Filing summary: TapImmune Inc. Form 10-Q, quarter ended June 30, 2013
Issuer identity: The supplied filing is for TapImmune Inc., not Marker Therapeutics, Inc. Investors should confirm that this is the intended filing. The company described itself as a development-stage biotechnology business developing immunotherapies and vaccine technologies, including a HER2/neu breast cancer vaccine in a Phase I trial at the Mayo Clinic and TAP-based vaccine programs.
Financial results and liquidity
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | None reported | None reported |
| Operating expenses | $675,131 (2012: $3,138,214) | $1,790,222 (2012: $3,811,965) |
| Net loss | $870,805 (2012: $2,750,047) | $1,312,237 (2012: $3,350,589) |
| Basic and diluted loss per share | $0.01 (2012: $0.04) | $0.01 (2012: $0.06) |
| Cash used in operating activities | $619,611 for the six-month period (2012: $823,707) |
At June 30, cash was $45,179; current assets were $185,306 and current liabilities were $4,955,732, resulting in a reported working-capital deficit of $4,770,426. Convertible notes payable were reported at $2,250,207; total liabilities were $4,955,732. The company had no revenue, so margins are not meaningful. It reported no cash interest or income taxes paid during the six-month period.
Six-month financing cash inflows were $630,951, including proceeds from share issuance, convertible notes and related-party advances. The company reported 115.6 million shares outstanding at June 30 and 128.8 million at August 10, 2013. It also reported 6.5 million options and 17.3 million warrants outstanding at June 30.
Changes, outlook and material matters
- Compared with the prior-year periods, operating expenses and net losses fell substantially, primarily because of lower stock-based consulting expense and lower general and administrative costs. Interest and finance charges rose to $291,212 for the quarter and $626,100 for the six months, mainly from interest accruals and debt-discount accretion.
- Quarterly results included a $781,321 gain from changes in derivative fair value and an $874,358 loss on debt settlement. These items materially affected reported net loss and involve valuation estimates.
- Management expected no sales revenue over the next 12 months, though grant funding was possible. It estimated financing needs of about $5 million over 24 months, assuming one Phase I trial, and said additional capital and strategic partners were needed to fund development.
- The company disclosed substantial doubt about its ability to continue as a going concern. Management was seeking equity and debt financing, debt restructuring, cost reductions and partnerships; it cautioned that funding was uncertain and that continued operations beyond 12 months depended on raising significant equity financing.
- Management reported that the first five patients’ interim safety review in the HER2/neu Phase I trial was successful and expected to release interim data in the following months. This is an early-stage trial; safety and immune response were principal endpoints.
- The company was in default on February 2011 secured notes after missing scheduled payments; default interest of 20% could apply, and other notes had cross-default provisions. It also disclosed other overdue or defaulted notes and a promissory-note payment schedule. Note holders had not made certain demands, and discussions were ongoing.
- Crucell research-license obligations of $492,365 were accrued and delinquent; Crucell could cancel the agreement, and renegotiation was uncertain. The filing also disclosed possible tax penalties and interest for unfiled returns, and legal matters including a $210,255 legal-fee judgment and a consultant’s damages claim.
- The company restated its 2012 financial statements for errors in accounting for derivative liabilities and other accounts. Management also concluded disclosure controls and internal control over financial reporting were ineffective, citing material weaknesses in oversight, segregation of duties, written procedures and period-end reporting controls.
Important facts for investors to verify
- Confirm issuer and filing: the provided document identifies TapImmune Inc., whereas the request identifies Marker Therapeutics, Inc.
- Check the original filing’s financial statement dates and cash-flow comparative headings. The balance sheet is labeled “March 31, 2013” in the supplied text despite the report period and notes referring to June 30, 2013; the cash-flow headings also appear inconsistent.
- Review the restatement, derivative-liability valuation assumptions, debt terms, defaults and any cross-default exposure against the original filing and subsequent disclosures.
- Assess near-term liquidity, financing availability, dilution from convertible notes and warrants, and whether the company could meet obligations and fund planned clinical work.
- Verify the status of the Mayo Clinic trial, Crucell license, disclosed litigation and tax filings, and the effectiveness of remediation of reported control weaknesses.