Business context and reporting period
This unaudited Form 10-Q covers the quarter and six months ended June 30, 2017. The filing registrant is TapImmune Inc. (identified in the request metadata as Marker Therapeutics, Inc.). It is a clinical-stage immuno-oncology company developing peptide- and gene-based cancer vaccines and PolyStart technology. It reported no revenue.
Financial position and results
| Metric | Q2 2017 / June 30, 2017 | Comparable period / year-end |
|---|---|---|
| Revenue | None since inception | None |
| Net income (loss) | Q2: $(1.89) million; six months: $(4.31) million | Q2 2016: $5.97 million; six months 2016: $1.22 million |
| Operating expenses | Q2: $2.39 million; six months: $4.81 million | Q2 2016: $2.43 million; six months 2016: $4.18 million |
| Cash | $9.96 million | $7.85 million at December 31, 2016 |
| Working capital | $8.57 million | $6.18 million at December 31, 2016 |
| Total liabilities | $1.58 million | $1.74 million at December 31, 2016 |
| Operating cash flow | Six months: $(3.94) million | Six months 2016: $(2.78) million |
Q2 R&D expense was $1.20 million and G&A was $1.19 million. For the first six months, R&D was $2.19 million and G&A was $2.62 million. The filing gives no meaningful gross margin measure because the company had no revenue.
Changes versus prior comparable periods
- The company moved from net income to a loss in both Q2 and the first half. The principal comparability factor was the prior-year noncash gain from changes in warrant fair value: $8.24 million in Q2 2016 and $5.24 million for the first half of 2016, versus only $7,500 and $4,500, respectively, in 2017.
- First-half operating expenses rose $631,000, chiefly because G&A increased $673,000. Management attributed the increase to stock compensation, higher headcount, investor relations, public-company costs, and professional fees. R&D declined $42,000 year over year, despite planned clinical-trial spending.
- 2017 results included a $492,365 gain from extinguishing the accrued Crucell research-agreement obligation after the company concluded the statute of limitations had expired. The company reported no amount due at June 30.
- Cash increased by $2.11 million in the first half, mainly from $5.41 million net proceeds from a June private placement and $639,000 net proceeds from warrant exercises, partly offset by operating cash use.
Outlook, commentary, and risks
- Management expected expenses to remain at a similar pace through the rest of 2017 and into 2018, primarily to fund Phase II trials, and estimated existing cash could fund operations through the end of fiscal 2018. It also said substantial additional capital would be needed; financing may not be available on acceptable terms or at all.
- Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing recurring losses, negative operating cash flow, no revenue, and dependence on additional financing. Failure to raise funds could force delays, reductions, or cancellation of research and clinical programs and could dilute shareholders.
- Clinical plans included continued Phase II development of TPIV200 for triple-negative breast and ovarian cancers, and preparation of an amended IND and Phase II program for TPIV110. Management reported more than half of enrollment in two TPIV200 studies, with expected enrollment completion and interim-data milestones extending into 2017–2019. These are forward-looking expectations, not assured outcomes.
- The June financing sold 1,503,567 shares and an equal number of five-year warrants for gross proceeds of approximately $6.2 million; offering fees and legal costs were approximately $0.8 million. The company also repriced certain existing warrants, and recorded $622,000 as a deemed dividend related to the modifications. These transactions increased potential dilution.
- The private placement registration-rights terms provide for liquidated damages if registration requirements are not met. The company estimated potential damages at about $57,000 per month and said payment was not probable as of June 30, 2017.
- Management concluded disclosure controls and procedures were not effective as of June 30, 2017. It reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether cash and any new financing are sufficient to sustain operations and planned trials beyond management’s estimated runway through year-end 2018.
- Clinical-trial enrollment, interim and final results, regulatory requirements, and whether anticipated timelines are achieved.
- Registration-statement filing and effectiveness deadlines, any resulting liquidated damages, and the dilution potential of outstanding and repriced warrants.
- Remediation of the disclosed ineffective disclosure controls and procedures.
- The legal basis and final status of the $492,365 Crucell obligation’s extinguishment.