| Convertible Preferred Stock, Common Stock and Warrants | 5. Convertible Preferred Stock, Common
Stock and Warrants Series A-1 preferred stock and common
warrants As of September
30, 2015, and December 31, 2014, there were no shares and 1,593,389 shares of Series A-1 preferred stock outstanding, respectively,
and no Series A-1 warrants and 1,280,047 Series A-1 warrants to purchase common stock at $3.62 per share outstanding, respectively. Both
the preferred stock and the warrants had price protection if there were to be a financing at a price lower than their conversion
price or exercise price, requiring adjustment as further described in the Companys Annual Report on Form 10-K. The
Series A-1 preferred stock and warrants were initially structured as Series C-1 preferred stock and common warrants of MabVax Therapeutics
prior to the Merger, and were converted from Series C-1 to Series A-1 preferred stock and warrants at the time of the Merger. Series B Preferred Stock As of September
30, 2015, and December 31, 2014, there were no shares and 1,250,000 shares of Series B preferred stock and no Series B warrants
and 78,125 Series B warrants to purchase common stock at $1.57 a share outstanding, respectively. Both the preferred
stock and the warrants had price protection if there were to be a financing at a price lower than their conversion price or exercise
price, requiring adjustment as further described in the Companys Annual Report on Form 10-K. As of December 31,
2014, the warrant liability was $92,463. As a result of the
anti-dilution provision contained in the Series B warrants, the Series B warrants were recorded as a current liability in the amount
of $92,463 on our consolidated balance sheet as of December 31, 2014. On March 25, 2015, the Series B warrants were
re-valued at $72,656 prior to being exchanged into shares of common stock and Series D convertible preferred stock on a one for
one basis and the warrant liability was eliminated and the Company recorded a gain of $19,807 for the three months ended March
31, 2015. Dividends on Preferred Stock The Company immediately
recognizes the changes in the redemption value on preferred stock as they occur and the carrying value of the security is adjusted
to equal what the redemption amount would be as if redemption were to occur at the end of the reporting period based on the conditions
that exist as of that date. The value adjustment made to the redemption value and preferred stock dividends for the three and nine
months ended September 30, 2015, was an increase of none and $93,234, respectively. Conversion of Preferred Stock into
Common Stock During the three
months ended March 31, 2015, holders of Series A-1, Series B, and Series C preferred stock converted 64,019, 106,437, and 96,571
shares into 38,456, 276,883, and 120,714 shares of common stock, respectively; such conversions eliminated all outstanding Series
A-1, Series B, and Series C preferred stock outstanding. Exchange of Series A-1 and Series
B Preferred Stock and Warrants into Common Stock and Series D Preferred Stock On March 25, 2015,
the Company entered into separate exchange agreements with certain holders of the Companys Series A-1 preferred stock and
Merger warrants (the Series A-1 Exchange Securities) and holders of the Companys Series B preferred stock
and Series B warrants (the Series B Exchange Securities and, collectively with the Series A-1 Exchange Securities,
the Exchange Securities), all previously issued by the Company. Pursuant to the exchange agreements, the holders
exchanged the Exchange Securities and relinquished any and all other rights they may have had pursuant to the Exchange Securities,
their respective governing agreements and certificates of designation, including any related registration rights, in exchange for
an aggregate of 2,537,502 shares of the Companys common stock and an aggregate of 238,156 shares of the Companys
newly designated Series D Convertible preferred stock (the Series D preferred stock), convertible into 23,815,600
shares of common stock. No cash was exchanged in the transaction. The Company recorded deemed dividends of
$9,017,512, $8,655,998 and $179,411 representing the excess fair value of the common stock issued over the original conversion
terms of the Series A-1 and B preferred stock as part of the consideration for elimination of the Series A-1, Series B convertible
preferred stock and Series A-1 warrant, respectively. Additionally, for
as long as a certain principal holder of Exchange Securities holds securities issued pursuant to the exchange agreements, subject
to certain exceptions, the Company is restricted from issuing any shares of common stock or securities convertible into common
stock, enter into any equity line of credit or issue any floating or variable priced equity linked instrument. No commission or
other payment was received by the Company in connection with the exchange agreements. Series D Preferred Stock As of September
30, 2015, there were 191,491 shares of Series D preferred stock issued and outstanding which are convertible into an aggregate
of 19,149,100 shares of common stock. As contemplated
by the exchange agreements governing the issuance of the Series D preferred stock and as approved by the Companys Board
of Directors, the Company filed with the Secretary of State of the State of Delaware a Certificate of Designation of Preferences,
Rights and Limitations of Series D Convertible Preferred Stock (the Series D Certificate of Designations), on March
25, 2015. Pursuant to the Series D Certificate of Designations, the Company designated 1,000,000 shares of its blank check preferred
stock as Series D preferred stock. Each share of Series D preferred stock has a stated value of $0.01 per share. In the event of
a liquidation, dissolution or winding up of the Company, each share of Series D preferred stock will be entitled to a per share
preferential payment equal to the stated value. Each share of Series D preferred stock is convertible into 100 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 Companys 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. MabVax Common Stock Financing On March 31, 2015,
the Company consummated the first closing of the April 2015 Private Placement and sold $4,714,726 of Units, net of $281,023 in
issuance costs, consisting of 6,661,000 shares of common stock and warrants to purchase 3,330,500 shares of common stock at $1.50
a share. The Units were sold at a price of $0.75 per Unit. On April 10, 2015,
the Company consummated the second and final closing of the April 2015 Private Placement and sold $3,831,622 of Units, net of $387,127
in issuance costs, of which $2,500,000 of the Units consisted of Series E preferred stock and the balance of i consisting of 5,624,998
shares of common stock, together with warrants to all investors to purchase 4,479,167 shares of common stock at $1.50 a share. Each
Unit was sold at a purchase price of $0.75 per Unit. The Company paid
commissions to broker-dealers in the aggregate amount of approximately $574,000 in the April 2015 Private Placement. OPKO was the lead
investor in the April 2015 Private Placement, purchasing $2,500,000 of Units consisting of Series E preferred stock. As a condition to
OPKOs participation in the April 2015 Private Placement, each of the other investors in the April 2015 Private Placement
agreed to execute lockup agreements restricting the sale of 50% of the securities underlying the Units purchased by them for a
period of 6 months and the remaining 50% prior to the expiration of 1 year following the final closing date of the April 2015 Private
Placement. On April 10, 2015,
the Company agreed that $3.5 million of the net proceeds of such closing would be paid into and held under and the terms of an
escrow agreement with Signature Bank, N.A pending the approval of a representative of OPKO or 10 weeks thereafter, unless released
sooner or extended by the Company and OPKO. On June 22, 2015 the Company and OPKO extended the termination date of the
escrow to 16 weeks from the final closing of the April 2015 Private Placement. In connection with the OPKO investment, Steven Rubin,
Esq. was appointed advisor to the Company. The escrowed funds were to be returned to the applicable investors and the Company shall
have no further obligation to issue Units to such investors in the event certain release conditions are not met. On June 30, 2015
the Company and OPKO entered into a letter agreement pursuant to which the Company granted the representative the right, but not
the obligation, until June 30, 2016, to nominate and appoint up to two additional members of the Companys Board, or to approve
the person(s) nominated by the Company pursuant to the agreement in consideration for the release of the escrowed funds. The nominees
will be subject to the satisfaction of standard corporate governance practices and any applicable national securities exchange
requirements. Upon signing the agreement, the escrowed funds were released to the Company. The warrants are
exercisable upon issuance and expire 30 months thereafter and may be exercised for cash or on a cashless basis. The warrants have
a per share exercise price of $1.50, subject to certain adjustments typical of warrants, namely stock splits, dividends and reverse-splits.
The Company is prohibited from effecting the exercise of the warrants to the extent that, as a result of such exercise, the holder
beneficially would own more than 4.99% in the aggregate, of the issued and outstanding shares of the Companys common stock
calculated immediately after giving effect to the issuance of shares of common stock upon the exercise of the warrants. In connection with
the Private Placement, the Company also entered into a Registration Rights Agreement with the investors in the Private Placement
Pursuant to which the Company has agreed to file a registration statement with the SEC covering resales of up to 25% of common
stock issued under the Subscription Agreements and shares issuable upon conversion of the Series E preferred stock, in the event
the investors elect to receive Series E preferred stock instead of common stock (together, the Registrable Securities),
no later than 60 days following the final closing date of the Private Placement, and to use its commercially reasonable best efforts
to have such registration statement declared effective with 120 days after filing. The Company will bear all expenses of such registration
of the resale of the Registrable Securities. Investors in the Private Placement also may be required under certain circumstances
to agree to refrain from resales of a percentage of their securities upon request of an underwriter or placement agent in a future
offering. The liquidated damages for failure to achieve effectiveness of the Registerable Securities is 1% a month 120 days after
filing, and provided management has not used commercially reasonable best efforts to have the registration statement declared effective
within that timeframe. In connection with
the April 2015 Private Placement, the Company also entered into a registration rights agreements (the Registration Rights
Agreements) with the investors in the April 2015 Private Placement Pursuant to which the Company has agreed to file a registration
statement with the SEC covering resales of up to 25% of common stock issued under the Subscription Agreements and shares issuable
upon conversion of the Series E preferred stock, in the event the investors elect to receive Series E preferred stock instead of
common stock (together, the Registrable Securities), no later than 60 days following the final closing date of the
April 2015 Private Placement, and to use its commercially reasonable best efforts to have such registration statement declared
effective with 120 days after filing. The Company will bear all expenses of such registration of the resale of the Registrable
Securities. Investors in the Private Placement also may be required under certain circumstances to agree to refrain
from resales of a percentage of their securities upon request of an underwriter or placement agent in a future offering. The liquidated
damages for failure to achieve effectiveness of the Registerable Securities is 1% a month 120 days after filing, and provided management
has not used commercially reasonable best efforts to have the registration statement declared effective within that timeframe. On June 9, 2015
the Company and investors holding over 60% of the outstanding Registrable Securities (as such term is defined in the Registration
Rights Agreements) entered into an amendment agreement to the Registration Rights Agreements in order to: (i) amend the definition
of Filing Date for the initial registration statement such that such term shall be defined as August 5, 2015
and (ii) waive any payments that may be due to the Investors as a result of the Company not filing a registration statement on
or before the Filing Date, as such term was originally defined. On August 4, 2015, the Company and Investors holding
over 70% of the outstanding Registrable Securities entered into a second amendment agreement to further extend the Filing Date
to October 9, 2015. On October 12, 2015,
the Company and Investors holding over 60% of the outstanding Registerable Securities (as such term is defined in the Registration
Rights Agreements) entered into a third amendment agreement to the Registration Rights Agreements to suspend the Companys
registration obligations under the Registration Rights Agreements and related subscription agreements during any period when the
Standstill provision set forth in 5(u) of the subscription agreements is in effect. Except for certain
issuances, for a period beginning on the closing date of the April 2015 Private Placement and ending on the date that is the earlier
of (i) 24 months from the final closing date of the April 2015 Private Placement, (ii) the date the Company consummates a financing
(excluding proceeds from the April 2015 Private Placement) in which the Company receives gross proceeds of at least $10,000,000
and (iii) the date the common stock is listed for trading on a national securities exchange (such period until the earlier date,
the Price Protection Period), in the event that the Company issues any shares of common stock or securities convertible
into common stock at a price per share or conversion price or exercise price per share that is less than $0.75, the Company shall
issue to the investors in the April 2015 Private Placement such additional number of shares of common stock such that the investor
shall own an aggregate total number of shares of common stock as if they had purchased the Units at the price of the lower price
issuance. No adjustment in the warrants is required in connection with a lower price issuance. The Company
has also granted each investor prior to the expiration of 24 months following the final closing date of the April 2015 Private
Placement, a right of participation in the Companys financings. In the event the
Company conducts certain private or public offerings of its securities, each investor has agreed, if requested by the underwriter
or placement agent so engaged by the Company in connection with such offering, to refrain from selling any securities of the Company
for a period of up to 60 days. Between April 13,
2015, and April 14, 2015, certain holders of warrants issued in the April 2015 Private Placement to purchase an aggregate of 1,849,999
shares of common stock exercised such warrants on a cashless basis for an aggregate issuance of 1,219,780 shares of common stock.
As of September 30, 2015, there were 5,959,668 warrants outstanding to purchase common stock at $1.50 a share. Series E Preferred Stock As of September
30, 2015, there were 33,333 shares of Series E preferred stock issued and outstanding, convertible into 3,333,300 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 to designate 100,000 shares of its blank check preferred stock as Series E
preferred stock. The shares of Series
E preferred stock are convertible into shares of common stock based on a conversion calculation equal to the stated value of such
preferred share, plus all accrued and unpaid dividends, if any, on such share of Series E preferred stock, as of such date of determination,
divided by the conversion price. The stated value of each share of Series E preferred stock is $75 and the initial conversion price
is $0.75 per share, each subject to adjustment for stock splits, stock dividends, recapitalizations, combinations, subdivisions
or other similar events. In addition, during the Price Protection Period, 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 holders share of
Series E preferred stock, but not in excess of beneficial ownership limitations. The shares of Series E preferred stock bear no
interest. Issuance of Common Stock under Common Stock Purchase Agreement In connection with
a financing that took place in July 2014, or the July 2014 Financing Transaction, the Company assumed certain obligations as per
the original agreement to issue additional shares to investors in the July 2014 Financing Transaction if a subsequent financing
was at a price per share lower than the price per share in the July 2014 Financing Transaction. The Company therefore issued on
March 31, 2015, an aggregate of 88,093 shares of common stock that were required to be issued in connection with the July 2014
Financing Transaction, as a result of the lower share price in the April 2015 Private Placement. Grant of Restricted Shares Rubin Grant On April 3, 2015,
the Company entered into a consulting agreement with Steve Rubin pursuant to which he agreed to provide advisory services in connection
with corporate strategy, licensing and business development estimated to be for a period of 12 months. In exchange for
his services, the Company provided him with a one-time grant of 200,000 shares of the Companys restricted common stock,
valued at $2.30 a share. As the shares granted were fully vested upon grant and the Company has no legal recourse to
recover the shares in the event of nonperformance, the Company recognized the grant date fair value of the shares as consulting
expense upon grant during the current quarter. Ravetch Grant On April 4, 2015,
the Board approved the issuance of an additional restricted stock award of 131,500 shares to Jeffrey Ravetch. This award
is for future services covering at least one year period. The award was granted in addition to the prior award to Dr. Ravetch on
April 2, 2015 of: (i) 34,250 restricted shares and (ii) options to purchase 34,250 shares of common stock with an exercise price
of $2.30 per share, for a total grant of 200,000 restricted shares and options. As the 131,500 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 current quarter. Livingston Grant On April 4, 2015,
the Board of Directors approved a restricted stock award by the Company of 1,000,000 shares of common stock, valued at $2.30 a
share, to be issued to Phil Livingston, Ph.D. for his continuing service to the Company. On May 13, 2015, the Compensation
Committee of the Board clarified that the award is being granted in consideration for at least one year of Dr. Livingstons
services. The committee further clarified that the vesting of the common stock shall be on the one-year anniversary
of the Board of Directors approval of the award, or April 4, 2016. The Company is expensing the grant date fair
value of the award over the vesting period of one year. Consulting Agreement On April 5, 2015,
the Company entered into a consulting agreement with The Del Mar Consulting Group, Inc. and Alex Partners, LLC, together, the Investor
Relations Consultants, pursuant to which such Investor Relations Consultants shall provide investor relations services to
the Company in consideration for an immediate grant of 300,000 shares of the Companys 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 200,000
shares of the Companys restricted common stock upon the Companys 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 300,000 shares of $690,000, as investor
relations expense upon grant during the current quarter. The performance condition for the 200,000 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 quarter ended June 30, 2015 Consultant Grants During the quarter
ended September 30, 2015, the Board of Directors approved the issuance of restricted stock awards to two consultants totaling 120,000
shares with vesting terms ranging from one to three years, valued from $1.77 to $2.13 per share. The Company is expensing
each of the grant date fair value of the awards over the performance period for the award, and will be re-measured at the end of
each quarter until the performance is complete. | 7. Redeemable Convertible Preferred Stock, Convertible Preferred
Stock, Common Stock and Warrants
MabVax Therapeutics Series A and MabVax Therapeutics Series B
preferred stock (Pre-Merger MabVax Therapeutics
Issuances)
During February 2013 through December 2013, the Company sold an
additional 410,557 shares of MabVax Therapeutics Series B
redeemable convertible preferred stock in exchange for $2,792,993
in funds, net of issuance costs of $7,007. The Company also issued
warrants to purchase an additional 194,281 shares of MabVax
Therapeutics Series B redeemable convertible preferred stock at an
exercise price of $0.01 per share (the “Series B
Warrant”). The Series B Warrant is exercisable immediately
and has a term of five years. Because the Series B Warrant is
immediately convertible at the option of the holder, the Company
recorded a deemed dividend of $691,812 from the beneficial
conversion feature associated with the issuance of the MabVax
Therapeutics Series B redeemable convertible preferred stock and
the Series B Warrant.
The Company valued the warrants at fair value at the date the
warrants were issued, using the Black Scholes valuation model with
the following assumptions; contractual term of five years,
volatility of 86%, no dividend yield and a risk-free interest rate
of 0.28%.
As of December 31, 2013, the holders of shares of MabVax
Therapeutics Series A redeemable convertible preferred stock and
MabVax Therapeutics Series B redeemable convertible preferred stock
were entitled to cumulative cash dividends of 8% per annum,
when and if declared by the MabVax Therapeutics Board of Directors.
Such dividends would have been in preference to and prior to any
payment of any dividend on shares of MabVax Therapeutics common
stock. Cumulative preferred stock dividends, when and if declared,
for the MabVax Therapeutics Series A redeemable convertible
preferred stock totaled $2,114,818 and the MabVax Therapeutics
Series B redeemable convertible preferred stock totaled $430,944,
as of December 31, 2013, and were reduced to zero in February
2014 as a result of the MabVax Therapeutics Series C-1 Preferred
Stock Financing.
In January 2014, holders of warrants to purchase shares of MabVax
Therapeutics Series B redeemable convertible preferred stock
exercised their rights to purchase 194,281 shares of MabVax
Therapeutics Series B redeemable convertible preferred stock for
proceeds of $1,942.
In February 2014, the holders of MabVax Therapeutics Series A
redeemable convertible preferred stock and MabVax Therapeutics
Series B redeemable convertible preferred stock waived any rights
to all prior accrued dividends they may have had a right to receive
and amended the MabVax Therapeutics certificate of incorporation to
eliminate their right to accrue dividends in the future as an
inducement to buyers in the MabVax Therapeutics Series C-1
Preferred Stock Financing. The effect of this change reduced the
liquidation preference for the MabVax Therapeutics Series A
redeemable convertible preferred stock by $2,187,762 and the MabVax
Therapeutics Series B redeemable convertible preferred stock by
$486,938 as of February 12, 2014.
No dividends were ever declared by the MabVax Therapeutics Board of
Directors since MabVax Therapeutics’ inception on either of
the MabVax Therapeutics Series A redeemable convertible preferred
stock or the MabVax Therapeutics Series B redeemable convertible
preferred stock.
Removal of Redemption Rights
Liquidation preference –
Series C-1 preferred stock purchase agreement
On February 12, 2014, MabVax Therapeutics entered into a
Securities Purchase Agreement (the “MabVax Therapeutics
Securities Purchase Agreement”) and issued 3,697,702 shares
of MabVax Therapeutics Series C-1 preferred stock, warrants to
purchase 2,055,260 shares of MabVax Therapeutics common stock at
$3.62 a share (the “MabVax Therapeutics Series C Common
Warrants”) and warrants to purchase 1,848,851 shares of
MabVax Therapeutics Series C-1 preferred stock at $0.84 a share
(the “MabVax Therapeutics Series C Preferred
Warrants”), respectively, for aggregate gross proceeds of
$3,100,000, less issuance costs of $126,345 (the “MabVax
Therapeutics Series C-1 Financing”). The MabVax Therapeutics
Series C Common Warrants and Preferred Warrants were exercisable
immediately. The MabVax Series C Common Warrants would have expired
on February 13, 2022, and the MabVax Therapeutics Series C
Preferred Warrants would have expired upon registration of the
shares of MabVax Therapeutics common stock (or a successor entity)
under the Securities Act. Because the warrants are immediately
convertible at the option of the holder, MabVax Therapeutics
recorded a deemed dividend of $2,214,911 from the beneficial
conversion feature associated with the issuance of the MabVax
Series C-1 preferred stock and the MabVax Therapeutics Series C
Common Stock Warrants and the MabVax Therapeutics Series C
Preferred Stock Warrants.
In connection with the MabVax Therapeutics Series C-1 Financing,
MabVax Therapeutics agreed to use its reasonable best efforts to
raise at least an additional $3,000,000 through the sale and
issuance of shares of MabVax Therapeutics common stock initially
intended to be at $15.08 per share (the “Subsequent Capital
Raise”). Substantially all of the investors in the MabVax
Therapeutics Series C-1 Financing executed a financing commitment
letter (such letters, the “Financing Commitment
Letters”) to purchase a pro rata number of shares of MabVax
Therapeutics common stock at the purchase price of $15.08 per
share, representing in the aggregate at least $750,000, subject to
certain terms and conditions, including a condition that MabVax
Therapeutics raise at least $3,000,000 from new investors in the
Subsequent Capital Raise. In addition, each such commitment letter
provided that, in the event that less than $3,000,000 was raised
from new investors in the Subsequent Capital Raise and subject to
certain terms and conditions, each investor party to such letter
was required to purchase shares of MabVax Therapeutics preferred
stock to be designated as MabVax Therapeutics Series C-2
convertible preferred stock at $15.08 per share and in the
aggregate amount of up to $3,000,000 (the “Backstop Capital
Raise”).
On May 12, 2014, MabVax Therapeutics and certain investors
amended the MabVax Therapeutics Securities Purchase Agreement to,
among other things, (i) lower the price per share of the
Subsequent Capital Raise from $15.08 to $9.93 per share, and
(ii) provide that the price per share payable by investors as
set forth in the Financing Commitment Letters would henceforth be
the lower of (A) $15.08 a share and (B) the lowest price
paid in the Subsequent Capital Raise. The price per share of the
Backstop Capital Raise was not changed as a result of the
amendment. On July 7, 2014, prior to the Merger, MabVax
Therapeutics raised over $3.0 million from the sale of common
stock and the Backstop Capital Raise was no longer in effect.
The MabVax Therapeutics Series C-1 preferred stock allowed the
holders to require that MabVax Therapeutics redeem their shares of
MabVax Therapeutics Series C-1 preferred stock, including any
accrued but unpaid dividends, upon the occurrence of any of the
following events (each, a “Triggering Event”):
(i) the suspension of trading of common stock following
registration of such shares, (ii) the failure to issue shares
of MabVax Therapeutics common stock upon conversion of any MabVax
Therapeutics Series C-1
On July 8, 2014, the date of the Merger, all MabVax
Therapeutics Series C-1 preferred stock was converted into shares
of MabVax Therapeutics Holdings Series A-1 preferred stock, and the
Triggering Events were removed. Because of the removal of the
Triggering Events as of the Merger date, the MabVax Therapeutics
Holdings Series A-1 convertible preferred stock is presented on the
consolidated balance sheet as permanent equity as of
December 31, 2014.
Conversion
After giving effect to the Merger and Reverse Split, the holders of
our Series A-1 preferred stock may at any time voluntarily convert
each share into a number of fully paid shares of our common stock
determined by dividing the liquidation preference (described below)
by the initial conversion price of $1.6767 per share. Conversion is
subject to (a) proportional adjustment for certain dilutive
issuances, splits, combinations and other recapitalizations or
reorganizations and (b) a full ratchet anti-dilution
adjustment upon issuance of shares of common stock (or securities
convertible into shares of common stock) at a price per share (or
with a conversion or exercise price per share) less than the
applicable conversion price, and subject to customary carve outs
and exclusions.
Under the terms described for a mandatory conversion, all
outstanding shares of our Series A-1 preferred stock shall be
automatically converted into shares of our common stock upon the
affirmative election of the holders of a majority of the issued and
outstanding shares of our Series A-1 preferred stock. In the event
that the Company does not issue the shares of its common stock upon
conversion of any shares of its Series A-1 preferred stock, certain
penalties, which may be paid in the form of cash or additional
shares of its common stock, will accrue. The number of shares of
our common stock issuable upon conversion of our Series A-1
preferred stock held by any particular holder, together with all
affiliates of such holder, is capped at 4.99% of the issued and
outstanding shares of common stock of the Company. Any shares in
excess of such amount will be held in abeyance until such time as
the issuance of such shares of common stock would not put such
holder, together will all affiliates of such holder, above 4.99%.
An individual holder may elect to increase this limit to up to
9.99% effective 61 days after providing notice to the Company.
Dividends
The Company’s Series A-1 stockholders are entitled to
cumulative dividends on each share held at a rate of 8% per
annum on the Stated Value (as defined in the Series A-1
certificate of designations) from and after the first date of
issuance of any Series A-1 whether or not declared by the Board and
whether or not there are funds legally available for the payment of
dividends. Such dividends are in preference to and prior to any
payment of any dividend on shares of our Series B preferred stock,
our Series C preferred stock or our common stock. If any dividend
is declared and paid on any shares of our common stock, Series B
preferred stock or Series C preferred stock, a dividend shall be
declared and paid on shares of our Series A-1 preferred stock on an
“as converted” basis. The Company is accreting the
dividends in accordance with the agreement.
Liquidation preference
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, our Series A-1 preferred
stockholders shall be paid an amount equal to $1.6767 per share,
plus all accrued dividends, as adjusted to reflect any stock
splits, stock dividends or other recapitalization. In addition,
after setting apart or paying in full the Series A-1 preferred
stock, and Series B preferred stock liquidation preference, any
remaining assets of the Company available for distribution to
stockholders, if any, shall be distributed to all stockholders of
the Company with holders of our preferred stock participating on an
as converted basis without actually converting their preferred
stock into common stock.
In the event that upon liquidation or dissolution, the assets and
funds of the Company are insufficient to permit the payment to its
preferred stockholders of the full preferential amounts, then the
entire assets and funds of the Company legally available for
distribution are to be distributed ratably first to the holders of
shares of our Series A-1 preferred stock, second to holders of our
Series B preferred stock and third on a pro rata basis to all
stockholders of the Company on an as-converted basis.
Voting rights
Each holder of our Series A-1 preferred stock is entitled to the
number of votes equal to the number of shares of our common stock
into which such holder’s shares are convertible. In addition,
the consent of the Required Holders (as defined in the Series A-1
preferred stock certificate of designations) is required in certain
circumstances.
Registration of Common Stock Issuable upon Conversion of
Series A-1 Preferred Stock, and Conversions
On October 14, 2014, the Company filed an Amendment No. 1
to a Registration Statement on Form S-1 (the “Form
S-1”) that was initially filed on September 29, 2014,
for the purpose of registering additional shares of MabVax
Therapeutics Holdings common stock issuable upon conversion of
outstanding shares of MabVax Therapeutics Holdings Series A-1
preferred stock. The Form S-1, as amended, to register 1,615,070
shares of common stock, was declared effective by the SEC at 4:00
p.m. Eastern Standard Time on November 12, 2014.
From November 13, 2014, to December 31, 2014, holders of
Series A-1 preferred stock converted 1,169,452 shares into 693,335
shares of common stock.
Exercise of MabVax Therapeutics Series C Preferred
Warrants
On July 7, 2014, MabVax Therapeutics received $1.5 million in
exchange for the exercise by holders of the MabVax Therapeutics
Series C Preferred warrants to purchase 1,827,979 shares of MabVax
Therapeutics Series C-1 preferred stock.
MabVax Therapeutics Holdings Series B Redeemable Convertible
Preferred Stock
On May 12, 2014 (the “Closing Date”), MabVax
Therapeutics Holdings entered into a securities purchase agreement
(the “Series B Purchase Agreement”) with certain
purchasers the “Purchasers” pursuant to which MabVax
Therapeutics Holdings agreed to issue and sell to the Purchasers,
subject to customary closing conditions, an aggregate of 1,250,000
shares of MabVax Therapeutics Series B redeemable convertible
preferred stock and warrants (the “Series B Common
Warrants”) to purchase up to an additional 78,125 shares of
MabVax Therapeutics Holdings common stock, with an aggregate
purchase price of $2,500,000, or $2.00 for each share of our Series
B redeemable convertible preferred stock and related Series B
Common Warrant (such transaction collectively, the “Series B
Private Placement”). The closing of the Series B Private
Placement took place on the Closing Date.
On May 8, 2014, MabVax Therapeutics Holdings filed a
certificate of designation for the MabVax Therapeutics Holdings
Series B preferred stock with the Secretary of State of the State
of Delaware. The certificate of designations authorized 1,250,000
shares of Series B preferred stock. Holders of MabVax Therapeutics
Series B redeemable convertible preferred stock
(the “Holders”) are entitled to cumulative
dividends on each share held at a rate of 8% per annum on the
Stated Value (as defined in the certificate of designations). Upon
a liquidation event, the Holders are entitled to a liquidation
preference per share, prior to any distribution of the
Company’s assets to the holders of its common stock, in an
amount equal to the Stated Value plus accrued and unpaid dividends.
After payment to the Holders of the full preferential amount, the
Holders will, on a pari passu
The Series B Common Warrants became exercisable six months from the
Closing Date, or November 12, 2014, expire five years from the
Closing Date and may be exercised for cash or otherwise may be
net-exercised. The Series B Common Warrants initially had a per
share exercise price of $26.64. On the 60th day following the
earlier of (i) the date all of the shares underlying the
Warrants become registered pursuant to an effective registration
statement and (ii) six months following the Closing Date (in
each case, the “Reset Date”), the exercise price shall
be reset to equal the lower of (i) the current exercise price
and (ii) 90% of the average of the 10 lowest weighted average
prices of Common Stock during the 20 trading days immediately
preceding the Reset Date. The price was reset to $1.57 on
January 11, 2015. The exercise price is subject to full
ratchet anti-dilution adjustment for any issuances of common stock
and convertible securities for common stock below the current
conversion price, consistent with the terms of the Series B
preferred stock.
In connection with the Series B Private Placement, the Company also
entered into a Registration Rights Agreement with the Purchasers
(the “Series B Registration Rights Agreement”).
Pursuant to the Series B Registration Rights Agreement, the Company
agreed to file a registration statement with the SEC covering
resales of the Warrant Shares and the shares issuable upon
conversion of the Series B preferred stock (together, the
“Series B Registerable Securities”) by the Purchasers
no later than 60 days following the Closing Date, and to use its
commercially reasonable best efforts to have such registration
statement declared effective as soon as practicable. The Company
bears all expenses of such registration of the resale of the
Registerable Securities. On September 3, 2014, the Required
Holders (as defined in the Series B preferred stock certificate of
designations) temporarily waived the 60 day registration deadline
for a five day period.
As a result of the Series B Warrants’ anti-dilution
provision, the Series B Warrants are recorded as a current
liability on our consolidated balance sheet. The outstanding
warrant was valued at $92,463 and $567,885 as of December 31,
2014, and July 8, 2014 or the acquisition date, respectively.
Our outstanding warrants are revalued on each balance sheet date,
with changes in the fair value between reporting periods recorded
in the consolidated statements of operations.
Warrants are valued using the Black-Scholes-Merton model. The
warrant has only partial down round protection, as it has a price
reset only on a down round financing, and not an increase in number
of shares convertible with the warrant. The Company concluded that
using the Black-Scholes-Merton model for the valuation as of
December 31, 2014, is fairly accurate compared to a recent
buyout offer. The fair value of warrants is estimated using the
following assumptions, which, except for risk-free interest rate,
are Level 3 inputs:
Warrant liability valuation assumptions
As of December 31, 2014 As of July 8, 2014
Risk-free interest rate 1.75 % 1.60 %
Dividend yield — % — %
Expected volatility 86.67 % 101.60 %
Expected life of options, in years 4.36 4.90
Market price for common stock $ 1.82 $ 11.60
Warrant exercise price, adjusted $ 1.80 $ 26.64
The following table presents information about our financial
instruments that are measured at fair value on a recurring basis as
of December 31, 2014 and indicates the fair value hierarchy of
the valuation techniques utilized to determine such fair value:
Basis of Fair Value Measurement at
December 31, 2014
December 31, 2014 Quoted Prices in Significant Significant
Financial liabilities:
Warrants $ 92,463 $
— $
— $ 92,463
Total financial liabilities $ 92,463 $
— $
— $ 92,463
The changes in the value of the warrant liability during the year
ended December 31, 2014 were as follows:
Fair value - beginning of year $
—
Fair value on acquisition 567,885
Change in fair value (475,422 )
Fair value - end of year $ 92,463
There were no transfers between Level 1 and Level 2 measurements
for the years ended December 31, 2014 and no required
disclosure as of December 31, 2013.
Exchange Agreement and Series C Preferred Stock
On September 3, 2014, MabVax Therapeutics Holdings and certain
holders of its issued and outstanding common stock entered into an
Exchange Agreement (the “Exchange Agreement”) pursuant
to which such holders agreed to exchange 148,713 shares of MabVax
Therapeutics Holdings common stock for an aggregate of 118,970
shares of newly designated MabVax Therapeutics Holdings Series C
preferred stock. From October to December 2014, holders converted
22,399 shares of Series C preferred stock into 28,000 shares of
common stock.
As contemplated by the Exchange Agreement and as approved by the
Board of Directors, the Company filed with the Secretary of State
of the State of Delaware a certificate of designations for the
Series C preferred stock, on September 3, 2014. Holders of the
Series C preferred stock are entitled to vote on an as converted
basis on matters presented to the Company’s stockholders and,
upon liquidation, share in distributions on a pari
passu
The terms of the Exchange Agreement and Series C Certificate of
Designations were determined by arms-length negotiation between the
parties. The shares of common stock issuable pursuant to the
Exchange Agreement have been, or will be, upon settlement, issued
in reliance on the exemption from registration contained in
Section 3(a)(9) of the Securities Act for securities exchanged
by an issuer and an existing security holder where no commission or
other remuneration is paid or given directly or indirectly by the
issuer for soliciting such exchange.
MabVax Common Stock Financing
From June 27 to July 7, 2014, MabVax Therapeutics
Holdings issued approximately 326,000 shares of common stock for
aggregate proceeds of approximately $2,884,000, net of issuance
costs of approximately $156,000, in a private placement transaction
(the “MabVax Common Stock Private Placement”), pursuant
to Common Stock Purchase Agreements by and among MabVax
Therapeutics and certain institutional investors party thereto (the
“MabVax Purchase Agreements”). Pursuant to the MabVax
Purchase Agreements, MabVax Therapeutics agreed to issue the
purchasers participating in closings held under the MabVax Common
Stock Private Placement prior to the closing of the Merger
additional “anti-dilution” shares of MabVax
Therapeutics common stock, for no additional consideration should
MabVax Therapeutics sell shares of its common stock in the future
(subject to certain customary exceptions, such as upon the
conversion or exercise of then outstanding convertible securities,
the securities issued in the Merger and issuances under the MabVax
Therapeutics option plan) at a price lower than $9.14 per share
prior to the first to occur of (x) December 31, 2015 and
(y) the date on which MabVax Therapeutics raises an aggregate
of $10,000,000. The number of additional shares would be calculated
on a weighted average based on the price per share of equity
securities sold by MabVax Therapeutics following the initial
closing of the MabVax Common Stock Private Placement and in no
event would a purchaser be issued a number of additional shares of
MabVax Therapeutics common stock in excess of 33% of the number of
shares initially purchased by such purchaser and held as of the
date of any anti-dilution adjustment. These shares of MabVax
Therapeutics common stock issued in the MabVax Common Stock Private
Placement were converted into shares of MabVax Therapeutics
Holdings common stock in connection with the Merger. MabVax
Therapeutics’ obligations with respect to the anti-dilution
provisions in the Merger were assumed by MabVax Therapeutics
Holdings, and these provisions now apply to sales of MabVax
Therapeutics Holdings common stock. As of December 31, 2014,
no sales of common stock had taken place since the MabVax Common
Stock Private Placement that would have caused the issuance of
anti-dilution shares.
Temporary Waiver of Warrant Exercise Period
On the effective date of the Merger and pursuant to the Merger
Agreement, MabVax Therapeutics Holdings issued as part of its
securities to the holders of MabVax Therapeutics in exchange for
securities owned by MabVax Therapeutics’ security holders,
warrants to purchase up to an aggregate of 2,055,268 shares of
MabVax Therapeutics Holdings common stock, with an exercise price
of $3.62 per share and expiring on July 10, 2023 (the
“Merger Warrants”).
The preamble of the Merger Warrants contains limitations
prohibiting the Merger Warrant holders from exercising the Merger
Warrants prior to the one year anniversary of the effective date of
the Merger, or July 8, 2015.
On September 3, 2014, the Company sent a letter to the holders
of the issued and outstanding Merger Warrants (the “Waiver
Letter”), waiving, on a limited basis from September 3
through September 12, 2014, the requirement set forth in the
preamble of the Merger Warrants that the Merger Warrants may not be
exercised until July 8, 2015, and permitting the Merger
Warrants to be exercised, either through payment of the exercise
price or on a net “cashless” basis, at any time during
the period commencing on the date of the letter and ending on and
including September 12, 2014 (the “Waiver
Period”). The Waiver Letter also provides that, with respect
to exercises pursuant to the Waiver Letter during the Waiver
Period, the number of shares of common stock issuable upon cashless
exercise shall be determined in accordance with the formula set
forth in the Waiver Letter rather than the formula set forth in
Section 1(d) of the Merger Warrant.
On October 3, 2014, following the Company’s delivery on
September 30, 2014, of a second letter to the holders of the
issued and outstanding Merger Warrants (the “Waiver Extension
Letter”), waiving, on a limited basis for a four day period,
the requirement set forth in the preamble of the Merger Warrants
that the Merger Warrants may not be exercised until July 8,
2015, and permitting the Merger Warrants to be exercised, either
through payment of the exercise price or on a net
“cashless” basis, at any time during the period
commencing on the date of the letter and ending on and including
October 3, 2014 (the “Waiver Extension Period”).
The Waiver Extension Letter also provides that, with respect to
exercises pursuant to the Waiver Extension Letter during the Waiver
Extension Period, the number of shares of the Company’s
common stock issuable upon cashless exercise shall be determined in
accordance with the formula set forth in the Waiver Extension
Letter rather than the formula set forth in Section 1(d) of
the Merger Warrant.
The Company’s management issued the temporary waiver of the
warrant exercise period with the intention of gradually increasing
the number of its publicly held shares in furtherance of the
Company’s continued efforts to satisfy NASDAQ’s Initial
Listing Standards and regain trading eligibility for shares of its
common stock on the NASDAQ Capital Market. Shares of the
Company’s common stock issued upon exercise of the Merger
Warrants will not be registered for resale during the Waiver
Extension Period and will be subject to resale restrictions per
Rule 144 as promulgated by the Securities Act.
For the year ended December 31, 2014, 488,659 additional
shares of the Company’s common stock had been issued pursuant
to the exercise and delivery of 775,219 Merger Warrants in
accordance with the terms of the Waiver Letter and the Waiver
Extension Letter. As of December 31, 2014, the number of
warrants outstanding was 1,280,049 shares and 78,125 shares of the
Merger Warrants exercisable into common stock and the Series B
Common Warrants, respectively. |
