Liquidity and Going Concern
|6 Months Ended|
Jun. 30, 2017
|Notes to Financial Statements|
|Liquidity and Going Concern||
The accompanying condensed consolidated financial statements have been prepared on the going concern basis, which assumes that the Company will continue to operate as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, the Company had a net loss of $11,344,722, net cash used in operating activities of $6,025,305, net cash used in investing activities of $4,142, and net cash provided by financing activities of $3,897,063 for the six months ended June 30, 2017. As of June 30, 2017, the Company had $1,846,906 in cash and cash equivalents and an accumulated deficit of $94,846,396 and stockholders’ equity of $86,814.
On January 15, 2016, we and Oxford Finance LLC, as collateral agent and lender, entered into a Loan and Security Agreement providing for senior secured term loans to the Company in an aggregate principal amount of up to $10,000,000, subject to the terms and conditions set forth in the Loan Agreement (the “January 2016 Term Loan”). On January 15, 2016, the Company received an initial loan of $5,000,000 under the Loan Agreement, before fees and issuance costs of approximately $390,000. The option to draw the second $5,000,000 expired on September 30, 2016.
On March 31, 2017, we and Oxford Finance LLC, signed a First Amendment to Loan and Security Agreement (“Amendment”), providing that the payment of principal of $138,889 on the January 2016 Term Loan that otherwise would have been due on the Amortization Date of April 1, 2017, will be due and payable on May 1, 2017 along with any other payment of principal due on May 1, 2017. We were obligated to pay a fully earned and non-refundable amendment fee of $15,000 to the Collateral Agent. On May 1, 2017, we paid the principal that was due on May 1, 2017, along with the $15,000 amendment fee.
On August 22, 2016, we closed a public offering of 1,297,038 shares of common stock and 665,281 shares of Series F Convertible Preferred Stock (the “Series F Preferred Stock”), and warrants to purchase 1,962,319 shares of common stock at $5.55 per share and warrants to purchase 1,962,319 shares of common stock at $6.29 per share, at an offering price of $4.81 per share (the “August 2016 Public Offering”). For every one share of common stock or Series F Preferred Stock sold, we issued one warrant to purchase one share of common stock at $5.55 per share and one warrant to purchase one share of common stock at $6.29 per share. We received $9,438,753 in gross proceeds, before underwriting discounts and commissions and offering expenses totaling $871,305. The gross proceeds include the underwriters’ over-allotment option, which they exercised on the closing date.
On May 3, 2017, we sold 850 shares of 0% Series H Convertible Preferred Stock (“the Series H Preferred Stock”), at a stated value of $1,000 per share, representing an aggregate of $850,000 before offering costs of $29,429 in a private placement (the “May 2017 Private Placement”), to certain existing investors. The shares of Series H Preferred Stock are convertible into shares of common stock based on a conversion calculation equal to the stated value of the Series H Preferred Stock, plus all accrued and unpaid dividends (the “Base Amount”), if any, on such Series H Preferred Stock, as of such date of determination, divided by the conversion price. The stated value of each share of Series H Preferred Stock is $1,000 and the initial conversion price is $1.75 per share, each subject to adjustment for stock splits, stock dividends, recapitalizations, combinations, subdivisions or other similar events. This financing is discussed in further detail in Note 5, Convertible Preferred Stock, Common Stock and Warrants.
On May 19, 2017, we closed a public offering of 1,342,858 shares of common stock and 1,000,000 shares of newly designated 0% Series G Convertible Preferred Stock (the “Series G Preferred Stock”), at $1.75 per share of common stock and Series G Preferred Stock (the “May 2017 Public Offering”). The Series G Preferred Stock is initially convertible into 1,000,000 shares of common stock, subject to adjustment for stock splits, stock dividends, recapitalizations, combinations, subdivisions or other similar events, to certain existing investors in the offering who, as a result of their purchases of common stock, would hold in excess of 4.99% of our issued and outstanding common stock, and elect to receive shares of our Series G Preferred Stock. We received $4,100,000 in gross proceeds, before underwriting discounts and commissions and offering expenses totaling $397,743. The May 2017 Public Offering is described in more detail in Note 5, Convertible Preferred Stock, Common Stock and Warrants.
On July 24, 2017, the Board of Directors, or Board, authorized the Company to engage an independent financial advisory firm to assist the Company in exploring and evaluating strategic options with the goal of maximizing shareholder value. The Company will continue to work to advance its clinical programs and validate its platform technology, including the recent commencement of patient dosing in the Phase 1 MVT-1075 Radioimmunotherapy clinical trial for the treatment of pancreatic, colon and lung cancers, and remains committed to this continued progression. As part of the Company’s ongoing evaluation and prioritization of its portfolio of assets, and in response to inbound inquiries, the Company plans to engage an industry-leading firm to advise us on potential alternatives and strategies that will have the potential to unlock shareholder value.
The financial advisory firm will be assisting the Company in evaluating transaction options currently being considered, which could include the acquisition of MabVax by another company, the sale or divestiture of specific assets, merging with another company, licensing of selected technologies or a combination of selected divestitures followed by a reverse merger. MabVax does not have a defined timeline for the exploration of strategic alternatives and is not confirming that the evaluation will result in any strategic alternative being announced or consummated.
On July 27, 2017, we entered into a subscription agreement with an accredited investor pursuant to which we agreed to sell an aggregate of $125,000 in common stock under terms similar to the May 2017 Public Offering. The transaction closed on August 2, 2017, as further described in Note 12, Subsequent Events.
On August 11, 2017, we entered into a security purchase agreement with a group of existing investors in the Company, where we sold 2,386.36 shares of 0% Series J Convertible Preferred Stock to be issued (“the Series J Preferred Stock”), at a stated value of $550 per share, representing an aggregate of approximately $1,312,500 before offering costs estimated at approximately $130,000 in a registered direct offering (the “August 2017 Financing”). The shares of Series J Preferred Stock are convertible into shares of common stock based on a conversion calculation equal to the stated value of the Series J Preferred Stock plus the Base Amount on such Series J Preferred Stock, as of such date of determination, divided by the conversion price. The stated value of each share of Series J Preferred Stock is $550 and the initial conversion price is $0.55 per share, each subject to adjustment for stock splits, stock dividends, recapitalizations, combinations, subdivisions or other similar events. This financing is discussed in further detail in Note 12, Subsequent Events.
We plan to continue to fund the Company’s losses from operations and capital funding needs through equity or debt financings, strategic collaborations, licensing arrangements, government grants or other arrangements. Further, to extend availability of existing cash available for our programs for the purpose of achieving milestones or a strategic transaction, we have cut personnel and other operating expenses substantially following the completion of two clinical development programs. For example, we were able to reduce costs following completion of two phase 1a clinical trials of our lead antibody HuMab 5B1, which has enabled us to reduce our expenditures on clinical trials while we continue with our radioimmunotherapy product MVT-1075 discussed further in Management’s Discussion and Analysis of Financial Condition and Results of Operations. Further, we have reduced our personnel from 25 full time employees to 13 full time employees with the completion of our two clinical trials, and management has volunteered to defer receiving portions of salaries until one or more business transactions can be achieved, as discussed further in Note 12, Subsequent Events. However, we cannot be sure that capital funding will be available on reasonable terms, or at all, and that our staff reductions to fit ongoing needs will be sufficient. If we are unable to secure adequate additional funding, we may be forced to make additional reductions in spending, incur further cutbacks in personnel, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. In addition, if the Company does not meet its payment obligations to third parties as they come due, it may be subject to litigation claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.
We anticipate that the Company will continue to incur net losses into the foreseeable future as we: (i) monitor the four patients remaining on therapy in our Phase I clinical trial of MVT5873 until therapy is discontinued; (ii) continue our clinical trial for the development of MVT1075 as a radioimmunotherapy; and (iii) continue operations as a public company. Based on receipt of $850,000 from our May 2017 Private Placement, $4.1 million from the May 2017 Public Offering, the $125,000 private placement in July 2017, and the $1.3 million in securities purchase agreements signed in August 2017, and without any other additional funding or receipt of payments from potential licensing agreements, we expect we will have sufficient funds to meet our obligations through October 2017. These conditions give rise to substantial doubt as to the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Any of these actions could materially harm the Company’s business, results of operations, and prospects. These conditions give rise to substantial doubt as to the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
If the Company raises additional funds by issuing equity securities, substantial dilution to existing stockholders would result. If the Company raises additional funds by incurring debt financing, the terms of the debt may involve significant cash payment obligations as well as covenants and specific financial ratios that may restrict the Company’s ability to operate its business.
The entire disclosure when substantial doubt is raised about the ability to continue as a going concern. Includes, but is not limited to, principal conditions or events that raised substantial doubt about the ability to continue as a going concern, management's evaluation of the significance of those conditions or events in relation to the ability to meet its obligations, and management's plans that alleviated or are intended to mitigate the conditions or events that raise substantial doubt about the ability to continue as a going concern.
Reference 1: http://www.xbrl.org/2003/role/presentationRef