Liquidity and Going Concern
|9 Months Ended|
Sep. 30, 2018
|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 $5,908,068, net cash used in operating activities of $2,620,437, net cash used in investing activities of $0, and net cash provided by financing activities of $2,686,478 for the nine months ended September 30, 2018. As of September 30, 2018, the Company had $951,751 in cash and cash equivalents, a working capital deficit of $6,334,244, an accumulated deficit of $118,349,884, and stockholders’ equity of $42,558. The Company also has significant debt payments due within the next twelve months.
Overview of 2018 Private Placements
Between February 2 and February 10, 2018, the Company entered into separate purchase agreements with investors pursuant to which the Company sold (i) shares of its common stock, (ii) shares of its convertible preferred stock, and (iii) warrants to purchase shares of common (the “February 2018 Private Placements”). From April 30 to May 2, 2018, the Company entered into separate purchase agreements with investors pursuant to which we agreed to sell shares of its common stock and convertible preferred stock (the “May 2018 Private Placements”). No financial advisor was used in connection with the February 2018 Private Placements nor the May 2018 Private Placements.
The securities issued in connection with the February 2018 Private Placements and the May 2018 Private Placements were offered and sold solely to accredited investors in reliance on the exemption from registration afforded by Rule 506 of Regulation D and Section 4(a)(2) of the Securities Act. The Company entered into separate registration rights agreements with each of the investors in the February 2018 Private Placements and the May 2018 Private Placements, pursuant to which the Company agreed to undertake to file a registration statement to register the resale of the shares of common stock and the shares of common stock underlying the warrants and preferred stock. The Company also agreed to use reasonable best efforts to cause such registration statement to be declared effective and to maintain the effectiveness of the registration statement until all of such shares of common stock have been sold or are otherwise able to be sold pursuant to Rule 144 under the Securities Act, without any restrictions.
February 2018 Private Placements
In connection with the February 2018 Private Placements, the Company sold (i) an aggregate of 555,557 shares of its common stock for an aggregate purchase price of $1,250,000, or $2.25 per share, (ii) 5,000 shares of our newly designated 0% Series M Convertible Preferred Stock (the “Series M Preferred Stock”) for an aggregate purchase price of $1,500,000, or $300.00 per share, and (iii) warrants to purchase up to an aggregate of 855,561 shares of common stock each with an exercise price of $2.70 per share. The net proceeds of the February 2018 Private Placements were $2,700,000 after transaction costs of $50,000.
May 2018 Private Placements
In connection with the May 2018 Private Placements, the Company agreed to sell (i) 218,182 shares of common stock at an aggregate purchase price of $240,000, or $1.10 per share, and (ii) 5,363.64 shares of newly designated 0% Series N Convertible Preferred Stock (the “Series N Preferred Stock”) at an aggregate purchase price of $590,000, or $110.00 per share. The following investors in the May 2018 Private Placements also invested in the February 2018 Private Placements (the “Prior Investors”): GRQ Consultants Inc., Roth 401K FBO Renee Honig; GRQ Consultants Inc., Roth 401K FBO Barry Honig; Melechdavid, Inc.; Grander Holdings Inc. 401K; Robert S. Colman Trust UDT 3/13/85; Ben Brauser; Joshua A. Brauser; Daniel A. Brauser; Gregory Aaron Brauser; Erick E. Richardson; and Ronald B. Low.
Under the terms of the May 2018 Private Placements, we were required to offer an aggregate of 12,777.77 shares (the “May 2018 Inducement Shares”) of newly designated 0% Series O Preferred Stock (the “Series O Preferred Stock”) to investors who previously purchased securities in the February 2018 Private Placements and who also purchased securities in the May 2018 Private Placements with an aggregate purchase price of at least 40% of their investment amounts in the February 2018 Private Placements. Based on the closing of the offering, and participation of the Prior Investors who invested an aggregate of $830,000 (the “May 2018 Inducement Investors”), the Company issued an aggregate of 10,605.56 May 2018 Inducement Shares in the form of Series O Preferred Stock convertible into an aggregate of 1,060,556 shares of common stock. The May 2018 Private Placements closed on May 15, 2018, with the Company receiving gross proceeds totaling $830,000.
Plans for Continuing to Fund the Company’s Losses from Operations
We plan to continue to fund the Company’s losses from operations and capital funding needs through equity financings in the form of common stock and preferred stock, licensing agreements, asset sales, strategic collaborations, government grants, issuance of common stock in lieu of cash for services, debt financings or other arrangements. Further, to extend availability of existing cash available for our programs for achieving milestones or a strategic transaction, in mid-2017 we began reducing personnel from twenty-five (25) full time employees to six (6) as of November 13, 2018, and reduced other operating expenses following the completion of two (2) Phase 1a clinical trials of our lead antibody product candidate, HuMab 5B1, which has enabled us to reduce our expenditures on clinical trials. We plan to continue funding Phase 1 clinical trials of our product candidate MVT-5873 in cancer patients, MVT-2163 as a diagnostic agent in pancreatic cancer patients, and MVT-1075 as a radioimmunotherapy agent for the treatment of various cancers, preclinical testing of follow-on antibody candidates, investor and public relations, SEC compliance efforts, and the general and administrative expenses associated with each of these activities, and prepare for a mid-stage proof-of-concept clinical trial of MVT-5873 as a treatment for pancreatitis. We will also support research efforts and continued Phase 1 clinical development by MSK of our Positron-emission tomography (“PET”) imaging agent MVT-2163 under an R01 Research Grant provided by the National Institutes of Health (“NIH”) to MSK in April 2018, with the bulk of the costs of the research and clinical development being borne by the NIH. Although we achieved two strategic transactions in late June 2018 and early July 2018, there can be no assurance that we will be able to achieve additional license and or sales agreements and earn revenues large enough to offset our operating expenses in the future, as discussed further in Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Quarterly Report. We cannot be sure that asset sales or licensing agreements can be signed in a timely manner, if any, or that capital funding will be available on reasonable terms, or at all. If we are unable to secure significant asset sales or licensing agreements and adequate additional funding, we may be forced to make additional reductions in spending, incur further cutbacks in personnel, extend payment terms with suppliers, liquidate assets where possible, suspend or curtail planned programs and/or cease our operations entirely. In addition, if the Company does not meet its payment obligations to third parties as they come due, it may be subject to litigation claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.
We anticipate the Company will continue to incur net losses into the foreseeable future as we: (i) continue our clinical trial of MVT-5873 in cancer patients, (ii) continue our clinical trial for the development of MVT-1075 as a radioimmunotherapy, (iii) prepare for a mid-stage proof-of-concept clinical trial of MVT-5873 as a treatment for pancreatitis, to be initiated in early 2019, and (iv) continue operations as a public company. Based on receipt of $2.7 million net of transaction costs in February 2018, an additional $830,000 from a financing in May 2018, and receipt of $700,000 from an upfront payment under a sublicense agreement with Y-mAbs Therapeutics, Inc. (“Y-mAbs”) during the first nine months of 2018; and receipt of $4.0 million in gross proceeds from an asset purchase and license agreement with Boehringer Ingelheim International GmbH (“Boehringer Ingelheim”) in July 2018, and without any other additional funding or receipt of payments from potential asset sales or licensing agreements, we expect we will have sufficient funds to meet our obligations until December 2018. These conditions give rise to substantial doubt as to the Company’s ability to continue as a going concern. Any of these actions could materially harm the Company’s business, results of operations, and prospects. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
If the Company raises additional funds by issuing equity securities, substantial dilution to existing stockholders could result. If the Company raises additional funds by incurring debt financing, the terms of the debt may involve significant cash payment obligations as well as covenants and specific financial ratios that may restrict the Company’s ability to operate its business.
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://fasb.org/us-gaap/role/ref/legacyRef