT-5873 prior to dosing MVT-2163 reduces liver
uptake facilitating detection of liver metastases. In addition, we
determined that the MVT-5873 cold antibody pre-dose does not
interfere with the uptake of MVT-2163 on cancer
lesions.
-4-
Uptake
of MVT-2163 was observed in primary tumors and metastases as early
as day two and continuously through day seven. Standard Uptake
Values (SUV), a measurement of activity in PET imaging, reached as
high as 101 in the study. The investigators reported that the 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 produced acceptable safety
tolerability, pharmacokinetics and biodistribution. MVT-2163 also
produced high quality PET images identifying both primary tumor and
metastatic sites. There was a promising correlation with diagnostic
CT that warrants further studies correlating these findings with
histopathology to assess the accuracy of MVT-2163 in identifying
smaller metastatic nodes below the detection level of standard CT
scans. The continual increase in high SUV values on cancer lesions
in this study supports the use of the Company’s MVT-1075
radioimmunotherapy product which utilizes the same antibody to
deliver a radiation dose for the treatment of patients with
pancreatic, lung and colon cancers.
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 of our
HuMab-5B1 radioimmunotherapy product MVT-1075 based on experience
we gained through clinical studies involving over 50 patients with
either the antibody MVT-5873, or our imaging agent we designate as
MVT-2163. Results from the first three patients dosed in the
initial cohort of this dose escalation Phase 1 safety trial
demonstrated that MVT-1075 is reasonably well tolerated and
accumulates 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.
MVT-1075 combines
the demonstrated targeting specificity of the MVT-5873 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 1 trials for the treatment of
cancer. The investigative sites are Honor Health in Scottsdale,
Arizona, and Memorial Sloan Kettering Cancer Center in New York
City.
In
April 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 an important new therapeutic agent
in the treatment of pancreatic, colon and lung cancers. Supporting
the MVT-1075 RIT clinical investigation are the Company's
successful MVT-5873 and MVT-2163 Phase 1a safety and target
specificity data which were reported earlier this year at the
annual meetings of the American Society for Clinical Oncology
(ASCO) and the Society for Nuclear Medicine and Molecular Imaging
(SNMMI), respectively. The combined results from 50 patients in the
Phase 1 MVT-5873 and MVT-2163 studies established safety and
provided significant insight into drug biodistribution and an
optimal dosing strategy, which the Company has incorporated into
the MVT-1075 program.
Plan for 2018
Based
on inquiries from third parties regarding their interest in MabVax
assets and clinical progress to date with MVT-5873, MVT-1075, and
MVT-2163, and with the assistance of investment advisor Greenhill
& Co., we expect to be able to decide on one or more licensing
and/or partnering opportunities for certain fields of use of our
technology in the first half of 2018.
We
currently intend to continue clinical development of MVT-5873 in
combination with gemcitabine and nab-paclitaxal in first line
therapy for the treatment of patients newly diagnosed with
pancreatic cancer. We have treated two cohorts of patients for a
total of six patients through September 22, 2017 in this study with
promising results achieved to date; and plan to continue enrollment
of patients with the objective of confirming early observations
seen to date.
We
currently plan to continue clinical development of MVT-1075 for the
treatment of locally advanced or metastatic pancreatic cancer
patients, by completing additional cohorts of patients in a dose
escalation safety trial to continue to assess the safety and
potential efficacy of this treatment, and expect to report results
from the first cohort of patients treated in the first half of
2018.
-5-
Reverse Splits for Listing and Maintaining Listing on The NASDAQ
Capital Market
Listing Reverse Split – On June
29, 2016, our stockholders approved a reverse stock split of our
issued and outstanding shares of common stock at a range of between
1-for-2 and 1-for-15, with the specific ratio and effective time of
the reverse stock split to be determined by our Board of Directors,
or our Board. On August 2, 2016, the Board approved a 1-for-7.4
reverse stock split, or the Listing Reverse Split. The Listing
Reverse Split was intended to allow us to meet the minimum share
price requirement of The NASDAQ Capital Market, or NASDAQ. On
August 11, 2016, we received approval from The NASDAQ Capital
Market for the listing of our common stock under the symbol
“MBVX”, subject to implementation of the Listing
Reverse Split and closing of our August 2016 public offering (the
“August 2016 Public Offering”). On August 16, 2016,
we implemented the Listing Reverse Split, closed on the August
2016 Public Offering and began trading on The NASDAQ Capital Market
at the open of business on August 17, 2016.
Continued Listing Reverse Split –
On October 6, 2017, our stockholders approved a reverse stock split
of our issued and outstanding shares of common stock at a range of
between 1-for-2 and 1-for-20, with the specific ratio and effective
time of the reverse stock split to be determined by our Board. On
February 1, 2018, the Board approved a 1-for-3 reverse stock split,
or the Continued Listing Reverse Split; and, on February 16, 2018,
we implemented the Continued Listing Reverse Split effective with
the open of trading on The NASDAQ Capital Market on a
split-adjusted basis under the same trading symbol
“MBVX.” On March 5, 2018, we received a letter from the Listing Qualifications
Department of The NASDAQ Capital Market notifying us that the
Company has regained compliance with Nasdaq Listing Rule 5550(a)(2)
by achieving and maintaining the $1.00 minimum closing bid price
for at least ten trading days prior to the March 5, 2018 deadline
for continued listing. The primary intent of the Continued
Listing Reverse Split was to increase the market price of the
Company’s common stock in order to help ensure compliance
with The NASDAQ Capital Market’s $1.00 minimum closing bid
price continued listing maintenance requirement. All share amounts
have been adjusted based on the Continued Listing Reverse
Split.
Consolidated Financial Statements Prepared on a Going Concern
Basis
We have a history of losses, and we anticipate that we will
continue to incur losses in the future as we continue to develop
our product pipeline, resulting in the need to achieve either
substantial revenues from licensing arrangements or financing
transactions, as
more fully described in our “Risk Factors”. These
conditions raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans
regarding these matters are more fully described in Item 7.
“-Liquidity and Capital Resources” and in Note 1.
“Nature of Operations and Basis of Presentation” in the
Notes to the Consolidated Financial
Statements.
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 United States (U.S.) Food and
Drug Administration, or 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 called CA19-9 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. This antigen is also shed by the tumor and the
amount of antigen present in blood samples is used to monitor
patients especially with pancreatic cancer. Elevated levels of
CA19-9 are indicative of a poor prognosis and falling levels of
CA19-9 indicate an improving prognosis. The CA19-9 antigen plays an
important role in tumor progression and metastasis. Patients who
develop metastatic disease have a significantly poorer prognosis
for survival.
-6-
We
believe there is a critical unmet medical need for a 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 only 7.7%. Annually,
53,000 new patients are diagnosed with pancreatic cancer 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 each
year in the US. The five-year survival rate for the 35% of patients
who are diagnosed with metastatic colon cancer that is locally
spread, is 71%. However, the five-year survival for the 35% of
patients who are diagnosed with regionally spread colon cancer
falls to 13.5%.
Pancreatic Cancer Imaging and Diagnosis
We believe that our radiolabeled HuMab-5B1 PET imaging antibody
represents the only human derived agent in development specifically
aimed at improving diagnostic imaging in pancreatic cancer 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
the majority of patients newly diagnosed with pancreatic cancers.
We believe that the market opportunity for
a HuMab-5B1antibody-based radiopharmaceutical is
significant. The ability of physicians to accurately diagnose,
stage, and assess treatment outcomes in pancreatic cancer is a 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 offer significant room
for improvement in diagnostic technique and that accurate
determinations on the 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
On
February 28, 2018, we announced positive interim results from the
initial three-patient cohort of the Phase 1 clinical trial. Results
from the first three patients dosed in the initial cohort of this
dose escalation Phase 1 safety trial demonstrated that MVT-1075 is
reasonably well tolerated and accumulates 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.
The Company has enrolled 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 locally advanced or
metastatic adenocarcinoma of the pancreas (“PDAC”) or
other CA19-9 positive malignancies including colon and lung
cancers. The primary objective is to determine the maximum
tolerated dose and safety profile in late stage patients with
recurring disease who have failed prior therapies. Secondary
objectives 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.
License and Development Agreements
Memorial Sloan Kettering
We have licensed
from MSK the exclusive world-wide developmental and commercial
rights to receive biological materials from vaccinated clinical
trial participants enrolled in any of the clinical trials involving
the vaccines licensed to us, allowing us to discover human
monoclonal antibody-based therapeutics. MSK has issued patents or
has pending patent applications on the vaccine antigen conjugates,
mixtures of vaccine antigen conjugates and methods of use. This
patent portfolio includes 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 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 licensed certain cell lines from Life Technologies used in the
production of recombinant proteins for our clinical
trials. The amount of the contract was $450,000 and was
fully expensed in 2015. We paid $225,000 in 2015 and the
remainder in 2016.
-7-
Rockefeller University Collaboration
Effective July 1,
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 studies 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.
Juno Option Agreement
On
August 29, 2014, we entered into an Option Agreement with Juno
Therapeutics, Inc. (“Juno”) in exchange for a one-time
up-front option fee in the low five figures. Pursuant to the option
agreement, we granted Juno the option to obtain an exclusive,
world-wide, royalty-bearing license authorizing Juno to develop,
make, have made, use, import, have imported, sell, have sold, offer
for sale and otherwise exploit certain patents we developed with
respect to fully human antibodies with binding specificity against
human GD2 or sialyl-Lewis A antigens and certain of our controlled
biologic materials. As of June 30, 2016, the option agreement
expired and Juno no longer has a contractual right for use of our
binding domains for use in the construction of CAR
T-cells.
Patents
We
strive to protect the proprietary technology that we believe is
important to our business, including seeking and maintaining
patents intended to cover our vaccines and monoclonal
antibody-based candidates, their methods of use and processes for
their manufacture and any other inventions that are commercially
important to the development of our business. We also rely on trade
secrets to protect aspects of our business that are not amenable
to, or that we do not consider appropriate for, patent
protection.
As of April 2, 2018, we are the exclusive licensee
or sole assignee of 14 granted U.S. patents, 3 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.
-8-
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.
-9-
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.
-10-
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.
-11-
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.
Employees
As
of December 31, 2017, we had a total of 11 full-time
employees.
-12-
Item 1A.
|
Risk Factors.
|
Our business faces significant risks, some of which are set forth
below to enable readers to assess, and be appropriately apprised
of, many of the risks and uncertainties applicable to the
forward-looking statements made in this Annual Report. You should
carefully consider these risk factors as each of these risks could
adversely affect our business, operating results and financial
condition. If any of the events or circumstances described in the
following risks actually occurs, our business may suffer, the
trading price of our common stock could decline, and our financial
condition or results of operations could be harmed. Given these
risks and uncertainties, you are cautioned not to place undue
reliance on forward-looking statements. These risks should be read
in conjunction with the other information set forth in this Annual
Report. There may be additional risks faced by our business, though
we do believe that the risks set forth below reflect the more
important ones.
Risks Relating to Our Financial Condition
We will be required to raise additional funds to finance our
operations and remain a going concern; we may not be able to do so
when necessary, and/or the terms of any financings may not be
advantageous to us, requiring cutbacks in personnel.
Our
operations to date have consumed substantial amounts of cash.
Negative cash flows from our operations are expected to continue
over at least the next several years. Our cash needs are highly
dependent on the progress of our product development programs,
particularly, the results of our preclinical and clinical studies
and those of our partners, the cost, timing and outcomes of
regulatory approval for our product candidates, and the rate of
recruitment of patients in our human clinical trials. In addition,
the further development of our ongoing clinical trials will depend
on upcoming analysis and results of those studies and our financial
resources at that time.
Although we raised approximately $9.4 million, net of offering
costs, during 2017, through various financings and offerings, and
an additional $2.7 million, net of offering costs in the first
quarter of 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 April 2, 2018, we have sufficient
cash to fund operations through April 2018 assuming we do not
complete any strategic or financing transactions between now and
the end of April 2018. We are exploring and evaluating strategic
options with the goal of maximizing stockholder value, and
currently working with our financial advisor Greenhill & Co.,
to assist us with our efforts to complete one or more strategic
transactions.
Our
ongoing capital requirements will depend on numerous factors,
including: the progress and results of preclinical testing and
clinical trials of our product candidates under development; the
costs of complying with the FDA and other domestic and foreign
regulatory agency requirements, the progress of our research and
development programs and those of our partners; the time and costs
expended and required to obtain any necessary or desired regulatory
approvals; the resources that we devote to manufacturing
expenditures; our ability to enter into licensing arrangements,
including any unanticipated licensing arrangements that may be
necessary to enable us to continue our development and clinical
trial programs; the costs and expenses of filing, prosecuting and,
if necessary, enforcing our patent claims, or defending against
possible claims of infringement by third-party patent or other
technology rights; the cost of commercialization activities and
arrangements, if any, that we undertake; and, if and when approved,
the demand for our products, which demand depends in turn on
circumstances and uncertainties that cannot be fully known,
understood or quantified unless and until the time of approval,
including the range of indications for which any product is granted
approval. If we are unable to raise additional capital, then we may
have to substantially curtail our clinical trials which could slow
the progress in the development of our products.
We are required to obtain the consent of an existing investor, or
the Lead Investor, to certain future transactions, which may hinder
our ability to obtain future financing.
Since
July 8, 2014, we have been subject to restrictions on financing and
other material transactions of the Company that require the consent
of a lead investor in our offerings (the “Lead
Investor”). Additionally, we granted the Lead Investor in our
public offering in May 2017 (the “May 2017 Public
Offering”) the right of consent 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 Convertible
Preferred Stock (the “Series G Preferred Stock”)
purchased by the Lead Investor in this offering (the “May
2017 Consent Right”). On October 18, 2017, the Lead Investor
exchanged its Series G Preferred Stock for Series L Convertible
Preferred Stock (the “Series L Preferred Stock”),
retaining the May 2017 Consent Right. All other prior consent
rights of the Lead Investor have been superseded by the May 2017
Consent Right.
-13-
Should
the May 2017 Consent Right be required in connection with future
offerings, we may be required again to provide additional
consideration, including, but not limited to, consideration in the
form of cash and/or additional shares of our capital stock and/or
securities convertible into or exercisable for shares of our
capital stock, in order to obtain the May 2017 Consent Right.
If we are unable to obtain the May 2017 Consent Right when
necessary for future offerings, we may be unable to raise
additional funds. An inability to raise additional funds could have
a material adverse effect on our financial condition, results of
operations, ability to conduct our business and on the price of our
common stock.
The terms of our secured debt facility require us to meet certain
operating and financial covenants and place restrictions on our
operating and financial flexibility. If we raise additional capital
through debt financing, the terms of any new debt could further
restrict our ability to operate our business.
Effective
in January 2016, we entered into a $10 million loan and
security agreement with Oxford Finance LLC, or Oxford Finance, that
is secured by a lien covering substantially all of our assets,
excluding intellectual property. 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. As of
December 31, 2017, we were in compliance with all the covenants. If
we default under the loan agreement, the lenders may accelerate all
of our repayment obligations and take control of our pledged
assets, potentially requiring us to renegotiate our agreement on
terms less favorable to us or to immediately cease operations.
Further, if we are liquidated, the lender’s right to
repayment would be senior to the rights of the holders of our
common stock and preferred stock to receive any proceeds from the
liquidation. The lenders could declare a default upon the
occurrence of any event that they interpret as a material adverse
change as defined under the loan agreement, thereby requiring us to
repay the loan immediately or to attempt to reverse the declaration
of default through negotiation or litigation. Any declaration by
the lenders of an event of default could significantly harm our
business and prospects and could cause the price of our common
stock to decline. If we raise any additional debt financing, the
terms of such additional debt could further restrict our operating
and financial flexibility.
We have a history of losses, and we anticipate that we will
continue to incur losses in the future; our auditors have included
in their audit report an explanatory paragraph as to substantial
doubt as to our ability to continue as a going
concern.
We have experienced net losses every year since our inception
and, as of December 31, 2017, had an accumulated deficit of
$111,053,637. Our auditors have included in their audit report a
“going concern” explanatory paragraph as to substantial
doubt as to our ability to continue as a going concern that assumes
the realization of our assets and the satisfaction of our
liabilities and commitments in the normal course of business. Until
such time as we have completed more than one license agreement for
our technology, and assuming we have sufficient funding from such
licenses and financing transactions to continue to sustain
operations, we anticipate continuing to incur substantial
additional losses over at least the next several years due to,
among other factors, expenses related to the following: continuing
Phase I clinical trials 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, anticipated research and development activities and the
general and administrative expenses associated with each of these
activities. We have not yet commercialized any product candidates.
Our ability to attain profitability will depend upon our ability to
enter into material revenue generating license arrangements,
develop and commercialize products that are effective and
commercially viable, to obtain regulatory approval for the
manufacture and sale of our products and to license or otherwise
market our products successfully. We may never achieve
profitability, and even if we do, we may not be able to sustain
being profitable. If we are unable to obtain additional capital we
may be forced to license, sell or terminate our activities with
respect to promising technologies which may require us to agree to
disadvantageous terms that will prevent us from realizing the
potential value from the results of our efforts and
expenditures.
-14-
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.
-15-
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.
-16-
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.
-17-
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 only have a limited number of employees to manage and operate
our business.
As
of December 31, 2017, we had a total of 11 full-time employees. Our
focus on limiting cash utilization requires us to manage and
operate our business in a highly efficient manner. We cannot assure
you that we will be able to retain adequate staffing levels to run
our operations and/or to accomplish all the objectives that we
otherwise would seek to accomplish.
We depend heavily on our executive officers, directors, and
principal consultants and the loss of their services would
materially harm our business.
We
believe that our success depends, and will likely continue to
depend, upon our ability to retain the services of our current
executive officers, directors, principal consultants and others. In
addition, we have established relationships with universities,
hospitals and research institutions, which have historically
provided, and continue to provide, us with access to research
laboratories, clinical trials, facilities and patients. The loss of
the services of any of these individuals or institutions would have
a material adverse effect on our business.
Our internal computer systems, or those of our third-party service
providers, licensees, licensors, collaborators or other contractors
or consultants, may fail or suffer security breaches, which could
result in a material disruption in our business and
operations.
Despite
the implementation of security measures, our internal computer
systems and those of our current and future service providers,
licensees, licensors, collaborators and other contractors and
consultants are vulnerable to damage from computer viruses,
unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. While we are not aware
of any such material system failure, accident or security breach to
date, if such an event were to occur and cause interruptions in our
operations, it could result in a material disruption of our
development programs and our business operations. For example, the
loss of clinical trial data from completed, on-going or future
clinical trials could result in delays in our regulatory approval
efforts and significant costs to recover or reproduce the data.
Likewise, we rely on third parties to manufacture our drug
candidates and conduct clinical trials, and similar events relating
to their computer systems could also have a material adverse effect
on our business. To the extent that any disruption or security
breach were to result in a loss of, or damage to, our data or
applications, or inappropriate disclosure of confidential or
proprietary information, we could incur liabilities and the further
development and commercialization of our product candidates could
be delayed.
-18-
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.
-19-
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.
-20-
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 April 2, 2018, we were the exclusive licensee or sole
assignee of 14 granted United States patents, 3 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.
-21-
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.
-22-
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.
-23-
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.
-24-
Risks Related to our Common Stock
The Securities and Exchange Commission (“SEC”) is
conducting an investigation and examination pursuant to Section
8(e) of the Securities Act, relating to certain of the
Company’s registration statements (and amendments thereto)
which could negatively affect the perception of the Company, the
price of our common stock, and the ability to raise capital on
attractive terms, if at all.
On January 29,
2018, the Company received notice that the SEC is conducting an
investigation and examination pursuant to Section 8(e) of the
Securities Act, relating to certain of the Company’s
registration statements (and amendments thereto) which could
negatively affect the price of our common stock and ability to
raise capital on attractive terms, if at all. On February 2,
2018, the SEC followed up with a subpoena to produce documents by
April 9, 2018, in connection with its investigation. The Company
intends to cooperate fully with the SEC’s examination.
At this time the Company cannot predict when such
investigation will be complete or what the SEC findings would be.
The Company cannot predict how the current investigation or
its eventual outcome will affect how the Company
is perceived by the market, potential partners and
potential investors. The Company expects that it may not be able to
file new registration statements or use existing registration
statements until the SEC has completed its investigation. Without
an effective registration statement or ability to file new
registration statements, the options for the Company being able to
raise capital will be limited to private investments, if any, which
could be more dilutive to the Company’s stockholders than a
registered offering. Without the ability to raise capital on
attractive terms, if at all, and assuming the Company is unable to
license or sell any of its technologies to raise non-dilutive
capital in the next few months, the Company 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 intellectual property and/or sale of assets. Any or
all of these actions, if taken, could jeopardize the value of
existing assets, the Company, and ability to continue as a going
concern, as further discussed in Item 7. “-Liquidity and
Capital Resources” and in Note
1. “Nature of Operations and Basis of Presentation” in
the Notes to the Consolidated Financial
Statements.
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:
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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;
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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;
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prohibiting
cumulative voting in the election of directors, which would
otherwise allow for less than a majority of stockholders to elect
director candidates;
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●
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limiting
the ability of stockholders to call special meetings of the
stockholders;
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prohibiting
stockholder action by written consent and requiring all stockholder
actions to be taken at a meeting of our stockholders;
and
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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.
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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 and
Series M Preferred Stock; these rights may have a negative effect
on the value of shares of our common stock.
As
of April 2, 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 Preferred Stock and Series M Convertible
Preferred Stock (the “Series M 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, and Series M 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, and $300 per share or approximately $1.5
million for the Series M Preferred Stock.
-25-
We may not be able to maintain compliance for continued listing on
The NASDAQ Capital Market and a delisting of our stock could make
it more difficult for investors to sell their shares
Our
common stock was approved for listing on The NASDAQ Capital Market in August 2016 where
it continues to be listed. The listing rules of The NASDAQ Capital Market require the Company
to meet certain requirements. These continued listing standards
include specifically enumerated criteria, such as:
●
a
$1.00 minimum closing bid price;
●
stockholders’
equity of $2.5 million;
●
500,000 shares
of publicly-held common stock with a market value of at least $1
million;
●
300
round-lot stockholders; and
●
compliance with
The NASDAQ Capital Market’s corporate governance
requirements, as well as additional or more stringent criteria that
may be applied in the exercise of The NASDAQ Capital Market’s
discretionary authority.
On March 5, 2018, we received a letter from the
Listing Qualifications Department of The NASDAQ Capital Market
notifying us that the Company has regained compliance with Nasdaq
Listing Rule 5550(a)(2) as a result of maintaining the $1.00
minimum closing bid price for at least ten trading days prior to
the March 5, 2018 deadline for continued listing. The Company
regained compliance with the minimum bid price maintenance
requirement as a result of completing, on February 16, 2018, the
Continued Listing Reverse Split. We had previously received written
notification from The NASDAQ Capital Market regarding the
Company’s non-compliance with the minimum bid price
requirements set forth in Nasdaq Listing Rule 5550(a)(2) and we
were afforded 180 calendar days, or until March 5, 2018, for the
Company to regain compliance with Nasdaq Listing Rule 5550(a)(2).
As a result of regaining compliance with the minimum bid price, The
NASDAQ Capital Market has informed us that this matter is now
closed. There is no guarantee that we will continue to
successfully maintain compliance with the minimum bid
price.
Continued listing
is also contingent on our continued compliance with all other
listing requirements other than for the minimum bid price. As of
December 31, 2017, our stockholders’ equity was $1,130,440,
which was approximately $1,369,560 below the continued listing
maintenance requirement of stockholders’ equity of $2.5
million. In February 2018, we were able to raise $2.7 million in
additional capital. However, there can be no assurance that The
NASDAQ Capital Market will give us credit for financing
transactions that we have been able to achieve subsequent to
December 31, 2017, to enable continued listing on The NASDAQ
Capital Market.
If we
fail to comply with The NASDAQ
Capital Market’s continued listing standards, we may be
delisted and our common stock will trade, if at all, only on the
over-the-counter market, such as the OTC Bulletin Board or OTCQX
market, and then only if one or more registered broker-dealer
market makers comply with quotation requirements. In
addition, delisting of our common stock could depress our stock
price, substantially limit liquidity of our common stock and
materially adversely affect our ability to raise capital on terms
acceptable to us, or at all.
Finally, delisting
of our common stock would likely result in our common stock
becoming a “penny stock” under the Exchange
Act. The principal result or effect of being designated
a “penny stock” is that securities broker-dealers
cannot recommend the shares but must trade it on an unsolicited
basis. Penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from those rules,
to deliver a standardized risk disclosure document prepared by the
SEC, which specifies information about penny stocks and the nature
and significance of risks of the penny stock market. A
broker-dealer must also provide the customer with bid and offer
quotations for the penny stock, the compensation of the
broker-dealer and sales person in the transaction, and monthly
account statements indicating the market value of each penny stock
held in the customer’s account. In addition, the penny stock
rules require that, prior to a transaction in a penny stock not
otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser’s
written agreement to the transaction. These disclosure requirements
may have the effect of reducing the trading activity in the
secondary market for shares that become subject to those penny
stock rules. Under such circumstances, shareholders may find it
more difficult to sell, or to obtain accurate quotations, for our
common stock, and our common stock would become substantially less
attractive to certain purchasers such as financial institutions,
hedge funds and other similar investors.
Future sales of our securities, or the perception in the markets
that these sales may occur, could depress our stock
price.
Additional equity financings or other share
issuances by us, including shares issued in connection with
strategic alliances and corporate partnering transactions, could
adversely affect the market price of our common stock. As of April
2, 2018, we had 5,477,488 shares held by our existing shareholders
available for resale pursuant to Rule 144 or resale registration
statements, upon conversion of Series D Preferred Stock, Series E
Preferred Stock, Series I Preferred Stock, Series J Preferred
Stock, Series K Preferred Stock and Series L Preferred Stock, and
an additional 666,667 shares could become available for resale in
August 2018 pursuant to Rule 144, or sooner if pursuant to a resale
registration statement, upon conversion of Series M 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.
-26-
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
April 2, 2018, represents approximately 45% 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
April 2, 2018, we had 8,961,840 shares of common stock issued and
outstanding. Up to an additional 6,144,155 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; and Series M Preferred
Stock; 1,278,243 shares issuable upon exercise of warrants at a
weighted average price of $8.12; 951,161 shares upon exercise of
all outstanding options to purchase our common stock at a weighted
average price of $13.98; and 34,247 shares issuable upon vesting of
restricted stock units granted, resulting in a total of up to
17,369,646 shares that may be issued and outstanding. The issuance
of any and all of the 8,407,806 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.
-27-
If our common stock is not listed on a national securities
exchange, compliance with applicable state securities laws may be
required for subsequent offers, transfers and sales of the shares
of common stock offered hereby.
The securities offered hereby are being offered
pursuant to one or more exemptions from registration and
qualification under applicable state securities laws. Because our
common stock is listed on The NASDAQ Capital Market, we are not required to
register or qualify in any state the subsequent offer, transfer or
sale of the common stock. If our common stock is delisted from The
NASDAQ Capital Market and is not eligible to be listed on another
national securities exchange, subsequent transfers of the shares of
our common stock offered hereby by U.S. holders may not be exempt
from state securities laws. In such event, it will be the
responsibility of the holder of shares or warrants to register or
qualify the shares for any subsequent offer, transfer or sale in
the United States or to determine that any such offer, transfer or
sale is exempt under applicable state securities
laws.
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.
Item 1B.
|
Unresolved Staff Comments.
|
None
Item 2.
|
Properties.
|
In
September 2015 we entered into a lease agreement with AGP Sorrento
Business Complex, L.P. (the “Lease”) 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 early February 2016. Monthly rent
commenced upon occupancy at $2.38 per square foot, totaling
$35,631 per month in 2016, increased 3% to $36,700 per month in
2017, and escalate at an annual rate of 3% a year over the six-year
term of the lease as set forth in the Lease.
Item 3.
|
Legal Proceedings.
|
On
January 29, 2018, the Company received notice that the SEC was
conducting an investigation and examination pursuant to Section
8(e) of the Securities Act relating to certain of the
Company’s registration statements (and amendments thereto).
The Company intends to cooperate fully with the SEC’s
examination.
Item 4.
|
Mine Safety Disclosures.
|
Not applicable.
-28-
PART II
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.
|
Our
common stock traded on the OTCQB until August 17, 2016, on which
date our common stock began trading on The NASDAQ Capital Market
under the symbol “MBVX”. The following table sets forth
the high and low sales prices for our common stock for each
quarterly period within the two most recent fiscal years. All stock
prices included in the following table are adjusted for the 1 for
7.4 reverse stock split which occurred on August 16, 2016 and the
1-for-3 reverse stock split on February 16, 2018.
|
High
|
Low
|
2017
|
|
|
Quarter
ended March 31, 2017
|
$10.76
|
$6.30
|
Quarter
ended June 30, 2017
|
$7.80
|
$4.05
|
Quarter
ended September 30, 2017
|
$4.37
|
$1.28
|
Quarter
ended December 31, 2017
|
$2.91
|
$1.72
|
2016
|
|
|
Quarter
ended March 31, 2016
|
$19.42
|
$9.10
|
Quarter
ended June 30, 2016
|
$19.20
|
$10.43
|
Quarter
ended September 30, 2016
|
$18.15
|
$10.77
|
Quarter
ended December 31, 2016
|
$13.50
|
$9.30
|
Holders
As
of March 30, 2018, there were approximately 105 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.
Dividends
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.
Securities Authorized for Issuance under Equity Compensation
Plans
The
following table provides certain information with respect to all
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 Plan (Excluding Securities Reflected
in Column (a)
|
Equity
compensation plans approved by security holders
|
953,937
|
$13.97
|
1,521,481
|
Equity
compensation plans not approved by security holders
|
—
|
N/A
|
—
|
Total
|
953,937
|
$13.97
|
1,521,481
|
Item 6.
|
Selected Financial Data.
|
The
information under this Item is not required to be provided by
smaller reporting companies.
-29-
Item 7.
|
Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
|
You
should read the following discussion and analysis in conjunction
with “Item 8. Financial Statements and Supplementary
Data” included in this Annual Report on Form 10-K, or
Annual Report. Operating results are not necessarily indicative of
results that may occur in future periods.
This
discussion and analysis contains forward-looking statements that
involve several risks, uncertainties and assumptions. Actual events
or results may differ materially from our expectations. Important
factors that could cause actual results to differ materially from
those stated or implied by our forward-looking statements include,
but are not limited to, those set forth in “Item 1A.
Risk Factors” in this Annual Report. All forward-looking
statements included in this Annual Report are based on information
available to us as of the time we file this Annual Report and,
except as required by law, we undertake no obligation to update
publicly or revise any forward-looking statements.
Reverse Stock Split and Listing
on The NASDAQ Capital Market
On
August 16, 2016, we filed a certificate of amendment to our Amended
and Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware in order to effectuate a reverse
stock split of our issued and outstanding common stock on a 1 for
7.4 basis, effective on August 16, 2016 (the “Reverse Stock
Split”). The Reverse Stock Split was effective with Financial
Industry Regulatory Authority (FINRA), and the Company’s
common stock began trading on The NASDAQ Capital Market at the open
of business on August 17, 2016. All
share and per share amounts, and number of shares of common stock
into which each share of preferred stock will convert, in the
financial statements and notes thereto have been retroactively
adjusted for all periods presented to give effect to the Reverse
Stock Split, including reclassifying an amount equal to the
reduction in par value of common stock to additional paid-in
capital.
Continued Listing Reverse Split
On
October 6, 2017, our stockholders approved a reverse stock split of
our issued and outstanding shares of common stock at a range of
between 1-for-2 and 1-for-20, with the specific ratio and effective
time of the reverse stock split to be determined by our Board. On
February 1, 2018, the Board approved a 1-for-3 reverse stock split,
or the Continued Listing Reverse Split; and, on February 16, 2018,
we implemented the Continued Listing Reverse Split effective with
the open of trading on The NASDAQ Capital Market on a
split-adjusted basis under the same trading symbol
“MBVX.” The primary intent of the Continued Listing
Reverse Split is to increase the market price of the
Company’s common stock in order to help ensure compliance
with The NASDAQ Capital Market’s $1.00 minimum closing bid
price continued listing maintenance requirement. On March 5, 2018,
we received a letter from the Listing Qualifications Department of
The NASDAQ Capital Market notifying us that the Company has
regained compliance with Nasdaq Listing Rule 5550(a)(2) as a result
of maintaining the $1.00 minimum closing bid price for at least ten
trading days prior to the March 5, 2018 deadline for continued
listing. All share amounts have been adjusted based on the
Continued Listing Reverse Split.
Business Overview
We are
a clinical-stage biotechnology company focused on the development
of antibody-based products to address unmet medical needs in the
treatment of cancer. MabVax has discovered a pipeline of
human monoclonal antibody products based on the protective immune
responses generated by patients who have been vaccinated against
targeted cancers with our proprietary vaccines. MabVax's lead
development program is centered around our HuMab-5B1 antibody,
which is fully human and discovered from the immune response of
cancer patients vaccinated with an antigen-specific vaccine during
a Phase I trial at Memorial Sloan Kettering Cancer Center, or
MSK. The antigen the antibody targets is expressed on
more than 90% of pancreatic cancers, and expressed in significant
percentages on small cell lung cancer, stomach, colon and other
cancers, making the antibody potentially broadly applicable to many
types of cancers. We have multiple antibody candidates,
discovered utilizing the same methodologies that are in preclinical
development.
Monoclonal
antibodies are produced from a single DNA sequence encoded into
multiple cells that all produce the same single antibody. We
generate our pipeline of antibody-based product candidates from
patients who have been vaccinated with proprietary vaccines
licensed from MSK. Our approach involves surveying the protective
immune response from many patients who were vaccinated with the
same vaccine to identify one or more optimal monoclonal antibody
candidates against a specific target on the surface of a cancer
cell. We believe this approach provides us with a novel
next-generation human antibody technology platform. We believe our
approach to antibody discovery allows us to identify antibody
candidates with superior performance characteristics while
minimizing many of the toxicity and off target binding drawbacks
(phenomenon occurring when antibodies bind to non-cancer cells) of
other discovery technologies.
-30-
Our
clinical development programs are centered around our HuMab-5B1
human antibody, which we have tested in 56 patients as a
monotherapy, in combination with chemotherapy, and conjugated to
radioisotopes in effort to establish safety and tolerability as
well as to assess therapeutic benefit for patients diagnosed with
pancreatic and other cancers. We will continue to enroll patients
in multiple ongoing Phase 1 clinical trials in the following
protocols: (1) As monotherapy in late stage patients who have
failed all other treatment options and have progressive disease;
(2) in combination with standard of care chemotherapy in newly
diagnosed treatment naïve patients; (3) as a
radioimmunotherapy (“RIT”) product which utilizes the
same antibody as a targeting agent and to which we attach a
radionuclide to provide localize cancer cell killing effect; and
finally (4) as an imaging agent, again using the same antibody to
which we attach a PET imaging agent to illuminate tumors and
metastatic sites.
MVT-5873 in combination with first line therapy for pancreatic
cancer patients
In the
Phase 1 study, MabVax’s MVT-5873, a fully human antibody, was
given in combination with nab-paclitaxel and gemcitabine to
patients newly diagnosed with CA19-9 positive pancreatic cancer. 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. All six patients in the
current cohort had measurable tumor reductions, with four patients
meeting the criteria for partial response (PR) and two patients
meeting the criteria for stable disease (SD). 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. We plan to enroll additional patients at this
dose to further explore safety and increase statistical
significance of results seen to date in a larger
population.
MVT-1075 radioimmunotherapy for pancreatic cancer
patients
On
February 28, 2018, we announced positive interim results from the
initial three-patient cohort of the Phase 1 clinical trial. Results
from the first three patients dosed in the initial cohort of this
dose escalation Phase 1 safety trial demonstrated that MVT-1075 is
reasonably well tolerated and accumulates 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 locally advanced or metastatic adenocarcinoma of the pancreas
(“PDAC”) or other CA19-9 positive malignancies
including colon and lung cancers. The primary objective is to
determine the maximum tolerated dose and safety profile in late
stage patients with recurring disease who have failed prior
therapies. Secondary objectives 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.
Exploration and Evaluation of Strategic Options
In
September 2017, we announced our engagement of Greenhill & Co.
(NYSE: GHL) to serve as an advisor to assist the Company in
exploring and evaluating strategic options with the goal of
maximizing stockholder value. Greenhill & Co.’s sole
mandate has been to provide MabVax with opportunities in exploring
and evaluating strategic options while continuing to identify new
opportunities. MabVax is currently in advanced discussions with
several potential strategic partners that could result in one or
more licensing and partnering transactions in the first half of
2018 of certain antibody assets for defined fields of use. However,
there is no guarantee that we will enter into binding agreements
with the parties introduced to us by Greenhill &
Co.
Post
potential transactions, we expect to retain rights to core aspects
of our antibody development program and intend to continue
developing these core assets using funds from one or more strategic
transactions. MabVax will focus on advancing its Phase 1 clinical
programs including MVT-5873 in combination with chemotherapy and
MVT-1075 as a radioimmunotherapy.
Our Growth and Core Business Strategy
Our
primary business strategy is to develop our early antibody product
candidates through proof of concept clinical trials, which may
represent either Phase I or Phase II clinical trials depending on
the program and extent of progress. Once through proof of concept
clinical trials, we will decide whether to license, partner or sell
those product candidates, or continue to develop the candidates
depending on several variables such as access to additional
capital, cost of later stage clinical trials, risk of such
development efforts, and the value derived from licensing,
partnering or selling those assets.
-31-
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 being treated with our therapeutic
antibody MVT-5873 as a monotherapy, which was evaluated for
safety and tolerability in patients with advanced pancreatic cancer
and other CA19-9 positive cancers, in a poster presentation at the
American Society of Clinical Oncology (ASCO) Annual Meeting on June
3, 2017. The Company highlighted that the single agent MVT-5837
appears safe and well tolerated in patients at biologically active
doses. Furthermore, all patients were evaluated by RECIST 1.1 for
tumor response, and the Company reported 11 patients achieved
stable disease in this dose escalation safety trial of 32
patients.
The
results of the Phase 1a trial with MVT-5873 indicate that this
fully-human antibody targeting CA19-9 cancers can be administered
at doses with acceptable safety and with a potentially positive
impact on disease. 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. At the maximum tolerated dose
(MTD) established in this trial, we have demonstrated an acceptable
safety margin for the antibody.
MVT-5873 in Combination with a Standard of Care
Chemotherapy – Based upon observations from the first
two cohorts of patients treated, the Company is continuing clinical
development of MVT-5873 in combination with gemcitabine and
nab-paclitaxal as a first line therapy for the treatment of
patients newly diagnosed with pancreatic cancer. MabVax has treated
six patients as of October 12, 2017 and is actively enrolling
additional patients with the objective of obtaining additional
safety and tumor response (RECIST 1.1) data. Dr. Eileen
O’Reilly, Associate Director of the David M. Rubenstein
Center for Pancreatic Cancer Research, attending physician, member
at Memorial Sloan Kettering Cancer Center and Professor of Medicine
at Weill Cornell Medical College, is the lead investigator in the
MVT-5873 Phase 1 clinical trial.
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. All six patients in the
current cohort had measurable tumor reductions, with four patients
meeting the criteria for partial response (PR) and two patients
meeting the criteria for stable disease (SD). 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. We plan to enroll additional patients at this
dose to further explore safety and increase statistical
significance of results seen to date in a larger
population.
MVT-2163 – as an Imaging Agent for Pancreatic
Cancer
We
reported results from our Phase 1a clinical trial of ImmunoPET
imaging agent, MVT-2163, in 12 patients with locally advanced or
metastatic adenocarcinoma of the pancreas (PDAC) or other CA19-9
positive malignancies in a poster presentation and podium talk at
the Society of Nuclear Medicine and Molecular Imaging (SNMMI)
Annual Meeting held in Denver, CO on June 10-14, 2017.
The
Phase 1a clinical trial of MVT-2163 Phase I trial was intended to
evaluate our next generation diagnostic PET imaging agent in
patients with locally advanced or metastatic adenocarcinoma of the
pancreas (PDAC) or other CA19-9 positive malignancies. MVT-2163
(89Zr-HuMab-5B1) combines the well-established PET imaging
radiolabel Zirconium-89 [89Zr] with the targeting specificity of
MVT-5873. We designed the trial to establish safety,
pharmacokinetics, biodistribution, optimal time to obtain the PET
image, and the amount of MVT-5873 to be administered as a blocking
dose prior to administration of MVT-2163 to obtain optimized PET
scan images.
As of
July 2017, 12 patients had been treated in this first-in-human
trial evaluating the safety and feasibility of MVT-2163 to image
pancreatic tumors and other CA19-9 positive malignancies. MVT-2163
was administered alone and in combination with MVT-5873 and was
well tolerated in all cohorts. The only toxicities were infusion
reactions that resolved on the day of the injection, with some
patients requiring standard supportive medication. We reported that
administering MVT-5873 prior to dosing MVT-2163 reduces liver
uptake facilitating detection of liver metastases. In addition, we
determined that the MVT-5873 cold antibody pre-dose does not
interfere with the uptake of MVT-2163 on cancer
lesions.
-32-
Uptake
of MVT-2163 was observed in primary tumors and metastases as early
as day two and continuously through day seven. Standard Uptake
Values (SUV), a measurement of activity in PET imaging, reached as
high as 101 in the study. The investigators reported that the 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 produced acceptable safety
tolerability, pharmacokinetics and biodistribution. MVT-2163 also
produced high quality PET images identifying both primary tumor and
metastatic sites. There was a promising correlation with diagnostic
CT that warrants further studies correlating these findings with
histopathology to assess the accuracy of MVT-2163 in identifying
smaller metastatic nodes below the detection level of standard CT
scans. The continual increase in high SUV values on cancer lesions
in this study supports the use of the Company’s MVT-1075
radioimmunotherapy product which utilizes the same antibody to
deliver a radiation dose for the treatment of patients with
pancreatic, lung and colon cancers.
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. Results
from the first three patients dosed in the initial cohort of this
dose escalation Phase 1 safety trial demonstrated that MVT-1075 is
reasonably well tolerated and accumulates 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 locally advanced or metastatic adenocarcinoma of the pancreas
(“PDAC”) or other CA19-9 positive malignancies
including colon and lung cancers. The primary objective is to
determine the maximum tolerated dose and safety profile in late
stage patients with recurring disease who have failed prior
therapies. Secondary objectives 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.
MVT-1075 combines
the demonstrated targeting specificity of the MVT-5873 antibody
with the proven clinical success of a low-energy radiation emitter,
177Lutetium [177Lu]. We dosed MVT-1075 in our first patient in June
2017. This Phase 1 first-in-human clinical trial is an open-label,
multi-center study evaluating the safety and efficacy of MVT-1075
in up to 22 patients with CA19-9 positive malignancies. The primary
objective is to determine the maximum tolerated dose and safety
profile in patients with recurring disease who have failed prior
therapies. Secondary endpoints are to evaluate tumor response rate
and duration of response by RECIST 1.1, and to determine dosimetry
and pharmacokinetics. This dose-escalation study utilizes a
traditional 3+3 design that is commonly used by companies as a dose
escalation strategy typical for phase I trials for the treatment of
cancer. The investigative sites are Honor Health in Scottsdale,
Arizona, and Memorial Sloan Kettering Cancer Center in New York
City.
In
April 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 an important new therapeutic agent
in the treatment of pancreatic, colon and lung cancers. Supporting
the MVT-1075 RIT clinical investigation are the Company's
successful MVT-5873 and MVT-2163 Phase 1a safety and target
specificity data which were reported earlier this year at the
annual meetings of the American Society for Clinical Oncology
(ASCO) and the Society for Nuclear Medicine and Molecular Imaging
(SNMMI), respectively. The combined results from 50 patients in the
Phase 1 MVT-5873 and MVT-2163 studies established safety and
provided significant insight into drug biodistribution and an
optimal dosing strategy, which the Company has incorporated into
the MVT-1075 program.
Plan for 2018
Based
on inquiries from third parties regarding their interest in MabVax
assets and clinical progress to date with MVT-5873, MVT-1075, and
MVT-2163, and with the assistance of investment advisor Greenhill
& Co., we expect to be able to decide on one or more licensing
and/or partnering opportunities for certain fields of use of our
technology in the first half of 2018.
We
currently intend to continue clinical development of MVT-5873 in
combination with gemcitabine and nab-paclitaxal in first line
therapy for the treatment of patients newly diagnosed with
pancreatic cancer. We have treated two cohorts of patients for a
total of six patients through September 22, 2017 in this study with
promising achieved results to date; and plan to continue enrollment
of patients with the objective of confirming early observations
seen to date.
-33-
We
currently plan to continue clinical development of MVT-1075 for the
treatment of locally advanced or metastatic pancreatic cancer
patients, by completing additional cohorts of patients in a dose
escalation safety trial to continue to assess the safety and
potential efficacy of this treatment, and expect to report results
from the first cohort of patients treated in the first half of
2018.
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.
-34-
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
|
2016to 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.
-35-
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.
-36-
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.
-37-
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 Continued Listing Reverse Split, 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 Continued Listing Reverse Split 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.
-38-
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.
-39-
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.
-40-
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 7, “Convertible Preferred Stock, Common Stock
and Warrants” in the Notes to Consolidated Financial
Statements.
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.
-41-
Off-Balance Sheet Arrangements
We
have no material off-balance sheet arrangements as defined in
Regulation S-K 303(a)(4)(ii).
Item 7A.
|
Quantitative and Qualitative Disclosures About Market
Risk.
|
We
do not hold any derivative financial instruments, commodity-based
instruments or other long-term debt obligations.
Item 8.
|
Financial Statements and Supplementary Data.
|
All
information required by this item is included in Item 15 of
Part IV of this Annual Report and is incorporated into this item by
reference.
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
|
None
Item 9A.
|
Controls and Procedures.
|
a) Disclosure Controls and Procedures
Our principal executive officer and principal financial officer
evaluated the effectiveness of our disclosure controls and
procedures as of December 31, 2017. The term “disclosure
controls and procedures,” as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”),
means controls and other procedures of a company that are designed
to ensure that information required to be disclosed by a company in
the reports that it files or submits under the Exchange Act, is
recorded, processed, summarized and reported, within the time
periods specified in the SEC’s rules and forms.
Management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable
assurance of achieving their objectives and management necessarily
applies its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Disclosure controls and
procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange
Act is accumulated and communicated to the company’s
management, including our principal executive and principal
financial officer, as appropriate to allow timely decisions
regarding required disclosure. Based on that evaluation, including
review by the Audit Committee of a reportable event on a Current
Report on Form 8-K which was untimely but eventually filed with the
SEC, our principal executive officer and principal financial
officer concluded that our disclosure controls and procedures were
effective, at the reasonable assurance level, in ensuring that
information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
SEC's rules and forms.
-42-
b) Management’s Report on Internal Control over Financial
Reporting
Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting for our company. Internal
control over financial reporting is defined in
Rule 13a-15(f) and 15d-15(f) promulgated under the
Exchange Act, as a process designed by, or under the supervision
of, a company’s principal executive and principal financial
officer and effected by the our Board of Directors, management and
other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with GAAP, and
includes those policies and procedures that:
(1)
pertain to the
maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of
the company;
(2)
provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP, and
that receipts and expenditures of the company are being made in
accordance with authorizations of management and directors of the
company; and
(3)
provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the company’s assets that
could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Projections of
any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate. Management recognizes that any controls
and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving their objectives and
management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible enhancements to controls and
procedures.
We conducted an evaluation of the effectiveness of
internal control over financial reporting based on the framework
in Internal
Control — Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation,
our principal executive officer and principal financial officer
conclude that, at December 31, 2017, our internal controls
over financial reporting were effective.
As part of our evaluation, we took into consideration that the
Company had received notice on January 29, 2018, that the SEC is
conducting an investigation and examination pursuant to Section
8(e) of the Securities Act, relating to certain of the
Company’s registration statements (and amendments
thereto). The Company intends to cooperate fully with the
SEC’s examination and we have also considered the SEC’s
letter when reviewing and reexamining our internal control
processes. While we are unaware of the SEC’s focus, which may
have nothing to do with our internal controls over financial
reporting, we nonetheless re-examined our process for reviews and
filings of registration statements, and the financial statements
included therein, which involves extensive reviews by legal counsel
and our audit committee, evaluations by consultants who review our
corporate procedures and internal controls, and reviews and
approvals of terms of financing and registration documents by our
Board of Directors. At this time, the Company cannot predict
when such investigation will be complete or what the SEC findings
would be. In the event that the investigation does involve our
internal controls over financial reporting, the Company’s
principal executive officer and principal financial officer will
conduct a reevaluation of the Company’s internal controls
over financial reporting.
This
Annual Report does not include an attestation report of the
Company’s independent registered public accounting firm
regarding internal control over financial reporting.
Management’s report was not subject to attestation by the
Company’s independent registered public accounting firm
pursuant to rules of the Securities and Exchange Commission that
permit the Company to provide only management’s report in
this Annual Report.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
As
required by Rule 13a-15(d) of the Exchange Act, our
management, including our principal executive officer and our
principal financial officer, conducted an evaluation of the
internal control over financial reporting to determine whether any
changes occurred during the year ended December 31, 2017 that
have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting. Based on
that evaluation, our principal executive officer and principal
financial officer concluded that there were no such changes during
the year ended December 31, 2017.
Item 9B.
|
Other Information.
|
None.
-43-
PART
III
Item 10.
|
Directors, Executive Officers and Corporate
Governance.
|
Board of Directors
Name
|
|
Position
|
|
|
|
J. David Hansen
|
|
Chairman of the Board of Directors, President and Chief Executive
Officer
|
|
|
|
Kenneth M. Cohen
|
|
Director (1)(2)(3)(4)
|
|
|
|
Jeffrey F. Eisenberg
|
|
Director (2)(3)(4)
|
|
|
|
Philip O. Livingston, M.D.
|
|
Director, Chief Science Officer
|
|
|
|
Paul V. Maier
|
|
Director (1)(3)(4)
|
|
|
|
Thomas C. Varvaro
|
|
Director (1)(2)(3)(4)
|
(1)
Member of our audit committee
(2)
Member of our compensation committee
(3)
Member of our nominating and governance
committee
(4)
Independent member of the board
The
following is a summary of the background of each of our
directors.
J. David
Hansen, 66, serves as our
President, Chief Executive Officer (“CEO”), and as
Chairman of our Board of Directors and, prior to the merger with
Telik, Inc. on July 8, 2014 (the “Merger”), served as
President, CEO, and Chairman of the Board of Directors of MabVax
Therapeutics, Inc. after co-founding the Company in 2006. Mr.
Hansen is an experienced biopharmaceutical executive with more than
30 years of industry experience. He has held senior management
roles in both private start-up companies as well as small to
mid-sized public companies. His senior level experience includes
executive management, finance and accounting, corporate
development, sales and marketing. During his career, Mr. Hansen has
executed a wide variety of in and out licensing agreements,
research and development collaborations, joint ventures,
divestitures, and acquisitions. Mr. Hansen has developed expertise
in the therapeutic areas of immunology, oncology, and infectious
disease. Mr. Hansen gained executive management experience at
several life sciences companies prior to co-founding the Company
that make him particularly suited for his leadership role in the
Company. For example, he was a corporate officer of Avanir
Pharmaceuticals where he held the titles of Vice President of
Commercial Development, Senior Vice President of Corporate
Development, and President and Chief Operations Officer of the
Avanir subsidiary Xenerex Biosciences. Prior to Avanir, Mr. Hansen
served in multiple roles at Dura Pharmaceuticals including National
Sales Director, Director of Marketing, and Director of Business
Development. He has additional management experience with Merck
& Co. (Schering-Plough), Key Pharmaceuticals, and Bristol Myers
Squibb. We believe that Mr. Hansen’s extensive experience in
leadership roles with public and private pharmaceutical companies
qualifies him to serve as the Chairman of our Board of Directors
and as our President and Chief Executive
Officer.
-44-
Kenneth M.
Cohen, 62, serves as a
member of our Board of Directors and, prior to the Merger, served
as a member of the Board of Directors of MabVax Therapeutics, Inc.
since July of 2014. Since 2007, Mr. Cohen has served
either as a board member, executive officer or advisor to various
companies, entrepreneurs and investors in the life sciences
area. From January 2011 to August 2014, he served as a
member of the Board of Directors of Adamis Pharmaceuticals
Corporation (NASDAQ: ADMP). He was a co-founder of publicly
held Somaxon Pharmaceuticals, served as its President and CEO from
2003 through 2007 and continued as a director until June 2008.
Prior to Somaxon Pharmaceuticals, Mr. Cohen gained executive
management and board experience through various executive
positions. He was President and CEO of Synbiotics
Corporation; Executive Vice President and Chief Operating Officer
for Canji Incorporated, a human gene-therapy company that was
acquired by Schering-Plough Corporation; Vice President of Business
Affairs at Argus Pharmaceuticals, Inc.; and Vice President of
Marketing and Business Development for LifeCell
Corporation. Mr. Cohen began his career at Eli Lilly and
Company where, among many different responsibilities over ten
years, he directed business planning for the Medical Instrument
Systems Division and managed the launch of Prozac. He received an
A.B. in biology and chemistry from Dartmouth College and an M.B.A.
from the Wharton School of the University of Pennsylvania. We
believe that Mr. Cohen’s 20 years of experience serving as an
executive officer including chief executive officer of several life
sciences companies, and serving as a member of the board of several
life sciences companies qualifies him to serve as a member of the
Board of Directors.
Jeffrey F. Eisenberg,
52, has served as a member of our Board of Directors
since February 2016. Mr. Eisenberg has served
in a variety of senior management positions, and has developed
significant experience in the areas of corporate transactions,
strategic alliances, product development, commercialization,
manufacturing and talent management. Since December
2016, Mr. Eisenberg has served as Chief Executive Officer and since
July 2016 as a member of the board of directors of Xenetic
Biosciences, Inc. (NASDAQ: XBIO) a biopharmaceutical company
developing next-generation biologic drugs and novel oncology
therapeutics. From November 1998 to December 2015 Mr. Eisenberg
held various executive management positions including President,
CEO and a board member of Noven Pharmaceuticals, Inc., the U.S.
prescription pharmaceutical division of Hisamitsu Pharmaceutical
Inc., a Japanese pharmaceutical company and the world's largest
manufacturer of transdermal drug patches. Mr. Eisenberg led
the post-acquisition integration of JDS Pharmaceuticals, a private
specialty pharmaceutical company purchased by Noven in 1997, as
well as the integration of Noven and Hisamitsu following the 2009
acquisition. From 2007 to August 2014 Mr. Eisenberg also
served as President of Novogyne Pharmaceuticals, a Women's Health
commercial joint venture between Noven and Novartis Pharmaceuticals
Corporation. Mr. Eisenberg was appointed President and Chief
Executive Officer of Noven following Hisamitsu's acquisition of
Noven. Prior to Noven Pharmaceuticals, Inc., Mr.
Eisenberg gained extensive legal experience serving as Associate
General Counsel and then as Acting General Counsel of IVAX
Corporation, at the time a publicly-traded pharmaceutical company
with global operations. Prior to serving at IVAX, Mr. Eisenberg was
a lawyer in the corporate securities department of
the Florida law firm of Steel Hector & Davis, where
he began his professional career in 1990.
Mr.
Eisenberg holds a BS, Economics degree from the Wharton School of
the University of Pennsylvania, and a JD degree
from Columbia University Law School. We
believe that Mr. Eisenberg’s extensive experience in
corporate transactions, product development, corporate governance
and executive leadership, qualifies him to serve as a member of our
Board of Directors.
Philip O. Livingston,
M.D., 75, serves as a
member of our Board of Directors and our Chief Science Officer and,
prior to the Merger, served as a member of the Board of Directors
and Chief Science Officer of MabVax Therapeutics, Inc. since 2012.
He received his M.D. degree from Harvard Medical School and was
Professor of Medicine in the Joan and Sanford Weill Medical College
at Cornell University and Attending Physician and Member in
Memorial Sloan Kettering Cancer Center where he treated melanoma
patients and ran the Cancer Vaccinology Laboratory research lab for
over 30 years until his retirement from MSK October 1, 2011. Dr.
Livingston’s research focused on: identification of suitable
targets for immunotherapy of a variety of cancers, construction of
polyvalent conjugate vaccines specifically designed to augment
antibody responses against these targets, and identification of
optimal immunological adjuvants to further augment the potency of
these vaccines. He has over 108 publications and 4 issued and 3
pending patents concerning cancer vaccines. Recently, Dr.
Livingston helped establish MabVax Therapeutics, Inc., and another
biotech company, Adjuvance Technologies, Inc. MabVax supported two
randomized Phase II trials with these MSK polyvalent vaccines and
establishment of human monoclonal antibodies from the blood of
immunized patients. We believe that Dr. Livingston’s
extensive expertise in immunotherapy qualifies him to serve as a
member of our Board of Directors and our Chief Science
Officer.
Paul V. Maier, 70, joined our Board of
Directors in July 2014. Since 2007, Mr. Maier has served
as a member of the Board of Directors of International Stem Cell
Corporation (OTCQB: ISCO) and currently serves as the Chairperson
of its Audit Committee and as a member of its Compensation and
Governance Committees. Since 2012 Mr. Maier has served as Chairman
of the Audit Committee and a member of the Governance Committee of
the Board of Directors of Apricus Biosciences, Inc. (NASDAQ: APRI).
Since 2015, Mr. Maier has served as Chairman of the Audit Committee
and member of the Compensation Committee of the Board of Directors
of Ritter Pharmaceuticals (NASDAQ: RTTR). Mr. Maier also serves as
a Director of Biological Dynamics and Eton Pharmaceuticals, both
private life sciences companies. From 2009 to June 2014, Mr. Maier
served as the CFO of Sequenom, Inc., (acquired by Laboratory
Corporation of America Holdings). Prior to Sequenom, Inc., Mr.
Maier gained executive
management experience through various management positions that
make him suitable for membership on the Board of Directors of the
Company. For example, Mr. Maier served as
Senior Vice President and CFO of Ligand Pharmaceuticals, Inc.,
where he helped build Ligand from a venture stage company to a
commercial, integrated biopharmaceutical
organization. Prior to Ligand Pharmaceuticals, Inc., he
held various management and finance positions at ICN
Pharmaceuticals. Mr. Maier received his M.B.A. from Harvard
Business School and a B.S. from Pennsylvania State University. We
believe that Mr. Maier’s over 25 years of experience in life
sciences as a chief financial officer and serving on the board of
several life sciences public companies qualifies him to serve as a
member of the Board of Directors and as chair of the Audit
Committee.
-45-
Thomas
C. Varvaro, 48, has
served as a member of our Board of Directors since April
2015. Mr. Varvaro has served in several executive level
and board member positions at ChromaDex Corp. (NASDAQ:
CDXC) since January 2004, including Senior Vice President Finance
from October 2017 to January 2018, CFO from January 2004 to October
2017, Corporate Secretary from March 2006 to October 2017, and as a
member of the board of directors from March 2006 until May 2010. As
CFO of ChromaDex, Mr. Varvaro was responsible for overseeing all
aspects of ChromaDex’s accounting, information technology,
intellectual property management and human resources management.
Mr. Varvaro has extensive process-mapping and business process
improvement skills, along with a solid information technology
background that includes management and implementation experiences
ranging from custom application design to enterprise wide system
deployment. Mr. Varvaro also has hands-on experience in integrating
acquisitions and in new facility startups. In working with
manufacturing organizations, Mr. Varvaro has overseen plant
automation, reporting and bar code tracking implementations. Mr.
Varvaro also has broad legal experience in intellectual property,
contract and employment law. Prior to ChromaDex, Mr. Varvaro gained
substantial management experience in several positions that
make him suitable for membership on the Board of Directors of the
Company. For example, he was employed by Fast Heat Inc., a
Chicago, Illinois based Global supplier to the plastics, HVAC,
packaging, and food processing industries, where he began as
controller and was promoted to chief information officer and then
chief financial officer during his tenure. During his time there,
Mr. Varvaro was responsible for all financial matters including
accounting, risk management and human resources. Earlier in his
career Mr. Varvaro gained additional experience in other areas of
information technology and accounting roles. For
example, Mr. Varvaro was employed by Maple Leaf Bakery, Inc.,
Chicago, Illinois, during its rise to becoming a national leader in
specialty bakery products. During his tenure, Mr. Varvaro served in
information technology and accounting roles, helping to shepherd
the company from a single facility to national leader in specialty
food products. Mr. Varvaro has a B.S. in Accounting from University
of Illinois, Urbana-Champaign and is a Certified Public
Accountant. We believe Mr. Varvaro’s extensive
industry experience as an officer and director, as well as his
extensive financial and accounting training and management
experience qualify him to serve as a member of our Board of
Directors, and as an Audit Committee financial
expert.
Family Relationships
None
of our Directors are related by blood, marriage, or adoption to any
other Director, executive officer, or other key
employees.
Other Directorships
Other
than as disclosed above, none of the Directors of the Company are
also directors of issuers with a class of securities registered
under Section 12 of the Exchange Act (or which otherwise are
required to file periodic reports under the Exchange
Act).
Legal Proceedings
On
January 29, 2018, the Company received notice that the SEC was
conducting an investigation and examination pursuant to Section
8(e) of the Securities Act relating to certain of the
Company’s registration statements (and amendments thereto).
The Company intends to cooperate fully with the SEC’s
examination. We are not aware of any
other matter of our directors or officers being involved in any
legal proceedings in the past ten years relating to any matters in
bankruptcy, insolvency, criminal proceedings (other than traffic
and other minor offenses) or being subject to any of the items set
forth under Item 401(f) of Regulation S-K.
BOARD LEADERSHIP STRUCTURE
The
Board of Directors is currently chaired by the President and Chief
Executive Officer of the Company, Mr. Hansen. The Company believes
that combining the positions of Chief Executive Officer and
Chairman of the Board of Directors helps to ensure that the Board
of Directors and management act with a common purpose. Integrating
the positions of Chief Executive Officer and Chairman can provide a
clear chain of command to execute the Company’s strategic
initiatives. The Company also believes that it is advantageous to
have a Chairman with an extensive history with and knowledge of the
Company, and extensive technical and industry experience.
Notwithstanding the combined role of Chief Executive Officer and
Chairman, key strategic initiatives and decisions involving the
Company are discussed and approved by the entire Board of
Directors. In addition, meetings of the independent directors of
the Company are regularly held, which Mr. Hansen does not attend.
The Company believes that the current leadership structure and
processes maintains an effective oversight of management and
independence of the Board of Directors as a whole without separate
designation of a lead independent director. However, the Board of
Directors will continue to monitor its functioning and will
consider appropriate changes to ensure the effective independent
function of the Board of Directors in its oversight
responsibilities.
-46-
ROLE OF THE BOARD IN RISK OVERSIGHT
One
of the Board of Director’s key functions is informed
oversight of the Company’s risk management process. The Board
of Directors does not have a standing risk management committee,
but rather administers this oversight function directly through the
Board of Directors as a whole, as well as through various Board of
Directors standing committees that address risks inherent in their
respective areas of oversight. In particular, our Board of
Directors is responsible for monitoring and assessing strategic
risk exposure, including a determination of the nature and level of
risk appropriate for the Company. The Audit Committee considers and
discusses with management the Company’s major financial risk
exposures and related monitoring and control of such exposures as
well as compliance with legal and regulatory requirements. The
Nominating & Governance Committee monitors the effectiveness of
our corporate governance guidelines. The Compensation Committee
assesses and monitors whether our compensation policies and
programs have the potential to encourage excessive risk-taking. Any
findings regarding material risk exposure to the Company are
reported to and discussed with the Board of Directors.
INDEPENDENCE OF THE BOARD OF DIRECTORS AND ITS
COMMITTEES
|
After review of all relevant transactions or
relationships between each director and nominee for director, or
any of his or her family members, and the Company, its senior
management and its Independent Registered Public Accounting Firm,
the Board of Directors has determined that all of the
Company’s directors and the Company’s nominees for
director are independent within the meaning of the applicable
listing standards of The NASDAQ Capital Market, except Mr. Hansen, the Chairman of the Board of
Directors, Chief Executive Officer and President, of the Company
and Dr. Livingston, Chief Science Officer. As required under the
listing standards of The NASDAQ Capital Market, the Company’s independent directors meet
in regularly scheduled executive sessions at which only independent
directors are present. The Board of Directors met 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 each member
of each committee meets the applicable rules and regulations
regarding “independence” and that each member is free
of any relationship that would interfere with his individual
exercise of independent judgment regarding the
Company.
BOARD OF DIRECTORS COMMITTEES AND MEETINGS
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 April 2, 2018, the Audit Committee is
currently composed of three outside directors: Mr. Maier, Mr.
Cohen, and Mr. Varvaro. 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.
-47-
The Board of Directors periodically reviews
The NASDAQ Capital Market’s listing standards’ definition of
independence for Audit Committee members and has determined that
all members of the Company’s Audit Committee are independent
(as independence is currently defined in Rule 5605(c)(2)(A) of
The NASDAQ Capital Market’s listing standards and Rule 10A-3(b)(1) of the
Securities Exchange Act of 1934, as amended). The Board of
Directors has determined that Mr. Maier qualifies as an
“audit committee financial expert,” as defined in
applicable NASDAQ Capital Market and SEC rules. The Board of
Directors made a qualitative assessment of Mr. Maier’s level
of knowledge and experience based on several factors, including his
formal education and his service in executive capacities having
financial oversight responsibilities. These positions include Chief
Financial Officer, Senior Vice President, and member of the boards
of directors and audit committees of, several biotechnology and
genomics companies, pursuant to which he has experience preparing,
reviewing and supervising the preparation of financial reports. In
addition, Mr. Maier holds an M.B.A from Harvard Business School.
For further information on Mr. Maier’s experience, please see
his biography above.
COMPENSATION COMMITTEE
The
Compensation Committee of the Board of Directors, or the
Compensation Committee 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 April 2, 2018, the Compensation Committee
was composed of three outside directors: Mr. Cohen, Mr. Eisenberg,
and Mr. Varvaro. All members of the Compensation
Committee are independent (as independence is currently defined in
Rule 5605(a)(2) of The NASDAQ Capital Market’s
listing standards). The Compensation
Committee met 4 times and acted
once 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
No
member of our compensation committee has at any time been an
employee of ours. None of our executive officers serves as a member
of the Board of Directors or compensation committee of any entity
that has one or more executive officers serving as a member of our
Board of Directors or compensation committee.
NOMINATING & GOVERNANCE COMMITTEE
The
Nominating & Governance Committee of the Board of Directors,
the Nominating & Governance Committee, 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 April 2, 2018, the Nominating &
Governance Committee is currently composed of four outside
directors: Messrs. Cohen, Eisenberg, Maier and
Varvaro. All members of the Nominating &
Governance Committee are independent (as independence is currently
defined in Rule 5605(a)(2) of The NASDAQ Capital
Market’s listing standards). The
Nominating & Governance Committee met once 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.
-48-
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.
-49-
EXECUTIVE OFFICERS
The following table sets forth information regarding the
Company’s executive officers and key personnel.
Executive Officers:
Name
|
|
Position
|
J. David Hansen
|
|
Chairman of the Board of Directors, President and Chief Executive
Officer
|
|
|
|
Gregory P. Hanson, CMA, MBA
|
|
Chief Financial Officer
|
|
|
|
Paul W. Maffuid, Ph.D.
|
|
Executive Vice President of Research and Development
|
|
|
|
Paul Resnick, M.D., MBA
|
|
Vice President and Chief Business Officer
|
The following is a brief summary of the background of each of our
executive officers.
J. David
Hansen. Biographical
information regarding Mr. Hansen is provided above under Board of
Directors.
Gregory P. Hanson, CMA,
MBA, 71, serves as our CFO, and prior to the Merger served
as CFO of MabVax Therapeutics, Inc. since February of 2014. Mr.
Hanson has over 30 years serving as CFO/financial executive/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. From
November 2009 to November 2016, Mr. Hanson served as Advisory Board
Member of Menon International, Inc., and from October 2011 to
September 2016, served on the Life Sciences Advisory Board of
Brinson Patrick Securities, a boutique investment
bank. He also serves either as a board member, mentor or
confidential advisor to several other tech and life sciences
companies. Mr. Hanson is Past-President and 10-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 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
Mast Therapeutics (MSTX—NYSE MKT), and prior to Mast
Therapeutics 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 his career, Mr. Hanson has
completed approximately $1 billion in financing, licensing and
partnering arrangements. Mr. Hanson was a founding and 6-year
member of the Small Business Advisory Committee to the Financial
Accounting Standards Board, and has spoken at various national
conferences, industry organizations and panels on financing
strategy and mergers and acquisitions, and twice spoken to the
SEC’s Committee on Improvements to Financial
Reporting.
Mr.
Hanson has passed the examination for Certified Public Accountants
and is a Certified Management Accountant. He has an MBA
with distinction from the University of Michigan, and a BS in
Mechanical Engineering from Kansas State
University. From 2008 to September 2016, Mr. Hanson
maintained Series 7 & Series 63 securities
licenses.
Paul W. Maffuid, Ph.D.,
62, serves as Executive Vice President of Research and
Development. Dr. Maffuid joined the Company in July
2014. From 2011 to June 2014, he worked for AAIPHARMA
Services Corporation where he held various management positions
including Executive Vice President, Pharma Operations. His
responsibilities included formulation, process development,
technology transfer, stability and analytical services for clients
developing biologic and small molecule therapeutics. He was a
member of the Executive Team that transformed a declining business
into one of the world’s leading providers of integrated
development services for the biopharmaceutical
sector. Dr. Maffuid has been able to gain extensive
experience to qualify him in his executive leadership role over
research and development at the Company. For example,
prior to joining AAIPHARMA he was the founder of Biopharmalogics,
Inc. a consulting service providing Chemistry Manufacturing and
Controls (CMC) as well as Drug Metabolism-Pharmacokinetics (DMPK)
services for the development of pharmaceutical products which he
operated from 2008 to 2011. Earlier in his career Dr. Maffuid was
Senior Vice President of Irvine Pharmaceutical Services, Inc., and
Vice President of Pharmaceutical Development for Arena
Pharmaceuticals. While at Arena Pharmaceuticals Dr. Maffuid was a
member of the Executive Management team responsible for all CMC and
DMPK in support of discovery, development, and commercial
operations. He led the design and construction of a 40,000 sq. ft.
cGMP compliant pilot manufacturing facility. Dr. Maffuid had
management roles at Magellan Laboratories, Cabrillo Laboratories,
and Amylin Pharmaceuticals.
-50-
Paul F. Resnick, M.D., MBA,
61, serves as Vice President and Chief Business
Officer. Dr. Resnick joined the Company in March
2016. From January 2013 to March 2016 Dr. Resnick was
Senior Vice President, Business Development for Juventas
Therapeutics, where he was responsible for business and commercial
strategy and working with executive management overseeing corporate
clinical development, and financial and business
strategies. From February 2012 to December 2012, Dr.
Resnick was an advisor to several companies in the life sciences
area. From January 2008 to January 2012 he was Vice
President, Business Development for Intellikine, Inc. (acquired by
Takeda Pharmaceuticals), responsible for managing alliances and
leading the business development strategy that resulted in securing
an acquisition by Takeda Pharmaceuticals. During the
course of Dr. Resnick’s career, he has been able to gain
extensive experience to qualify him in his executive leadership
role for business development for the Company. For
example, Dr. Resnick held Senior Director positions for Worldwide
Business Development, and for Strategic Alliances, at Pfizer Inc.,
where he was responsible for networking with leaders from
biotechnology companies, universities, and research institutions to
gain early insights into emerging technologies, and for leading
technical and business diligence, negotiations, and alliance
management of science and technology initiatives for Pfizer’s
Biotechnology and Bio-innovation Center. Prior to Pfizer
Dr. Resnick held Director and Senior Director positions at Rinat
Neuroscience (acquired by Pfizer), Intermune, Inc. and Roche
Pharmaceuticals. Dr. Resnick has an M.D. from The
Medical College of Wisconsin and an MBA from The Wharton School of
the University of Pennsylvania.
Code of Conduct
We
have adopted the MabVax Therapeutic Holdings, Inc. Code of Conduct,
a code of ethics with which every person who works for us is
expected to comply, including without limitation our principal
executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar
functions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors and executive officers, and persons who own more than
ten percent of a registered class of our equity securities, to file
with the SEC initial reports of ownership and reports of changes in
ownership of our common stock and our other equity securities.
Officers, directors and greater than ten percent stockholders are
required by SEC regulations to furnish us with copies of all
Section 16(a) forms they file.
Based
solely on a review of the copies of such forms furnished to us
during 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.
-51-
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)
|
Mr. Resnick was appointed as Vice President and Chief Business
Officer of the Company in March 2016.
|
(2)
|
The amounts in this column represent the aggregate full grant date
fair value of restricted stock units (RSUs) granted. Such RSU
awards were granted during 2017 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 Listing Reverse Split and the
Continued Listing Reverse Split. Each option grant is shown
separately for each Named Executive Officer. The vesting schedule
for each option grant is shown following this table.
-52-
|
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)
|
Mr. Resnick was appointed as Vice President and Chief Business
Officer of the Company in March 2016.
|
-53-
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.
-54-
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.
-55-
Resnick Employment Agreement
On
March 16, 2016, we entered into an employment agreement with Paul
F. Resnick, M.D. (the “Resnick Employment
Agreement”). The Resnick Employment Agreement
provides that Dr. Resnick’s employment is
“at-will” and is not for any specified term or length
of time. Under the terms of the Resnick Employment Agreement, Dr.
Resnick was entitled to receive an initial base salary of $265,000
which may be increased at the discretion of the Company. Dr.
Resnick is also entitled to an annual bonus of up to 30% of his
base salary. In connection with hiring Dr. Resnick, the Company
granted Dr. Resnick options to purchase up to 10,091 shares of the
Company’s common stock at an exercise price of
$38.85 per share and 15,136 shares of the Company’s
common stock at an exercise price of $16.44 per share under the
terms of the Amended and Restated 2014 Employee, Director and
Consultant Equity Incentive Plan.
The
Resnick Employment Agreement may be terminated upon death,
disability, with or without Cause (as defined by the Resnick
Employment Agreement) by the Company, with Good Reason (as defined
in the Resnick Employment Agreement), and upon a Change in Control
(as defined in the Resnick Employment Agreement) or at either
party’s election to terminate upon 30 days’ prior
written notice. In the event the Resnick Employment Agreement is
terminated as a result of Dr. Resnick’s death, Dr.
Resnick’s authorized representative shall be entitled to
receive all Accrued Obligations (as defined in the Resnick
Employment Agreement), full acceleration of vesting of all issued
and outstanding stock options, benefits for up to 1 year, any
unpaid annual bonus amounts and a pro rata bonus payment. In the
event the Resnick Employment Agreement is terminated by the Company
for Disability or without Cause, by Dr. Resnick for Good Reason, or
in connection with a Change in Control, Dr. Resnick would be
entitled to receive all Accrued Obligations, full acceleration of
vesting of all issued and outstanding stock options, unpaid bonus
amounts and a pro rata bonus payment, benefits for up to one year
or until Dr. Resnick obtains coverage through subsequent employment
(whichever is earlier) and severance payments equal to Dr.
Resnick’s annual base salary payable in 12 equal monthly
installments.
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.
-56-
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
|
*
**
|
Mr. Hoffman became a consultant after being a Board
member.
Dr. Ravetch was a consultant while he was a Board member and he has
continued to be a consultant after his Board membership
ended.
|
(1)
|
The amounts in this column represent the aggregate full grant date
fair values of stock options granted to each of the non-employee
directors computed in accordance with Accounting Standards
Codification 718, or ASC 718, “Compensation—Stock
Compensation,” excluding the effect of estimated forfeitures.
The amounts reported for these options may not represent the actual
economic values that the Company’s non-employee directors
will realize from these options, as the actual value realized will
depend on the Company’s performance, stock price and their
continued services.
|
(2)
|
Represents the aggregate grant date fair value of restricted stock
and restricted stock units granted in accordance with Accounting
Standards Codification 718, or ASC 718,
“Compensation—Stock Compensation.”
|
(3)
|
Dr. Livingston does not receive any cash compensation as a
director. Dr. Livingston’s employee compensation in
2017 consisted of $60,000 in cash compensation. In addition to his
employee compensation, Dr. Livingston was granted 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 will fully
vest on January 8, 2018
|
(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 will fully vest on January 8,
2018.
|
(7)
|
In addition to the options granted to all non-employee directors,
Mr. Cohen, Mr. Hoffman, Mr. Maier and 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.
|
(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.
|
-57-
Non-employee Director option awards and restricted stock units
outstanding at December 31, 2017 were:
Name of Director
|
Option Awards
|
Stock Awards
|
Philip
O. Livingston, M.D.
|
18,138
|
33,334
|
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.
-58-
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
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.
-59-
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
|
The
following table sets forth information known to us concerning the
beneficial ownership of our common stock for:
●
each person known by us to beneficially own more than 5% of our
common stock;
●
each of our directors;
●
each of our executive officers; and
●
all of our directors and executive officers as a
group.
Beneficial
ownership is determined in accordance with the rules and
regulations of the SEC. In general, a person is deemed to be the
beneficial owner of (i) any shares of the Company’s Common
Stock over which such person has sole or shared voting power or
investment power, plus (ii) any shares which such person has the
right to acquire beneficial ownership of within 60 days of the
above date, whether through the exercise of options, warrants or
otherwise. Percentage ownership calculations for beneficial
ownership are based on 8,961,840 shares outstanding as of April 2,
2018, adjusted as required by rules promulgated by the
SEC.
Name and Address of Beneficial Owner
|
Number of Shares of Common
Stock
|
Percentage of Common Stock
|
5% Stockholders
|
|
|
None
|
|
|
Directors and Executive Officers
|
|
|
J. David Hansen (1)
|
405,550
|
4.42%
|
Philip O. Livingston, M.D. (2)
|
108,999
|
1.21%
|
Gregory P. Hanson CMA (3)
|
134,723
|
1.50%
|
Kenneth M. Cohen (4)
|
54,953
|
*
|
Paul W. Maffuid, Ph.D. (5)
|
115,207
|
1.28%
|
Paul V. Maier (6)
|
49,527
|
*
|
Thomas C. Varvaro (7)
|
48,769
|
*
|
Jeffrey F. Eisenberg (8)
|
45,206
|
*
|
Paul Resnick M.D. (9)
|
16,210
|
*
|
All executive officers and directors as a group (9
persons)
|
979,143
|
10.52%
|
(1)
|
Includes 210,034 shares subject to options exercisable within 60
days of April 2, 2018, and 13,563 restricted stock units vesting
within 60 days of April 2, 2018.
|
(2)
|
Consists
of (i) 58,892 shares held by RTP Venture Fund, (ii) 25,953 shares
held by Philip O. Livingston, (iii) 574 shares held by the Joan L.
Tweedy 2011 Revocable Trust, or the Tweedy Trust, and (iv) 23,580
shares subject to options exercisable within 60 days of April 2,
2018 held by Philip O. Livingston. Voting and dispositive decisions
of RTP Venture Fund, LLC are made by Philip Livingston, and Philip
O. Livingston is a trustee of the Tweedy Trust. The address for RTP
Venture Fund, LLC is 156 E. 79th Street, Apt. 6C, New York, NY
10075.
|
(3)
|
Includes
17,988 shares subject to options exercisable within 60 days of
April 2, 2018, and 7,021 restricted stock units vesting within 60
days of April 2, 2018.
|
(4)
|
Includes
(i) 26,063 shares subject to options exercisable within 60 days of
April 2, 2018, 515 restricted stock units vesting within 60 days of
April 2, 2018 and (ii) 2,080 common stock warrants purchased in the
August 2016 financing transaction.
|
(5)
|
Includes
13,595 shares subject to options exercisable within 60 days of
April 2, 2018, and 5,015 restricted stock units vesting within 60
days of April 2, 2018.
|
(6)
|
Includes
26,063 shares subject to options exercisable within 60 days of
April 2, 2018, and 515 restricted stock units vesting within 60
days of April 2, 2018.
|
(7)
|
Includes
25,529 shares subject to options exercisable within 60 days of
April 2, 2018, and 515 restricted stock units vesting within 60
days of April 2, 2018.
|
(8)
|
Includes
23,508 shares subject to options exercisable within 60 days of
April 2, 2018.
|
(9)
|
Includes
10,098 shares subject to options exercisable within 60 days of
April 2, 2018.
|
-60-
Item 13.
|
Certain Relationships and Related Transactions, and Director
Independence.
|
We
are parties to 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 Grants
On April
3, 2015, the Board approved the issuance of an additional
restricted stock award of 5,924 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) 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.
In
connection with the May 17, 2017 Letter Agreement, the Board
approved the issuance of fully vested options to purchase 166,667
shares of the Company’s Common Stock at an exercise price of
$6.00 per share for Board services.
Ravetch Agreement
On
April 1, 2016 we entered into a consulting agreement with Dr.
Ravetch to provide key technology and product development, as well
as corporate development and consulting services, in addition to
his services as a Board member. The term of the
agreement is 2 years beginning January 1, 2016, and Dr. Ravetch
will receive $100,000 cash compensation per year.
Director Independence
After review of all relevant transactions or
relationships between each director and nominee for director, or
any of his or her family members, and the Company, its senior
management and its Independent Registered Public Accounting Firm,
the Board has determined that all of the Company’s directors
are independent, as of December 31, 2017 within the meaning of the
applicable SEC rules and The NASDAQ Capital Market
listing standards, except Mr. Hansen,
the Chairman of the Board of Directors and Chief Executive Officer
and President of the Company, and Dr. Livingston, Chief Science
Officer of the Company.
-61-
Item 14.
|
Principal Accounting Fees and Services
|
The
following summarizes the fees billed by our independent registered
public accounting firm for audit, tax and other professional
services for the years ended December 31, 2017 and
2016:
|
2017
|
2016
|
|
CohnReznick LLP
|
CohnReznick LLP
|
Audit
and Registration Related Fees
|
$200,078
|
$251,213
|
Audit-Related Fees(1)
|
—
|
—
|
Tax Fees(2)
|
—
|
—
|
All Other Fees(3)
|
—
|
—
|
Total
Fees
|
$200,078
|
$251,213
|
(1)
Audit fees
represent professional services provided in connection with the
audit of our financial statements, review of our quarterly
financial statements, and audit service in connection with other
regulatory filings.
(2)
Tax fees consist of fees billed for professional services rendered
in connection with tax compliance, tax advice, and tax planning. We
incurred no such fees in the fiscal years ended December 31, 2017
and 2016.
(3)
Other fees consist of fees for products and services other than the
services reported above. There were no other fees for services by
our independent registered public accounting firms for the fiscal
years ended December 31, 2017 and 2016.
Audit Committee Pre-approval Policies and Procedures
Our
Audit Committee assists the Board in overseeing and monitoring the
integrity of the Company’s financial reporting process, its
compliance with legal and regulatory requirements and the quality
of its internal and external audit processes. The role and
responsibilities of the Audit Committee are set forth in a written
charter adopted by the Board, which is available on our website at
www.mabvax.com. The Audit Committee is responsible for selecting,
retaining and determining the compensation of our independent
public accountant, approving the services they will perform, and
reviewing the performance of the independent public accountant. The
Audit Committee reviews with management and our independent public
accountant our annual financial statements on Form 10-K and our
quarterly financial statements on Forms 10-Q. The Audit Committee
reviews and reassesses the charter annually and recommends any
changes to the Board for approval. The Audit Committee is
responsible for overseeing our overall financial reporting process.
In fulfilling its responsibilities for the financial statements for
fiscal year 2017, the Audit Committee took the following
actions:
●
reviewed and discussed the audited financial
statements for the fiscal year ended December 31, 2017 with
management and CohnReznick LLP (“CohnReznick”), our
independent registered
public accountant;
●
discussed with CohnReznick the matters
required to be discussed in accordance with the rules set forth by
the Public Company Accounting Oversight Board
(“PCAOB”), relating to the conduct of the audit;
and
●
received written disclosures and the letter
from CohnReznick regarding its independence as required by
applicable requirements of the PCAOB regarding CohnReznick's
communications with the Audit Committee and the Audit Committee
further discussed with CohnReznick its independence. The Audit
Committee also considered the status of pending litigation,
taxation matters and other areas of oversight relating to the
financial reporting and audit process that the Audit Committee
determined appropriate.
Our
Audit Committee approved all services that our independent
registered public accountant provided to us in the past two
fiscal years
-62-
PART IV
Item 15.
|
Exhibits and Financial Statement Schedules.
|
The
following documents are filed as part of this Annual
Report:
1.
Financial
Statements. Our consolidated financial
statements and the Report of Independent Registered Public
Accounting Firm are included in Part IV of this Report on the pages
indicated:
2.
Financial
Statement Schedules. All schedules are omitted
because they are not applicable or the required information is
shown in the consolidated financial statements or the notes
thereto.
3.
Exhibits:
No.
|
|
Description
|
|
Form
|
|
Filing
Date/Period
End
|
|
Exhibit
Number
|
|
|
|
|
|
|
|
|
|
|
Agreement and Plan of Merger and Reorganization, dated May 12,
2014, between the Company, Tacoma Acquisition Corp., Inc. and
MabVax Therapeutics, Inc.
|
|
8-K
|
|
5/12/2014
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
Amendment No.1, dated as of June 30, 2014, by and between the
Company and MabVax Therapeutics, Inc.
|
|
8-K
|
|
7/1/2014
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
Amendment No.2 to the Agreement and Plan of Merger, dated July 7,
2014, by and among the Company, Tacoma Acquisition Corp. and MabVax
Therapeutics, Inc.
|
|
8-K
|
|
7/9/2014
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
Amended and Restated Certificate of Incorporation
|
|
S-1
|
|
3/16/2017
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
Amended and Restated Bylaws
|
|
8-K
|
|
12/14/2007
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
Form of Certificate of Designations, Preferences and Rights of
Series D Convertible Preferred Stock
|
|
8-K
|
|
3/26/2015
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of Certificate of Designations, Preferences and Rights of
Series E Convertible Preferred Stock
|
|
8-K
|
|
4/6/2015
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
Form of Certificate of Designations, Preferences and Rights of
Series F Convertible Preferred Stock
|
|
8-K
|
|
8/17/2016
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of Series G
Convertible Preferred Stock
|
|
8-K
|
|
5/16/2017
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of Series H
Convertible Preferred Stock
|
|
8-K
|
|
5/3/2017
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of Series I
Convertible Preferred Stock
|
|
8-K
|
|
5/26/2017
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of Series J
Convertible Preferred Stock
|
|
8-K
|
|
8/14/2017
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Certificate of Designations, Preferences and Rights of Series K
Convertible Preferred Stock
|
|
8-K
|
|
8/14/2017
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
Form of Certificate of Amendment to Amended and Restated
Certificate of Incorporation
|
|
8-K
|
|
8/17/2016
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
-63-
|
Form of
Certificate of Designations, Preferences and Rights of Series L
Convertible Preferred Stock
|
|
8-K
|
|
10/19/2017
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of Certificate of Correction to the Designations, Preferences
and Rights of Series L Convertible Preferred Stock
|
|
8-K
|
|
10/19/2017
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
3.14
|
|
Certificate
of Elimination of Series F, Series G, and Series H Preferred
Stock
|
|
8-K
|
|
12/21/2017
|
|
3.1
|
|
|
|
|
|
|
|
|
|
3.15
|
|
Form of Certificate of Designations, Preferences and Rights of the
0% Series M Convertible Preferred Stock
|
|
8-K
|
|
2/6/2018
|
|
3.1
|
|
|
|
|
|
|
|
|
|
3.16
|
|
Certificate
of Amendment to MabVax’s Amended and Restated Certificate of
Incorporation
|
|
8-K
|
|
2/15/2018
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
Form of Common Stock Certificate
|
|
S-1
|
|
9/29/2014
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
4.2
|
|
Form of Common Stock Purchase Warrant
|
|
10-K
|
|
3/31/2015
|
|
4.12
|
|
|
|
|
|
|
|
|
|
|
Form of Secured Promissory Note
|
|
8-K
|
|
1/19/2016
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of Warrant
|
|
8-K
|
|
1/19/2016
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
Form of Warrant Agency Agreement between MabVax Therapeutics
Holdings, Inc. and Equity Stock Transfer LLC and the Form of
Warrant Certificate
|
|
S-1
|
|
8/25/2015
|
|
4.10
|
|
|
|
|
|
|
|
|
|
|
Form of Warrant
|
|
8-K
|
|
2/6/2018
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement, dated July 1, 2014, by and between MabVax
Therapeutics, Inc. and J. David Hansen
|
|
10-Q
|
|
8/8/2014
|
|
10.9
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement, dated July 1, 2014, by and between MabVax
Therapeutics, Inc. and Gregory P. Hanson
|
|
10-Q
|
|
8/8/2014
|
|
10.10
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement, dated July 1, 2014, by and between MabVax
Therapeutics, Inc. and Wolfgang W. Scholz, Ph.D.
|
|
10-Q
|
|
8/8/2014
|
|
10.11
|
|
|
|
|
|
|
|
|
|
|
|
Second Amended and Restated MabVax Therapeutics Holdings, Inc. 2014
Employee, Director and Consultant Equity Incentive
Plan
|
|
10-K
|
|
3/31/2015
|
|
10.15
|
|
Form of Exchange Agreement (Series A-1 Preferred Stock and Series
A-1 Warrants).
|
|
8-K
|
|
3/26/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of Exchange Agreement (Series B Preferred Stock and Series B
Warrants).
|
|
8-K
|
|
3/26/2015
|
|
10.2
|
|
2008 Equity Incentive Plan
|
|
10-K
|
|
3/31/2015
|
|
10.29
|
|
|
|
|
|
|
|
|
|
|
|
Form of Option Agreement, 2008 Equity Incentive Plan
|
|
10-K
|
|
3/31/2015
|
|
10.30
|
|
|
|
|
|
|
|
|
|
|
|
Form of Lockup Agreement dated as of April 3, 2015
|
|
8-K
|
|
4/6/2015
|
|
10.3
|
|
|
|
|
|
|
|
|
|
|
|
Consulting Agreement with The Del Mar Consulting Group, Inc.
and Alex Partners, LLC dated as of April 5, 2015
|
|
8-K
|
|
4/6/2015
|
|
10.4
|
|
|
|
|
|
|
|
|
|
|
Form of Escrow Deposit Agreement dated as of April 14,
2015
|
|
8-K
|
|
4/15/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of Amendment Agreement to Registration Rights
Agreement
|
|
8-K
|
|
6/10/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
Amendment to
Escrow Deposit Agreement dated June 22, 2015
|
|
8-K
|
|
6/24/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
-64-
|
Letter Agreement dated June 30, 2015 between MabVax Therapeutics,
Inc. and OPKO Health, Inc.
|
|
8-K
|
|
7/1/205
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of Proposed Lease Agreement with AGP Sorrento Business
Complex, L.P.
|
|
S-1
|
|
8/25/2015
|
|
10.37
|
|
|
|
|
|
|
|
|
|
|
|
Form of Amendment Agreement No. 2 to Registration Right s
Agreement
|
|
8-K
|
|
8/4/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Non-Employee Director Compensation Policy
|
|
10-Q/A
|
|
8/12/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Standard Industrial Net Lease, dated as of May 23, 2008, by
and between MabVax Therapeutics, Inc. and Sorrento
Square
|
|
10-Q/A
|
|
8/12/2015
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
First Amendment
to that Standard Industrial Net Lease, dated May 6, 2010, by and
between MabVax Therapeutics, Inc. and Sorrento Square
|
|
10-Q/A
|
|
8/12/2015
|
|
10.3
|
|
|
|
|
|
|
|
|
|
|
|
Second Amendment to that Standard Industrial Net Lease, dated
August 1, 2012, by and between the Company and Sorrento
Square
|
|
10-Q/A
|
|
8/12/2015
|
|
10.4
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreement, dated July 21, 2014, by and between
MabVax Therapeutics, Inc. and Paul Maffuid, Ph.D.
|
|
10-Q/A
|
|
8/12/2015
|
|
10.5
|
|
|
|
|
|
|
|
|
|
|
|
Development and Manufacturing Services Agreement, dated April 15,
2014, by and between MabVax Therapeutics, Inc. and Gallus
BioPharmaceuticals NJ, LLC
|
|
10-Q/A
|
|
8/12/2015
|
|
10.6
|
|
|
|
|
|
|
|
|
|
|
|
Exclusive License Agreement for “Polyvalent Conjugate
Vaccines for Cancer” (SK#14491), dated as of June 30,
2008, by and between MabVax Therapeutics, Inc. and Memorial Sloan
Kettering Institute for Cancer Research
|
|
10-Q/A
|
|
8/12/2015
|
|
10.7
|
|
|
|
|
|
|
|
|
|
|
|
Research and License Agreement, dated as of April 7, 2008, by
and between MabVax Therapeutics, Inc. and Memorial Sloan Kettering
Institute for Cancer Research
|
|
10-Q/A
|
|
8/12/2015
|
|
10.8
|
|
|
|
|
|
|
|
|
|
|
|
Exclusive License to Unimolecular Antibodies, dated October 13,
2011, by and between MabVax Therapeutics, Inc. and Memorial Sloan
Kettering Institute for Cancer Research
|
|
10-Q/A
|
|
8/12/2015
|
|
10.9
|
|
|
|
|
|
|
|
|
|
|
Option
Agreement, dated August 29, 2014, by and between MabVax
Therapeutics, Inc. and Juno Therapeutics, Inc.
|
|
10-Q/A
|
|
8/12/2015
|
|
10.10
|
|
|
|
|
|
|
|
|
|
|
|
SBIR
Contract from National Cancer Institute
|
|
10-Q/A
|
|
8/12/2015
|
|
10.11
|
|
|
|
|
|
|
|
|
|
|
Lease by and between AGP Sorrento Business Complex, L.P., and
MabVax Therapeutics Holdings, Inc., dated as of September 2,
2015
|
|
8-K
|
|
9/3/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Form of Amendment Agreement No.3 to Registration Rights
Agreement
|
|
8-K
|
|
10/13/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Loan and Security Agreement dated as of January 15,
2016
|
|
8-K
|
|
1/19/2016
|
|
10.1
|
|
|
|
|
|
|
|
|
|
-65-
|
Form of Amendment Agreement
|
|
10-K
|
|
3/14/2016
|
|
10.54
|
|
|
|
|
|
|
|
|
|
|
|
Consulting Agreement, dated April 1, 2016, by and between MabVax
Therapeutics Holdings, Inc. and Jeffrey Ravetch, M.D.,
Ph.D.
|
|
8-K
|
|
4/7/2016
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Employment
Agreement, dated March 16, 2016, by and between MabVax
Therapeutics Holdings, Inc. and Paul Resnick, M.D.
|
|
10-K/A
|
|
4/19/2016
|
|
10.56
|
|
|
|
|
|
|
|
|
|
|
|
Non-Employee
Director Compensation Policy, as amended through August 25,
2016
|
|
8-K
|
|
8/31/2016
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Form
of Subscription Agreement between the Company and the subscribers
set forth on the signature pages thereto
|
|
8-K
|
|
5/3/2017
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Form
of Registration Rights Agreement between the Company and the
subscribers set forth on the signature pages
thereto
|
|
8-K
|
|
5/3/2017
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
Form
of Exchange Agreement
|
|
8-K
|
|
5/10/2017
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
10.39
|
|
Form of
Securities Purchase Agreement
|
|
8-K
|
|
8/14/2017
|
|
10.1
|
|
|
|
|
|
|
|
|
|
10.40
|
|
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
|
|
9/13/2017
|
|
10.1
|
|
|
|
|
|
|
|
|
|
10.41
|
|
Form of Subscription Agreement, dated September 22,
2017
|
|
8-K
|
|
9/22/2017
|
|
10.1
|
|
|
|
|
|
|
|
|
|
10.42
|
|
Form of Subscription Agreement, dated October 10, 2017
|
|
8-K
|
|
10/11/2017
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
Form
of Exchange Agreement
|
|
8-K
|
|
10/19/2017
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
Form
of Registration Rights Agreement
|
|
8-K
|
|
10/19/2017
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
Form
of Subscription Agreement
|
|
S-1
|
|
12/12/2017
|
|
5.1
|
|
|
|
|
|
|
|
|
|
|
10.46
|
|
Form of
Purchase Agreement
|
|
8-K
|
|
2/6/2018
|
|
10.1
|
|
|
|
|
|
|
|
|
|
10.47
|
|
Form of
Registration Rights Agreement
|
|
8-K
|
|
2/6/2018
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
Statement of per
share earnings
|
|
S-1
|
|
9/29/2014
|
|
11.1
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiaries of
the Registrant
|
|
S-1
|
|
9/29/2014
|
|
21.1
|
|
|
|
|
|
|
|
|
|
|
23.1
|
*
|
Consent of
Independent Registered Public Accounting Firm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1
|
*
|
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2
|
*
|
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1
|
*
|
Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
32.2
|
*
|
|
|
|
|
|
|
|
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101
|
*
|
Interactive data file
|
|
|
|
|
|
|
*
|
Filed
herewith
|
-66-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: April 2, 2018
MABVAX THERAPEUTICS HOLDINGS, INC
|
||
|
|
|
By:
|
|
/s/
J. David Hansen
|
|
|
J. David Hansen
|
|
|
President and Chief Executive Officer (Principal executive
officer)
|
|
|
|
By:
|
|
/s/
Gregory P. Hanson
|
|
|
Gregory P. Hanson
|
|
|
Chief Financial Officer (Principal financial and accounting
officer)
|
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature
|
Title
|
Date
|
|
|
|
/s/
J. David Hansen
|
Chairman of the Board, President and
Chief Executive Officer
|
April 2, 2018
|
J. David Hansen
|
(Principal executive officer)
|
|
|
|
|
|
|
|
/s/
Gregory P. Hanson
|
Chief Financial Officer
|
April 2, 2018
|
Gregory P. Hanson
|
(Principal financial and accounting officer)
|
|
|
|
|
|
|
|
/s/
Kenneth M. Cohen
|
Director
|
April 2, 2018
|
Kenneth M. Cohen
|
|
|
|
|
|
|
|
|
/s/
Jeffrey F. Eisenberg
|
Director
|
April 2, 2018
|
Jeffrey F. Eisenberg
|
|
|
|
|
|
|
|
|
/s/
Philip O. Livingston
|
Director
|
April 2, 2018
|
Philip O. Livingston, M.D.
|
|
|
|
|
|
|
|
|
/s/
Paul V. Maier
|
Director
|
April 2, 2018
|
Paul V. Maier
|
|
|
|
|
|
|
|
|
/s/
Thomas C. Varvaro
|
Director
|
April 2, 2018
|
Thomas C. Varvaro
|
|
|
-67-
MABVAX THERAPEUTICS HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
F-2
|
|
|
|
|
F-3
|
|
|
|
|
F-4
|
|
|
|
|
F-5
|
|
|
|
|
F-6
|
|
|
|
|
F-7
|
|
F-1
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
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 1 to the consolidated financial statements, the
Company has incurred recurring operating losses and is dependent on
additional financing to fund operations. These conditions raise
substantial doubt about the Company’s ability to continue as
a going concern. Management’s plans in regard to these
matters are described in Note 1 to the consolidated financial
statements. The consolidated financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
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 since 2014.
San
Diego, California
April
2, 2018
F-2
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
|
311675
|
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-3
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-4
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
|
$68,025,556
|
$(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
|
133,333
|
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-5
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-6
MABVAX THERAPEUTICS HOLDINGS, INC.
Notes to Consolidated Financial
Statements
1. Nature of Operations and Basis of Presentation
MabVax Therapeutics Holdings, Inc. (f.k.a. Telik,
Inc. and referred to herein as “MabVax Therapeutics
Holdings” or the “Company”) (NASDAQ: MBVX) was
incorporated in the state of Delaware on October 20, 1988. On
July 8, 2014, Tacoma Acquisition Corp., a Delaware corporation
and wholly owned subsidiary of MabVax Therapeutics Holdings
(“Tacoma Corp.”) merged with MabVax Therapeutics, Inc.,
a Delaware corporation (“MabVax Therapeutics”) pursuant
to an Agreement and Plan of Merger, dated May 12, 2014, by and
among MabVax Therapeutics Holdings, Tacoma Corp. and MabVax
Therapeutics, as amended by that certain Amendment No. 1 to
the Merger Agreement, dated June 30, 2014, by and among the
parties thereto and by that certain Amendment No. 2 to the
Merger Agreement, dated July 7, 2014, by and among the parties
thereto (such agreement as amended, the “Merger
Agreement”; such Merger, the “Merger”). Unless
the context otherwise requires, references to “we,”
“our,” “us,” or the “Company”
in this Annual Report mean MabVax Therapeutics Holdings, Inc. on a
consolidated financial statement basis with our wholly owned
subsidiary following the Merger, MabVax Therapeutics, as
applicable. On October 9, 2014, the Financial Industry
Regulatory Authority (FINRA) approved
the Company’s stock symbol change request and the Company
began trading on the OTCQB under the symbol MBVX on October 10,
2014. On August 17, 2016, our common stock began trading on The
NASDAQ Capital Market under the symbol
“MBVX.”
On
August 16, 2016, we filed a certificate of amendment to our Amended
and Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware to effectuate a reverse stock split
of our issued and outstanding common stock on a 1 for 7.4 basis,
effective on August 16, 2016 (the “Reverse Stock
Split”). The Reverse Stock Split was effective with FINRA and
the Company’s common stock began trading on The NASDAQ
Capital Market at the open of business on August 17, 2016.
All share and per share amounts, and
number of shares of common stock into which each share of preferred
stock will convert, in the financial statements and notes hereto
have been retroactively adjusted for all periods presented to give
effect to the Reverse Stock Split, including reclassifying an
amount equal to the reduction in par value of common stock to
additional paid-in capital.
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 a reverse
stock split of our issued and outstanding common stock on a 1-for-3
basis, effective on February 16, 2018, (the “Continued
Listing Reverse Split”). The Continued Listing Reverse Split
was effective with The NASDAQ Capital Market on the opening of
trading 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 hereto
have been retroactively adjusted for all periods presented to give
effect to the Continued Listing Reverse Split, including
reclassifying an amount equal to the reduction in par value of
common stock to additional paid-in-capital.
The
Company is a clinical stage biopharmaceutical company engaged in
the discovery, development and commercialization of proprietary
human monoclonal antibody products and vaccines for the treatment
of a variety of cancers. The Company has discovered a pipeline of
human monoclonal antibody products based on the protective immune
responses generated by patients who have been immunized against
targeted cancers. Therapeutic vaccines under development were
discovered at Memorial Sloan Kettering Cancer Center
(“MSK”) and are exclusively licensed to MabVax
Therapeutics. The Company operates in only one business
segment.
The
Company has incurred net losses since inception and expects to
incur substantial losses for the foreseeable future as it continues
its research and development activities. To date, the Company has
funded operations primarily through government grants, the sale of
preferred stock and equity securities, issuance of common stock for
services, debt financing, non-equity payments from collaborators
and interest income. The process of developing products will
require significant additional research and development,
preclinical testing and clinical trials, as well as regulatory
approvals. The Company expects these activities, together with
general and administrative expenses, to result in substantial
operating losses for the foreseeable future, unless revenues can be
generated from potential license and/or partnering arrangements, of
which there can be no assurance of achieving. The Company will not
receive substantial revenue unless the Company enters into one or
more significant license agreements and collaborative partnerships
that generate upfront and milestone payments related to potential
licenses and product development activities, including completion
of clinical trials, obtaining regulatory approvals and successfully
commercializing one or more products.
The
preparation of consolidated financial statements in conformity with
GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of
expenses during the reporting period. Management believes that
these estimates are reasonable; however, actual results may differ
from these estimates.
F-7
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 the Lead Investor.
Additionally, we granted the Lead Investor in the May 2017 Public
Offering the May 2017 Consent Right to approve future (i) issuances
of our securities, (ii) equity or debt financings and (iii) sales
of any development product assets currently held by us, subject to
certain exceptions, if such securities are sold at price below
$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. On October 18, 2017, the Lead Investor exchanged the
Series G Preferred Stock for Series L Preferred Stock, retaining
the May 2017 Consent Right. All other prior consent rights of the
Lead Investor have been 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 the
Lead Investor in Note 7, “Convertible Preferred Stock, Common
Stock and Warrants.”
On January 15, 2016, the Company and Oxford
Finance LLC, as collateral agent and lender, entered into a loan
and security agreement (the “Loan Agreement”) providing
for senior secured term loans to the Company in an aggregate
principal amount of up to $10,000,000, subject to the terms and
conditions set forth in the Loan Agreement (the “January 2016
Term Loan”). On January 15, 2016, the Company
received an initial loan of $5,000,000 under the Loan Agreement,
before fees and issuance costs of approximately $390,000. On March
31, 2017, we and Oxford Finance, LLC, signed a First Amendment to
the Loan Agreement (the “Amendment”), providing that
the payment of principal of $138,889 on the January 2016 Term Loan
that otherwise would have been due on the Amortization Date of
April 1, 2017, will be due and payable on May 1, 2017 along with
any other payment of principal due on May 1, 2017. We were
obligated to pay a fully earned and non-refundable amendment fee of
$15,000 to Oxford Finance LLC. On May 1, 2017, we paid the
principal that was due on May 1, 2017, along with the $15,000
amendment fee.
On
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
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 Continued Listing Reverse 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, which we refer to as 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 5, Convertible
Preferred Stock, Common Stock and Warrants of the Notes to
Consolidated Financial Statements.
F-8
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 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 and was purchased by the Prior Investors. 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. 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, and $2.7 million net of
transaction costs 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 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-9
If
the Company raises additional funds by issuing equity securities,
substantial dilution to existing stockholders would result. If the
Company raises additional funds by incurring debt financing, the
terms of the debt may involve significant cash payment obligations
as well as covenants and specific financial ratios that may
restrict the Company’s ability to operate its
business.
2. Summary of Significant Accounting Policies
Basis of Presentation
The
accompanying consolidated financial statements reflect all of our
activities, including those of our wholly owned subsidiaries. All
material intercompany accounts and transactions have been
eliminated in consolidation.
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America, or
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-10
Revenue Recognition
Revenue
from grants is based upon internal and subcontractor costs incurred
that are specifically covered by the grant, including a facilities
and administrative rate that provides funding for overhead
expenses. NIH Grants are recognized when the Company incurs
internal expenses that are specifically related to each grant, in
clinical trials at the clinical trial sites, by subcontractors who
manage the clinical trials, and provided the grant has been
approved for payment. The Company records revenue associated with
the NIH Grants as the related costs and expenses are incurred. Any
amounts received by the Company pursuant to the NIH Grants prior to
satisfying the Company’s revenue recognition criteria are
recorded as deferred revenue.
Research and Development Costs
Research
and development expenses, which consist primarily of salaries and
other personnel costs, clinical trial costs and preclinical study
fees, manufacturing costs for non-commercial products, and the
development of earlier-stage programs and technologies, are
expensed as incurred when these expenditures have no alternative
future uses. A significant portion of the development activities
are outsourced to third parties, including contract research
organizations. In such cases, the Company may be required to
estimate related service fees incurred.
Stock-based Compensation
The
Company’s stock-based compensation programs include grants of
common stock and stock options to employees, non-employee directors
and non-employee consultants. Stock-based compensation cost is
measured at the grant date, based on the calculated fair value of
the award, and is recognized as an expense, under the straight-line
method, over the employee’s requisite service period
(generally the vesting period of the equity grant).
The
Company accounts for equity instruments, including common stock and
stock options, issued to non-employees in accordance with
authoritative guidance for equity based payments to non-employees.
Stock options issued to non-employees are accounted for at their
estimated fair value determined using the Black-Scholes-Merton
option-pricing model. The fair value of options granted to
non-employees is re-measured as they vest, and the resulting
increase in value, if any, is recognized as expense during the
period the related services are rendered.
Income Taxes
The
Company uses the asset and liability method of accounting for
income taxes. Deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to basis
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.
As of December 31, 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.
3. Recent Accounting Pronouncements
In May
2014, the FASB issued ASU 2014-09, “Revenue
from Contracts with Customers (Topic 606)”, which
contains new accounting literature relating to how and when a
company recognizes revenue. Under ASU 2014-09, a company will
recognize revenue when it transfers promised goods or services to
customers in an amount that reflects the consideration to which the
company expects to be entitled in exchange for those goods and
services. ASU 2014-09 is effective for the
Company’s fiscal year beginning January 1, 2018, which
reflects a one-year deferral approved by the FASB in July 2015, and
will be adopted by the Company beginning January 1, 2018.
The adoption of this new standard did not have a material impact on
our consolidated financial statements.
F-11
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-12
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.
4. 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.
5. Reverse Splits for Listing and Maintaining Listing on The NASDAQ
Capital Market
Listing Reverse Split – On June
29, 2016, our stockholders approved a reverse stock split of our
issued and outstanding shares of common stock at a range of between
1-for-2 and 1-for-15, with the specific ratio and effective time of
the reverse stock split to be determined by our Board of Directors,
or our Board. On August 2, 2016, the Board approved a 1-for-7.4
reverse stock split, or the Listing Reverse Split. The Listing
Reverse Split was intended to allow us to meet the minimum share
price requirement of The NASDAQ Capital Market, or NASDAQ. On
August 11, 2016, we received approval from The NASDAQ Capital
Market for the listing of our common stock under the symbol
“MBVX”, subject to implementation of the Listing
Reverse Split and closing of our August 2016 public offering (the
“August 2016 Public Offering”). On August 16, 2016,
we implemented the Listing Reverse Split, closed on the August
2016 Public Offering and began trading on The NASDAQ Capital Market
at the open of business on August 17, 2016.
Continued Listing Reverse Split –
On October 6, 2017, our stockholders approved a reverse stock split
of our issued and outstanding shares of common stock at a range of
between 1-for-2 and 1-for-20, with the specific ratio and effective
time of the reverse stock split to be determined by our Board to
regain compliance with The NASDAQ Capital Market $1.00 minimum bid
price maintenance requirement, if determined to be necessary
sufficiently prior to March 5, 2018, which is the date The NASDAQ
provided to the Company to regain compliance. On February 1, 2018,
the Board approved a 1-for-3 reverse stock split, or the Continued
Listing Reverse Split; and, on February 16, 2018, we implemented
the Continued Listing Reverse Split effective with the open of
trading on The NASDAQ Capital Market on a split-adjusted basis
under the same trading symbol “MBVX.” The primary
intent of the Continued Listing Reverse Split was to increase the
market price of the Company’s common stock in order to help
ensure compliance with The NASDAQ Capital Market’s $1.00
minimum closing bid price continued listing maintenance
requirement.
6. Notes Payable, Net
On
January 15, 2016, we entered into a loan and security agreement
with Oxford Finance LLC pursuant to which we had the option to
borrow $10,000,000 in two equal tranches of $5,000,000 each (the
“Loan Agreement”). The first tranche of
$5,000,000 was funded at close on January 15, 2016 (the “Term
A Loan”). The option to fund the second tranche of $5,000,000
(the “Term B Loan”) was upon the Company achieving
positive interim data on the Phase 1 HuMab-5B1 antibody trial in
pancreatic cancer and successfully uplisting to either The NASDAQ
Capital Market or NYSE MKT on or before September 30,
2016. The option for the Term B Loan expired on
September 30, 2016. The Company is not pursuing completion of any
additional debt financing with Oxford Finance LLC at the present
time. The interest rate for the Term A Loan is set on a monthly
basis at a rate equal to the greater of the index rate plus 11.29%,
where the index rate is the 30-day LIBOR rate, or 11.5%. Interest
is due on the first day of each month, in arrears, calculated based
on a 360-day year. The loan is interest only for the
first year after funding, and the principal amount of the loan is
amortized in equal principal payments, plus period interest, over
the next 36 months. A facility fee of 1.0% or $100,000
was due at closing of the transaction, and was incurred and paid by
the Company on January 15, 2016. The Company is
obligated to pay a $150,000 final payment upon completion of the
term of the loan, and this amount is being accreted using the
effective interest rate method over the term of the loan. The
amount being accreted is included in the long-term portion of notes
payable, net, on the balance sheet. Each of the term loans can be
prepaid subject to a graduated prepayment fee, depending on the
timing of the prepayment.
F-13
Concurrent
with the closing of the transaction, the Company issued a warrant
to purchase 75,076 shares of common stock purchase warrants to
Oxford Finance LLC 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 LLC a perfected first priority lien on all
of the Company’s assets with a negative pledge on
intellectual property. The Company paid Oxford Finance LLC a good
faith deposit of $50,000, which was applied towards the facility
fee at closing. The Company agreed to pay all costs,
fees and expenses incurred by Oxford Finance LLC in the initiation
and administration of the facilities including the cost of loan
documentation.
At
the initial funding, the Company received net proceeds of
approximately $4,610,000 after fees and expenses. These fees and
expenses are being accounted for as a debt discount and classified
within notes payable on the Company’s consolidated balance
sheet as a direct deduction from the carrying amount of the notes
payable, consistent with debt discounts. Debt discounts, issuance
costs and the final payment are being amortized or accreted as
interest expense over the term of the loan using the effective
interest method.
The
Loan Agreement also contains customary indemnification obligations
and customary events of default, including, among other things, our
failure to fulfill certain of the Company's obligations under the
Loan Agreement, the occurrence of a material adverse change, which
is defined as a material adverse change in the Company's business,
operations, or condition (financial or otherwise), a material
impairment of the prospect of repayment of any portion of the loan,
or a material impairment in the perfection or priority of the
Lenders’ lien in the collateral or in the value of such
collateral. In the event of default by the Company under the
Loan Agreement, the Lenders would be entitled to exercise their
remedies thereunder, including the right to accelerate payment of
the debt, upon which we may be required to repay all amounts then
outstanding under the Loan Agreement, which could harm the
Company's financial condition.
The
Company was in compliance with all applicable covenants set forth
in the Loan Agreement as of December 31, 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 has one insurance premium
note outstanding with a balance totaling $15,210, which
matures 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
|
7. 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-14
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
(the “Conversion Shares”). 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 Certificates 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-15
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-16
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
Board, such right to expire on December 31, 2017.
In the
event of a liquidation, dissolution or winding up of the Company,
each share of Series G Preferred Stock 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-17
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 (the “Beneficial
Ownership Limitation”), which beneficial ownership limitation
may be increased by the holder up to, but not exceeding,
9.99%. Each share of Series I Preferred Stock entitles the
holder to vote on all matters voted on by holders of Common Stock.
With respect to any such vote, each share of Series I Preferred
Stock entitles the holder to cast such number of votes equal to the
number of shares of Common Stock such shares of Series I Preferred
Stock are convertible into at such time, but not in excess of the
Beneficial Ownership Limitation.
Series J Preferred Stock
As of
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-18
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-19
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, or 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 at
$29.31 per share were issued in connection with our public offering
on October 5, 2015, which consisted of 112,613 shares of common
stock and warrants to purchase 56,307 shares of common stock, at an
offering price of $2.71 per share. For every two shares of
common stock sold, the Company issued one warrant to purchase one
share of common stock. We received $2,750,000 in gross
proceeds, before underwriting discounts and commissions and
offering expenses totaling approximately $586,608. The shares and
warrants were separately issued and sold in equal proportions. The
warrants are immediately exercisable, expire September 30, 2018,
and have an exercise price of $29.31 per share. The
warrants are not listed on any securities exchange or other trading
market.
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 at $16.65 per share and $18.87 per share 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-20
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 Continued Listing Reverse 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 a public offering of 447,620 shares of
common stock and 1,000,000 shares of newly designated 0% Series G
Convertible Preferred Stock, or Series G Preferred Stock, at $5.25
per share of common stock and Series G Preferred Stock, or the May
2017 Public Offering. The Series G Preferred Stock is
initially convertible into 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
& Company (UK) Ltd. (“Laidlaw”), as underwriter
(the “Underwriter”) pursuant to which, among other
things, we agreed to issue and sell to the Underwriter, and the
Underwriter agreed to purchase from us, in an underwritten public
offering, an aggregate of 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-21
In
connection with the May 2017 Public Offering, we agreed with the
lead investor of the August 2016 Public Offering (the “Lead
Investor”) 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, or the Minimum Required
Investment, and who still hold 100% of the shares of common stock
previously acquired. Such August 2016 Investors shall be entitled
to receive their pro rata share of 966,667 shares, after the Lead
Investor in this offering receives the first 10%. For the August
2016 Investors who purchased Series F Preferred Stock and made the
Minimum Required Investment and who still held 100% of the shares
of Series F Preferred Stock at the closing of the May 2017 Public
Offering, they may, instead of receiving a pro rata share of the
870,000 shares remaining after the Lead Investor 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 the Lead Investor
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
As
a condition to the Lead Investor leading an investment in the May
2017 Public Offering, including the requirement that we offer
incentive shares to August 2016 Investors who participate in making
the Minimum Required Investment in the May 2017 Public Offering, we
agreed to the following:
Board
Nomination
|
|
The Company shall nominate one candidate to the Board of Directors
of the Company acceptable to the holder of a majority of the Series
G Preferred Stock by December 31, 2017, and two current Board
members will resign.
|
Executive
Hire
|
|
The Company shall hire a new C-level executive in a leadership role
by July 15, 2017.
|
Board
Compensation
|
|
The Company is obligated to issue an aggregate of 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.
|
F-22
Additionally
we granted the Lead Investor in the May 2017 Public Offering
certain rights to approve future (i) issuances of our securities,
(ii) equity or debt financings and (iii) sales of any development
product assets currently held by us, subject to certain exceptions,
if such securities are sold at price below $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 this offering (the “May 2017 Consent
Right”). All other prior consent rights of the Lead Investor
have been superseded by the May 2017 Consent Right.
For
the period from the May 2017 Public Offering to December 31, 2017,
the Company incurred approximately $729,772 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, two Board members
have resigned, which achieves 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.
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.
August 11, 2017 Registered Direct Offering
On
August 11, 2017, we entered into securities purchase agreements to
sell 2,386.36 shares of Series J Preferred Stock with a stated
value of $550 per share (the “August 2017
Offering”). The Series J Preferred Stock is convertible
into common stock at $1.65 per share, subject to adjustment for
stock splits, stock dividends, recapitalizations, combinations,
subdivisions or other similar events and was purchased by certain
existing investors of the Company (the “Prior
Investors”). The total amount of the securities purchase
agreements amounted to approximately $1,312,500, before 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 in a special meeting of
stockholders on October 2, 2017 (the “October 2017 Special
Meeting”), and a 125% liquidation preference. All shares of
the Company’s capital stock will be junior in rank to the
Series J Preferred Stock at the time of creation, with respect to
the preferences as to dividends, distributions and payments upon
the liquidation, dissolution and winding-up of the Company, except
for the Company’s Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred
Stock, Series H Preferred Stock, and Series I Preferred
Stock.
In
connection with the August 2017 Offering, we agreed with the Lead
Investor pursuant to a letter agreement dated August 9, 2017 (the
“August 2017 Letter Agreement”), 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
Convertible Preferred Stock (the “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 Prior Investors, as directed by the Lead
Investor, as an incentive to invest in the August 2017 Offering.
The Company established 65,000 shares of the new Series K Preferred
Stock, and the Lead Investor allocated the Series K Preferred Stock
to Prior Investors. The holders were able to convert the Series K
Preferred Stock into 2,166,667 shares of common stock after
obtaining stockholder approval, which was completed in the October
2017 Special Meeting. The stated value of each share of Series K
Preferred Stock is $0.01 and the conversion rate is the stated
value of $0.01 divided by 0.0003, or approximately 33.33 shares of
common stock upon conversion of one (1) share of Series K Preferred
Stock, each subject to adjustment for stock splits, stock
dividends, recapitalizations, combinations, subdivisions or other
similar event, and have a 4.99% beneficial ownership conversion
blocker. In the event of a liquidation, dissolution or winding up
of the Company, each share of Series K Preferred Stock will be
entitled to a per share preferential payment equal to the par
value, or $0.01 per share. All shares of the Company’s
capital stock will be junior in rank to the Series K Preferred
Stock at the time of creation, with respect to the preferences as
to dividends, distributions and payments upon the liquidation,
dissolution and winding-up of the Company, except for the
Company’s Series D Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock, Series I Preferred Stock and Series J Preferred
Stock. The Company recorded a deemed dividend of $3,120,000 in
August 2017 in connection with issuing the August 2017 Inducement
Shares.
F-23
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 the Company's financial statements.
F-24
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 Company’s Board
members. This award is for future services covering at
least a one-year period. The award was granted in addition to the
prior award to Dr. Ravetch on April 2, 2015 of (i) 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-25
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 12,
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.
8. Related Party Transactions
On
April 1, 2016, the Company entered into a two-year consulting
agreement with Jeffrey Ravetch, M.D., Ph.D., a Board member 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 Board member, for his ongoing
consulting services to the Company. The option award vests over a
three-year period. Dr. Ravetch resigned from the Board 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 Board member 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 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-26
9. Stock-based Compensation
Stock Incentive Plan
In
September 2008, the Company’s stockholders approved the 2008
Stock Incentive Plan (the “2008 Plan”) which became
effective in September 2008 and under which 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-27
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-28
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, or
the Black-Scholes model, to determine the stock-based compensation
expense for stock options recognized under ASC 718 and ASC 505. The
Company’s expected stock-price volatility assumption was
based solely on the weighted average of the historical and implied
volatility of comparable companies whose share prices are publicly
available. The expected term of stock options granted was based on
the simplified method in accordance with Staff Accounting Bulletin
No. 110, or SAB 110, as the Company’s historical share
option exercise experience did not provide a reasonable basis for
estimation. The risk-free interest rate was based on the U.S.
Treasury yield for a period consistent with the expected term of
the stock award in effect at the time of the grant.
|
Years Ended December 31,
|
|
|
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-29
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-30
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
|
10. Net Loss per Share
The
Company calculates basic and diluted net loss per share using the
weighted average number of shares of common stock outstanding
during the period. When the Company is in a net loss position, it
excludes from the calculation of diluted net loss per share all
potentially dilutive stock options, preferred stock and warrants,
and the diluted net loss per share is the same as the basic net
loss per share for such periods. If the Company was to be in a net
income position, the weighted average number of shares used to
calculate the diluted net income per share would include the
potential dilutive effect of in-the-money securities, as determined
using the treasury stock method.
The
table below presents the potentially dilutive securities that would
have been included in the calculation of diluted net loss per share
if they were not antidilutive for the periods presented. 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-31
11. 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-32
12. 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
|
13. 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-33
14. 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-34
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.
15. Subsequent Events
SEC Examination
On
January 29, 2018, the Company received notice that the SEC was
conducting an investigation and examination pursuant to Section
8(e) of the Securities Act, relating to certain of the
Company’s registration statements (and amendments thereto).
On February 2, 2018, the SEC followed up with a subpoena to produce
documents by April 9, 2018, in connection with its investigation.
The Company intends to cooperate fully with the SEC’s
examination. At this time the Company cannot predict when
such investigation will be complete or what the SEC findings would
be.
F-35
Private Placement February 2 and 3, 2018
On February 2 and February 3, 2018, the Company
entered into separate purchase agreements with accredited investors
pursuant to which the Company agreed to sell an aggregate of
$2,100,000 worth of shares of common stock at a purchase price
of $2.25 per share (or, at the election of any investor who, as a
result of receiving common stock would hold in excess of 4.99% of
our issued and outstanding common stock, shares of our newly
designated 0% Series M Convertible
Preferred Stock (the “Series M Preferred
Stock”)) and three-year
warrants to purchase common stock at $2.70 a share equal to seventy
percent (70%) of such number of shares of common stock purchased
(or, if Series M Preferred Stock, seventy percent (70%) of the
shares of common stock issuable upon conversion of the Series M
Preferred Stock). Of the Purchase Agreements accepted, investors
elected $1,400,000 to be in the form of shares of Series M
Preferred Stock.
The
net proceeds of the private placement were $2,050,000 after
transaction costs of $50,000. Neither the Series M Preferred Stock
nor the warrants will be separately listed on any securities
exchange or other trading market. No bank was used for this
transaction.
The
warrants are exercisable, at any time on or after the sixth-month
anniversary of the closing date, and expire three years from
the initial exercise date. The holders may, subject to certain
limitations, exercise the warrants on a cashless basis if not
registered under the Securities Act within 120 days of issuance.
The Company is prohibited from effecting an exercise of any warrant
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
warrant.
The
shares and warrants 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, pursuant
to which the Company 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 as set forth therein 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.
Private Placement February 9 and 10, 2018
On
February 9 and 10, 2018, the Company entered into separate purchase
agreements with accredited investors pursuant to which it agreed to
sell an additional $650,000 worth of units on the same
terms as the private placement on February 2 and February 3, 2018.
Of the additional purchase agreements accepted, investors elected
$100,000 to be in the form of shares of Series M
Preferred Stock. The net proceeds from the additional purchase
agreements were $645,000 after transaction costs estimated to be
$5,000. The additional purchase agreements, together
with subscriptions previously reported by the Company on February
6, 2018, brings the total subscriptions to $2.75 million, or
approximately $2.70 million after transaction costs, and completes
the total amount designated in the form of securities purchase
agreement included with the Current Report on a Form 8-K filed with
the Commission on February 6, 2018. Neither the Series M
Preferred Stock nor the warrants will be separately listed on any
securities exchange or other trading market.
Series I Preferred Stock Conversion
On
February 12, 2018, a holder of Series I Preferred Stock converted
152,820 shares of Series I Preferred Stock into 50,940 shares of
common stock.
Continued Listing Reverse Split and
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
one-for-three reverse stock split, effective as of 9:00 a.m.
Eastern Standard Time on February 16, 2018. At such time,
immediately and without further action by MabVax’s
stockholders, every three shares of MabVax common stock issued and
outstanding immediately prior to the Effective Date were
automatically converted into one share of MabVax common
stock.
The accompanying financial statements and notes to the consolidated
financial statements give retroactive effect to the reverse stock
split for all periods presented. In addition, the reverse stock
split resulted in an adjustment in the number of shares of common
stock issuable upon conversion of our convertible preferred stock
to a 3:1 ratio. Our authorized shares of common stock and preferred
stock, and par value per share remain
unchanged.
F-36
As
a result of the Continued Listing Reverse Split and calculated as
of February 16, 2018, the number of outstanding shares of common
stock were reduced to approximately 8,961,840 shares, excluding
unconverted preferred stock, outstanding and unexercised share
options and warrants and subject to adjustment for fractional
shares. No fractional shares shall be issued as a result of the
Continued Listing Reverse Split and fractional share amounts
resulting from the Continued Listing Reverse Split shall be rounded
up to the nearest whole share. Further, any options, warrants,
preferred shares and contractual rights outstanding that are
subject to adjustment shall be adjusted in accordance with their
terms. These adjustments include, without limitation, changes to
the number of shares of common stock that may be obtained upon
exercise or conversion of these securities, and changes to the
applicable exercise or purchase price of such securities. The
certificate of amendment to MabVax’s amended and restated
certificate of incorporation was filed as Exhibit 3.1 in a Current
Report on Form 8-K filed on February 16, 2018, and is incorporated
by reference herein.
Shares
of the Company’s common stock continued trading on The NASDAQ
Capital Market on a post-split basis on February 16, 2018 under the
new CUSIP number 55414P702.
As
previously disclosed in a Current Report on Form 8-K filed on
October 6, 2017, on October 6, 2017 the stockholders of the Company
had approved a reverse split ratio of not less than
one-for-two and not more than one-for-20 at any time prior to
September 28, 2018, with the exact ratio to be set at a whole
number within this range as determined by the Board of
Directors. Also, as previously disclosed in a Current Report
on Form 8-K filed on February 6, 2018, the Company’s Board of
Directors approved the Reverse Split on February 1,
2018.
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.
F-37