TapImmune Inc. (not Marker Therapeutics): Q2 2014 Form 10-Q
The supplied filing is for TapImmune Inc., a clinical-stage immunotherapy company, for the quarter and six months ended June 30, 2014. It does not identify Marker Therapeutics as the registrant. TapImmune reported no revenue in the periods presented.
Financial performance and liquidity
| Metric | Three months ended June 30, 2014 | Six months ended June 30, 2014 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $510,927 | $1,732,794 |
| Net income (loss) | $753,480 | $(28,953,750) |
| Net cash used in operating activities | Not stated for the quarter | $(611,442) |
- Quarterly net income was driven by non-operating items, including a $920,233 gain on debt settlement and a $352,834 gain from changes in derivative fair value; operating loss was $510,927.
- The six-month net loss included a $26,743,197 non-cash loss on debt settlement. The filing attributes the loss to issuing shares whose fair value exceeded the debt settled.
- Cash was $20,647 at June 30, down from $48,589 at year-end 2013. Current liabilities were $2,598,257, and the working capital deficit was $2,562,606. Accumulated development-stage losses were $84,380,385.
- Current debt and obligations included $356,950 of convertible notes, $492,365 owed under a research agreement, $298,459 of warrant derivative liabilities, and $1,212,541 of accounts payable and accrued liabilities.
- Financing activities provided $583,500 in the first half, while the company used $611,442 in operating cash. The filing reports no investing cash flow.
Changes versus prior comparable periods
- Second-quarter net income of $753,480 compared with a net loss of $870,805 in Q2 2013, primarily reflecting debt-settlement and derivative fair-value gains.
- First-half net loss widened to $28,953,750 from $1,312,237 in 2013, largely because the current period recorded the $26.7 million debt-settlement loss.
- First-half operating expenses declined to $1,732,794 from $1,790,222; R&D expense fell to $45,000 from $188,778. Stock-based consulting expense rose to $791,575 from $83,768.
- Reported working capital deficit improved from $8,768,003 at December 31, 2013 to $2,562,606 at June 30, 2014, following debt conversions, settlements, and equity financing. These transactions involved substantial share issuance.
Outlook, risks, and unusual items
- Management said the company required additional financing to fund clinical trials, research and development, patents, and working capital. It identified substantial doubt about the company’s ability to continue as a going concern and stated that sufficient funding was not assured.
- Management estimated approximately $7.5 million of planned expenditures over the next 12 months, subject to financing availability; elsewhere it said significant financing would be needed for anticipated expenditures over the next 24 months, estimated at $7.5 million assuming one Phase I trial.
- In August 2014, after quarter-end, the company closed a registered direct offering with aggregate gross proceeds of $2 million. The filing also describes additional August share and warrant issuances. These events are subsequent to the reporting date and do not change June 30 cash.
- Management planned to advance HER2/neu and folate receptor alpha cancer vaccine programs, with Phase II or Phase Ib/II activity targeted for late 2014. These were plans, not assured outcomes. The HER2/neu Phase I trial was fully enrolled, with initial safety and immune-response findings described by management as positive; the folate alpha Phase I trial was also reported fully enrolled.
- Other risks include uncertain trial results, dependence on future financing and potential partners, a consultant-related dispute with an undetermined potential loss, and possible penalties or interest relating to unfiled tax returns in certain jurisdictions.
- Management concluded disclosure controls and procedures were not effective as of June 30, 2014. The filing reported no material changes in internal control over financial reporting during the six-month period.
Important facts for investors to verify
- Confirm the issuer identity: this filing is TapImmune Inc., not Marker Therapeutics.
- Verify current cash, financing proceeds net of fees, and the company’s cash runway against its stated development spending needs.
- Check subsequent clinical-trial progress, regulatory status, and whether the planned 2014 milestones were achieved.
- Review the terms and accounting for debt conversions and settlements, including the resulting dilution and non-cash settlement loss.
- Monitor the going-concern risk, litigation and tax contingencies, and any remediation of ineffective disclosure controls.