Business context and reporting period
TapImmune Inc. (the registrant named in this filing; the request metadata identifies Marker Therapeutics, Inc.) filed this unaudited Form 10-Q for the quarter ended March 31, 2016. The company was a clinical-stage immunotherapy developer with no product revenue, focused on cancer vaccines and related technologies. It reported plans to advance its folate receptor alpha and HER2/neu programs toward Phase II trials and continue preclinical development of its Polystart technology.
Financial performance and condition
| Metric | Q1 2016 | Q1 2015 / comparison |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $986,000 | $609,000 |
| General and administrative expense | $768,000 | $419,000 |
| Operating loss | $1.754 million | $1.028 million |
| Net loss | $4.750 million | $701,000 |
| Basic and diluted loss per share | $0.07 | $0.03 |
| Cash used in operating activities | $830,000 | $1.014 million |
| Cash at period end | $5.722 million | $1.454 million at March 31, 2015 |
There were no revenues, so revenue growth and gross margins are not applicable. Operating expenses rose about 71% year over year. The net loss increase was primarily driven by a $2.996 million noncash expense from the increased fair value of warrant liabilities; the prior-year quarter recorded a $327,000 gain from fair-value changes.
At March 31, 2016, current assets were $5.759 million and current liabilities were $31.464 million, resulting in a $25.705 million working capital deficit and a $25.705 million stockholders’ deficit. The balance sheet included a $29.489 million derivative warrant liability, up from $26.493 million at year-end; this is a fair-value liability, not conventional borrowings. Promissory notes totaled $28,000, including a $5,000 note in default that bears 10% interest and was due in 2012, and a $23,000 non-interest-bearing related-party note with no fixed repayment terms. The company had no material off-balance-sheet arrangements.
Cash declined by $855,000 during the quarter. Operating cash use was partly offset by a $679,000 increase in accounts payable and accrued liabilities; financing cash use was $25,000, reflecting repayment of a note. The filing reports no clear operating margin because the company had no revenue.
Material changes versus the prior comparable period
- R&D expense increased by $376,000, which management attributed primarily to expensing Mayo Foundation upfront license-fee payments.
- G&A expense increased by $349,000. Management cited higher noncash consulting and compensation expense, including increased vesting-related stock-based compensation.
- Weighted-average shares outstanding increased to 70.6 million from 27.6 million. The company issued 440,000 shares during the quarter, including compensation and consulting-related shares.
- Cash used in operations decreased by $185,000, while the prior-year period included $2.326 million of net financing proceeds; Q1 2016 had no financing proceeds and included a $25,000 note repayment.
Outlook, developments, and risks
- Funding and going concern: Management said existing resources were insufficient to support operations and disclosed substantial doubt about the company’s ability to continue as a going concern. It expected to need approximately $7.5 million over the next 12 months for planned activities, while stating existing cash was expected to fund the operating plan through year-end 2016. No financing was committed. Management planned to seek debt or equity financing, warrant exercises, partnerships, or other strategic transactions; availability and terms were uncertain.
- Clinical and product plans: The filing describes positive immune responses in evaluable patients in completed Phase I studies: 20 of 21 for the folate receptor alpha vaccine and 19 of 20 for the HER2/neu vaccine. It reports FDA Fast Track designation in February 2016 for TPIV 200 in ovarian cancer and previously received orphan drug designation for that program. The company planned Phase II development; a $13.3 million U.S. Department of Defense grant to Mayo Clinic was expected to cover a 280-patient triple-negative breast cancer Phase II trial. These are development plans and reported trial observations, not evidence of commercial efficacy.
- Subsequent developments: After quarter-end, the company reported completing TPIV 200 formulation development, scale-up, GMP manufacturing, and release, with doses available for planned Phase II trials. It also announced plans to participate in a Phase 2 ovarian cancer trial with Memorial Sloan Kettering and durvalumab.
- Warrant-related exposure: Warrant valuations rely on Level 3 assumptions and can materially change with stock price, volatility, and other inputs. The company warned that cash settlement value could differ significantly from the carrying value. Certain warrants include a contingent put right; assuming all holders exercised it following a qualifying fundamental transaction, the company estimated an aggregate payment of approximately $29 million.
- Potential dilution: The filing lists 55.7 million potentially dilutive securities, excluded from diluted loss per share as anti-dilutive. Management expected warrant exercises to be a potential funding source, but exercise proceeds were not assured. Additional equity financing could dilute existing shareholders.
- Controls and contingencies: Management concluded disclosure controls and procedures were not effective as of quarter-end. It reported no material legal proceedings. A related-party note remains outstanding, and the $5,000 overdue note was in default.
Important facts for investors to verify
- Confirm the registrant identity and corporate-name history, given the filing names TapImmune Inc. while the request metadata names Marker Therapeutics, Inc.
- Track cash burn, actual spending against the stated $7.5 million plan, and whether financing was obtained on acceptable terms.
- Verify the timing, funding arrangements, enrollment, and regulatory status of the planned Phase II programs, including the Mayo Clinic grant-funded study.
- Assess the warrant liability’s valuation assumptions, potential settlement obligations, outstanding warrant exercises, and resulting dilution.
- Monitor remediation of the ineffective disclosure controls and the status of the defaulted promissory note.