Business context and reporting period
This is TapImmune Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2018. TapImmune was a clinical-stage immuno-oncology company developing peptide and gene-based cancer immunotherapies, including TPIV200 and TPIV110. The filing covers TapImmune, not the post-merger Marker Therapeutics entity; a proposed merger with Marker Therapeutics remained pending.
Key financial metrics
| Metric | Three months ended June 30, 2018 | Six months ended June 30, 2018 |
|---|---|---|
| Revenue | $206,000, all grant income | $206,000, all grant income |
| Research and development expense | $1.83 million | $3.43 million |
| General and administrative expense | $3.05 million | $4.65 million |
| Operating loss | $4.67 million | $7.87 million |
| Net loss | $4.81 million | $8.01 million |
| Basic and diluted loss per share | $0.41 | $0.71 |
At June 30, cash was $7.78 million, working capital was $4.14 million, total assets were $7.89 million, and total liabilities were $3.75 million. Liabilities included a $5,000 promissory note and $147,000 warrant liability. No product-sales revenue was reported; the grant income reimbursed clinical supplies provided for a TPIV200 study. Profit margins are not meaningful given the development-stage business and negligible revenue.
For the first six months, operating cash use was $4.75 million, compared with $3.94 million in 2017. Financing provided $7.40 million, including $3.12 million from a private stock purchase and $4.26 million from warrant exercises. Cash increased by $2.65 million from year-end 2017.
Changes versus prior comparable periods
- Second-quarter revenue rose from zero to $206,000; six-month revenue likewise rose from zero to $206,000.
- Second-quarter operating expenses increased to $4.88 million from $2.39 million, and net loss widened to $4.81 million from $1.89 million. Six-month operating expenses rose to $8.08 million from $4.81 million, and net loss widened to $8.01 million from $4.31 million.
- R&D costs increased with clinical-trial activity. G&A rose principally due to stock-based compensation, higher headcount, merger-related costs, investor relations, and legal and other professional fees.
- The 2017 comparison included a $492,000 debt-extinguishment gain, which did not recur in 2018. The 2018 period included a $138,000 six-month expense from the change in fair value of warrant liabilities.
- Cash increased from $5.13 million at December 31, 2017. Common shares outstanding increased from 10.6 million to 13.6 million by June 30, 2018.
Outlook, risks, and unusual items
- Management expected existing cash, excluding the proposed merger and concurrent financing, to fund operations into the first quarter of 2019. The filing states that continuing operations depend on raising more capital and that substantial doubt exists about the company’s ability to continue as a going concern.
- A proposed $70 million private placement—17.5 million shares at $4.00 each, with warrants for an additional 13.125 million shares—was subject to stockholder approval and expected to close concurrently with the merger. It was not included in June 30 cash. Management projected at least 30 months of post-transaction funding if both transactions closed.
- The merger agreement provided for a proposed combination with Marker Therapeutics and a potential $1.5 million termination fee under specified circumstances, plus reimbursement of certain expenses up to $500,000. Completion was subject to approvals and other conditions; the filing identified November 14, 2018 as the extended outside date.
- Clinical updates included completed enrollment in TapImmune’s 80-patient TPIV200 triple-negative breast cancer trial; ongoing TPIV200 ovarian cancer studies; and a planned TPIV110 program. Results and regulatory approval remained uncertain. TPIV200 had FDA Fast Track and Orphan Drug designations for specified ovarian cancer uses.
- Stock-based compensation was $1.10 million for the six months. Repricing warrants generated a $728,000 deemed dividend recorded in equity. The 2017 debt-extinguishment gain related to an expired license agreement and reliance on outside counsel’s legal opinion.
- Management concluded disclosure controls and procedures were not effective as of June 30, 2018. It reported no material changes in internal control over financial reporting during the quarter.
- Principal risks include financing availability and dilution, merger closing and integration, clinical and regulatory failure, manufacturing and supplier dependence, and reliance on key personnel and collaborators.
Investor verification priorities
- Confirm whether the merger and $70 million private placement closed, their final terms, and the resulting cash balance, share count, and warrant overhang.
- Review the basis for the going-concern conclusion and actual cash burn against the stated runway, including any financing completed after quarter-end.
- Check subsequent clinical-trial enrollment, interim analyses, safety findings, and regulatory milestones against the filing’s expectations.
- Assess the causes of ineffective disclosure controls and whether subsequent filings report remediation.
- Verify the effects of warrant repricing and exercise, stock-based compensation, and potential dilution from outstanding securities.