Marker Therapeutics, Inc. (then TapImmune Inc.) — Form 10-Q summary
Reporting period: Quarter and nine months ended September 30, 2016. The filing identifies the registrant as TapImmune Inc., a clinical-stage immunotherapy company developing peptide- and gene-based cancer vaccines. Figures below are in U.S. dollars; share and per-share data reflect the September 16, 2016 one-for-twelve reverse split.
Financial performance and position
| Metric | Three months ended September 30, 2016 | Three months ended September 30, 2015 | Nine months ended September 30, 2016 | Nine months ended September 30, 2015 |
|---|---|---|---|---|
| Revenue | None reported; management states the company has not generated revenue since inception. | |||
| Research and development expense | $1.109 million | $0.969 million | $3.343 million | $2.324 million |
| General and administrative expense | $1.612 million | $0.769 million | $3.558 million | $1.580 million |
| Operating loss | $2.722 million | $1.738 million | $6.901 million | $3.904 million |
| Net income (loss) | $(2.103) million | $28.503 million | $(0.879) million | $(32.414) million |
| Basic net income (loss) per share | $(0.29) | $7.04 | $(0.14) | $(10.61) |
- The 2015 third-quarter profit largely reflects a $30.266 million noncash gain from changes in warrant derivative fair value. The 2016 nine-month result also includes a $5.925 million noncash derivative gain and $0.231 million of grant income; the grant reimbursed clinical-supply costs.
- Cash was $9.587 million at September 30, 2016, versus $6.577 million at December 31, 2015. Current assets were $9.698 million and current liabilities $2.204 million, yielding working capital of approximately $7.494 million.
- For the first nine months, operating cash use was $4.756 million, compared with $3.492 million in 2015. Financing provided $7.766 million, versus $9.438 million; cash increased by $3.010 million.
- Debt was limited: $5,000 remained on a promissory note, and the $23,000 related-party note was repaid during the period. No material interest or tax payments were reported. No gross or operating margin is meaningful because the company reported no product revenue.
Material changes and notable items
- Operating expenses rose year over year, attributed to increased clinical and research activity, Mayo Foundation license-related costs, consulting, professional fees, and other administrative costs.
- August financings included approximately $3.1 million in private-placement proceeds and $6.0 million from warrant exercises. The company incurred approximately $0.8 million in placement, legal, and related costs. The transactions increased shares outstanding and included warrants.
- Warrant amendments changed the accounting classification of certain warrants from derivative liabilities to equity. The reported warrant derivative liability fell from $26.493 million at December 31, 2015 to $29,000 at September 30, 2016, reflecting reclassifications, exercises, and fair-value changes. The amendment consideration included 750,000 shares and new warrants; the filing records $4.5 million as a dividend in equity.
- The reverse split was effected in connection with a planned Nasdaq listing. After the quarter, the company reported approval for Nasdaq Capital Market listing, with trading expected to begin November 8, 2016. Common shares outstanding were 8,379,101 as of November 2, 2016.
Outlook, risks, and contingencies
- Management expected substantial losses to continue and estimated spending approximately $7.5 million over the next 12 months. It anticipated financing operations through additional debt or equity, partnerships, or other strategic arrangements; no committed financing source was disclosed.
- The filing states that the lack of revenue and dependence on future financing raise substantial doubt about the company’s ability to continue as a going concern. Additional funding may be unavailable or dilutive; failure to obtain it could force delays, reductions, or cancellation of research and clinical programs.
- Management described TPIV 200 Phase II studies in triple-negative breast and ovarian cancer as underway or enrolling, and expected a Mayo Clinic/U.S. Department of Defense-funded 280-patient breast cancer study to begin enrolling in Q4 2016. It also anticipated a platinum-sensitive ovarian study and an FDA IND for TPIV 110 around late 2016 or early 2017. These were forward-looking expectations, not assurances of completion or clinical success.
- The Mayo Clinic’s $13.3 million Department of Defense grant was awarded to Mayo for a Phase II study; it is not presented as unrestricted funding to TapImmune. The company reported receiving approximately $231,000 of grant reimbursement for clinical supplies during the nine-month period.
- Private-placement registration rights required a resale registration statement to be filed by December 8, 2016 and declared effective by March 8, 2017. Failure could trigger liquidated damages calculated at 10% annually; management concluded payment was not probable as of September 30, 2016.
- Management concluded disclosure controls and procedures were not effective at period end. It reported no material change in internal control over financial reporting during the nine months. The filing disclosed no material legal proceedings.
Most important facts for investors to verify
- Whether the registration statement deadlines were met and whether any liquidated damages became payable.
- Actual cash burn, clinical spending, and financing needs relative to the stated $7.5 million 12-month plan and the going-concern warning.
- Enrollment, trial milestones, funding responsibilities, and clinical results for TPIV 200 and TPIV 110 programs.
- Fully diluted share count and potential dilution from outstanding options and warrants, including the effect of the reverse split and subsequent Nasdaq listing.
- Remediation of the ineffective disclosure controls and procedures.
- The reported per-share figures and derivative gains should be read alongside the underlying statements and notes: the large period-to-period earnings swings were materially affected by noncash warrant valuation and classification changes.