7. Related-Party Transactions

Related party transactions with Celgene, which owned 10.5% and 15.4% of the Company’s outstanding equity interest as of September 30, 2018 and December 31, 2017, respectively, are described in Note 5.

Related party transactions with Merck, which owned 12.5% and 0% of the Company’s outstanding equity interest as of September 30, 2018 and December 31, 2017, respectively, are described in Note 5.

Three directors of the Company have performed consulting services for the Company, which consulting services were terminated concurrently with the Company’s IPO in September 2018.  Subsequent to his appointment to the Company’s Board of Directors, the Company paid to one of the directors $10,000 and $40,000 during the three and nine months ended September 30, 2018, respectively, and $15,000 and $45,000 in during the three and nine months ended September 30, 2017, respectively. Additionally, such director was granted options to purchase 9,805 shares of the Company’s common stock from 2009 to 2015, at the then-current fair values of the common stock ranging from $4.36 to $11.98 per share, related to his consulting services, which vest ratably over four years. As of September 30, 2018, all of such shares were vested.

There were zero and $250,000 in transaction advisory fees during the nine months ended September 30, 2018 and 2017, respectively, paid to a firm of which such director is a managing executive, related to the Celgene Agreements. Additional payments, based on a single digit percentage of any future payments, will be made to such transaction advisory firm upon receipt of future payments under the 2017 Celgene Agreement (see Note 5). In June 2018, the Company entered into a side letter to its consulting agreement with such director, pursuant to which the Company agreed to pay such director a one-time success fee of $400,000 within 30 days of the execution of a definitive collaboration agreement with a third-party pharmaceutical company. Following the execution of the 2018 Merck Agreement in July 2018, the Company paid such director $400,000. The Company terminated the consulting agreement and side letter with such director prior to the completion of the Company’s IPO.

The Company paid to the second director $5,000 and $20,000 during the three and nine months ended September 30, 2018, respectively, and $7,500, and $22,500 during the three and nine months ended September 30, 2017, respectively.   Additionally, such director was granted an option to purchase 3,269 shares of the Company’s common stock in September 2015 at the then-current fair value of the common stock, related to his consulting services, which vests ratably over four years.

The Company paid to the third director $5,000 and $20,000 during the three and nine months ended September 30, 2018, respectively, and $7,500 and $17,500 during the three and nine months ended September 30, 2017, respectively.

On August 30, 2010, the Company received a promissory note with recourse from its chief executive officer, which was used to purchase common stock. The principal amount of the note was approximately $0.2 million, which accrues interest at 0.53%, compounding semiannually. The note can be prepaid without penalty and is due on August 30, 2019. As of December 31, 2017, the outstanding balance was $0.2 million and the note and related interest receivable were recorded as a component of stockholders’ deficit. The promissory note was paid in full by the chief executive officer in August 2018.

Investment in SutroVax, Inc. (“SutroVax”)

In December 2013, the Company and Johnson & Johnson Innovation, through the Johnson & Johnson Development Corporation, provided initial co-funding for a new company, SutroVax. SutroVax leverages the Company’s proprietary integrated cell-free protein synthesis platform, XpressCF+™, to develop novel vaccines for a broad range of disease targets. The Company had $584,000 and $34,000 in receivables due from SutroVax as of September 30, 2018 and December 31, 2017, respectively, which were included in accounts receivable on the condensed balance sheet.

As of September 30, 2018 and December 31, 2017, the Company held a 5.6% and 7.8% common stock ownership interest in SutroVax, respectively, on a fully-diluted basis, with a carrying value of $0 and was accounted for under the cost method.

SutroVax qualifies as a variable interest entity. However, the Company maintains only shared power to direct the activities that most significantly impact the performance of SutroVax. Therefore, the Company is not considered the primary beneficiary and consolidation is not required.

See Note 5, SutroVax, Inc. Supply Agreement for discussion of the supply arrangement entered into with SutroVax in May 2018 and related revenue recognized for the three months and nine months ended September 30, 2018.

In May 2018, the Company entered into amendments to the license agreement with SutroVax, which primarily clarified under certain limited future circumstances SutroVax’s ability to manufacture extract pursuant to the license agreement. The Company received a warrant for the purchase of 100,000 shares of SutroVax preferred stock which was valued at $140,000. The value of warrants received has been recognized as other revenue-related parties during the nine months ended September 30, 2018 as there are no remaining deliverables under the license agreement.